<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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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 19, 2000
_____________
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 19, 2000, at 9:00 a.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 2003, or until their successors are elected and qualified; and
(2) 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 7, 2000 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
Calabasas, California
April 12, 2000
<PAGE>
AMWEST INSURANCE GROUP, INC.
5230 Las Virgenes Road
Calabasas, California 91302
_________________
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
May 19, 2000
_________________
GENERAL INFORMATION ON THE MEETING
This Proxy Statement is being mailed on or about April 18, 2000 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 19, 2000 at 9:00 a.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 7, 2000 are
entitled to notice of and to vote at the meeting, or any adjournment or
postponement thereof. As of April 7, 2000, 4,333,093 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 2000 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/she is entitled to cast as many votes as equals the
number of his/her 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/she 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/her 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 7, 2000, or as
of the date otherwise indicated, 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, (iii) each executive officer of the Company ("Named
Officers") and (iv) all directors and officers as a group.
<TABLE>
<CAPTION>
Number of Shares Percent of Shares
Name or Identity of Group Beneficially Owned (1) Outstanding (20)
------------------------- ---------------------- ----------------
<S> <C> <C>
Directors and Named Officers:
Richard H. Savage..................................... 1,002,766 (2)(3)(4) 23.11%
John E. Savage........................................ 206,209 (5) 4.70%
Guy A. Main........................................... 611,318 (6)(7) 14.09%
Steven R. Kay......................................... 63,785 (8) 1.46%
Neil F. Pont.......................................... 49,845 (9) 1.14%
Thomas R. Bennett..................................... 23,872 (10) (21)
Bruce A. Bunner....................................... 15,100 (11) (21)
Robert W. Kleinschmidt................................ 28,607 (12) (21)
Arthur F. Melton...................................... 74,148 (13) 1.69%
Roland D. Miller...................................... 3,496 (14) (21)
Charles L. Schultz.................................... 15,100 (15) (21)
All Directors and Officers as a group (11 persons)...... 2,094,246 45.47%
Other Principal Stockholders:
Savage (1999) Limited Partnership..................... 152,790 (3)(4) 3.53%
5230 Las Virgenes Road
Calabasas, CA 91302
Savage Diversified, Inc............................... 843,177 (4) 19.46%
5230 Las Virgenes Road
Calabasas, CA 91302
Main Family Trust..................................... 593,175 (7) 13.69%
1405 Via Margarita
Palos Verdes Estates, CA 90274
Dimensional Fund Advisors Inc......................... 272,796 (16) 6.30%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Heartland Advisors, Inc............................... 325,810 (17) 7.52%
790 North Milwaukee Street
Milwaukee, WI 53202
Markel Corporation.................................... 259,061 (18) 5.98%
4551 Cox Road
Glen Allen, Virginia 23060
Wellington Management Company, LLP.................... 232,000 (19) 5.35%
75 State Street
Boston, MA 02109
</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) Of the shares beneficially owned by Richard H. Savage: (1) 152,790 shares
represent shares owned by the Savage Family Trust for which Mr. Savage
serves as Trustee; and (2) 843,177 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
2
<PAGE>
addition, 6,799 shares shown as beneficially owned by Richard H. Savage
represent shares which may be acquired by Richard H. Savage within sixty
days of April 7, 2000, pursuant to the exercise of options under the
Company's Stock Option Plan and the Company's 1998 Stock Incentive Plan.
(3) The Savage (1999) Limited Partnership owns 152,790 shares of Common Stock.
Pursuant to the terms of the Savage (1999) Limited Partnership, Richard H.
Savage maintains sole voting and investment power with respect to these
shares. 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, 843,177 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 23,567 shares of Common Stock;
(2) Savage Family Stock Trust FBO Lorraine Ann Savage which owns 23,567
shares of Common Stock; and (3) Savage Family Stock Trust FBO Geraldine K.
Thuresson which owns 23,569 shares of Common Stock. John E. Savage owns
76,844 shares of Common Stock. In addition, 58,662 shares shown as
beneficially owned by John E. Savage represent shares which may be acquired
by John E. Savage within sixty days of April 7, 2000, pursuant to the
exercise of options under the Company's Stock Option Plan and the Company's
1998 Stock Incentive Plan.
(6) Of the shares beneficially owned by Guy A. Main: (1) 593,175 shares
represent shares owned by the Main Family Trust for which Mr. Main and his
wife serve as Trustee; and (2) 12,100 shares represent shares which Mr.
Main holds directly. In addition, 6,043 shares shown as beneficially owned
by Guy A. Main represent shares which may be acquired by Guy A. Main within
sixty days of April 7, 2000, pursuant to the exercise of options under the
Company's Stock Option Plan and the Company's 1998 Stock Incentive Plan.
(7) The Main Family Trust owns 593,175 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) 16,463 shares
represent shares that are directly owned by Steven R. Kay; (2) 605 shares
represent shares that are indirectly held through his wife; (3) 242 shares
represent shares that are indirectly held through his son; and (4) 46,475
shares represent shares which may be acquired by Steven R. Kay within sixty
days of April 7, 2000, pursuant to the exercise of options under the
Company's Stock Option Plan and the Company's 1998 Stock Incentive Plan.
(9) Of the shares beneficially owned by Neil F. Pont: (1) 5,360 shares
represent shares that are directly owned by Neil F. Pont; and (2) 44,485
shares represent shares which may be acquired by Neil F. Pont within sixty
days of April 7, 2000, pursuant to the exercise of options under the
Company's Stock Option Plan and the Company's 1998 Stock Incentive Plan.
(10) Of the shares beneficially owned by Thomas R. Bennett: (1) 2,722 shares
represent shares that are jointly owned by Thomas R. Bennett and his wife;
and (2) 21,150 shares represent shares which may be acquired by Thomas R.
Bennett within sixty days of April 7, 2000, pursuant to the exercise of
options under the Company's Non-Employee Director Stock Option Plan and the
Company's 1998 Stock Incentive Plan.
(11) Of the shares beneficially owned by Bruce A. Bunner, all 15,100 shares
represent shares which may be acquired by Bruce A. Bunner within sixty days
of April 7, 2000, pursuant to the exercise of options under the Company's
Non-Employee Director Stock Option Plan and the Company's 1998 Stock
Incentive Plan.
(12) Of the shares beneficially owned by Robert W. Kleinschmidt: (1) 25,595
shares represent shares that are directly owned by Robert W. Kleinschmidt;
and (2) 3,012 shares represent shares which may be acquired by Robert W.
Kleinschmidt within sixty days of April 7, 2000, pursuant to the exercise
of options under the Company's 1998 Stock Incentive Plan.
3
<PAGE>
(13) Of the shares beneficially owned by Arthur F. Melton: (1) 3,509 shares
represent shares that are jointly owned by Arthur F. Melton and his wife;
(2) 18,150 shares represent shares that are directly owned by Arthur F.
Melton; and (3) 52,489 shares represent shares which may be acquired by
Arthur F. Melton within sixty days of April 7, 2000, pursuant to the
exercise of options under the Company's Stock Option Plan, the Company's
Non-Employee Director Stock Option Plan and the Company's 1998 Stock
Incentive Plan.
(14) Of the shares beneficially owned by Roland D. Miller: (1) 484 shares
represent shares that are directly owned by Roland D. Miller; and (2) 3,012
shares represent shares which may be acquired by Roland D. Miller within
sixty days of April 7, 2000, pursuant to the exercise of options under the
Company's 1998 Stock Incentive Plan.
(15) Of the shares beneficially owned by Charles L. Schultz, all 15,100 shares
represent shares which may be acquired by Charles L. Schultz within sixty
days of April 7, 2000, pursuant to the exercise of options under the
Company's Non-Employee Director Stock Option Plan and the Company's 1998
Stock Incentive Plan.
(16) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 272,796 shares of Amwest
Common Stock as of December 31, 1999, 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.
(17) Based solely upon information contained in Amendment No. 5 to a Schedule
13G filed January 18, 2000 received by the Company from Heartland Advisors,
Inc. ("Heartland"). The filing states that Heartland has sole voting power
over 83,810 and sole dispositive power over 325,810 shares.
(18) Based solely upon information contained in Amendment No. 4 to a Schedule
13G filed February 12, 1999 received by the Company from Markel Corporation
("Markel"). The filing states that Markel has sole voting power over
223,245 shares, sole dispositive power over 223,245 shares and shared
dispositive power over 35,816 shares.
(19) Based solely upon information contained in a Schedule 13G filed February
11, 2000 received by the Company from Wellington Management Company, LLP.
The filing states that Wellington Management Company, LLP, an investment
adviser to its subsidiary Wellington Trust Company, NA has shared voting
and dispositive power over 232,000 shares.
(20) Based on 4,333,093 shares of Common Stock outstanding as of April 7, 2000.
See "Record Date and Voting."
(21) 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 eleven (11) are to be elected at the 2000 Annual
Meeting of Stockholders to serve three-year terms expiring at the 2003 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified. Unless authority to vote for a certain nominee is withheld by an
indication thereon, the proxy will be voted to re-elect Richard H. Savage,
Steven R. Kay, Neil F. Pont and Charles L. Schultz to three-year terms, each to
serve until the 2003 Annual Meeting of Stockholders or until their successors
are 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 2000 Annual Meeting of Stockholders is set forth below:
4
<PAGE>
Nominees for Election at the 2000 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>
Richard H. Savage........ 80 Chairman of the Board and Director 1970 2000 2003
Steven R. Kay............ 46 Senior Vice President, Chief Financial 1992 2000 2003
Officer, Treasurer and Director
Neil F. Pont............. 54 Senior Vice President and Director 1998 2000 2003
Charles L. Schultz....... 72 Director 1995 2000 2003
</TABLE>
Incumbent Directors Whose Terms of Office
Continue After the 2000 Annual Meeting of Stockholders
<TABLE>
<CAPTION>
Current
Director Term
Name Age Position with Company Since Expires
---- --- --------------------- ----- -------
<S> <C> <C> <C> <C>
John E. Savage........... 47 Chief Executive Officer, President, 1976 2002
Chief Operating Officer and Director
Thomas R. Bennett........ 73 Director 1985 2002
Bruce A. Bunner.......... 66 Director 1995 2001
Robert W. Kleinschmidt... 50 Director 1998 2001
Guy A. Main.............. 63 Director 1996 2002
Arthur F. Melton......... 45 Director 1986 2001
Roland D. Miller......... 72 Director 1998 2001
</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. With his retirement from active employment in May 1999,
Mr. Savage relinquished his Co-Chief Executive Officer position but will
continue to serve as Chairman. 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, Co-Chief Executive Officer in November, 1992 and Chief Executive Officer
in May 1999. 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 served as Chairman and President of
Condor Insurance Company. Mr. Main retired effective May 1999 but will continue
to serve as a Director. Previously, Mr. Main was Chairman of the Board and
President of 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.
5
<PAGE>
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 LLP and served as an Audit Partner for KPMG LLP 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 currently retired but has served at various times as 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 LLP 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 InsWeb Corporation, an online insurance marketplace.
Robert W. Kleinschmidt became a Director of the Company in May 1998. Mr.
Kleinschmidt has served as President of Tocqueville Asset Management, LP, 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.
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 became a Director of the Company in May 1998. Mr. 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.
Charles L. Schultz became a Director of the Company in November 1995. Mr.
Schultz was serving as a director of Centris, an insurance company specializing
in reinsurance until December 1999 when the company was acquired by HCC
Holdings, Inc. and has since retired. 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.
6
<PAGE>
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 1999. Each incumbent director who
was a director during 1999 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.
From January to May 1999, the Compensation and Stock Option Committee was
composed of Messrs. Jonathan K. Layne (Chairman), Thomas R. Bennett and Arthur
F. Melton. Effective May 1999, the Compensation and Stock Option Committee
changed and is now composed of Messrs. Arthur F. Melton (Chairman), Thomas R.
Bennett and Charles L. Schultz. This Committee reviews and makes
recommendations concerning proposals by management with respect to compensation,
bonuses and other benefits and policies respecting such matters for executive
and senior officers. This Committee met 5 times during 1999.
From January to May 1999, the Audit Committee was composed of Messrs. Charles
L. Schultz (Chairman), Bruce A. Bunner, Jonathan K. Layne and Roland D. Miller.
Effective May 1999, the Audit Committee changed and is now composed of Messrs.
Charles L. Schultz (Chairman), Bruce A. Bunner and Roland D. Miller. This
Committee meets regularly with financial management, the internal auditors and
the independent certified public accountants of the Company to provide oversight
to the financial reporting process and internal control structure. This
Committee met 5 times during 1999.
From January to May 1999, the Investment Committee was composed of Messrs.
Steven R. Kay (Chairman), Richard H. Savage, John E. Savage, Guy A. Main, Thomas
R. Bennett, Robert W. Kleinschmidt and Charles L. Schultz. Effective May 1999,
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
and Robert W. Kleinschmidt. This Committee reviews the Company's investment
portfolio in terms of performance, duration, risk and a variety of other rating
criteria and approves investment guidelines. This Committee met once during
1999.
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 1999, 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 $1,500 for expenses relating to annual physical
examinations. Directors are also eligible to receive stock options under the
1998 Stock Incentive Plan.
7
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
John E. Savage.................... 47 Chief Executive Officer, President and
Chief Operating Officer
Steven R. Kay..................... 46 Senior Vice President, Chief Financial Officer
and Treasurer
Neil F. Pont...................... 54 Senior Vice President
</TABLE>
See "Principal Occupations of Nominees and Continuing Directors During Last
Five Years" for information regarding the Company's executive officers.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The Company believes that shareholders should be provided information about
executive compensation that is easier to understand, more relevant and
consistent with the proxy rules of the Securities and Exchange Commission. The
following table sets forth the compensation paid by the Company and its
subsidiaries to each of the Named Officers for services rendered in all
capacities to the Company and its subsidiaries for the three fiscal years ended
December 31, 1999, 1998 and 1997. Richard H. Savage served as Co-Chief Executive
Officer through May 1999 and Guy A. Main served as Executive Vice President
through May 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Name Other Underlying All
and Annual Options/ Other
Principal Salary (1) Bonus (2) Compensation (3) SARs Compensation (4)
Position Year ($) ($) ($) (#) ($)
-------- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Richard H. Savage............................ 1999 355,642 -- -- 3,000 4,185
Chairman of the Board 1998 346,642 88,017 -- 3,025 4,533
1997 337,997 103,106 -- 3,025 4,533
John E. Savage............................... 1999 297,106 -- 30,169(5) 7,150 5,000
Chief Executive Officer, President and 1998 270,000 105,121 -- 7,150 4,992
Chief Operating Officer 1997 270,000 41,310 -- 7,865 4,750
Guy A. Main.................................. 1999 270,300 -- -- 3,000 4,798
Executive Vice President 1998 268,442 -- 30,545(6) 3,025 4,961
1997 263,399 16,894 29,734(7) 3,025 4,750
Steven R. Kay................................ 1999 210,731 -- 24,468(8) 5,500 5,000
Senior Vice President, Chief 1998 206,001 39,230 25,800(9) 5,500 9,559
Financial Officer and Treasurer 1997 196,560 45,111 -- 6,050 18,176(10)
Neil F. Pont................................. 1999 206,593 -- 21,779(11) 5,500 16,194(12)
Senior Vice President 1998 202,305 38,526 -- 5,500 4,862
1997 196,560 45,111 -- 6,050 33,391(13)
</TABLE>
(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.
8
<PAGE>
(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. Except as
otherwise disclosed, 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) The amount indicated for Mr. Savage includes $15,791 in automobile
expenses, $6,061 for country club memberships and $3,054 in medical
benefits.
(6) The amount indicated for Mr. Main includes a $14,400 automobile allowance,
$8,100 for country club memberships and $3,015 for automobile expenses.
(7) The amount indicated for Mr. Main includes a $14,400 automobile allowance,
$8,100 for country club memberships and $2,488 for automobile expenses.
(8) The amount indicated for Mr. Kay includes a $14,400 automobile allowance,
$5,791 for country club memberships and $2,400 for automobile expenses.
(9) The amount indicated for Mr. Kay includes a $14,400 automobile allowance,
$5,590 for a country club membership and $3,086 for automobile expenses.
(10) 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.
(11) The amount indicated for Mr. Pont includes a $14,400 automobile allowance,
$3,551 for a country club membership and $1,817 for automobile expenses.
(12) In addition to the matching contribution made by the Company under the
provisions of its 401(k) Plan, the amount also includes $11,194 relating to
cash received in-lieu of vacation benefits.
(13) 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.
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. On October 8, 1999, the Company and Mr.
Main entered into an employment severance agreement whereby Mr. Main will
continue to receive the salary and benefits pursuant to the March 14, 1996
employment agreement until the expiration of the employment agreement on March
14, 2000. After March 14, 2000, as long as Mr. Main remains a member of the
Board of Directors, he will continue to receive all benefits enjoyed by
incumbent directors, as well as, selected other benefits including medical,
dental and optimetric care under the Company's benefit plans through October 31,
2002.
Severance Agreements
The Company has entered into a severance agreement ("Severance Agreement")
with each of Messrs. 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.
Each Severance Agreement generally provides that if, after a "Change in
Control" of the Company, the officer terminates his employment with the Company
for "Good Reason" (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
9
<PAGE>
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 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.
1998 Stock Incentive Plan
The 1998 Stock Incentive Plan (the "1998 Plan") currently provides for the
reservation of 275,000 shares of Common Stock, subject to adjustment for
reorganizations, recapitalizations, stock splits or similar events. 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.
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 may be granted 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"). Awards
10
<PAGE>
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.
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 275,000 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. 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.
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.
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.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the "Purchase Plan") provides for the
reservation of 242,000 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.
11
<PAGE>
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 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 7, 2000, a total of 50,278 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, 1999, 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............................... 3,000(3) 4.7% 9.3125 4/5/2009 17,570 44,525
Chairman of the Board
John E. Savage.................................. 7,150(3) 11.1% 9.3125 4/5/2009 41,875 106,118
Chief Executive Officer, President and
Chief Operating Officer
Guy A. Main..................................... 3,000(3) 4.7% 9.3125 4/5/2009 17,570 44,525
Executive Vice President
Steven R. Kay................................... 5,500(3) 8.6% 9.3125 4/5/2009 32,211 81,629
Senior Vice President, Chief Financial
Officer and Treasurer
Neil F. Pont.................................... 5,500(3) 8.6% 9.3125 4/5/2009 32,211 81,629
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 April 5, 1999 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>
Richard H. Savage............................ -- -- 4,536 7,539 -- --
Chairman of the Board
John E. Savage............................... -- -- 52,062 19,471 -- --
Chief Executive Officer, President and
Chief Operating Officer
Guy A. Main.................................. -- -- 3,779 7,539 -- --
Executive Vice President
Steven R. Kay................................ -- -- 41,456 14,919 -- --
Senior Vice President, Chief Financial
Officer and Treasurer
Neil F. Pont................................. -- -- 39,964 14,421 -- --
Senior Vice President
</TABLE>
(1) Represents the difference between the closing price of the Company's Common
Stock on the AMEX on December 31, 1999 and the exercise price of the
options.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "34
Act") requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's common stock, to file
with the SEC reports of ownership and changes in ownership of common stock of
the Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. The Company prepares Section 16(a) forms on behalf of
its officers and directors based on the information provided by them.
Based solely on review of this information, including written
representations from its officers and directors that no other reports were
required, the Company believes that, during the 1999 fiscal year, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
14
<PAGE>
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 Senior Executive Bonus Plan (the "Bonus
Plan") and the 1998 Stock Incentive Plan. The Committee is currently comprised
of three non-employee members of the Board of Directors.
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 CEO are intended to reward him 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 CEO 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 CEO, but
limit their bonus opportunities to a smaller percentage of their base salaries.
During 1999, due to the Company's performance no short-term cash bonus awards
were earned under the Bonus Plan by executive officers of the Company.
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 beginning
on January
15
<PAGE>
1, 1998 and ending on December 31, 2000. Subsequent performance periods begin
annually each January 1 thereafter, until the Bonus Plan is terminated.
The annual grant of stock options 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-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 1.5% to 2.5% of the outstanding stock of the
Company. This equates to approximately 60,000 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.
During 1999, the Committee authorized the grant of 64,250 employee stock
options, as compared to 66,825 grants in 1998 and 91,355 grants in 1997.
Included in the 1999 grants were 24,150 options granted to executive officers of
the Company, as detailed in the Option/SAR Grants Table of this Proxy Statement.
All of the 1999 options were granted at a per share exercise price of $9.3125.
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 that
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 10, 2000
Compensation and Stock Option Committee
Arthur F. Melton (Chairman)
Thomas R. Bennett
Charles L. Schultz
16
<PAGE>
Compensation Committee Interlocks and Insider Participation
For the period up to May 1999, directors Layne, Bennett and Melton comprised
the Compensation and Stock Option Committee. Mr. Layne vacated his membership on
the Compensation and Stock Option Committee effective May 1999 when he decided
not to stand for re-election as Director. After May 1999, director Schultz
replaced Mr. Layne as a member of the Compensation and Stock Option Committee.
Mr. Layne is a partner of the law firm Gibson, Dunn and Crutcher LLP that 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, 1995 and ending December 31, 1999.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
------------------------------ FISCAL YEAR ENDING -----------------------------
COMPANY /INDEX/ MARKET 12/30/1994 12/29/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999
<S> <C> <C> <C> <C> <C> <C>
Amwest Insur Grp 100.00 134.79 123.53 136.86 152.17 88.69
Surety/Title Insurance 100.00 145.09 189.73 281.91 250.32 227.46
S&P Composite 100.00 137.58 169.17 225.61 290.09 351.13
</TABLE>
17
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP was the Company's independent auditor for fiscal 1999. During fiscal
1999, the Company also engaged KPMG LLP 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 LLP 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 LLP has served as the Company's independent auditor since 1984.
Representatives of KPMG LLP 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 2001 ANNUAL MEETING
Stockholders who wish to present proposals for action at the 2001 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 15, 2000, 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, 1999,
including financial statements, is being mailed under the same cover to each
person who was a stockholder of record on April 7, 2000.
The Company will furnish without charge a copy of its Annual Report on Form
10-K for the fiscal year ended December 31, 1999, 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: Investor Relations.
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
Calabasas, California
April 12, 2000
18
<PAGE>
- -------------------------------------------------------------------------------
PROXY AMWEST INSURANCE GROUP, INC. PROXY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 19, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS for the Annual
Meeting of Stockholders to be held on May 19, 2000 at 9:00 A.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 2000 Annual
Meeting and, revoking all prior Proxies, appoints John E. Savage, 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 19, 2000 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
Richard H. Savage (2003), Steven R. Kay (2003), Neil F. Pont (2003), Charles L.
Schultz (2003)
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below:
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2. 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:________________________, 2000
___________________________________
___________________________________
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY
IN THE ENCLOSED ENVELOPE.
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