<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Amwest Insurance
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
AMWEST INSURANCE GROUP, INC.
5230 LAS VIRGENES ROAD
CALABASAS, CALIFORNIA 91302
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1998
---------------
To the Stockholders of
Amwest Insurance Group, Inc.:
The Annual Meeting of Stockholders of Amwest Insurance Group, Inc. (the
"Company") will be held at its corporate headquarters, 5230 Las Virgenes Road,
Calabasas, California 91302, on Friday, May 22, 1998, at 2:00 p.m., Los Angeles
time. The purpose of the Annual Meeting is to consider and vote upon the
following matters, as more fully described in the accompanying Proxy Statement:
(1) A proposal to elect four directors to serve three-year terms ending
in 2001, or until their successors are elected and qualified and to
elect one director to serve a two-year term ending in 2000 or until
his successor is elected and qualified;
(2) A proposal to approve and adopt the Amwest Insurance Group, Inc.
1998 Stock Incentive Plan; and
(3) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 10, 1998 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting and any adjournment or postponement
thereof. In order to constitute a quorum for the conduct of business at the
Annual Meeting, holders of a majority of all outstanding shares of Common Stock
must be present in person or be represented by proxy.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are requested to
mark, date, sign and return the enclosed proxy card as promptly as possible in
the envelope provided. Stockholders attending the meeting may vote in person
even if they have returned a proxy.
By Order of the Board of Directors
/s/ Richard H. Savage
Richard H. Savage
Chairman of the Board and
Co-Chief Executive Officer
Calabasas, California
April 15, 1998
<PAGE>
AMWEST INSURANCE GROUP, INC.
5230 LAS VIRGENES ROAD
CALABASAS, CALIFORNIA 91302
---------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1998
---------------
GENERAL INFORMATION ON THE MEETING
This Proxy Statement is being mailed on or about April 15, 1998 in connection
with the solicitation of proxies by and on behalf of the Board of Directors of
Amwest Insurance Group, Inc., a Delaware corporation ("Amwest" or the
"Company"), for use at the Annual Meeting of Stockholders of the Company,
which is to be held on Friday, May 22, 1998 at 2:00 p.m., Los Angeles time, at
its corporate headquarters, 5230 Las Virgenes Road, Calabasas, California 91302,
and any adjournment or postponement thereof.
The entire cost of soliciting proxies will be borne by the Company, including
expenses in connection with preparing and mailing of proxy solicitation
materials. In addition to the use of mails, proxies may be solicited by certain
officers, directors and regular employees of the Company, without extra
compensation, by telephone, telegraph, fax, or personal interview. Although
there is no formal agreement to do so, the Company will reimburse brokerage
houses and other custodians, nominees and fiduciaries for reasonable expenses
incurred in sending proxies and proxy material to the beneficial owners of the
Company's Common Stock.
RECORD DATE AND VOTING
Only stockholders of record at the close of business on April 10, 1998 are
entitled to notice of and to vote at the meeting, or any adjournment or
postponement thereof. As of April 10, 1998, 3,814,852 shares of Common Stock
were outstanding, all of which shares are entitled to be voted at the meeting.
The presence, either in person or by proxy, of persons entitled to vote a
majority of the Company's outstanding Common Stock is necessary to constitute a
quorum for the transaction of business at the Annual Meeting. A stockholder
giving a proxy may revoke it at any time before it is voted by filing written
notice of revocation with the Secretary of the Company at PO Box 4500, Woodland
Hills, California 91365-4500, or by appearing at the meeting and voting in
person. A prior proxy is automatically revoked by a stockholder giving a valid
proxy bearing a later date. Shares represented by all valid proxies will be
voted in accordance with the instructions contained in the proxies. In the
absence of instructions, shares represented by valid proxies will be voted in
accordance with recommendations of the Board of Directors as shown on the proxy.
Each stockholder is entitled to one vote per share on all matters coming
before the 1998 Annual Meeting, except for the election of directors. In the
election of directors, a stockholder in person or by proxy is entitled by the
Company's Restated Certificate of Incorporation to exercise "cumulative"
voting rights; that is, he is entitled to cast as many votes as equals the
number of his shares multiplied by the number of directors to be elected and may
cast all such votes for a single nominee or distribute them among the nominees
in any manner as he may see fit. For convenience sake, the proxy holders do not
presently intend to give notice of their intention to cumulate their votes, but
they may elect to do so in the event of a contested election or any other
presently unexpected circumstances. If any stockholder gives notice at the
meeting of his intention to cumulate votes, then all stockholders will have the
right to elect directors from nominees by cumulative voting.
Votes withheld from any director are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. The Company
believes that abstentions should be counted for purposes of determining whether
a quorum is present at the Annual Meeting for the transaction of business. In
the absence of controlling precedent to the contrary, the Company intends to
treat abstentions with respect to the election of directors in this manner. The
Company intends to count broker non-votes as present or represented for purposes
of determining the presence or absence of a quorum for the transaction of
business.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 10, 1998 with
respect to the beneficial ownership of the Company's Common Stock by (i) each
stockholder known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, and (iii)
all directors and officers as a group. These amounts, along with all other share
amounts contained in this Proxy Statement, have been adjusted to reflect the 10%
stock dividend paid to stockholders of record as of March 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME OR IDENTITY OF GROUP BENEFICIALLY OWNED (1) OUTSTANDING (21)
------------------------- ---------------------- --------------------
Directors:
<S> <C> <C>
Richard H. Savage..................................... 906,801 (2)(3)(4) 23.76%
John E. Savage........................................ 173,625 (5) 4.48%
Guy A. Main........................................... 550,937 (6)(7) 14.44%
Steven R. Kay......................................... 49,590 (8) 1.29%
Neil F. Pont.......................................... 32,981 (9) (22)
Thomas R. Bennett..................................... 16,225 (10) (22)
Bruce A. Bunner....................................... 4,125 (11) (22)
Edgar L. Fraser....................................... 23,672 (12) (22)
Jonathan K. Layne..................................... 13,860 (13) (22)
Arthur F. Melton...................................... 53,542 (14) 1.39%
Charles L. Schultz.................................... 4,125 (15) (22)
All Directors and Officers as a group (11 persons)...... 1,829,483 45.49%
Other Principal Stockholders:
Savage Family Trust................................... 138,901 (3)(4) 3.64%
5230 Las Virgenes Road
Calabasas, CA 91302
Savage Diversified, Inc............................... 766,525 (4) 20.09%
5230 Las Virgenes Road
Calabasas, CA 91302
Main Family Trust..................................... 539,250 (7) 14.14%
5230 Las Virgenes Road
Calabasas, CA 91302
Conner Clark & Company, Ltd........................... 384,505 (16) 10.08%
Scotia Plaza, 40 King Street, Suite 5110, Box 125
Toronto, Ontario M5H 3Y2
Dimensional Fund Advisors Inc......................... 210,980 (17) 5.53%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Franklin Advisory Services, Inc....................... 257,070 (18) 6.74%
777 Mariners Island Boulevard
San Mateo, CA 94403
Heartland Advisors, Inc............................... 291,527 (19) 7.64%
790 North Milwaukee Street
Milwaukee, WI 53202
Markel Corporation.................................... 237,380 (20) 6.22%
4551 Cox Road
Glen Allen, Virginia 23060
</TABLE>
(1) Based on information furnished by the persons named. The persons in the
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, except as otherwise
stated.
2
<PAGE>
(2) Of the shares beneficially owned by Richard H. Savage: (1) 138,901 shares
represent shares owned by the Savage Family Trust for which Mr. Savage
serves as Trustee; and (2) 766,525 shares represent shares owned by Savage
Diversified, Inc., a California corporation, all the voting stock of which
is owned by the Savage Family Trust. Richard H. Savage, as Trustee, has sole
voting power over shares owned by such trust. In addition, 1,375 shares
shown as beneficially owned by Richard H. Savage represent shares which may
be acquired by Richard H. Savage within sixty days of April 10, 1998,
pursuant to the exercise of options under the Company's Stock Option Plan.
(3) The Savage Family Trust owns 138,901 shares of Common Stock. Richard H.
Savage is the Trustee of the Savage Family Trust, and as such, exercises
sole voting and investment power with respect to shares owned by the Trust.
These shares are included in the number of shares beneficially owned by
Richard H. Savage as set forth in Note 2.
(4) Of the shares beneficially owned by Richard H. Savage, 766,525 shares are
owned by Savage Diversified, Inc., a California corporation, all the voting
stock of which is owned by Savage Family Trust. Richard H. Savage, as
Trustee, has sole voting power of such trust. These shares are included in
the number of shares beneficially owned by Richard H. Savage as set forth in
Note 2.
(5) John E. Savage serves as Trustee of the following Trusts: (1) Savage Family
Stock Trust FBO Sandra Lee Savage which owns 21,425 shares of Common Stock;
(2) Savage Family Stock Trust FBO Lorraine Ann Savage which owns 21,425
shares of Common Stock; and (3) Savage Family Stock Trust FBO Geraldine K.
Thuresson which owns 21,426 shares of Common Stock. John E. Savage owns
50,719 shares of Common Stock. In addition, 58,630 shares shown as
beneficially owned by John E. Savage represent shares which may be acquired
by John E. Savage within sixty days of April 10, 1998, pursuant to the
exercise of options under the Company's Stock Option Plan.
(6) Of the shares beneficially owned by Guy A. Main: (1) 539,250 shares
represent shares owned by the Main Family Trust for which Mr. Main and his
wife serve as Trustee; and (2) 11,000 shares represent shares which Mr. Main
holds directly. In addition, 687 shares shown as beneficially owned by Guy
A. Main represent shares which may be acquired by Guy A. Main within sixty
days of April 10, 1998, pursuant to the exercise of options under the
Company's Stock Option Plan.
(7) The Main Family Trust owns 539,250 shares of Common Stock. Guy A. Main and
his wife share voting and investment power with respect to shares owned by
the Trust. These shares are included in the number of shares beneficially
owned by Guy A. Main as set forth in Note 6.
(8) Of the shares beneficially owned by Steven R. Kay: (1) 21,458 shares
represent shares that are directly owned by Steven R. Kay; (2) 550 shares
represent shares that are indirectly held through his wife; (3) 220 shares
represent shares that are indirectly held through his son; and (4) 27,362
shares represent shares which may be acquired by Steven R. Kay within sixty
days of April 10, 1998, pursuant to the exercise of options under the
Company's Stock Option Plan.
(9) Of the shares beneficially owned by Neil F. Pont: (1) 5,619 shares represent
shares that are directly owned by Neil F. Pont: and (2) 27,362 shares
represent shares which may be acquired by Neil F. Pont within sixty days of
April 10, 1998, pursuant to the exercise of options under the Company's
Stock Option Plan.
(10) Of the shares beneficially owned by Thomas R. Bennett: (1) 2,475 shares
represent shares that are jointly owned by Thomas R. Bennett and his wife;
and (2) 13,750 shares represent shares which may be acquired by Thomas R.
Bennett within sixty days of April 10, 1998, pursuant to the exercise of
options under the Company's Non-Employee Director Stock Option Plan.
(11) Of the shares beneficially owned by Bruce A. Bunner, all 4,125 shares
represent shares which may be acquired by Bruce A. Bunner within sixty days
of April 10, 1998, pursuant to the exercise of options under the Company's
Non-Employee Director Stock Option Plan.
(12) Of the shares beneficially owned by Edgar L. Fraser: (1) 9,922 shares
represent shares that are directly owned by Edgar L. Fraser; and (2) 13,750
shares represent shares which may be acquired by Edgar L. Fraser within
sixty days of April 10, 1998, pursuant to the exercise of options under the
Company's Non-Employee Director Stock Option Plan.
(13) Of the shares beneficially owned by Jonathan K. Layne: (1) 110 shares
represent shares that are directly owned by Jonathan K. Layne; and (2)
13,750 shares represent shares which may be acquired by Jonathan K. Layne
within sixty days of April 10, 1998, pursuant to the exercise of options
under the Company's Non-Employee Director Stock Option Plan.
3
<PAGE>
(14) Of the shares beneficially owned by Arthur F. Melton: (1) 3,190 shares
represent shares that are jointly owned by Arthur F. Melton and his wife;
(2) 8,250 shares represent shares that are directly owned by Arthur F.
Melton; (3) 36,602 shares represent shares which may be acquired by Arthur
F. Melton within sixty days of April 10, 1998, pursuant to the exercise of
options under the Company's Stock Option Plan; and (4) 5,500 shares
represent shares which may be acquired by Arthur F. Melton within sixty
days of April 10, 1998, pursuant to the exercise of options under the
Company's Non-Employee Director Stock Option Plan.
(15) Of the shares beneficially owned by Charles L. Schultz, all 4,125 shares
represent shares which may be acquired by Charles L. Schultz within sixty
days of April 10, 1998, pursuant to the exercise of options under the
Company's Non-Employee Director Stock Option Plan.
(16) Based solely upon information contained in Amendment No. 2 to a Schedule
13G dated March 24, 1998 received by the Company from Conner Clark &
Company, Ltd. ("Conner Clark"). The filing states that Conner Clark has
shared voting and shared dispositive power over 384,505 shares.
(17) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 210,980 shares of Amwest
Common Stock as of December 31, 1997, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in a series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(18) Based solely upon information contained in Amendment No. 1 to a Schedule
13G dated January 16, 1998 received by the Company from Franklin Resources,
Inc. The filing states that Franklin Advisory Services, Inc., an investment
advisory subsidiary of Franklin Resources, Inc. has sole voting power and
sole dispositive power over 257,070 shares.
(19) Based solely upon information contained in Amendment No. 3 to a Schedule
13G dated January 23, 1998 received by the Company from Heartland Advisors,
Inc. ("Heartland"). The filing states that Heartland has sole voting
power and sole dispositive power over 291,527 shares.
(20) Based solely upon information contained in Amendment No. 3 to a Schedule
13G dated February 3, 1998 received by the Company from Markel Corporation
("Markel"). The filing states that Markel has sole voting power over
204,050 shares, sole dispositive power over 204,050 shares and shared
dispositive power over 33,330 shares.
(21) Based on 3,814,852 shares of Common Stock outstanding as of April 10, 1998.
See "Record Date and Voting."
(22) Less than 1% of the shares of Common Stock outstanding.
ELECTION OF DIRECTORS
Under the Restated Certificate of Incorporation and the Bylaws (as amended)
of the Company, which provide for a "classified" Board of Directors, four (4)
directors out of a total of twelve (12) are to be elected at the 1998 Annual
Meeting of Stockholders to serve three-year terms expiring at the 2001 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified. One of the current directors, Edgar L. Fraser, is retiring. Two of
the nominated directors were elected by the stockholders in previous years, one
new director will replace the position vacated by Mr. Fraser and one new
director will fill a position created by increasing the Board by one additional
member. In addition, in August 1997 the Board of Directors elected Neil F. Pont
to serve until the 2000 Annual Meeting of Stockholders. Mr. Pont had previously
relinquished his positions as Senior Vice President and Director of the Company
effective February, 1997. Unless authority to vote for a certain nominee is
withheld by an indication thereon, the proxy will be voted to re-elect Bruce A.
Bunner and Arthur F. Melton and to elect Robert W. Kleinschmidt and Roland D.
Miller to three-year terms, each to serve until the 2001 Annual Meeting of
Stockholders or until their successors are elected and qualified and to elect
Neil F. Pont to serve until the 2000 Annual Meeting of
4
<PAGE>
Stockholders or until his successor is elected and qualified. The Company has no
reason to believe that any of those named will not be available as a candidate.
However, if such a situation should arise, the proxy may be voted for the
election of other nominees as directors at the discretion of the person acting
pursuant to the proxy. Certain information regarding the nominees and each
director whose term of office will continue after the 1998 Annual Meeting of
Stockholders is set forth below:
NOMINEES FOR ELECTION AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
CURRENT NEW
DIRECTOR TERM TERM
NAME AGE POSITION WITH COMPANY SINCE EXPIRES EXPIRES
---- --- --------------------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Bruce A. Bunner.......... 64 Director 1995 1998 2001
Robert W. Kleinschmidt... 48 Director -- -- 2001
Arthur F. Melton......... 43 Director 1986 1998 2001
Roland D. Miller......... 70 Director -- -- 2001
Neil F. Pont............. 52 Senior Vice President and Director -- -- 2000
</TABLE>
INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE
CONTINUE AFTER THE 1998 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
CURRENT
DIRECTOR TERM
NAME AGE POSITION WITH COMPANY SINCE EXPIRES
---- --- --------------------- -------- --------
<S> <C> <C> <C> <C>
Richard H. Savage........ 78 Chairman of the Board, Co-Chief Executive 1970 2000
Officer and Director
John E. Savage........... 45 Co-Chief Executive Officer, President, Chief 1976 1999
Operating Officer and Director
Guy A. Main.............. 61 Executive Vice President and Director 1996 1999
Steven R. Kay............ 44 Senior Vice President, Chief Financial 1992 2000
Officer, Treasurer and Director
Thomas R. Bennett........ 71 Director 1985 1999
Jonathan K. Layne........ 44 Director 1989 1999
Charles L. Schultz....... 70 Director 1995 2000
</TABLE>
PRINCIPAL OCCUPATIONS OF NOMINEES AND
CONTINUING DIRECTORS DURING LAST FIVE YEARS
Richard H. Savage entered the surety business in 1958 by forming a general
agency which specialized in the sale of bail bonds. The business evolved into
the surety insurance business when Amwest Surety was licensed as an insurer in
December, 1976. Mr. Savage has served as Chairman, Director, Chief Executive
Officer (and since 1992 as Co-Chief Executive Officer) of the Company since its
organization in 1970. Richard H. Savage is the father of John E. Savage.
John E. Savage joined the Company in 1975 as Vice President and became a
Director of the Company in December, 1976. He became Secretary and Assistant
Treasurer of the Company in October, 1985. Mr. Savage managed the Court Division
from 1975 to 1980 and managed the Woodland Hills Branch from 1980 to 1985. He
managed the Underwriting Department from 1985 to 1987. He became a Senior Vice
President in September, 1987, President and Chief Operating Officer in February,
1990 and Co-Chief Executive Officer in November, 1992. He relinquished his
titles of Secretary and Assistant Treasurer in May, 1993. John E. Savage is the
son of Richard H. Savage.
Guy A. Main joined the Company in March 1996 as Executive Vice President and
Director upon consummation of the merger between the Company and Condor
Services, Inc. ("Condor"). Mr. Main also serves as Chairman and President of
Condor Insurance Company. Previously, Mr. Main was Chairman of the Board and
President of
5
<PAGE>
Condor's predecessor, Interstate Program Managers, Inc., since its founding in
1974. He became Chairman of the Board and President of Condor in November 1988.
From 1972 to 1974, he served as Executive Vice President of Garrett, Bromfield
Corporation, insurance managing general agents. From 1957 to 1972, Mr. Main
served in various capacities in underwriting and management of several insurance
companies.
Steven R. Kay joined the Company in April, 1992 as Senior Vice President,
Chief Financial Officer, Treasurer and Director. From 1977 he served in various
positions with KPMG Peat Marwick and served as an Audit Partner for KPMG Peat
Marwick from 1987 until April, 1992.
Neil F. Pont joined the Company in November, 1991 as Senior Vice President.
During 1991, he served as a retained consultant following his tenure from 1987
to 1991 with Imperial Corporation of America, where he served in various
executive management positions, including Executive Vice President Retail Bank,
board member First Imperial Investor Services, an investment broker dealer, and
Imperial Insurance Agency. Effective August 1997, Mr. Pont was elected to the
positions of Senior Vice President and Director of the Company after previously
relinquishing these positions effective February 1997.
Thomas R. Bennett became a Director of the Company in October, 1985. Mr.
Bennett is presently an independent financial consultant. From May, 1987 to
November, 1987, Mr. Bennett served as Senior Vice President, Treasurer and
Director of Technology Applications, Inc. From 1983 to 1987, Mr. Bennett served
as Vice President and Treasurer of ERC International, Inc.
Bruce A. Bunner became a Director of the Company in November 1995. Since his
retirement in 1994 as Chairman of Centre Reinsurance Company of New York, Mr.
Bunner has accepted the position of President of Financial Structures Ltd., a
financial services firm. Previously, he served with KPMG Peat Marwick for 22
years. In addition, Mr. Bunner served as California State Insurance Commissioner
from 1983 to 1986. Mr. Bunner is also a member of the Board of Directors of
Mercury Insurance Group, Inc., a property and casualty insurer specializing in
automobile coverages and American Progressive Life Insurance Company.
Robert W. Kleinschmidt has served as President of Tocqueville Asset
Management, L.P., an investment management company since January 1994 and
Managing Director since June 1991. From 1978 to 1991, Mr. Kleinschmidt was
Senior Partner of David J. Green and Company, an investment management company.
Mr. Kleinschmidt was a member of the Board of Directors of Condor Services, Inc.
whose merger with the Company was consummated on March 14, 1996. Tocqueville
Asset Management, L.P. has rendered, and the Company expects Tocqueville Asset
Management, L.P. to continue to render, investment advisory services to the
Company.
Jonathan K. Layne became a Director of the Company in June, 1989. Mr. Layne
has been a partner in the law firm of Gibson, Dunn & Crutcher LLP since 1987,
and has been associated with that firm since 1979. Such firm has rendered, and
the Company expects Gibson, Dunn & Crutcher LLP to continue to render, legal
services to the Company. Mr. Layne is also a member of the Board of Directors of
K-Swiss Inc., a manufacturer of athletic footwear, The Finish Line, Inc., a
retailer of brand name athletic and leisure footwear, activewear and accessories
and Maxwell Shoe Company Inc., a manufacturer of women's casual and dress
footwear.
Arthur F. Melton became a Director of the Company in August, 1986, became a
Senior Vice President of the Company in November, 1990 and resigned from this
position in November, 1996. Mr. Melton is currently a Director of Fresh
International Corporation, an agribusiness holding company, and its
subsidiaries, including Fresh Express Farms, TransFresh Corporation and Bruce
Church, Inc. Mr. Melton was the Director of Finance and Administration of
Industrial Tools, Inc. from 1985 to November, 1990.
Roland D. Miller served in various capacities including Vice President from
April 1970 to September 1982, President from September 1982 to February 1989 and
Vice Chairman from February 1989 to July 1992 for National Indemnity Company.
Mr. Miller retired effective July 1992. Mr. Miller has served as a director of
two of the Company's subsidiaries, Amwest Surety Insurance Company and Far West
Insurance Company, since November 1995.
6
<PAGE>
Charles L. Schultz became a Director of the Company in November 1995. Mr.
Schultz is currently a director of Centris, an insurance company specializing in
reinsurance. Mr. Schultz retired in 1993 as Senior Vice President, Finance and
Chief Financial Officer of Farmers Group, Inc. where he had served for 19 years
in various capacities. Previously, Mr. Schultz had been with Great American
Insurance Company in senior management positions from 1950 to 1974.
CERTAIN INFORMATION CONCERNING THE BOARD
OF DIRECTORS AND CERTAIN OF ITS COMMITTEES
The Board of Directors has the following standing committees: Compensation and
Stock Option Committee, Audit Committee and Investment Committee. The Company
does not have a nominating committee of its Board of Directors.
MEETING OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met 5 times during fiscal 1997 and each incumbent
director who was a director during 1997 and whose term of office will continue
after the Annual Meeting of Stockholders attended at least 75% of the meetings
of the Board and Board Committees of which he was a member.
For fiscal 1997, the Compensation and Stock Option Committee was composed of
Messrs. Thomas R. Bennett (Chairman), Edgar L. Fraser, Jonathan K. Layne and
Charles L. Schultz. This Committee met 4 times during fiscal 1997 and each
committee member attended each meeting held during the time that such director
was a member of the Committee. Effective April, 1998, the composition of the
Compensation and Stock Option Committee changed and is now composed of Messrs.
Jonathan K. Layne (Chairman), Arthur F. Melton and Thomas R. Bennett.
The Audit Committee is composed of Messrs. Edgar L. Fraser (Chairman), Bruce
A. Bunner, Jonathan K. Layne and Charles L. Schultz. This Committee met 4 times
during fiscal 1997 and each committee member attended each meeting held during
the time that such director was a member of the Committee. Effective April,
1998, the Audit Committee changed and is now composed of Messrs. Charles L.
Schultz (Chairman), Bruce A. Bunner, Jonathan K. Layne and Roland L. Miller
The Investment Committee is composed of Messrs. Steven R. Kay (Chairman),
Richard H. Savage, John E. Savage, Guy A. Main, Thomas R. Bennett, Bruce A.
Bunner and Charles L. Schultz. This Committee met 2 times during fiscal 1997 and
each committee member attended each meeting held during the time that such
director was a member of the Committee. Effective April, 1998, the Investment
Committee changed and is now composed of Messrs. Steven R. Kay (Chairman),
Richard H. Savage, John E. Savage, Guy A. Main, Thomas R. Bennett, Bruce A.
Bunner, Robert W. Kleinschmidt and Charles L. Schultz.
REMUNERATION OF DIRECTORS
All directors are paid $12,000 annually, plus normal and necessary expenses
for attending all regular or special meetings of the Board of Directors,
irrespective of the number of such regular or special meetings attended by such
Board members. During 1997, each director who was not an officer of the Company
was also paid $750 per in-person Board meeting attended plus $500 per committee
meeting attended, plus normal and necessary expenses for attending such
meetings. In addition, each director is eligible to receive reimbursement in an
annual amount up to $1,500 for expenses relating to annual physical
examinations. Directors are also eligible to receive stock options under the
Amwest Insurance Group, Inc. 1998 Stock Incentive Plan.
7
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard H. Savage................................. 78 Chairman of the Board and Co-Chief Executive Officer
John E. Savage.................................... 45 Co-Chief Executive Officer, President, Chief Operating
Officer
Guy A. Main....................................... 61 Executive Vice President
Steven R. Kay..................................... 44 Senior Vice President, Chief Financial Officer and
Treasurer
Neil F. Pont...................................... 52 Senior Vice President
</TABLE>
See "Principal Occupations of Nominees and Continuing Directors During Last
Five Years" for information regarding the Company's executive officers.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The Company believes that shareholders should be provided information about
executive compensation that is easier to understand, more relevant and
consistent with the proxy rules of the Securities and Exchange Commission. The
following table sets forth the compensation paid by the Company and its
subsidiaries to each of the executive officers of the Company ("Named
Officers") for services rendered in all capacities to the Company and its
subsidiaries for the three fiscal years ended December 31, 1997, 1996 and 1995.
The table does not include compensation paid by Condor to Mr. Main who became an
executive officer of the Company in March 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
NAME OTHER UNDERLYING ALL
AND ANNUAL OPTIONS/ OTHER
PRINCIPAL SALARY (1) BONUS (2) COMPENSATION (3) SARS COMPENSATION (4)
POSITION YEAR ($) ($) ($) (#) ($)
--------- ---- ---------- --------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Savage............................ 1997 337,997 103,106 -- 2,500 4,533
Chairman of the Board and 1996 343,779 -- -- 2,500 4,471
Co-Chief Executive Officer 1995 338,000 110,454 -- --- 4,533
John E. Savage............................... 1997 270,000 41,310 -- 6,500 4,750
Co-Chief Executive Officer, 1996 263,587 -- -- 10,000 44,442(5)
President and Chief Operating Officer 1995 225,394 74,425 -- 10,000 3,655
Guy A. Main.................................. 1997 265,006 16,894 -- 2,500 4,750
Executive Vice President 1996 203,620 -- -- 2,500 35,518(6)
1995 -- -- -- --- ---
Steven R. Kay................................ 1997 196,560 45,111 -- 5,000 18,176(7)
Senior Vice President, Chief 1996 198,074 -- -- 7,500 13,700(8)
Financial Officer and Treasurer 1995 189,000 49,995 -- 17,500 4,618
Neil F. Pont................................. 1997 196,560 45,111 -- 5,000 33,391(9)
Senior Vice President 1996 198,074 -- -- 7,500 10,636(10)
1995 185,733 49,995 -- 17,500 10,983(11)
</TABLE>
8
<PAGE>
(1) Includes directors' fees of $12,000 for each of the years indicated.
(2) Includes incentive compensation earned and accrued during the fiscal years
indicated and paid subsequent to the end of each fiscal year.
(3) Except where indicated, all Named Officers receive certain perquisites
such as paid premiums on additional life insurance, automobile allowances
and the expense associated with the use of these automobiles. Such
perquisites do not exceed the lesser of $50,000 or 10% of such officer's
salary and bonus.
(4) The matching contributions made by the Company under the provisions of its
401(k) Plan are included in this column.
(5) In addition to the matching contribution made by the Company under the
provisions of its 401(k) Plan, the amount also includes $39,692 relating
to cash received in-lieu of vacation benefits.
(6) In addition to the matching contribution made by the Company under the
provisions of its 401(k) Plan, the amount also includes $31,626 relating
to cash received in-lieu of vacation benefits.
(7) In addition to the matching contribution made by the Company under the
provisions of its 401(k) Plan, the amount also includes $13,426 relating
to cash received in-lieu of vacation benefits.
(8) In addition to the matching contribution made by the Company under the
provisions of its 401(k) Plan, the amount also includes $8,950 relating to
cash received in-lieu of vacation benefits.
(9) In addition to the matching contribution made by the Company under the
provisions of its 401(k) Plan, the amount also includes $28,641 relating
to cash received in-lieu of vacation benefits.
(10) In addition to the matching contribution made by the Company under the
provisions of its 401(k) Plan, the amount also includes $6,310 relating to
cash received in-lieu of vacation benefits.
(11) In addition to the matching contribution made by the Company under the
provisions of its 401(k) Plan, the amount also includes $6,365 relating to
cash received in-lieu of vacation benefits.
EMPLOYMENT AGREEMENT
The Company and Mr. Main entered into an employment agreement commencing
on March 14, 1996 and continuing for a period of four years providing Mr. Main
to be employed as Executive Vice President of the Company and Chairman and
President of Condor Insurance Company. Mr. Main is receiving a base salary of
$253,000, subject to annual review, and will be eligible for bonuses under the
Company's Senior Executive Bonus Plan and entitled to other benefits available
to other Company officers generally, including an automobile allowance.
SEVERANCE AGREEMENTS
The Company has entered into a severance agreement ("Severance Agreement")
with each of Messrs. Richard H. Savage, John E. Savage, Steven R. Kay and Neil
F. Pont to provide an incentive for such officers to continue their employment
following any "Change in Control" of the Company, thereby helping ensure
continuity of the Company's business by mitigating concerns about job security
that could affect management objectivity under such circumstances. The
Employment Agreement described above between the Company and Mr. Guy A. Main
also contains a severance provision.
Each Severance Agreement generally provides that if, after a "Change in
Control" of the Company, the officer terminates his employment with the Company
" (as defined in the Severance Agreement) or the Company terminates the
officer's employment for any reason other than "Cause" (as defined in the
Severance Agreement) or the death, disability or retirement (in accordance with
retirement policies in effect before such Change in Control) of the officer, the
Company shall (1) pay the officer severance compensation equal to 2.99 times his
average annual compensation (including bonuses) over the five most recent years
ending before the Change in Control, and (2) provide the officer, for three
years thereafter, insurance benefits substantially similar to those he received
immediately prior to his termination. In the event that such payments, alone or
together with other payments
9
<PAGE>
to be received by the officer from the Company, would not be deductible in whole
or in part by the Company, then such payments shall be reduced to the largest
amount that would be deductible by the Company. If the officer is required to
pay the excise taxes imposed by Section 4999 of the Internal Revenue Code (or a
similar provision of state law) then the Company is obligated to pay to the
officer an additional amount equal to the sum of such excise taxes and an amount
equal to all taxes, interest and penalties that become payable by the officer as
a result of the payment by the Company of such excise taxes.
Change in Control is defined in the Severance Agreement to include (i) the
acquisition by a third party of beneficial ownership of 30% or more of the
Company's outstanding voting equity securities (but not including any person who
had such beneficial ownership as of May 25, 1989), (ii) the approval by the
stockholders of the Company of a liquidation or dissolution of the Company,
(iii) a consolidation or merger of the Company if the Company is not the
surviving entity or shares of the Company's Common Stock would be converted into
cash, securities or other property (but not including a merger in which the
holders of the Company's Common Stock immediately prior to the merger have the
same proportionate ownership of the surviving corporation immediately after the
merger), (iv) any sale, lease, exchange or transfer of all or substantially all
of the Company's assets, or (v) a change in the membership of the Company's
Board of Directors such that during any two consecutive years, individuals who
at the beginning of such period constituted the entire Board of Directors shall
cease to constitute a majority thereof (unless the election or nomination for
election of each new director was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the beginning of the
period). Each Severance Agreement has an initial term of two years and is
automatically renewed for successive two year terms unless determined otherwise
by the Board of Directors prior to a Change in Control. Each Severance Agreement
terminates five years after a Change in Control.
STOCK OPTION PLAN
The Company's Stock Option Plan (the "Plan") currently provides for the
reservation of 676,000 shares of Common Stock, subject to adjustment for
reorganizations, recapitalizations, stock splits or similar events, for issuance
upon the exercise of options to be granted under the Plan. Shares of Common
Stock subject to the unexercised portions of any options granted under the Plan
which expire, terminate or are canceled may again be subject to options under
the Plan. Salaried employees, including directors who are employees, and
consultants are currently eligible to receive options under the Plan.
The Plan was amended and ratified by stockholders of the Company at the 1987,
1988, 1990 and 1994 Annual Meetings of Stockholders and the 1996 Special Meeting
of Stockholders and was adopted and ratified in its currently amended form by
the Board of Directors on February 1, 1996. These amendments brought the Plan
into compliance with Rule 16b-3 (promulgated by the Securities and Exchange
Commission under the Securities Act of 1934), increased the number of shares
subject to the Plan, and modified the exercise prices of non-incentive options
granted under the Plan.
The Plan is administered by a committee (the "Compensation and Stock Option
Committee") of directors who are appointed by the Board of Directors of the
Company. The Compensation and Stock Option Committee has the full power to
construe the Plan, to determine which persons are eligible to receive options
under the Plan, the vesting of such options and which of the eligible persons,
if any, shall be granted options under the Plan.
The Plan provides for options which qualify as incentive stock options
("Incentive Options") under Section 422 of the Internal Revenue Code (the
"Code") as well as options which do not so qualify ("Non-Qualified Stock
Options") and for the grant of stock appreciation rights ("Stock Appreciation
Rights") to be associated with stock options. The Stock Appreciation Rights
permit the optionee to elect to receive, in lieu of exercising the related
option, an amount equal to the difference between the value of the shares
subject to the option and the exercise price of the option. The per share
exercise price of Incentive Options under the Plan may not be less than 100% of
the fair market value of the underlying Common Stock on the date of grant of the
option (110% of such fair market value with respect to Incentive Options granted
to an individual who owns more than 10% of the combined voting power of all
classes of stock of the Company or any subsidiary corporation). On April 10,
1998 the closing sales price of the Company's Common Stock as reported on the
American Stock Exchange was $16.0625.
10
<PAGE>
The Plan provides that the aggregate fair market value of the stock with
respect to which Incentive Options are exercisable for the first time by each
employee during any calendar year (under the Plan or similar plans) shall not
exceed $100,000. No Incentive Option granted under the Plan may be exercised
more than ten years after its date of grant, except that an Incentive Option
granted to an individual owning more than 10% of the total combined voting power
of all classes of stock of the Company or any subsidiary or parent corporation
shall expire no later than five (5) years from the date the option was granted.
No Non-Incentive Option granted under the Plan may be exercised more than eleven
(11) years after its date of grant.
SECTION 16(B) OF THE EXCHANGE ACT
The acquisition and disposition of shares of Common Stock by officers,
directors and more than 10% stockholders of the Company ("Insiders") pursuant
to awards granted to them under the Plan may be subject to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"),
under which a purchase of shares of Common Stock within six months before or
after a sale of Common Stock could result in recovery by the Company of all or a
portion of any amount by which the sale proceeds exceed the purchase price.
Insiders are required to file reports of changes in beneficial ownership under
Section 16(a) of the Exchange Act upon acquisitions and dispositions of shares.
Rule 16b-3 provides an exemption from Section 16(b) liability for certain
transactions pursuant to employee benefit plans.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Non-Employee Director Stock Option Plan (the "Director Plan") provides for
the reservation of 75,000 shares of Common Stock, subject to adjustment for
reorganizations, recapitalizations, stock splits or similar events, for issuance
upon the exercise of options to be granted under the Director Plan. Shares of
Common Stock subject to the unexercised portions of any options granted under
the Director Plan which expire, terminate or are canceled may again be subject
to options under the Director Plan. Directors, who are not employees of the
Company or a subsidiary of the Company, are currently eligible to receive
options under the Director Plan. A person shall not be considered an employee
solely by serving as Chairman of the Board. As of April 10, 1998, six persons
were eligible to receive said grants.
The Director Plan is self-governing. Questions of interpretation, if any, will
be resolved by the Board of Directors.
Each non-employee director will be granted upon his initial election to the
Board a Non-Qualified Stock Option ("NQO") to purchase 5,000 shares of the
Company's Common Stock. After the initial grant of the NQO to purchase 5,000
shares of the Company's Common Stock, each non-employee director will receive
annual grants of NQO's to purchase 2,500 shares of the Company's Common Stock on
the date of each subsequent Annual Meeting of Stockholders. The per share
exercise price of the options will be the fair market value of a share of the
Company's Common Stock on the date of grant. Each option will have a term of ten
years and shall become exercisable at the rate of 25% per year over a period of
four years of Board Service. Optionees will receive credit for service, if any,
on the Board prior to the date of the option grant in satisfying these vesting
requirements.
EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "Purchase Plan") provides for the
reservation of 220,000 shares of Common Stock, subject to adjustment for
reorganizations, recapitalizations, stock splits or similar events, for issuance
to eligible participants. The Purchase Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code
of 1986, as amended.
Eligible participants include any employee who has a customary working
schedule of more than 20 hours per week and whose customary employment is for
more than five months in any calendar year. However, employees who
11
<PAGE>
own stock possessing 5% or more of the total combined voting power or value of
all classes of stock of the Company or of any parent or subsidiary of the
Company are not eligible to participate. Eligible employees are entitled to
purchase shares of Common Stock on a calendar month basis at 92% of the fair
market value of the Company's Common Stock on the last business day of a
calendar month, defined as the closing price of the Company's Common Stock on
the American Stock Exchange (or such other securities market on which the
Company's Common Stock is primarily traded).
The Purchase Plan is administered by a committee comprised of at least two
directors which are selected by the Board of Directors (the "Committee"). To the
extent necessary to comply with the requirements of Rule 16b-3, the Committee
shall consist of two or more Disinterested Directors.
As of April 10, 1998, a total of 12,891 shares of Common Stock have been
issued pursuant to the Purchase Plan.
12
<PAGE>
OPTION GRANTS
Shown below is further information on grants of stock options pursuant to the
Plan during the fiscal year ended December 31, 1997, to the Named Officers. No
stock appreciation rights have been granted in connection with options.
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
----------------- ---------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE
SARS GRANTED TO OR BASE
GRANTED EMPLOYEES IN PRICE EXPIRATION
NAME (2) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ----- ----------- -------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Savage............................... 2,750(3) 3.3% 11.023 9/9/2007 19,063 48,310
Chairman of the Board
and Co-Chief Executive Officer
John E. Savage.................................. 7,150(3) 8.6% 11.023 9/9/2007 49,565 125,607
Co-Chief Executive Officer, President
and Chief Operating Officer
Guy A. Main..................................... 2,750(3) 3.3% 11.023 9/9/2007 19,063 48,310
Executive Vice President
Steven R. Kay................................... 5,500(3) 6.6% 11.023 9/9/2007 38,127 96,621
Senior Vice President, Chief Financial
Officer and Treasurer
Neil F. Pont.................................... 5,500(3) 6.6% 11.023 9/9/2007 38,127 96,621
Senior Vice President
</TABLE>
(1) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown above (compounded
annually) from the date of grant until the end of the ten year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price growth.
(2) The Plan is administered by the Compensation and Stock Option Committee of
the Board of Directors. The committee determines the eligibility of
employees, the number of shares to be granted and the terms of such grants.
(3) Options were granted on September 7, 1997 at fair market value and become
exercisable at the rate of 25% on the first, second, third and fourth
anniversary of the grant date, and have a term of 10 years.
13
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to exercised and unexercised options
to purchase the Company's Common Stock under the Plan.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT FY-END
AT FY-END (#) ($)(1)
------------- ------
SHARES ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Savage............................ -- -- 687 4,812 703 8,047
Chairman of the Board
and Co-Chief Executive Officer
John E. Savage............................... 20,350 68,127 50,160 23,870 108,375 26,813
Co-Chief Executive Officer, President and
Chief Operating Officer
Guy A. Main.................................. 4,317 10,110 -- 4,812 -- 8,047
Executive Vice President
Steven R. Kay................................ 16,500 56,250 18,975 22,275 8,063 21,313
Senior Vice President, Chief Financial
Officer and Treasurer
Neil F. Pont................................. 6,187 27,656 18,975 22,275 8,063 21,313
Senior Vice President
</TABLE>
(1) Represents the difference between the closing price of the Company's Common
Stock on the AMEX on December 31, 1997 and the exercise price of the
options.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS
The Report of the Compensation and Stock Option Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") establishes the general compensation policies of the Company,
establishes the compensation plans and specific compensation levels for
executive officers and administers the Amwest Insurance Group, Inc. Stock Option
Plan, the Senior Executive Bonus Plan (the "Bonus Plan") and the Amwest
Insurance Group, Inc. 1998 Stock Incentive Plan. The Committee is currently
comprised of three non-employee members of the Board of Directors.
14
<PAGE>
The cash compensation of the executive officers of the Company is comprised
of two elements: base salary and cash bonuses awarded under the operation of the
Bonus Plan. The potential cash bonus awards are intended to comprise a
significant portion of each executive's compensation.
DESCRIPTION OF THE BONUS PLAN
Annual incentives for the Co-CEO's are intended to reward them for increasing
earnings while maintaining the quality of those earnings. In 1997, the Company
commissioned Deloitte & Touche, LLP to perform an executive compensation study
intended to provide recommendations on developing an executive incentive plan.
The resulting product was the Bonus Plan which provides for short-term cash
bonus awards and long-term cash bonus awards paid to the Co-CEO's based on the
Company's return on equity ("ROE"), which is calculated as the Company's net
income divided by beginning stockholders' equity for the fiscal year, subject to
adjustments for recapitalization or other extraordinary events. Net income and
beginning stockholders' equity is determined by the use of generally accepted
accounting principles. The Committee believes that the Bonus Plan aligns annual
executive compensation with stockholder interests, by tying the major part of
the annual executive bonus payments to the Company's ROE.
Both short-term and long-term cash bonus provisions for executive officers
below the level of CEO use the same benchmarks as established for the Co-CEO's,
but limit their bonus opportunities to a smaller percentage of their base
salaries.
During 1997, the short-term cash bonus awards under the Bonus Plan comprised
16.57% of the cash compensation of the five executive officers in the aggregate.
Richard H. Savage and John E. Savage, the Company's Co-Chief Executive Officers,
received 23.37% and 13.27%, respectively, of their aggregate cash compensation
from cash bonus awards made under the Bonus Plan.
SALARY ADMINISTRATION
The Committee's general policy is to establish base salaries for the executive
officers at levels consistent with those being paid by organizations with which
the Company is competing for executive talent. The Committee has used a
combination of factors in setting and adjusting the base salaries of the
executive officers. These factors include available salary data from other
insurance companies, relative responsibility and compensation within the
Company, the individual's past performance and future potential. Included in the
salary data reviewed by the Committee is information obtained from publicly
available salary surveys for Insurance Industry executives.
LONG-TERM INCENTIVES
It is the Committee's policy to provide long-term incentives to the executives
of the Company through the long-term cash bonus program and the annual grant of
stock options. This component of the compensation program is intended primarily
to motivate executives to improve the long-term market performance of the
Company's stock.
The long-term cash bonus award is based on the same criteria as the short-term
cash bonus awards except awards earned are held on account and adjusted at the
end of the performance period depending on operating results. The performance
period is three (3) years in length, with the first performance period to
beginning on January 1, 1998 and ending on December 31, 2000. Subsequent
performance periods will begin annually each January 1 thereafter, until the
Bonus Plan is terminated.
The annual grant of stock options bears a direct relationship to the Company's
stock price and is considered to be an effective incentive for managers to
create value for all stockholders. The Committee therefore views stock options
as an important component of its long-term performance-based compensation
philosophy. Richard H. Savage can only receive Non-Qualified Stock Options
("NQO's") granted at market price. Other executives receive Incentive Stock
Options ("ISO's") granted at the current market value, except for John E.
Savage who can elect to receive either ISO's granted at 110% of market value
pursuant to Section 422 of the Internal Revenue Code or Non-
15
<PAGE>
Qualified Stock Options ("NQO's") granted at market price. Generally, options
vest 25% per year over four years and expire after 10 years. The options will
only have value to the extent that the Company's stock price increases during
that period.
In recent years, the Committee has operated under a guideline of making annual
grants of options in the range of 2.5% to 3.0% of the outstanding stock of the
Company. This equates to approximately 85,000 to 100,000 annual grants
currently. Within this framework, the Committee determines the allocation of
options to be granted each year based on the executive's position in the
Company; i.e., the number of options granted is intended to be proportional to
an executive's perceived ability to influence the Company's long-term growth and
profitability. For 1997, the Company had available a small number of options for
grant which equated to lower grants than in previous years. Included in this
Proxy Statement is a proposal to adopt for the Amwest Insurance Group, Inc. 1998
Stock Incentive
Plan which will be utilized in addition to the previous Amwest Insurance Group,
Inc. Stock Option Plan and the Amwest Insurance Group, Inc. Non-Employee
Director Stock Option Plan.
During 1997, the Committee authorized the grant of 75,500 employee stock
options, as compared to 101,000 grants in 1996 and 98,500 grants in 1995.
Included in the 1997 grants were 21,500 options granted to executive officers of
the Company, as detailed in the Option/SAR Grants Table of this Proxy Statement.
All of these options were granted at a per share exercise price of $12.125. The
option price was $3.75 below the market price at the date of grant.
Under current law, income tax deductions for compensation paid by publicly-
traded companies may be limited to the extent total compensation (including base
salary, annual bonus, restricted stock awards, stock option exercises, and non-
qualified benefits) for certain executive officers exceeds $1 million in any one
year. Under such law, the deduction limit does not apply to payments which
qualify as "performance based." To qualify as "performance based,"
compensation payments must be made from a plan that is administered by a
compensation committee of the Board of Directors which is comprised solely of
two or more outside directors. In addition, the material terms of the plan must
be disclosed to and approved by stockholders, and the Committee must certify
that the performance goals were achieved before payments can be awarded.
To the extent readily determinable, and as one of the factors in its
consideration of compensation matters, the Committee also considers the
anticipated tax treatment of the Company and to the executives of various
payments and benefits. However, since some types of compensation payments and
their deductibility depend upon the timing of an executive's exercise of stock
options (e.g., the spread on exercise of non-incentive stock options), and
because interpretations and changes in the tax laws and other factors beyond the
Committee's control may also affect the deductibility of compensation, the
Committee will not necessarily limit executive compensation to that which is
deductible under applicable provisions of the Internal Revenue Code. The
Committee will consider various alternatives to preserving the deductibility of
compensation payments and benefits to the extent reasonably practicable and to
the extent consistent with its other compensation objectives.
Dated: April 13, 1998
Compensation and Stock Option Committee
Jonathan K. Layne (Chairman)
Thomas R. Bennett
Jonathan K. Layne
16
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Layne, Bennett and Melton comprise the Compensation and Stock Option
Committee.
Mr. Layne is a partner of the law firm Gibson, Dunn and Crutcher LLP which has
provided legal services to the Company. The Company expects that such law firm
will continue to render legal services to the Company.
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Stock Price Performance Graph below compares the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock
(assuming reinvestment of dividends) against the cumulative total return of the
S&P 500 Stock Index and the Property Casualty Insurance Industry Composite Index
(in each case also assuming reinvestment of dividends) for the five fiscal years
commencing January 1, 1993 and ending December 31, 1997.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG AMWEST INSURANCE GROUP, INC., S&P 500 INDEX AND PROPERTY
CASUALTY INSURANCE INDUSTRY COMPOSITE INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION> AMWEST
MEASUREMENT PERIOD INSURANCE S&P PROPERTY
(FISCAL YEAR COVERED) GROUP, INC. 500 INDEX CASUALTY
- -------------------- ----------- --------- --------
<S> <C> <C> <C>
Measurement Pt- 1992 $100.00 $100.00 $100.00
FYE 1993 $129.19 $110.08 $102.42
FYE 1994 $127.42 $111.54 $101.44
FYE 1995 $171.76 $153.54 $145.48
FYE 1996 $157.40 $188.69 $174.79
FYE 1997 $174.39 $251.64 $250.41
</TABLE>
17
<PAGE>
PROPOSAL TO APPROVE AND ADOPT
THE COMPANY'S 1998 STOCK INCENTIVE PLAN
At the Annual Meeting of Stockholders, the stockholders of the Company will be
asked to approve and adopt the Amwest Insurance Group, Inc. 1998 Stock Incentive
Plan (the "1998 Plan").
On April 13, 1998, the Board of Directors unanimously adopted, subject to
stockholder approval, the 1998 Plan. The 1998 Plan will be used in addition to
the Amwest Insurance Group, Inc. Stock Option Plan and the Amwest Insurance
Group, Inc. Non-Employee Director Stock Option Plan. The purpose of the 1998
Plan is to enable the Company to attract, retain and motivate its employees and
consultants in the Company, and to enable the Company to attract, retain and
motivate its non-employee directors and further align their interest with those
of the stockholders of the Company by providing for or increasing the
proprietary interest of such directors in the Company.
All statements set forth in this Proxy Statement relating to the 1998 Plan are
qualified in their entirety by reference to the complete statement of the 1998
Plan which is set forth in Appendix A to this Proxy Statement. The 1998 Plan is
intended to qualify under Rule 16b-3 of the Securities Exchange Act of 1934, as
amended. If any of the terms or provisions of the 1998 Plan conflict with the
requirements of Rule 16b-3, then such terms and provisions shall be deemed
inoperative to the extent they so conflict with such requirements.
ADMINISTRATION
The 1998 Plan shall be administered by a committee (the "Committee") of the
Board of Directors of the Company (the "Board") consisting of two or more
directors, each of whom is a "Non-Employee Director" (as such term is defined in
Rule 16b-3 promulgated under the Exchange Act, as such Rule may be amended from
time to time) and, with respect to grants of and other determinations affecting
Awards intended to qualify as performance-based compensation ("Performance-Based
Compensation") within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), is an "outside director" within the meaning of
Section 162(m) of the Code. This Plan may in the absence of action by the
Committee, be administered by the entire Board (subject to any limitations
contained in Rule 16b-3 or otherwise), with respect to any award not intended to
qualify as Performance-Based Compensation.
PARTICIPANTS
Awards may be granted pursuant to the 1998 Plan to: (a) any employee of the
Company or any of its subsidiaries or affiliates, including any director who is
also such an employee, (b) any consultant of the Company or any of its
subsidiaries or affiliates or (c) any director of the Company who is not an
employee of the Company (a "Non-Employee Director").
OPERATION OF THE 1998 PLAN
The Committee, on behalf of the Company, is authorized under the 1998 Plan to
enter into any type of arrangement with a Participant that is not inconsistent
with the provisions of the 1998 Plan and that, by its terms, involves or might
involve the issuance of (i) shares of common stock, par value $.01 per share
("Common Stock"), of the Company or of any other class of security of the
Company that is convertible into shares of Common Stock ("Shares") or (ii) a
right or interest with an exercise or conversion privilege at a price related to
the Shares or with a value derived from the value of the Shares, which right or
interest may, but need not, constitute a Derivative Security (as such term is
defined in Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as such rule may be amended from time to time).
The entering into of any such arrangement is referred to herein as the "grant"
of an "Award."
Awards are not restricted to any specified form or structure and may include,
without limitation, sales or bonuses of stock, restricted stock, stock options,
reload stock options, stock purchase warrants, other rights to acquire stock,
securities convertible into or redeemable for stock, stock appreciation rights,
limited stock appreciation rights, phantom stock, dividend equivalents,
performance units or performance shares, and an Award
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may consist of one such security or benefit or two or more of them in tandem or
in the alternative. Awards may be issued, and Shares may be issued, pursuant to
an Award, for any lawful consideration as determined by the Committee,
including, without limitation, services rendered by the recipient of such Award.
The 1998 Plan provides that the aggregate number of Shares that may be issued
pursuant to all Awards shall not exceed 250,000 and that the aggregate number of
shares that may be granted to any one Participant during any calendar year shall
not exceed 25,000, subject to adjustment as provided below. The 1998 Plan will
be used in addition to the two previous stock option plans, the Amwest Insurance
Group, Inc. Stock Option Plan and the Amwest Insurance Group, Inc. Non-Employee
Director Stock Option Plan, which provided for 751,000 shares to be issued
pursuant to options of which 47,136 remained available for awards as of April
10, 1998. If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold,
then, unless the terms of such transaction shall provide otherwise, the
Committee shall make appropriate and proportionate adjustments in (a) the number
and type of shares or other securities or cash or other property that may be
acquired pursuant to Incentive Stock Options ("ISO's") and other Awards
theretofore granted under this Plan, (b) the maximum number and type of shares
or other securities that may be issued pursuant to Incentive Stock Options and
other Awards thereafter granted under this Plan, and (c) the maximum number of
Shares for which options may be granted to any participant during any one
calendar year; provided, however, that no adjustment shall be made to the number
of Shares that may be acquired pursuant to outstanding Incentive Stock Options
or the maximum number of Shares with respect to which Incentive Stock Options
may be granted under this Plan to the extent such adjustment would result in
such options being treated as other than Incentive Stock Options; provided
further that no such adjustment shall be made to the extent the Committee
determines that such adjustment would result in the disallowance of a federal
income tax deduction for compensation attributable to Awards hereunder by
causing such compensation to be other than Performance-Based Compensation.
MANNER OF EXERCISE
The recipient of such Award, including any recipient who is a director or
officer of the Company, may pay the purchase price of the Shares or other
property issuable pursuant to such Award, and/or such recipient's tax
withholding obligation with respect to such issuance, in whole or in part, by
any one or more of the following:
(A) the delivery of cash;
(B) the delivery of the other property deemed acceptable by the Committee;
(C) the delivery of previously owned shares of capital stock of the Company
(including "pyramiding") or other property; or
(D) a reduction in the amount of Shares of Shares or other property
otherwise issuable pursuant to such Award.
AMENDMENT AND TERMINATION
The Board may amend or terminate this Plan at any time and in any manner,
subject to the following limitations:
(a) No such amendment or termination shall deprive the recipient of any
Award theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto;
(b) If an amendment to the Plan would (i) increase the maximum number of
Shares that may be issued pursuant to (A) all Awards granted under this Plan,
(B) all Incentive Stock Options granted under this Plan and (C) Awards granted
under this Plan during any calendar year to any one Employee, (ii) change the
class of accruing to participants who are subject to Section 16 of the Exchange
Act in a manner not specifically contemplated herein or (iv) affect the Plan's
compliance with Rule 16-b3 or applicable provisions of the Code, as required to
comply with
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Rule 16b-3, Sections 422 and 162(m) of the Code, and other applicable provisions
of or rules under the Code, as amended from time to time; and
(c) Section 4 hereof shall not be amended more than once every six months,
other than to comport with changes in the Code, the Employment Retirement Income
Security Act, or the rules and regulations thereunder.
NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to this Plan
shall confer on an individual any right to continue in the employ of the Company
or any of its subsidiaries or affiliates or interfere in any way with the right
of the Company (or its subsidiaries or affiliates, as applicable) to terminate
an individual's employment at any time. The agreement evidencing an Award may
contain such provisions as the Committee may approve with respect to the effect
of approved leaves of absence.
COMPLIANCE WITH LAW
This Plan, the grant and exercise of Awards thereunder, and the obligation of
the Company to sell and deliver Shares under such Awards, shall be subject to
all applicable federal and state laws, rules and regulations and to such
approvals by any governmental or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for shares of
Common Stock prior to the completion of any registration or qualification of
such shares under any federal or state law or issuance of any ruling or
regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
EFFECTIVE DATE
No Awards shall be made under the 1998 Plan after April 13, 2008. Although
Shares may be issued after April 12, 2008 pursuant to Awards made on or prior to
such date, no Shares shall be issued under the 1998 Plan after April 11, 2018.
FEDERAL INCOME TAX TREATMENT
The following is a brief discussion of the federal income tax treatment which
will generally apply to Awards made under the 1998 Plan, based on federal income
tax laws in effect on the date hereof. The exact federal income tax treatment of
Awards will depend on the specific nature of the Award. Such an Award may,
depending on the conditions applicable to the Award, be taxable as an option, as
restricted or unrestricted stock, as a cash payment, or otherwise. Because the
following is only a brief summary of the general federal income tax rules,
participants should not rely thereon for individual tax advice, as each
taxpayer's situation and the consequences of any particular transaction will
vary depending upon the specific facts and circumstances involved. Each
participant is advised to consult with his or her own tax advisor for particular
federal, as well as state and local, income and any other tax advice.
Nonqualified Options. An optionee will not be taxed at the time an option that
is not an ISO (a "nonqualified option") is granted. In general, an employee
exercising a nonqualified option will recognize ordinary income equal to the
excess of the fair market value on the exercise date of the stock purchased over
the option price. Upon subsequent disposition of the stock purchased, the
difference between the amount realized and the fair market value of the stock on
the exercise date will constitute capital gain or loss. The Company will not
recognize income, gain or loss upon the granting of a nonqualified option. Upon
the exercise of such an option, the Company is entitled to an income tax
deduction equal to the amount of ordinary income recognized by the employee.
ISO's. An employee will not be taxed at the time an ISO is granted. In
general, an employee exercising an ISO will not be taxed at the time an ISO is
exercised if the stock purchased is held for at least one year after the
exercise date and at least two years after the date of grant of the ISO;
provided, however, the excess of the fair market value of the stock acquired
upon exercise of an ISO over the exercise price is treated as a positive
adjustment to the employee's "alternative minimum taxable income" in the year of
exercise, and therefore exercise of an ISO may give rise to an alternative
minimum tax liability of the employee in the year of exercise.
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If the one-year and two-year holding periods are satisfied, the difference
between the option price and the amount realized upon subsequent disposition of
the stock will constitute long-term capital gain or loss. Stock held at least 18
months following the date of exercise of the ISO will be taxed as "adjusted net
capital gain" pursuant to Section 1(h) of the Code. Stock held more than one
year but less than 18 months will be taxed as "mid-term gain" pursuant to
Section 1(h) of the Code. If such holding periods are not satisfied, the
employee will recognize ordinary income to the extent of the lesser of the gain
realized and the excess of the fair market value of the stock on the exercise
date over the option price. Any gain realized in excess of the amount recognized
as ordinary income by the employee will be capital gain. The Company will not
recognize income, gain or loss upon the granting or exercise of an ISO, nor will
it be entitled to any deduction upon the disposition of an ISO if the holding
periods referred to above are satisfied. If such holding periods are not
satisfied, the Company will be entitled to a deduction equal to the amount of
the ordinary income recognized by the employee.
Special Rules for Awards Granted to Insiders. If an optionee is a director,
officer or stockholder subject to Section 16 of the Exchange Act (an "Insider"),
the determination of the amount and the timing of income recognition in
connection with the exercise of an option and the beginning of the holding
period for any Common Stock received generally may be required to be deferred
until the expiration of any period during which the Insider would be restricted
from disposing of any stock received. Insiders should consult their tax advisors
to determine the tax consequences to them of exercising options granted to them
pursuant to the Plan.
Miscellaneous Tax Issues. Awards may be granted under the 1998 Plan which do
not fall clearly into the categories described above. The federal income tax
treatment of these awards will depend upon the specific terms of such Awards.
Generally, the Company will be required to make arrangements for withholding
applicable taxes with respect to any ordinary income recognized by a participant
in connection with Awards made under the 1998 Plan.
With certain exceptions, an individual may not deduct investment-related
interest to the extent such interest exceeds the individual's net investment
income for the year. Investment interest generally includes interest paid on
indebtedness incurred to purchase shares of Common Stock. Interest disallowed
under this rule may be carried forward to and deducted in later years, subject
to the same limitations.
A holder's tax basis in Common Stock acquired pursuant to the 1998 Plan
generally will equal the amount paid for the Common Stock plus any amount
recognized as ordinary income with respect to such stock. Other than ordinary
income recognized with respect to the Common Stock and included in basis, any
subsequent gain or loss upon the disposition of such stock generally will be
capital gain or loss, the treatment of which will depend on the holder's holding
period.
Special rules will apply in cased where a recipient of any Award pays the
exercise or purchase price of the Award or applicable withholding tax
obligations under the Plan by delivering previously owned shares of Common Stock
or by reducing the amount of shares otherwise issuable pursuant to the Award.
The surrender of withholding of such shares will in certain circumstances result
in the recognition of income with respect to such shares or a carryover basis in
the shares acquired.
The terms of the agreements pursuant to which specific Awards are made to
employees under the 1998 Plan may provide for accelerated vesting or payment of
an Award in connection with a change in ownership or control of the Company. In
that event and depending upon the individual circumstances of the recipient,
certain amounts with respect to such Awards may constitute "excess parachute
payments" under the "golden parachute" provisions of the Code. Pursuant to these
provisions, a recipient will be subject to a 20% excise tax on any "excess
parachute payments."
The Company generally obtains a deduction equal to the ordinary income
recognized by the recipient of an Award. However, the Company's deduction for
such amounts (including amounts attributable to the ordinary income recognized
with respect to options) may be limited to $1,000,000 (per person) annually. In
addition, the Company is not entitled to a deduction for any compensation that
is subject to the 20% excise tax discussed in the preceding paragraph.
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RELATED PARTY TRANSACTIONS
In connection with the relocation of the Company's headquarters from Woodland
Hills, California to Calabasas, California, the Company listed for sale its two
corporate-owned condominiums in Woodland Hills used primarily for temporarily
housing employees visiting the home office. In April 1997, the Company sold one
of these units to a daughter of Richard H. Savage, Chairman of the Board and Co-
Chief Executive Officer, for a sales price of $184,250. The sales price, which
was approved by the Audit Committee of the Board of Directors, was based on
comparable sales data, an independent appraisal and the estimated selling price
of the other unit in the same complex, with a similar floor plan and square
footage.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick was the Company's independent auditor for fiscal 1997.
During fiscal 1997, the Company also engaged KPMG Peat Marwick to render certain
non-audit professional services involving assistance on tax planning matters,
actuarial services and general consultations.
The appointment of auditors is approved annually by the Board of Directors
which is based in part on the recommendation of the Audit Committee. In making
its recommendation, the Audit Committee reviews both the audit scope and
estimated audit fees for the coming year. KPMG Peat Marwick has been selected by
the Audit Committee for the current year and the Board of Directors is expected
to act upon its recommendation at its next meeting. Stockholder approval is not
sought in connection with this election.
KPMG Peat Marwick has served as the Company's independent auditor since 1984.
Representatives of KPMG Peat Marwick will be present at the Annual Meeting of
Stockholders and will be given an opportunity to make a statement if they desire
to do so and will respond to questions from stockholders.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholders who wish to present proposals for action at the 1999 Annual
Meeting of Stockholders should submit their proposals in writing to the
Secretary of the Company at the address set forth on the first page of this
Proxy Statement. Proposals must be received by the Secretary no later than
December 21, 1998, for inclusion in next year's proxy statement and proxy card.
MISCELLANEOUS
The Company knows of no matters other than the foregoing to be brought before
the Annual Meeting but if any other such matter properly comes before the
meeting, or any adjournment or postponement thereof, it is the intention of the
persons named in the accompanying form of Proxy to vote the proxies in
accordance with their best judgment.
The Annual Report of the Company for the fiscal year ended December 31, 1997,
including financial statements, is being mailed under the same cover to each
person who was a stockholder of record on April 10, 1998.
The Company will furnish without charge a copy of its Annual Report on Form
10-K for the fiscal year ended December 31, 1997, as filed with the Securities
and Exchange Commission, to any stockholder desiring a copy. Stockholders may
write to Amwest Insurance Group, Inc., PO Box 4500, Woodland Hills, CA 91365-
4500, Attention: Steven R. Kay, Senior Vice President.
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EACH STOCKHOLDER WHO DOES NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON IS
URGED TO EXECUTE THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ Richard H. Savage
Richard H. Savage
Chairman of the Board and
Co-Chief Executive Officer
Calabasas, California
April 15, 1998
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APPENDIX A
AMWEST INSURANCE GROUP, INC.
1998 STOCK INCENTIVE PLAN
Section 1. Purpose of Plan
The purpose of this 1998 Stock Incentive Plan (this "Plan") of Amwest
Insurance Group, Inc., a Delaware corporation (the "Company"), is to enable the
Company to attract, retain and motivate its employees and consultants in the
Company, and to enable the Company to attract, retain and motivate its non-
employee directors and further align their interest with those of the
stockholders of the Company by providing for or increasing the proprietary
interest of such directors in the Company.
Section 2. Eligible Persons
Each of the following persons (each, a "Participant") shall be eligible to be
considered for the grant of Awards (as hereinafter defined) hereunder: (a) any
employee of the Company or any of its subsidiaries or affiliates, including any
director who is also such an employee, (b) any consultant of the Company or any
of its subsidiaries or affiliates or (c) any director of the Company who is not
an employee of the Company (a "Non-Employee Director").
Section 3. Awards
(a) The Committee (as hereinafter defined), on behalf of the Company, is
authorized under this Plan to enter into any type of arrangement with a
Participant that is not inconsistent with the provisions of this Plan and that,
by its terms, involves or might involve the issuance of (i) shares of common
stock, par value $.01 per share ("Common Stock"), of the Company or of any other
class of security of the Company that is convertible into shares of Common Stock
("Shares") or (ii) a right or interest with an exercise or conversion privilege
at a price related to the Shares or with a value derived from the value of the
Shares, which right or interest may, but need not, constitute a Derivative
Security (as such term is defined in Rule 16a-1 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as such rule may be
amended from time to time). The entering into of any such arrangement is
referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or structure and may
include, without limitation, sales or bonuses of stock, restricted stock, stock
options, reload stock options, stock purchase warrants, other rights to acquire
stock, securities convertible into or redeemable for stock, stock appreciation
rights, limited stock appreciation rights, phantom stock, dividend equivalents,
performance units or performance shares, and an Award may consist of one such
security or benefit or two or more of them in tandem or in the alternative.
(c) Subject to paragraph (d)(ii) below, Awards may be issued, and Shares may
be issued pursuant to an Award, for any lawful consideration as determined by
the Committee, including, without limitation, services rendered by the recipient
of such Award.
(d) Subject to the provisions of this Plan, the Committee, in its sole and
absolute discretion, shall determine all of the terms and conditions of each
Award granted under this Plan, which terms and conditions may, but need not,
include, among other things:
(i) a provision permitting the recipient of such Award, including any
recipient who is a director or officer of the Company, to pay the purchase price
of the Shares or other property issuable pursuant to such Award, and/or any tax
withholding obligation with respect to such issuance, in whole or in part, by
any one or more of the following:
(A) the delivery of cash;
(B) the delivery of the other property deemed acceptable by the
Committee;
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(C) the delivery of previously owned shares of capital stock of the
Company (including "pyramiding") or other property; or
(D) a reduction in the amount of Shares or other property otherwise
issuable pursuant to such Award;
(ii) a provision specifying the exercise or settlement price for any
option, stock appreciation right or similar Award, or specifying the method by
which such price is determined; provided, that the exercise or settlement price
of any option, stock appreciation right or similar Award that is intended to
qualify as performance-based compensation ("Performance-Based Compensation") for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be not less that the fair market value of a Share on the date
such Award is granted;
(iii) a provision relating to the exercisability and/or vesting of Awards,
lapse and non-lapse restrictions upon the Shares obtained or obtainable under
Awards or under the Plan and the termination, expiration and/or forfeiture of
Awards;
(iv) a provision conditioning or accelerating the receipt of benefits
pursuant to such Award, either automatically or in the discretion of the
Committee, upon the occurrence of specified events, including without
limitation, a change of control of the Company (as defined by the Committee), an
acquisition of a specified percentage of the voting power of the Company, the
dissolution or liquidation of the Company, a sale of substantially all of the
property and assets of the Company or an event of the type described in Section
7 hereof;
(v) a provision required in order for such Award to qualify (A) as an
incentive stock option (an "Incentive Stock Option") under Section 422 of the
Code; provided, however that no Award issued to any consultant or any Non-
Employee Director may qualify as an Incentive Stock Option, (B) as "performance
based compensation" under Section 162(m) of the Code and/or (C) for an exemption
for Section 16 of the Exchange Act; and/or
(vi) a provision restricting the transferability of Awards or Shares issued
under Awards.
Section 4. Stock Subject to Plan
(a) The aggregate number of Shares that may be issued pursuant to all
Incentive Stock Options granted under this Plan shall not exceed 250,000,
subject to adjustment as provided in Section 7 hereof.
(b) At any time, the aggregate number of Shares issued pursuant to all Awards
(including all Incentive Stock Options) granted under this Plan shall not exceed
250,000, subject to adjustment as provided in Section 7 hereof.
(c) For purposes of Section 4(b) hereof, the aggregate number of Shares issued
and issuable pursuant to Awards granted under this Plan shall at any time be
deemed to be equal to the sum of the following:
(i) the number of Shares that were issued prior to such time pursuant to
Awards granted under this Plan, other than Shares that were subsequently
reacquired by the Company pursuant to the terms and conditions of such Awards
and with respect to which the holder thereof received no benefits of ownership
such as dividends; plus
(ii) the number of Shares that were otherwise issuable prior to such time
pursuant to Awards granted under the Plan, but that were withheld by the Company
as payment of the purchase price of the Shares issued pursuant to such Awards or
as payment of the recipient's tax withholding obligation with respect to such
issuance; plus
(iii) the maximum number of Shares that are or may be issuable at or after
such time pursuant to Awards granted or to be granted under this Plan prior to
such time.
(d) Subject to adjustment as provided in Section 7 hereof, the aggregate
number of Shares subject to Awards granted during any calendar year to any one
Participant (including the number of Shares involved in Awards having a value
derived from the value of Shares) shall not exceed 25,000 Shares.
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Section 5. Duration of Plan
No Awards shall be made under this Plan after April 13, 2008. Although Shares
may be issued after April 12, 2008 pursuant to Awards made on or prior to such
date, no Shares shall be issued under this Plan after April 11, 2018.
Section 6. Administration of Plan
(a) This Plan shall be administered by a committee (the "Committee") of the
Board of Directors of the Company (the "Board") consisting of two or more
directors, each of whom is a "Non-Employee Director" (as such term is defined in
Rule 16b-3 promulgated under the Exchange Act, as such Rule may be amended from
time to time) and, with respect to grants of and other determinations affecting
Awards intended to qualify as Performance-Based Compensation, is an "outside
director" within the meaning of Section 162(m) of the Code. Notwithstanding the
foregoing, however, prior to the registration of the Shares under Section 12 of
the Exchange Act, this Plan may in the absence of action by the Committee, be
administered by the entire Board (subject to any limitations contained in Rule
16b-3 or otherwise), with respect to any Award not intended to qualify as
Performance-Based Compensation.
(b) Subject to the provisions of this Plan, the Committee shall be authorized
and empowered to do all things necessary or desirable in connection with the
administration of this Plan, including without limitation, the following:
(i) adopt, amend and rescind rules and regulations relating to this Plan;
(ii) determine which persons are Participants and to which of Participants,
if any, Awards shall be granted hereunder,
(iii) grant Awards to Participants and determine the terms and conditions
thereof, including the number of Shares issuable pursuant thereto;
(iv) determine whether, and the extent to which adjustments are required
pursuant to Section 7 hereof; and
(v) interpret and construe this Plan and the terms and conditions of any
Award granted hereunder.
Section 7. Adjustments
If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold,
then, unless the terms of such transaction shall provide otherwise, the
Committee shall make appropriate and proportionate adjustments in (a) the number
and type of shares or other securities or cash or other property that may be
acquired pursuant to Incentive Stock Options and other Awards theretofore
granted under this Plan, (b) the maximum number and type of shares or other
securities that may be issued pursuant to Incentive Stock Options and other
Awards thereafter granted under this Plan, and (c) the maximum number of Shares
for which options may be granted to any participant during any one calendar
year; provided, however, that no adjustment shall be made to the number of
Shares that may be acquired pursuant to outstanding Incentive Stock Options or
the maximum number of Shares with respect to which Incentive Stock Options may
be granted under this Plan to the extent such adjustment would result in such
options being treated as other than Incentive Stock Options; provided further
that no such adjustment shall be made to the extent the Committee determines
that such adjustment would result in the disallowance of a federal income tax
deduction for compensation attributable to Awards hereunder by causing such
compensation to be other than Performance-Based Compensation.
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Section 8. Amendment and Termination of Plan
The Board may amend or terminate this Plan at any time and in any manner,
subject to the following limitations:
(a) No such amendment or termination shall deprive the recipient of any
Award theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto;
(b) If an amendment to the Plan would (i) increase the maximum number of
Shares that may be issued pursuant to (A) all Awards granted under this Plan,
(B) all Incentive Stock Options granted under this Plan and (C) Awards granted
under this Plan during any calendar year to any one Participant, (ii) change the
class of persons eligible to receive Awards under the Plan, (iii) otherwise
materially increase the benefits hereunder accruing to participants who are
subject to Section 16 of the Exchange Act in a manner not specifically
contemplated herein or (iv) affect the Plan's compliance with Rule 16-b3 or
applicable provisions of the Code, as amended from time to time, the amendment
shall be approved by the Company's stockholders to the extent required to comply
with Rule 16b-3, Sections 422 and 162(m) of the Code, and other applicable
provisions of or rules under the Code, as amended from time to time; and
(c) Section 4 hereof shall not be amended more than once every six months,
other than to comport with changes in the Code, the Employment Retirement Income
Security Act, or the rules and regulations thereunder.
Section 9. Effective Date of Plan
This Plan shall be effective as of April 13, 1998, the date upon which it was
approved by the Board; provided, however, that no Shares may be issued under
this Plan until it has been approved, directly or indirectly by the affirmative
votes of the holders of a majority of the securities of the Company present, or
represented, and entitles to vote at a meeting duly held or, or, in lieu
thereof, by action by written consent, in accordance with the laws of the State
of Delaware.
Section 10. Compliance with Other Laws and Regulations
This Plan, the grant and exercise of Awards thereunder, and the obligation of
the Company to sell and deliver Shares under such Awards, shall be subject to
all applicable federal and state laws, rules and regulations and to such
approvals by any governmental or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for shares of
Common Stock prior to the completion of any registration or qualification of
such shares under any federal or state law or issuance of any ruling or
regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
Section 11. No Right to Company Employment
Nothing in this Plan or as a result of any Award granted pursuant to this Plan
shall confer on an individual any right to continue in the employ of the Company
or any of its subsidiaries or affiliates or interfere in any way with the right
of the Company (or its subsidiaries or affiliates, as applicable) to terminate
an individual's employment at any time. The agreement evidencing an Award may
contain such provisions as the Committee may approve with respect to the effect
of approved leaves of absence.
Section 12. Liability of Company
The Company and any affiliate which is in existence or hereafter comes into
existence shall not be liable to a Participant or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or sales of Shares as to
which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any Shares hereunder; and
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(b) Tax Consequences. Any tax consequence expected, but not realized, by
any Participant or other person due to the issuance, exercise, settlement,
cancellation or other transaction involving any Award granted hereunder.
Section 13. Governing Law
This Plan and any Awards and agreements hereunder shall be interpreted and
construed in accordance with the laws of the State of Delaware and applicable
federal law.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing
by the Board, Amwest Insurance Group, Inc. has caused the presents to be duly
executed in its name and in its name and behalf by its proper officers thereunto
duly authorized as of this 13th day of April, 1998.
AMWEST INSURANCE GROUP, INC.
By: /s/ RICHARD H. SAVAGE
------------------------------
Richard H. Savage
Chairman of the Board and
Co-Chief Executive Officer
ATTEST:
By: /s/ RICHARD H. BUSCH
-----------------------------
Richard H. Busch
Secretary
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PROXY AMWEST INSURANCE GROUP, INC. PROXY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 22, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS for the Annual
Meeting of Stockholders to be held on May 22, 1998 at 2:00 P.M., Los Angeles
time, at its corporate headquarters, 5230 Las Virgenes Road, Calabasas,
California 91302.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the accompanying Proxy Statement for the 1998 Annual
Meeting and, revoking all prior Proxies, appoints Richard H. Savage, John E.
Savage, Guy A. Main, Steven R. Kay and Neil F. Pont, and each or any of them,
with full power of substitution in each, the proxies of the undersigned to
represent the undersigned and vote all shares of Common Stock of the
undersigned in Amwest Insurance Group, Inc., at the Annual Meeting of
Stockholders to be held on May 22, 1998 and any adjournments or postponements
thereof upon the following matters and in the manner designated below:
THIS PROXY WILL BE VOTED FOR ITEM 1 UNLESS OTHERWISE SPECIFIED
1. ELECTION OF DIRECTORS FOR THE TERMS EXPIRING AS SET FORTH BELOW AND AS
DESCRIBED IN THE PROXY STATEMENT:
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked) to vote for all nominees listed
Bruce A. Bunner (2001), Robert W. Kleinschmidt (2001), Arthur F. Melton (2001),
Roland D. Miller (2001), Neil F. Pont (2000)
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below:
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(CONTINUED ON REVERSE SIDE)
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(CONTINUED FROM OTHER SIDE)
2. To consider and to act upon a proposal to approve and adopt the Amwest
Insurance Group, Inc. 1998 Stock Incentive Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof and as to which the undersigned
hereby confers discretionary authority.
Please sign as name(s) appears.
Executors, administrators,
guardians, officers of cor-
porations, and others signing in a
fiduciary capacity should state
their full titles as such.
Date:________________________, 1998
___________________________________
___________________________________
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY
IN THE ENCLOSED ENVELOPE.
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