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EXHIBIT 1
BONDS.COM, INC.
111 AROQUIS ST.
SANTA BARBARA, CA 93108
September 22, 2000
VIA FACSIMILE
Amwest Insurance Group, Inc.
5230 Las Virgenes Road
Calabasas, CA 91302
Attention: John E. Savage
Re: Proposal
Dear John:
Bonds.com, Inc. (the "Purchaser") is pleased to be able to offer the
public shareholders of Amwest Insurance Group, Inc. (the "Company") a cash price
of $6.00 per share, subject to the conditions discussed below.
Our proposal is structured to address specific objectives of the Company
to the extent we understand them. Specifically, our proposal attempts to:
- maximize value to the Company's public shareholders by providing
a cash purchase price which we believe exceeds the likely
trading price of the Company's stock for the foreseeable future.
- allow the Company's management shareholders the ability to
participate in the future growth prospects of the Company.
- improve the A.M. Best rating of the Company's principal
insurance company and thereby better serve such company's
policyholders.
- offer a capital structure which improves the Company's balance
sheet and allows opportunities for expansion of its business
through existing channels and through the Internet.
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Our $6.00 per share price represents a 23% premium to today's closing
price of $4.875. Our belief is that this cash price at closing to the Company's
public shareholders significantly exceeds the valuation that such shareholders
are likely to receive from the public markets for at least the next 12-24
months.
We believe that the Company's common stock will trade relatively poorly
during this time period for the following reasons:
- recent large operating losses
- recent ratings downgrades of the Company's insurance companies
- increased competition faced by the Company both through
traditional channels and through the Internet
- the relative illiquidity and lack of float for the Company's
common stock
- a general market distaste for insurance company and small
capitalization stocks.
Financing
We intend to obtain equity financing from a nationally-recognized
venture capital firm in an amount expected to exceed $20 million. We also expect
to partner with an established insurance company which currently has an "A-"
rating or better. Our long-term goal is to build the enterprise value of the
Company by structuring a capitalization that bolsters the Company's principal
insurance company rating to "A-" or better and to offer the Company the ability
to expand its core business through traditional channels and the Internet.
Bonds.com
The Purchaser was founded by Michael B. Klein for the purpose of
offering bonds, surety and other similar insurance products over the Internet
and through traditional channels. Mr. Klein has successfully managed and sold
various technology businesses including Transoft Networks, Inc. and eGroups,
Inc. Mr. Klein also controls Pacificor, Inc. ("Pacificor") which owns
approximately 5.8% of the Company's outstanding common stock.
Management Shareholders
We believe the continued involvement of management and management
shareholders will be critical to ensuring the continued success of the Purchaser
and the Company. We would expect management shareholders comprising at least 50%
of the Company's common stock to exchange their existing shares of Company
common stock for common stock of the Purchaser. The number of shares received by
the management shareholders would be based on the same $6.00 per share price
received by the public
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shareholders and the same valuation of the Purchaser as valued by the
Purchaser's venture capital investor.
Conditions
Our proposal is subject to: (a) reaching an agreement with the current
management shareholders of the Company with respect to their investment and
equity position in the Purchaser; (b) completion of legal and accounting due
diligence; (c) receipt of sufficient equity financing from a
nationally-recognized venture capital investor; (d) completion of a satisfactory
partnering arrangement with another insurance company which will result in the
Company's principal insurance company obtaining an A.M. Best rating of "A-" or
better; (e) negotiation of a satisfactory purchase and sale agreement with
standard representations and warranties, and (f) all necessary state and federal
regulatory clearances.
Confidentiality/Non-Disclosure
We believe that it is in the best interest of all parties involved that
this proposal remain confidential at the current time. As such, please consider
our proposal withdrawn upon the public disclosure of the existence or relevant
terms of this letter before any public disclosure by the Purchaser or its
affiliates. Pacificor has previously filed a statement on Schedule 13G with
respect to the Company. Mr. Klein may be deemed to control both Pacificor and
the Purchaser. Mr. Klein or Pacificor may be required to disclose this offer
within 10 days from the date hereof on an amendment to Pacificor's Schedule 13G
or on a Schedule 13D.
Due Diligence/Timing
As discussed above, we are still completing our due diligence on the
Company. We expect that our legal and accounting due diligence will take
approximately 4 weeks to complete. Over this time, we would propose
simultaneously completing our equity investor and insurance company partnering
arrangements and negotiating a definitive purchase agreement with the Company.
Our goal would be to sign a definitive agreement and announce the transaction by
the end of October.
We look forward to working with you on this transaction and becoming
partners with the Company and taking it to the next level of success. If you
have any questions regarding this proposal, please call the undersigned directly
at 775-720-2488.
Very truly yours,
Bonds.com, Inc.
By: /s/ MICHAEL B. KLEIN
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Michael B. Klein
Chief Executive Officer
