AGREEMENT
AND
PLAN OF MERGER
BY AND BETWEEN
AMWEST INSURANCE GROUP, INC.
AND
CONDOR SERVICES, INC.
DATED
November 30, 1995
TABLE OF CONTENTS
Page(s)
CONTENTS
ARTICLE I THE MERGER......................................................... 1
Section 1.01 The Merger ................................................ 1
Section 1.02 Effective Time............................................. 1
Section 1.03 Certificate of Incorporation and Bylaws of the Surviving
Corporation........................................................ 2
Section 1.04 Board of Directors and Officers............................ 2
Section 1.05 Conversion of Shares....................................... 2
Section 1.06 Surrender of Certificates; Payment for and Exchange
of Shares.......................................................... 3
ARTICLE II RELATED MATTERS................................................... 5
Section 2.01 Treatment of Stock Options................................. 5
Section 2.02 Stockholder Approval....................................... 6
Section 2.03 Other Securities Matters................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CONDOR......................... 7
Section 3.01 Corporate Organization..................................... 7
Section 3.02 Authorization.............................................. 8
Section 3.03 Capitalization............................................. 8
Section 3.04 Affiliated Entities........................................ 8
Section 3.05 Financial Statements....................................... 9
Section 3.06 Absence of Certain Changes or Events....................... 10
Section 3.07 Consents and Approvals; No Violation....................... 10
Section 3.08 No Undisclosed Liabilities................................. 11
Section 3.09 Taxes ..................................................... 11
Section 3.10 Insurance: Licenses, Permits and Filings................... 15
Section 3.11 Patents, Trademarks, and Other Intellectual Property....... 16
Section 3.12 Litigation ................................................ 16
Section 3.13 Insurance ................................................. 17
Section 3.14 Compliance with Laws....................................... 17
Section 3.15 Employee Benefit Plans..................................... 17
Section 3.16 Employment Related Agreements.............................. 18
Section 3.17 Labor Agreements and Controversies......................... 18
Section 3.18 Environmental Matters...................................... 19
Section 3.19 Certain Fees............................................... 19
Section 3.20 Disclosure ................................................ 19
Section 3.21 Post-Retirement and Post-Employment Benefit Obligations.... 20
Section 3.22 Registration Statement and Proxy Statement................. 20
Section 3.23 Absence of Questionable Payments........................... 20
Section 3.24 Guaranties................................................. 21
Section 3.25 Material Contracts......................................... 21
Section 3.26 Insurance Contracts and Rates.............................. 22
Section 3.27 Reinsurance................................................ 22
Section 3.28 Loss Reserves; Solvency.................................... 22
Section 3.29 Opinion of Financial Advisor............................... 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF AMWEST.......................... 23
Section 4.01 Corporate Organization..................................... 23
Section 4.02 Authorization.............................................. 23
Section 4.03 Capitalization............................................. 24
Section 4.04 Financial Statements and Reports........................... 24
Section 4.05 Absence of Certain Changes................................. 25
Section 4.06 Consents and Approvals; No Violations...................... 25
Section 4.07 Litigation ................................................ 26
Section 4.08 Compliance with Laws....................................... 26
Section 4.09 Proxy Statement, Etc....................................... 26
Section 4.10 No Undisclosed Liabilities................................. 27
Section 4.11 Disclosure ................................................ 27
Section 4.12 Post-Retirement and Post-Employment Benefit Obligations.... 27
Section 4.13 Employee Benefit Plans..................................... 27
Section 4.14 Environmental Matters...................................... 28
Section 4.15 Absence of Questionable Payments........................... 29
Section 4.16 Certain Fees............................................... 30
Section 4.17 Taxes ..................................................... 30
Section 4.18 Affiliated Entities........................................ 33
Section 4.19 Reinsurance................................................ 33
Section 4.20 Insurance: Licenses, Permits and Filings................... 34
Section 4.21 Guaranties................................................. 35
Section 4.22 Material Contracts......................................... 35
Section 4.23 Insurance Contracts and Rates.............................. 36
Section 4.24 Loss Reserves; Solvency.................................... 36
ARTICLE V COVENANTS.......................................................... 37
Section 5.01 Conduct of Business of Condor and Amwest................... 37
Section 5.02 Access to Information...................................... 39
Section 5.03 All Reasonable Efforts..................................... 40
Section 5.04 Public Announcements....................................... 40
Section 5.05 Notification of Certain Matters............................ 40
Section 5.06 Indemnification and Insurance.............................. 40
Section 5.07 Regulatory Approvals....................................... 42
Section 5.08 Employee Matters........................................... 42
Section 5.09 No Actions Inconsistent With Tax-Free Reorganization....... 42
Section 5.10. Other Potential Acquirors................................. 42
Section 5.11 Letter of Condor's Accountants............................. 44
Section 5.12 Stock Exchange Listing..................................... 44
Section 5.13 Pooling of Interests....................................... 44
Section 5.14 Employment Agreement....................................... 44
Section 5.15 Condor Affiliates.......................................... 45
Section 5.16 Agreement with Guy A. Main................................. 45
ARTICLE VI CLOSING........................................................... 45
Section 6.01 Time and Place............................................. 45
Section 6.02 Deliveries at the Closing.................................. 45
ARTICLE VII CONDITIONS TO THE MERGER......................................... 45
Section 7.01 Conditions to the Obligations of Amwest and Condor......... 45
Section 7.02 Additional Conditions to the Obligations of Amwest......... 46
Section 7.03 Additional Conditions to the Obligations of Condor......... 48
ARTICLE VIII TERMINATION AND ABANDONMENT..................................... 49
Section 8.01 Termination................................................ 49
Section 8.02 Effect of Termination...................................... 50
Section 8.03 Fees and Expenses.......................................... 51
ARTICLE IX GENERAL PROVISIONS................................................ 52
Section 9.01 Amendment and Modification................................. 52
Section 9.02 Waiver of Compliance; Consents............................. 52
Section 9.03 Validity .................................................. 52
Section 9.04 Parties in Interest........................................ 53
Section 9.05 Survival of Representations, Warranties, Covenants and
Agreements......................................................... 53
Section 9.06 Notices ................................................... 53
Section 9.07 Governing Law.............................................. 54
Section 9.08 Counterparts............................................... 54
Section 9.09 Table of Contents and Headings............................. 54
Section 9.10 Entire Agreement........................................... 54
Section 9.11 Arbitration; Attorneys' Fees and Expenses.................. 54
Section 9.12 Miscellaneous.............................................. 55
EXHIBIT A STOCKHOLDER AGREEMENT.............................................. 57
EXHIBIT B AFFILIATES LETTER AND CONTINUITY OF INTEREST CERTIFICATE........... 61
EXHIBIT C AGREEMENT WITH GUY A. MAIN AND MAIN FAMILY TRUST................... 65
APPENDIX A TO EXHIBIT C...................................................... 73
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of November 30,
1995 (the "Agreement"), is between Amwest Insurance Group, Inc., a Delaware
corporation ("Amwest") and Condor Services, Inc., a Delaware corporation
("Condor").
RECITALS
A. Condor will be merged into Amwest pursuant to the terms of
this Agreement (the "Merger") and Condor will cease to exist as a separate
entity.
B. The Merger will be accomplished and will have the effects
set forth in this Agreement and as a result the shares of Condor common stock
will be converted into shares of common stock of Amwest.
C. A stockholder of Condor (the "Condor Stockholder") and
Amwest have entered into an agreement (the "Stockholder Agreement")
substantially in the form of Exhibit A to this Agreement by which the Condor
Stockholder has, among other things, consented to the Merger and agreed to vote
his shares in favor of the Merger.
ARTICLE I
THE MERGER
Section 1.01 The Merger
Upon the terms and subject to the satisfaction or, if
permissible, waiver of the conditions of this Agreement, at the Effective Time
(as defined in Section 1.02 hereof), Condor shall be merged with and into Amwest
in accordance with the applicable provisions of Delaware law and the separate
existence of Condor shall thereupon cease, and Amwest, which shall be and which
is hereinafter referred to as the "Surviving Corporation", shall continue its
corporate existence under the laws of the State of Delaware under the name
"Amwest Insurance Group, Inc." From and after the Effective Time, Amwest shall
possess all of the rights, privileges, powers and franchises of a public as well
as of a private nature, and be subject to all the restrictions, disabilities and
duties of each of the constituent corporations, all as set forth in Section 259
of the General Corporation Law of the State of Delaware (the "DGCL").
Section 1.02 Effective Time
On the date of the closing of the Merger referred to in
Section 6.01 hereof, a Certificate of Merger in such form as required by, and
executed in accordance with, the relevant provisions of the DGCL shall be filed
with the Secretary of State of Delaware. The Merger shall become effective at
the date and time specified in such filing, and the date and time of such filing
is hereinafter referred to as the "Effective Time."
Section 1.03 Certificate of Incorporation and Bylaws of
the Surviving Corporation
The Certificate of Incorporation and Bylaws of Amwest, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or by law.
Section 1.04 Board of Directors and Officers
The directors and officers of Amwest immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation,
each of such directors and officers to hold office, subject to the applicable
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation, until their successors are duly elected and qualified, or their
earlier death, resignation or removal.
Section 1.05 Conversion of Shares
At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof and subject to the conditions set forth
in Sections 7.02(i) and 7.03(h):
(a)......each share of Common Stock, par value $.01 per share,
of Condor (collectively, the "Condor Common Stock") then owned by Amwest or any
direct or indirect subsidiary of Amwest and each share of Condor Common Stock
then held in the treasury of Condor shall be canceled, and no payment shall be
made nor other consideration paid with respect thereto;
(b)......each then remaining outstanding share of Condor
Common Stock shall be converted into the right to receive 0.5 of a share
(subject to adjustment pursuant to Section 1.05(c) below, the "Conversion
Number") of common stock, par value $.01 per share, of Amwest (the "Amwest
Common Stock") (the shares of Amwest Common Stock into which each share of
Condor Common Stock is converted shall be referred to herein as the "Merger
Consideration"); and
(c)......(i) if the average daily Closing Price per share (as
defined in Section 2.01(a) below) of Amwest Common Stock as reported on the
American Stock Exchange ("ASE") for the 30 consecutive trading days ending on
the close of trading on the second trading day preceding the Closing Date (the
"Base Period Trading Price") is less than $12.50, the Merger Consideration per
share of Condor Common Stock shall be increased by a factor of 12.5 divided by
the Base Period Trading Price and (ii) if the Base Period Trading Price is
greater than $17.50, the Merger Consideration per Share shall be decreased by a
factor of 17.5 divided by the Base Period Trading Price.
Section 1.06 Surrender of Certificates; Payment for and
Exchange of Shares
(a)......As of the Effective Time, Amwest shall deposit with
American Stock Transfer & Trust Company, or another bank or trust company
designated by Amwest and reasonably acceptable to Condor (the "Exchange Agent"),
for the benefit of the holders of Condor Common Stock, for exchange in
accordance with this Article I, through the Exchange Agent: (i) certificates
representing the appropriate number of shares of Amwest Common Stock and (ii)
cash to be paid in lieu of fractional shares of Amwest Common Stock (such shares
of Amwest Common Stock and such cash are hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 1.06(f) in exchange for
outstanding Condor Common Stock.
(b)......As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Condor Common Stock (the "Certificates") whose shares were converted
into the right to receive shares of Amwest Common Stock pursuant to Section
1.05: (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Amwest and Condor may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Amwest Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Amwest, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Amwest Common Stock and, if applicable, a check representing the cash
consideration to which such holder may be entitled on account of a fractional
share of Amwest Common Stock, which such holder has the right to receive
pursuant to the provisions of this Article I, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of Condor
Common Stock which is not registered in the transfer records of Condor, a
certificate representing the proper number of shares of Amwest Common Stock,
together with a check, if applicable, for cash payable in lieu of a fractional
share, will be issued to a transferee if the Certificate representing such
Condor Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 1.06, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Amwest Common Stock and cash in
lieu of any fractional shares of Amwest Common Stock as contemplated by this
Section 1.06.
(c)......No dividends or other distributions declared or made
after the Effective Time with respect to Amwest Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Amwest Common Stock represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 1.06(f) until the holder of record (or a valid
transferee) of such Certificate shall surrender such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Amwest Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Amwest Common Stock to which such holder is entitled pursuant to
Section 1.06(f) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of Amwest Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Amwest Common Stock.
(d)......In the event that any certificate for Condor Common
Stock shall have been lost, stolen or destroyed, the Exchange Agent shall issue
in exchange therefor, upon the making of an affidavit of that fact by the holder
thereof such shares of Amwest Common Stock and cash in lieu of fractional
shares, if any, as may be required pursuant to this Agreement provided, however,
that Amwest may, in its discretion, require the delivery of a suitable bond or
indemnity.
(e)......All shares of Amwest Common Stock issued upon the
surrender for exchange of Condor Common Stock in accordance with the terms
hereof (including any cash paid pursuant to Section 1.06(c) or 1.06(f)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
Condor Common Stock, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which may have been declared or made by Condor on such Condor
Common Stock in accordance with the terms of this Agreement or prior to the date
hereof and which remain unpaid at the Effective Time, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Condor Common Stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article I.
(f)......No fractions of a share of Amwest Common Stock shall
be issued in the Merger, but in lieu thereof each holder of Condor Common Stock
otherwise entitled to a fraction of a share of Amwest Common Stock shall, upon
surrender of his or her certificate or certificates, be entitled to receive an
amount of cash (without interest) determined by multiplying the Base Period
Trading Price by the fractional share interest to which such holder would
otherwise be entitled. The parties acknowledge that payment of the cash
consideration in lieu of issuing fractional shares was not separately bargained
for consideration but merely represents a mechanical rounding off for purposes
of simplifying the corporate and accounting problems which would otherwise be
caused by the issuance of fractional shares.
(g)......Any portion of the Exchange Fund which remains
undistributed to the stockholders of Condor for six months after the Effective
Time shall be delivered to Amwest, upon demand, and any stockholders of Condor
who have not theretofore complied with this Article I shall thereafter look only
to Amwest for payment of their claim for Amwest Common Stock, as the case may
be, any cash in lieu of fractional shares of Amwest Common Stock and any
dividends or distributions with respect to Amwest Common Stock.
(h)......Neither Amwest nor Condor shall be liable to any
holder of Condor Common Stock, or Amwest Common Stock, as the case may be, for
such shares (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE II
RELATED MATTERS
Section 2.01 Treatment of Stock Options
(a)......At or immediately prior to the Effective Time, each
holder of a then outstanding option to purchase shares of Condor Common Stock,
other than those options held by non-employee directors of Condor, (whether or
not then currently exercisable) granted by Condor ("Condor Stock Option") as set
forth in Section 2.01 of the Condor Disclosure Schedule to this Agreement
executed by Condor and delivered simultaneously herewith (the "Condor Disclosure
Schedule") shall be canceled and, in lieu thereof, Amwest shall issue to each
holder thereof an option ("Amwest Option"), to acquire, on substantially the
same terms and subject to substantially the same conditions as were applicable
under such Condor Stock Option, the same number of shares of Amwest Common Stock
as the holder of such Condor Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full immediately
prior to the Effective Time, at a price per share equal to (y) the per share
exercise price for the shares of Condor Common Stock otherwise purchasable
pursuant to such Condor Stock Option divided by (z) .5 as appropriately adjusted
pursuant to subsection (c) of Section 1.05; provided, however, that the number
of shares of Amwest Common Stock that may be purchased upon exercise of any
Amwest Option shall not include any fractional share and, upon exercise of the
Amwest Option, a cash payment shall be made for any fractional share based upon
the Closing Price (as hereinafter defined) of a share of Amwest Common Stock on
the trading day immediately preceding the date of exercise. "Closing Price"
shall mean, on any day, the last reported sale price for one share of Amwest
Common Stock on the ASE. Condor Stock Options issued to non-employee directors
of Condor which remain outstanding as of the Effective Time shall be
automatically canceled as of the Effective Time.
(b)......Amwest shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Amwest Common Stock for
delivery upon exercise of Amwest Options assumed in accordance with this Section
2.01. As soon as practicable after the Effective Time, Amwest shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form with respect
to the shares of Amwest Common Stock subject to such options and shall use its
best efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
Section 2.02 Stockholder Approval
(a)......(i) As promptly as practicable, Amwest will cause a
meeting of its stockholders to be duly called and will give notice of, convene
and hold such meeting as soon as practicable for the purpose of obtaining
approval of the Merger. The stockholder vote required for such approvals will be
no greater than that required by the applicable requirements of the DGCL and the
applicable rules of the ASE and the applicable requirements of Amwest's
Certificate of Incorporation and Bylaws. Amwest will solicit such approvals by
its stockholders and recommend that its stockholders vote in favor of such
approvals.
(ii) As promptly as practicable, Condor will cause a
meeting of its stockholders to be duly called and will give notice of, convene
and hold such meeting as soon as practicable for the purpose of obtaining
approval of the Merger. The stockholder vote required for such approvals will be
no greater than that required by the applicable requirements of the DGCL and the
applicable rules of the National Association of Securities Dealers ("NASD") and
the applicable requirements of Condor's Certificate of Incorporation and Bylaws.
Condor will solicit such approvals by its stockholders and recommend that its
stockholders vote in favor of such approvals.
(b)......In connection with any solicitations of approval of
the Merger by Amwest's and Condor's stockholders, Amwest and Condor will each
file with the Securities and Exchange Commission (the "Commission" or the "SEC")
under the Securities Exchange Act of 1934 (the "Exchange Act"), and will use all
reasonable efforts to have cleared by the Commission, and promptly thereafter
will mail to its respective stockholders proxy solicitation materials (including
a proxy statement and appropriate related forms of proxies) with respect to such
meeting. Except as provided in Section 9.12(b), such proxy statement of Amwest
will also constitute a prospectus of Amwest with respect to the shares of Amwest
Common Stock to be issued in the Merger and will be a part of a registration
statement filed by Amwest with the Commission for purposes of registering the
public offering of such shares under the Securities Act of 1933 (the "Securities
Act"). Amwest will promptly so file such registration statement and will use all
reasonable efforts to have it declared effective by the Commission. The term
"Proxy Materials" shall mean such proxy statement together with the related
forms of proxies and other proxy solicitation materials at the time initially
mailed to stockholders and all amendments or supplements thereto, if any,
similarly filed and mailed. The term "Registration Statement" shall mean the
registration statement of Amwest containing, as a part thereof, a prospectus in
the form of such proxy statement of Amwest, at the time it is declared effective
by the Commission.
(c)......The information provided and to be provided by Amwest
and Condor for use in the Registration Statement and the Proxy Materials will
not, in the case of the Registration Statement, on the date the Registration
Statement becomes effective and, in the case of the Proxy Materials, on the
respective dates on which either (i) the Proxy Materials are mailed to
stockholders of Amwest or Condor, as the case may be, or (ii) approval of the
Merger by Amwest's or Condor's stockholders, as the case may be, is obtained,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Amwest and Condor agree promptly to correct any such information
which shall have become false or misleading in any material respect and take all
steps necessary to file with the Commission and have declared effective or
cleared by the Commission any amendment or supplement to the Registration
Statement or the Proxy Materials so as to correct the same and to cause the
Proxy Materials as so corrected to be disseminated to their respective
stockholders, in each case as to the extent required by applicable law. The
Registration Statement and the Proxy Materials will comply as to form in all
material respects with the provisions of the Securities Act and the Exchange Act
and other applicable law and will contain the recommendation of the Board of
Directors of Amwest and of Condor that Amwest's and Condor's stockholders vote
in favor of or consent to such approvals.
Section 2.03 Other Securities Matters
Amwest shall promptly prepare and file with respect to the
shares of Amwest Common Stock to be issued in the Merger any action required to
be taken under state blue sky or securities laws in connection with the issuance
of shares of Amwest Common Stock in the Merger and Condor shall furnish Amwest
with all information and shall take such other action as Amwest may reasonably
request in connection with any such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONDOR
Condor represents and warrants to Amwest as follows:
Section 3.01 Corporate Organization
Condor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted, and is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or conduct of business requires such licensing
or qualification, except where the failure to be so qualified would not have a
Material Adverse Effect (as defined below) on Condor. Condor has delivered to
Amwest complete and correct copies of its Certificate of Incorporation and
Bylaws as in effect on the date hereof. "Material Adverse Effect" means any
change or effect (i) that is or is reasonably likely to be materially adverse to
the properties, business, results of operations, condition (financial or
otherwise) or prospects of Condor or Amwest or both taken together, as the case
may be, and any Affiliated Entity (as defined in Section 3.04 hereof), taken as
a whole, other than any change or effect arising out of general economic
conditions unrelated to any businesses in which such party is engaged or (ii)
that may impair the ability of such party to consummate the transactions
contemplated hereby.
Section 3.02 Authorization
Condor has the requisite corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery by Condor of this Agreement, the performance by Condor of
its obligations hereunder and the consummation by Condor of the transactions
contemplated hereby have been duly authorized by Condor's Board of Directors
and, except for the approval of the stockholders of Condor Common Stock, no
other corporate proceeding on the part of Condor is necessary for the execution
and delivery thereof, and this Agreement is a legal, valid and binding
obligation of Condor, enforceable against it in accordance with its terms.
Section 3.03 Capitalization
The authorized capital stock of Condor and the ownership
thereof as well as the number of issued and outstanding shares of each class of
capital stock of Condor is as set forth in Section 3.03 of the Condor Disclosure
Schedule. All of such outstanding shares have been duly and validly issued, were
not issued in violation of any preemptive rights and are fully paid and
non-assessable with no personal liability attaching to the ownership thereof.
Except as set forth on Section 3.03 of the Condor Disclosure Schedule, there are
no options, warrants, subscriptions, conversion or other rights, agreements,
commitments, arrangements or understandings with respect to (i) the issuance of
shares of capital stock of Condor or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any such shares, (ii)
obligating Condor to purchase shares of Condor Common Stock or any security
convertible into Condor Common Stock or (iii) obligating any of Condor
stockholders to purchase, sell or transfer any Condor Common Stock. Section 3.03
of the Condor Disclosure Schedule lists all stock options granted by Condor,
true and correct copies of which have been provided by Condor to Amwest.
Section 3.04 Affiliated Entities
(a)......Except as set forth in Section 3.04(a) of the Condor
Disclosure Schedule, Condor has no direct or indirect "Affiliated Entities"
(which term includes each direct or indirect subsidiary of Condor or Amwest, as
the case may be, and each business entity in which Condor or Amwest, as the case
may be, has any direct or indirect interest and for which it accounts on the
equity method of accounting). Each Affiliated Entity of Condor listed on Section
3.04(a) of Condor Disclosure Schedule is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as now being conducted,
and is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or conduct of
business requires such qualification or licensing, except where the failure to
be so qualified would not have a Material Adverse Effect on Condor. Condor has
delivered to Amwest complete and correct copies of the Articles or Certificate
of Incorporation and Bylaws of each such Affiliated Entity as in effect on the
date hereof.
(b)......Except as set forth in Section 3.04(b) of the Condor
Disclosure Schedule, Condor is, directly or indirectly, the record and
beneficial owner of all of the outstanding shares of capital stock of each of
its Affiliated Entities, and all of the outstanding shares of capital stock of
each such Affiliated Entity are duly and validly issued, were not issued in
violation of any preemptive rights, are fully paid and non-assessable and are
owned free and clear of any claim, lien, encumbrance or agreement with respect
thereto. Except as and to the extent set forth in Section 3.04(b) of the Condor
Disclosure Schedule, there are not any options, warrants, subscriptions,
conversion or other rights, agreements, or commitments, arrangements or
understandings with respect to the issuance of capital stock of any Affiliated
Entity of Condor or any other securities convertible into, exchangeable for or
evidencing the right to subscribe for any such shares.
(c)......Except as set forth in Section 3.04(c) of the Condor
Disclosure Schedule, Condor does not own, directly or indirectly, any capital
stock or other equity securities of any corporation, limited liability company
or limited partnership, other than of its Affiliated Entities, does not have any
direct or indirect equity or ownership interest in any other business or entity,
and does not have any direct or indirect obligation or any commitment to invest
any funds in any corporation or other business or entity other than investments
previously made in its Affiliated Entities.
Section 3.05 Financial Statements
Since January 1, 1994, Condor has filed with the SEC all
reports, registration statements and all other filings required to be filed with
the SEC under the rules and regulations of the SEC (collectively, the "Required
Condor Reports"), all of which, as of their respective effective dates, complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act. Condor has delivered to Amwest true and complete copies of
(i) Condor's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, as filed with the SEC, (ii) Quarterly Reports on Form 10-Q for the three
months ended March 31, 1995, June 30, 1995 and September 30, 1995, as filed with
the SEC, (iii) proxy statements relating to all meetings of Condor's
stockholders (whether annual or special) held or scheduled to be held since
January 1, 1994, (iv) all other forms, reports, statements and documents filed
by Condor with the SEC since January 1, 1994 and (v) all reports, statements and
other information provided by Condor to its stockholders since January 1, 1994
(collectively, the "Condor SEC Filings"). Except as set forth in Section 3.05 of
the Condor Disclosure Schedule, as of their respective dates, none of the
Required Condor Reports or Condor SEC Filings contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except as set forth in
Section 3.05 of the Condor Disclosure Schedule, the consolidated financial
statements of Condor included or incorporated by reference in the Condor SEC
Filings were prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") (except as otherwise stated in
such financial statements or, in the case of audited statements, the related
report thereon of independent certified public accountants), and present fairly
the financial position and results of operations, cash flows and changes in
stockholders' equity of Condor and its consolidated Affiliated Entities as of
the dates and for the periods indicated, subject, in the case of unaudited
interim financial statements, to the absence of notes and to normal year-end
adjustments, and are consistent with the books and records of Condor.
Section 3.06 Absence of Certain Changes or Events
Except as set forth in Condor SEC Filings or in Section 3.06
of the Condor Disclosure Schedule, since December 31, 1994, Condor and its
Affiliated Entities have conducted their respective businesses only in the
ordinary and usual course and there has not been any event, change or
development which has had or will have a Material Adverse Effect on Condor.
Section 3.07 Consents and Approvals; No Violation
There is no requirement applicable to Condor or any of its
Affiliated Entities to make any filing with, or to obtain any permit,
authorization, consent or approval of, any governmental or regulatory authority
as a condition to the lawful consummation of the transactions contemplated by
this Agreement, other than (i) requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx"), (xx) requirements of the California
Insurance Code (the "Insurance Code"), (iii) filings with the SEC pursuant to
the Securities Act and the Exchange Act, (iv) such filings and approvals as may
be required under the "blue sky," takeover or securities laws of various states,
(v) compliance with the requirements of the NASD, or (vi) where the failure to
make any such filing, or to obtain such permit, authorization, consent or
approval, would not prevent or delay consummation of the Merger or would not
otherwise prevent Condor from performing its obligations under this Agreement.
Except as set forth in Section 3.07 of the Condor Disclosure Schedule, neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (a) result in the acceleration of, or the
creation in any party of any right to accelerate, terminate, modify or cancel
any indenture, contract, lease, sublease, loan agreement, note or other
obligation or liability to which Condor or any Affiliated Entity is a party or
by which any of them is bound or to which any of their assets is subject, except
as would not have a Material Adverse Effect on Condor, (b) conflict with or
result in a breach of or constitute a default under any provision of the
Certificate of Incorporation or Bylaws (or other charter documents) of Condor or
any Affiliated Entity, or, except as would not have a Material Adverse Effect on
Condor, a default under or violation of any restriction, lien, encumbrance,
indenture, contract, lease, sublease, loan agreement, note or other obligation
or liability to which any of them is a party or by which any of them is bound or
to which any of their assets is subject or result in the creation of any lien or
encumbrance upon any of said assets, or (c) violate or result in a breach of or
constitute a default under any judgment, order, decree, rule or regulation of
any court or governmental agency to which Condor or any Affiliated Entity is
subject.
Section 3.08 No Undisclosed Liabilities
Except as and to the extent set forth on the consolidated
balance sheet of Condor as of December 31, 1994, included in the Required Condor
Reports, neither Condor nor any Affiliated Entities had, at such date, any
liabilities or obligations (absolute, accrued, contingent or otherwise) greater
than $50,000, taken as a whole and since that date neither Condor nor any
Affiliated Entities has incurred any liabilities or obligations material to
Condor and Affiliated Entities taken as a whole except those incurred in the
ordinary and usual course of business and consistent with past practice or in
connection with or as a result of the transactions contemplated by this
Agreement to which Condor is or is to be a party.
Section 3.09 Taxes
(a)......For purposes of this Agreement: (i) the term "Taxes"
means (A) all federal, state, local, foreign and other net income, gross income,
gross receipts, sales, use, ad valorem, value added, intangible, unitary,
capital gain, transfer, franchise, profits, license, lease, service, service
use, withholding, backup withholding, payroll, employment, estimated, excise,
severance, stamp, occupation, premium, property, prohibited transactions,
windfall or excess profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto, (B) any liability
for payment of amounts described in clause (A) whether as a result of transferee
liability, of being a member of an affiliated, consolidated, combined or unitary
group for any period, or otherwise through operation of law and (C) any
liability for the payment of amounts described in clauses (A) or (B) as a result
of any tax sharing, tax indemnity or tax allocation agreement or any other
express or implied agreement to indemnify any other person; and the term "Tax"
means any one of the foregoing Taxes; and (ii) the term "Returns" means all
returns, declarations, reports, statements and other documents required to be
filed in respect of Taxes; and the term "Return" means any one of the foregoing
Returns.
(b)......Section 3.09 of the Condor Disclosure Schedule sets
forth: (i) the taxable years of Condor and Tax Affiliates as to which the
respective statutes of limitations on the assessment of United States federal
income and any applicable state, local or foreign income, franchise and premium
Taxes have not expired, and (ii) with respect to such taxable years sets forth
those years for which examinations by the Internal Revenue Service or the state,
local or foreign taxing authority have been completed, those years for which
examinations by such agencies are presently being conducted, those years for
which notice of pending or threatened examination or adjustment has been
received, those years for which examinations by such agencies have not been
initiated, and those years for which required Returns for such Taxes have not
yet been filed. Except to the extent indicated in Section 3.09 of the Condor
Disclosure Schedule, all deficiencies asserted or assessments made as a result
of any examinations by the Internal Revenue Service or state, local or foreign
taxing authority have been fully paid, or are fully reflected as a liability in
the Required Condor Reports, or are set forth in Section 3.09 of the Condor
Disclosure Schedule, are being contested and an adequate reserve therefor has
been established and is fully reflected in the Required Condor Reports to the
extent required by GAAP. Section 3.09 of the Condor Disclosure Schedule sets
forth all Returns not otherwise described above that are presently under
examination with respect to Taxes and all assessments and deficiencies with
respect to the Returns that are presently being contested by Condor and Tax
Affiliates.
(c)......Condor represents and warrants to Amwest that, except
as described in Section 3.09 of the Condor Disclosure Schedule:
(i) Condor, its Affiliated Entities and every member of a consolidated,
combined,unitary, or other similar group for federal, state or local income tax
purposes(for the period during which Condor or Amwest, as the case may be, or
any of such Affiliated Entities were included in that group) (all such
Affiliated Entities and other entities collectively referred to herein
as "Tax Affiliates"), have filed on a timely basis all Returns required to
have been filed by it and have paid on a timely basis all Taxes shown thereon
as due. All such Returns are true, complete and correct in all material
respects. The provisions for taxes in the Required Condor Reports set forth
in all material respects the maximum liability of Condor and the Affiliated
Entities for Taxes relating to periods covered thereby. No liability for Taxes
has been incurred by Condor and the Affiliated Entities since the dates of
the Required Condor Reports other than in the ordinary course of their
business. No director, officer or employee of Condor or any of the
Affiliated Entities having responsibility for Tax matters has reason to
believe that any Taxing authority has valid grounds to claim or assess any
material additional Tax with respect to Condor or the Tax Affiliates in excess
of the amounts shown on the Required Condor Reports for the periods covered
thereby.
(ii) With respect to all amounts in respect of Taxes imposed upon Condor or
Tax Affiliates, or for which Condor or Tax Affiliates are or could be liable,
whether to taxing authorities (as, for example, under law) or to other persons
or entities (as, for example, under tax allocation agreements), and with respect
to all taxable periods or portions of periods ending on or before the Effective
Time, all applicable Tax laws and agreements have been fully complied with, and
all such amounts required to be paid by Condor and Tax Affiliates to taxing
authorities or others have been paid, in all material respects.
(iii) None of the Returns required to be filed by Condor and Tax Affiliates
contains, or were required to contain (in order to avoid the imposition of a
penalty), a disclosure statement under Section 6662 (or any predecessor
provision) of the Internal Revenue Code of 1986, as amended (the "Code"), or any
similar provision of state, local or foreign law;
(iv) Neither Condor nor any Tax Affiliate has received notice that the
Internal Revenue Service ("IRS") or any other taxing authority has asserted
against Condor or such Tax Affiliate any deficiency or claim for additional
Taxes in connection with any Return, and no issues have been raised (and are
currently pending) by any taxing authority in connection with any Return.
Neither Condor nor any Tax Affiliate has received notice that it is or may be
subject to Tax in a jurisdiction in which it has not filed or does not currently
file Returns;
(v) There is no pending or, to Condor's Knowledge, threatened action, audit,
proceeding, or investigation with respect to (i) the assessment or collection of
Taxes or (ii) a claim for refund made, of or by Condor and Tax Affiliates with
respect to Taxes;
(vi) All Tax deficiencies asserted or assessed against Condor and Tax
Affiliates have been paid or finally settled with no further amounts owed;
(vii) All amounts that were required to be collected or withheld by Condor and
Tax Affiliates have been duly collected or withheld in all material respects,
and all such amounts that were required to be remitted to any taxing authority
have been duly remitted in all material respects;
(viii) Condor and Tax Affiliates have not requested an extension of time to file
any Return not yet filed, and have not granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No power of attorney granted by Condor or Tax Affiliates with respect
to Taxes is in force;
(ix) Condor and Tax Affiliates have not taken any action not in accordance
with past practice that would have the effect of deferring any material Tax
liability of Condor or any Tax Affiliate from any taxable period ending on or
before or including the Effective Time to any subsequent taxable period;
(x) Other than the Affiliated Entities, Condor has had no Tax Affiliates
during any period with respect to which the applicable statue of limitations on
the assessment of Taxes remains open;
(xi) Condor was not acquired in a "qualified stock purchase" under Section
338(d)(3) of the Code and no elections under Section 338(g) of the Code,
protective carryover basis elections, offset prohibition elections or similar
election are applicable to Condor or any Tax Affiliate;
(xii) Neither Condor nor any Tax Affiliate is required to include in income any
adjustment pursuant to Sections 481 or 263A of the Code (or similar provisions
of other law or regulations) by reason of a change in accounting method or
otherwise, following the Effective Time, and Condor has no Knowledge that the
IRS (or other taxing authority) has proposed, or is considering, any such change
in accounting method or other adjustment;
(xiii) There are no liens for Taxes (other than for current Taxes not yet due
and payable) upon the assets of Condor or the Affiliated Entities;
(xiv) Neither Condor nor any of the Affiliated Entities are party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code, whether by reason of
the Merger or otherwise;
(xv) Neither Condor nor any Affiliated Entity is, and has not been, a United
States real property holding corporation (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code (or any corresponding provision of state, local or foreign Tax law);
(xvi) Neither Condor nor any of the Affiliated Entities has or has had a
permanent establishment in any foreign country, as defined in any applicable Tax
treaty or convention between the United States of America and such foreign
country and neither Condor nor any of the Affiliated Entities has engaged in a
trade or business within any foreign country;
(xvii) Condor and the Affiliated Entities are not party to any joint venture,
partnership, or other arrangement or contract which could be treated as a
partnership for federal income tax purposes;
(xviii)Neither Condor nor any of the Affiliated Entities has not made a "waters
edge election" pursuant to California Revenue and Taxation Code Section 25110;
(xix) There are no excess loss accounts, deferred intercompany gains or losses,
or intercompany items, as such terms are defined in the Treasury Regulations,
that will be required to be recognized or otherwise taken into account as a
result of the acquisition of the Condor Common Stock pursuant to this Agreement;
(xx) Neither Condor nor any of the Affiliated Entities has filed a consent
under Section 341(f) of the Code (or any corresponding provision of state, local
or foreign Tax law); and
(xxi) Neither Condor nor any of the Affiliated Entities is a party to or bound
by any Tax sharing agreement nor has any current or contingent contractual
obligation to indemnify any other person with respect to Taxes, other than
obligations to indemnify a lessor for property Taxes, sales/use Taxes or gross
receipts Taxes (but not income, franchise or premium Taxes) imposed on lease
payments arising from terms that are customary for leases of similar property.
Section 3.10 Insurance: Licenses, Permits and Filings
Condor is duly organized and registered as a California
insurance holding company, and each Affiliated Entity which engages in an
insurance business ("Insurance Subsidiary") is duly organized and licensed as an
insurance company in California and is duly licensed or authorized as an insurer
or reinsurer in any other jurisdiction where it is required to be so licensed or
authorized to conduct its business, or is subject to no liability or disability
that would have a Material Adverse Effect by reason of the failure to be so
licensed or authorized in any such jurisdiction. Since January 1, 1994, Condor
has made all required filings under applicable insurance holding company
statutes. Each of Condor and its Insurance Subsidiaries has all other necessary
authorizations, approvals, orders, consents, certificates, permits,
registrations or qualifications of and from the California Department of
Insurance (the "Department") and any other applicable insurance regulatory
authorities (the "Insurance Licenses") to conduct their businesses as currently
conducted and all such Insurance Licenses are valid and in full force and
effect, except such Insurance Licenses which the failure to have or to be in
full force and effect individually or in the aggregate would not have a Material
Adverse Effect. Section 3.10 of the Condor Disclosure Schedule lists each order
and written understanding or agreement of or with the Department currently in
effect and applicable to Condor or any of its Insurance Subsidiaries. Neither
Condor nor any Affiliated Entity has received any notification (which
notification has not been withdrawn or otherwise resolved prior to the date of
this agreement) from the Department or any other insurance regulatory authority
to the effect that any additional Insurance License from such insurance
regulatory authority is needed to be obtained by Condor or any Affiliated Entity
in any case where it could be reasonably expected that (x) Condor or any
Affiliated Entity would in fact be required either to obtain any such additional
Insurance License, or cease or otherwise limit writing certain business and (y)
obtaining such Insurance License or the limiting of such business would have a
Material Adverse Effect. Each Insurance Subsidiary is in compliance with the
requirements of the insurance laws and regulations of California and the
insurance laws and regulations of any other jurisdiction which are applicable to
such Insurance Subsidiary, and has filed all notices, reports, documents or
other information required to be filed thereunder or in any such case is subject
to no Material Adverse Effect by reason of the failure to so comply or file.
Section 3.11 Patents, Trademarks, and Other
Intellectual Property
Except as set forth in Section 3.11 of the Condor Disclosure
Schedule, Condor and its Affiliated Entities possess or have the right to use to
the extent they are now using, all proprietary rights (including, without
limitation, patents, trade secrets, technology, know-how, copyrights,
trademarks, tradenames, and rights to any of the foregoing), the failure to
possess which would have a Material Adverse Effect on Condor or would prevent
Condor from carrying on its business and completing the development of new
products as currently contemplated ("Proprietary Rights"), and the consummation
of the transactions contemplated hereby will not alter or impair any such
rights. Set forth in Section 3.11 the of Condor Disclosure Schedule is a list of
all Proprietary Rights consisting of patents, patent applications, trademarks,
trademark applications, trade names and service marks owned or utilized by
Condor or its Affiliated Entities. Section 3.11 of the Condor Disclosure
Schedule also lists all licenses or other contracts related to Propriety Rights,
other than those entered into in the ordinary course. With respect to such
Proprietary Rights, and except as set forth in Section 3.11 of the Condor
Disclosure Schedule, (i) Condor has no Knowledge of any claim asserted by any
person challenging such Proprietary Rights which could have a Material Adverse
Effect on the business of Condor and its Affiliated Entities, (ii) to the
Knowledge of Condor, none of the aforesaid infringes or otherwise violates the
rights of others or is being infringed by others, and (iii) except for sales and
licenses in the ordinary course of business, no licenses, sublicenses or
agreements pertaining to any of the aforesaid have been granted by Condor or any
Affiliated Entity.
Section 3.12 Litigation
Except as set forth in Section 3.12 of the Condor Disclosure
Schedule, there is no Proceeding (as defined below) pending or, to the Knowledge
of Condor, threatened against or involving Condor or any of its Affiliated
Entities or any of their respective properties, assets, rights or obligations
before any court, arbitrator or administrative or governmental body, nor is
there any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against Condor or any of its Affiliated Entities involving sums in excess of
$75,000. Neither Condor nor any of its Affiliated Entities is in violation of
any term of any judgment, decree, injunction or order outstanding against it.
There are no Proceedings pending or, to the Knowledge of Condor, threatened
against Condor or any of its Affiliated Entities arising out of or in any way
related to this Agreement or any of the transactions contemplated hereby. As
used in this Agreement, "Proceeding" means any action, suit, hearing,
arbitration or governmental investigation (whether public or private). None of
the Proceedings set forth in Section 3.12 of the Condor Disclosure Schedule
could result in any Material Adverse Effect.
Section 3.13 Insurance
All material policies of fire, liability, workmen's
compensation and other similar forms of insurance owned or held by Condor and
each Affiliated Entity are in full force and effect, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are valid, outstanding and enforceable policies, and will not in
any way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. Such policies, together with the self-insurance
reserves, if any, reflected on the most recent Condor SEC Filings, and such
other policies and reserves added since such date, provide, to the Knowledge of
Condor, insurance coverage that is adequate for the assets and operations of
Condor. Since January 1, 1994, Condor and its Affiliated Entities have been
covered by insurance in scope and amount customary and reasonable for business
in which it has engaged during such period.
Section 3.14 Compliance with Laws
Condor and each Affiliated Entity have complied in all
material respects with the laws and regulations of federal, state, local and
foreign governments and all agencies thereof which are applicable to the
business or properties of Condor or any Affiliated Entity, a violation of which
would result in a Material Adverse Effect on Condor. Except for all licenses,
permits, consents, authorizations and orders contained in Section 3.10, Condor
holds such licenses, permits, consents, authorizations and orders of such
governmental or regulatory authorities as are necessary to carry on its business
as currently being conducted and as anticipated to be conducted, the failure to
hold which could have a Material Adverse Effect on Condor, and such licenses,
permits, consents, authorizations and orders are in full force and effect and
have been and are being fully complied with by Condor.
Section 3.15 Employee Benefit Plans
(a)......Except as set forth in Section 3.15(a) to the Condor
Disclosure Schedule, (i) neither Condor nor any entity that together with Condor
is treated as a single employer pursuant to Section 414(b) or (c) of the Code or
Section 3(5) or 4001(b) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (an "ERISA Affiliate"), maintains or in the past has
maintained any Employee Benefit Plan, as defined in ERISA, under which Condor or
any of its Affiliated Entities has any present or future obligation or liability
or under which any present or former employee of Condor or its Affiliated
Entities has any present or future rights to benefits, (ii) each Employee
Benefit Plan listed in Section 3.15(a) of the Condor Disclosure Schedule has
been administered in accordance with the applicable requirements of ERISA and
the Code, and in the case of any such Plan that is funded for purposes of ERISA
and the Code, has not incurred any federal income or excise tax liability which
would have a Material Adverse Effect on Condor, (iii) all material reports and
information required to be filed with the United States Department of Labor,
Internal Revenue Service or Pension Benefit Guaranty Corporation, or distributed
to participants and their beneficiaries with respect to each Employee Benefit
Plan listed in Section 3.15(a) of the Condor Disclosure Schedule, has been
timely filed or distributed and, with respect to each Employee Benefit Plan for
which an Annual Report has been filed, no change has occurred with respect to
the matters covered by the Annual Report since the date of the most recent such
Annual Report which could reasonably be expected to have a Material Adverse
Effect on Condor, and (iv) there have been no non-exempt "prohibited
transactions" (as that term is defined in the Code or in ERISA) with respect to
any Employee Benefit Plan listed in Section 3.15(a) of the Condor Disclosure
Schedule and no material penalty or tax under ERISA or the Code has been imposed
upon Condor or any of its Affiliated Entities and there are no pending or, to
Condor's Knowledge, threatened claims by or on behalf of any Employee Benefit
Plan listed in Section 3.15(a) of the Condor Disclosure Schedule, by any
employee or beneficiary covered by Employee Benefit Plan listed in Section
3.15(a) of the Condor Disclosure Schedule, or otherwise involving an Employee
Benefit Plan listed in Section 3.15(a) of the Condor Disclosure Schedule, other
than claims for benefits in the ordinary course and other than claims which
would not have a Material Adverse Effect on Condor.
(b)......Each Employee Benefit Plan listed in Section 3.15(a)
of the Condor Disclosure Schedule which is an "employee pension benefit plan,"
as defined in ERISA and which is intended to be "qualified" within the meaning
of Section 401(a) of the Code, is so qualified, and, except as set forth in
Section 3.15(b) of the Condor Disclosure Schedule, a favorable determination
letter has been issued by the Internal Revenue Service with respect to such plan
and no such plan has been amended since the issuance of the most recent
determination letter issued by the Internal Revenue Service with respect
thereto. No Employee Benefit Plan listed in Section 3.15(a) of the Condor
Disclosure Schedule is subject to Title IV of ERISA or Section 412 of the Code.
(c)......Condor or its Affiliated Entities has not maintained
or contributed to, or been obligated or required to contribute to, a
"multiemployer plan," as such term is defined in Section 3(37) of ERISA.
Section 3.16 Employment Related Agreements
Except as described in Section 3.03, 3.15 or 3.16 of the
Condor Disclosure Schedule, neither Condor nor any of its Affiliated Entities is
a party to any bonus, profit sharing, stock option, incentive, pension,
retirement, deferred compensation, consulting, severance, indemnification,
employment or similar arrangement or agreement with officers, directors or
employees of Condor or any of its Affiliated Entities ("Employment Related
Agreements").
Section 3.17 Labor Agreements and Controversies
Neither Condor nor any of its Affiliated Entities is a party
to any collective bargaining agreement nor are there any union representation
proceedings or labor controversies pending or, to the Knowledge of Condor,
threatened against Condor or any of its Affiliated Entities.
Section 3.18 Environmental Matters
(a)......Except as disclosed in Section 3.18 of the Condor
Disclosure Schedule, Condor is in full compliance with all laws, rules,
regulations, and other legal requirements relating to the prevention of
pollution and the protection of human health or the environment, including all
such legal requirements pertaining to human health and safety (collectively,
"Environmental Laws"), except for noncompliance that could not reasonably be
expected to have a Material Adverse Effect on Condor; and Condor possesses and
can transfer to Amwest all permits, licenses, and similar authorizations
required under Environmental Laws. Except as disclosed in Section 3.18 of the
Condor Disclosure Schedule, Condor or an Affiliated Entity has not received
written notice of, or, to the best Knowledge of Condor, is the subject of, any
action, cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or noncompliance with any Environmental Law (an
"Environmental Claim") that could reasonably be expected to have a Material
Adverse Effect on Condor; and to the best Knowledge of Condor, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance in the future.
(b)......Except as disclosed in Section 3.18 of the Condor
Disclosure Schedule, there are no Environmental Claims which could reasonably be
expected to have a Material Adverse Effect on Condor or an Affiliated Entity
that are pending or, to the best Knowledge of Condor, threatened against Condor
or an Affiliated Entity or, to the best Knowledge of Condor, against any person
or entity whose liability for any Environmental Claim Condor or an Affiliated
Entity has or may have retained or assumed either contractually or by operation
of law.
Section 3.19 Certain Fees
Neither Condor, nor any of its Affiliated Entities nor any of
their directors, officers or stockholders has employed any broker or finder or
incurred any liability for any financial advisory, brokerage or finders' fees or
similar fees or commissions in connection with the transactions contemplated by
this Agreement.
Section 3.20 Disclosure
To the best of Condor's Knowledge, no representation or
warranty by Condor in this Agreement and no statement contained in any document,
certificate or other writing furnished or to be furnished by Condor to Amwest or
Amwest contains or will contain any untrue statement of a material fact or omits
or will omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Section 3.21 Post-Retirement and Post-Employment
Benefit Obligations
All obligations associated with the benefits to be provided to
present and former employees after retirement or termination have been properly
recognized as liabilities on Condor's balance sheet at December 31, 1994 in
accordance with Financial Accounting Standards Board Statements No. 106 and 112.
Section 3.22 Registration Statement and Proxy Statement
None of the information with respect to Condor or any
affiliate or associate of Condor that has been supplied by Condor or any of its
accountants, counsel or other authorized representatives in writing (the "Condor
Information") specifically for use in the Proxy Materials or the Registration
Statement will, at the time the Registration Statement becomes effective,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
Section 3.23 Absence of Questionable Payments
(a)......Neither Condor nor any Affiliated Entity nor any
director, officer, agent or employee or any other person authorized to act on
behalf of Condor nor any Affiliated Entity has used any corporate or other funds
on behalf of Condor or any Affiliated Entity in any significant amount for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures in any significant amount relating to political activity,
government officials or others and neither Condor nor any Affiliated Entity nor
any director, officer, agent or employee or any other person authorized to act
on behalf of Condor or any Affiliated Entity has accepted or received any
unlawful contributions, payments, gifts or expenditures in any significant
amount.
(b)......Neither Condor nor any director, officer, employee or
agent of Condor acting in such person's capacity as such, or any Affiliated
Entity (1) has solicited or received any remuneration (including any kickback,
bribe, rebate or other payment, whether in cash or in kind), directly or
indirectly, overtly or covertly in return for (A) referring a Person to another
Person in connection with the furnishing or arranging for the furnishing of any
item, product or service or (B) purchasing, leasing, ordering or arranging for
or recommending the purchase, lease or order of any good, facility, service or
item, where any of the foregoing has violated, or could be deemed to violate,
any applicable law, (2) has offered or paid any such remuneration directly or
indirectly, overtly or covertly, to any person to induce such Person to so refer
a Person or to so purchase, lease, order, arrange for or recommend, and (3) is a
party to any agreement or arrangement, written or oral, that may result in any
of the events described in clauses (1) or (2).
Section 3.24 Guaranties.
Other than risks or liabilities assumed pursuant to insurance
policies or contracts issued by any of Condor's Affiliated Entities, neither
Condor nor any of its Affiliated Entities is a guarantor or otherwise liable for
any liability or obligation of any other person other than Condor and the
Affiliated Entities.
Section 3.25 Material Contracts.
(a)......Section 3.25(a) of the Condor Disclosure Schedule
lists all of the following contracts not otherwise listed on the Condor
Disclosure Schedule to which Condor is a party or by which any of its properties
or assets are bound: (i) employment, consulting, non-competition, severance,
golden parachute or indemnification contract (including, without limitation, any
contract to which Condor is a party involving employees of Condor, but excluding
any insurance policies issued by Condor's Affiliated Entities); (ii) material
licensing, merchandising or distribution agreements; (iii) contracts granting a
right of first refusal or first negotiation; (iv) partnership or joint venture
agreements; (v) agreements for the acquisition, sale or lease of material
properties or assets of Condor (by merger, purchase or sale of assets or stock
or otherwise) entered into since January 1, 1993; (vi) contracts or agreements
with any governmental entity; (vii) other contracts which materially affect the
business, properties or assets of Condor and its Affiliated Entities taken as a
whole and are not otherwise disclosed in this Agreement or were entered into
other than in the ordinary course of business; and (viii) all commitments and
agreements to enter into any of the foregoing (collectively, for purposes of
this Section 3.25 only, the "Contracts"). Condor has delivered or otherwise made
available to Amwest true, correct and complete copies of the Contracts listed in
Section 3.25(a) of the Condor Disclosure Schedule, together with all amendments,
modifications and supplements thereto and all side letters to which Condor is a
party affecting the obligations of any party thereunder.
(b)......Except as set forth in Section 3.25(b) of the Condor
Disclosure Schedule:
...........................(i) Each of the Contracts is valid and enforceable in
accordance with its terms, and there is no material default under any Contract
so listed either by Condor or, to the Knowledge of Condor, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a material default thereunder by Condor or, to
the Knowledge of Condor, any other party.
...........................(ii) No party to any such Contract has given
notice to Condor of or made aclaim against Condor with respect to any material
breach or material default thereunder.
(c)......With respect to those Contracts that were assigned or
subleased to Condor by a third party, all necessary consents to such assignments
or subleases have been obtained.
Section 3.26 Insurance Contracts and Rates.
All contracts, agreements, leases, policies or agreements of
insurance or reinsurance, contracts, notes, mortgages, indentures, arrangements
or other commitments or obligations, whether written or oral ("Insurance
Contracts") regarding insurance, written or issued by Condor or any of its
Insurance Subsidiaries as now in force are in all material respects, to the
extent required under applicable law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected to by such
authorities within the period provided for objection, and such forms comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto. True, complete and correct copies of such forms have been
furnished or made available to Amwest and there are no other forms of Insurance
Contracts used in connection with Condor's and its Insurance Subsidiaries'
business. Premium rates established by Condor or its Insurance Subsidiaries
which are required to be filed with or approved by insurance regulatory
authorities have been so filed or approved, the premiums charged conform thereto
in all material respects, and such premiums comply in all material respects with
the insurance statutes, regulations and rules applicable thereto.
Section 3.27 Reinsurance.
Section 3.27 of the Condor Disclosure Schedule contains a list
of all reinsurance or coinsurance treaties or agreements, including
retrocessional agreements, to which Condor or any Insurance Subsidiary is a
party or under which Condor or any Insurance Subsidiary has any existing rights,
obligations or liabilities. All reinsurance and coinsurance treaties or
agreements, including retrocessional agreements, to which Condor or any
Insurance Subsidiary is a party or under which Condor or any Insurance
Subsidiary has any existing rights, obligations or liabilities are in full force
and effect. Neither Condor nor any Insurance Subsidiary, nor, to the knowledge
of Condor, any other party to a reinsurance or coinsurance treaty or agreement
to which Condor or any Insurance Subsidiary is a party, is in default in any
material respect as to any provision thereof, and no such agreement contains any
provision providing that the other party thereto may terminate such agreement by
reason of the transactions contemplated by this Agreement. Condor has not
received any notice to the effect that the financial condition of any other
party to any such agreement is impaired with the result that a default
thereunder may reasonably be anticipated, whether or not such default may be
cured by the operation of any offset clause in such agreement.
Section 3.28 Loss Reserves; Solvency.
Except as set forth in Section 3.28 of the Condor Disclosure
Schedule, the reserve for loss and loss adjustment expense liabilities set forth
in the most recent Condor SEC Filing and subsequent Condor SEC Filings provided
to Amwest after the date hereof was or will be determined in accordance with
generally accepted actuarial standards and principles consistently applied, is
fairly stated in accordance with sound actuarial principles and statutory
accounting principles and meets the requirements of the insurance statutes, laws
and regulations of the State of California. Except as disclosed in Section 3.28
of the Condor Disclosure Schedule, the reserves for loss and loss adjustment
expense liabilities reflected in the most recent Condor SEC Filing and
subsequent Condor SEC Filings provided to Amwest after the date hereof and
established on the books of Condor for all future insurance and reinsurance
losses, claims and expenses make or will make a reasonable provision for all
unpaid loss and loss adjustment expense obligations of Condor and its Insurance
Subsidiaries under the terms of its policies and agreements. Condor and each of
its Insurance Subsidiaries owns assets which qualify as admitted assets under
California state insurance laws in an amount at least equal to the sum of all of
their respective required insurance reserves and minimum statutory capital and
surplus as required by Sections 700.01 through 700.05 of the Insurance Code. The
value of the assets of Condor and its Affiliated Entities at their present fair
saleable value is greater than their total liabilities, including contingent
liabilities, and Condor and its Affiliated Entities have assets and capital
sufficient to pay their liabilities, including contingent liabilities, as they
become due.
Section 3.29 Opinion of Financial Advisor
Wedbush Xxxxxx Securities (the "Condor Financial Advisor") has
delivered to the Condor board of directors its written opinion, dated the date
of this Agreement, to the effect that, as of such date, the Merger Consideration
is fair to the public holders of Condor Common Stock from a financial point of
view, a signed, true and complete copy of which opinion has been delivered to
Amwest, and such opinion has not been withdrawn or modified.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
AMWEST
Amwest represents and warrants to Condor as follows:
Section 4.01 Corporate Organization
Amwest is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted, and is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or conduct of business requires such licensing
or qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on Amwest. Amwest has delivered to Condor complete and
correct copies of its Certificate of Incorporation and Bylaws as in effect on
the date hereof.
Section 4.02 Authorization
Amwest has the requisite corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery by Amwest of this Agreement and the performance by it of
its obligations hereunder and the consummation by it of the transactions
contemplated hereby have been duly authorized by its Board of Directors and,
except for the approval of the stockholders of Amwest Common Stock contemplated
herein, no other corporate proceeding is necessary for the execution and
delivery thereof, and the performance of Amwest's obligations hereunder, and the
consummation by it of the transactions contemplated hereby. This Agreement is a
legal, valid and binding obligation of Amwest enforceable against Amwest in
accordance with its terms.
Section 4.03 Capitalization
The authorized capital stock of Amwest as well as the number
of issued and outstanding shares of each class of capital stock of Amwest is as
set forth on Section 4.03 of the Amwest Disclosure Schedule to this Agreement
executed by Amwest and delivered to Condor simultaneously with the execution of
this Agreement (the "Amwest Disclosure Schedule"). All of such outstanding
shares have been duly and validly issued, were not issued in violation of any
preemptive rights and are fully paid and non-assessable with no personal
liability attaching to the ownership thereof. Except as set forth on Section
4.03 of the Amwest Disclosure Schedule, there are no options, warrants,
subscriptions, conversion or other rights, agreements, commitments, arrangements
or understandings with respect to (i) the issuance of shares of capital stock of
Amwest or any other securities convertible into, exchangeable for or evidencing
the right to subscribe for any such shares, (ii) obligating Amwest to purchase
shares of Amwest Common Stock or any security convertible into Amwest Common
Stock, or (iii) obligating any of the stockholders of Amwest to purchase, sell
or transfer any Amwest Common Stock. Section 4.03 of Amwest Disclosure Schedule
lists each of Amwest's stock option plans and other stock award plans, true and
correct copies of which have been provided by Amwest to Condor.
Section 4.04 Financial Statements and Reports
Since January 1, 1994, Amwest has filed with the SEC all
reports, registration statements and all other filings required to be filed with
the SEC under the rules and regulations of the SEC (collectively, the "Required
Amwest Reports"), all of which, as of their respective effective dates, complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act. Amwest has delivered to Condor true and complete copies of
(i) Amwest's Annual Report on Form 10-K for the fiscal years ended December 31,
1994, as filed with the SEC, (ii) Quarterly Reports on Form 10-Q for the three
months ended March 31, 1995, June 30, 1995 and September 30, 1995, as filed with
the SEC, (iii) proxy statements relating to all meetings of Amwest's
stockholders (whether annual or special) held or scheduled to be held since
January 1, 1994, (iv) all other forms, reports, statements and documents filed
by Amwest with the SEC since January 1, 1994 and (v) all reports, statements and
other information provided by Amwest to its stockholders since January 1, 1994
(collectively, the "Amwest SEC Filings"). As of their respective dates, none of
the Required Amwest Reports or Amwest SEC Filings contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of Amwest included or incorporated by reference in the
Amwest SEC Filings were prepared in accordance with GAAP applied on a consistent
basis (except as otherwise stated in such financial statements or, in the case
of audited statements, the related report thereon of independent certified
public accountants), and present fairly the financial position and results of
operations, cash flows and changes in stockholders' equity of Amwest and its
consolidated Affiliated Entities as of the dates and for the periods indicated,
subject, in the case of unaudited interim financial statements, to the absence
of notes and to normal year-end adjustments, and are consistent with the books
and records of Amwest.
Section 4.05 Absence of Certain Changes
Except as set forth in Amwest SEC Filings or in Section 4.05
of the Amwest Disclosure Schedule, since December 31, 1994, Amwest, and each
Affiliated Entity, have conducted their respective businesses only in the
ordinary and usual course and there has not been any event, change or
development which has had or will have a Material Adverse Effect on Amwest.
Section 4.06 Consents and Approvals; No Violations
There is no requirement applicable to Amwest or any of its
Affiliated Entities to make any filing with, or to obtain any permit,
authorization, consent or approval of, any governmental or regulatory authority
as a condition to the lawful consummation of the transactions contemplated by
this Agreement, other than (i) requirements of the HSR Act, (ii) requirements of
the Insurance Code, the Arizona State Department of Insurance and applicable
Arizona insurance code provisions and regulations thereunder, and any other
applicable insurance regulatory authorities and applicable insurance code
provisions and regulations thereunder, (iii) filings with the SEC pursuant to
the Securities Act and the Exchange Act, (iv) such filings and approvals as may
be required under the "blue sky," takeover or securities laws of various states,
(v) compliance with the requirements of the ASE, (vi) the written consent from
Union Bank regarding the Merger and the transactions contemplated thereby, or
(vii) where the failure to make any such filing, or to obtain such permit,
authorization, consent or approval, would not prevent or delay consummation of
the Merger or would not otherwise prevent Amwest from performing its obligations
under this Agreement. Except as set forth in Section 4.06 of the Amwest
Disclosure Schedule, neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (a) result in the
acceleration of, or the creation in any party of any right to accelerate,
terminate, modify or cancel any indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability to which Amwest or any
Affiliated Entity is a party or by which any of them is bound or to which any of
their assets is subject, except as would not have a Material Adverse Effect on
Amwest, (b) conflict with or result in a breach of or constitute a default under
any provision of the Certificate of Incorporation or Bylaws (or other charter
documents) of Amwest or any Affiliated Entity, or, except as would not have a
Material Adverse Effect on Amwest, a default under or violation of any
restriction, lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability to which any of them is a party
or by which any of them is bound or to which any of their assets is subject or
result in the creation of any lien or encumbrance upon any of said assets, or
(c) violate or result in a breach of or constitute a default under any judgment,
order, decree, rule or regulation of any court or governmental agency to which
Amwest or any Affiliated Entity is subject.
Section 4.07 Litigation
Except as set forth in Section 4.07 of the Amwest Disclosure
Schedule, there is no action, proceeding or investigation pending or, to the
Knowledge of Amwest, threatened against or involving Amwest or any of its
Affiliated Entities or any of their respective properties, assets, rights or
obligations before any court, arbitrator or administrative or governmental body
nor is there any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against Amwest or any of its Affiliated Entities in which a decision
could have a Material Adverse Effect on Amwest. Neither Amwest nor any of its
Affiliated Entities is in violation of any term of any judgment, decree,
injunction or order outstanding against it. There are no actions, suits or
proceedings pending or, to the Knowledge of Amwest, threatened against Amwest or
any of its Affiliated Entities arising out of or in any way related to this
Agreement or any of the transactions contemplated hereby.
Section 4.08 Compliance with Laws
Amwest and each Affiliated Entity have complied in all
material respects with the laws and regulations of federal, state, local and
foreign governments and all agencies thereof which are applicable to the
business or properties of Amwest or any Affiliated Entity, a violation of which
would result in a Material Adverse Effect on Amwest, including the provisions of
the Insurance Code.
Section 4.09 Proxy Statement, Etc.
The Proxy Statement and Registration Statement (as defined in
Section 2.02) and all amendments and supplements thereto will comply as to form
in all material respects with the provisions of the Exchange Act, the Securities
Act and the rules and regulations promulgated thereunder. The Proxy Statement,
the Registration Statement and any amendments thereof or supplements thereto,
will not, on the date the Proxy Statement and Registration Statement are first
mailed to stockholders of Condor, at the time the meeting of the stockholders of
Amwest referred to in Section 2.02 hereof is convened or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that Amwest makes no representation or warranty with respect
to any information furnished to it by Condor or any of their accountants,
counsel or other authorized representatives in writing specifically for
inclusion in the Proxy Statement or the Registration Statement.
Section 4.10 No Undisclosed Liabilities
Except as set forth in Section 4.10 of the Amwest Disclosure
Schedule, and except as and to the extent set forth on the consolidated balance
sheet of Amwest as of December 31, 1994 (including those liabilities and
potential liabilities referred to in the financial footnotes thereto), included
in the Required Amwest Reports, neither Amwest nor any Affiliated Entities had,
at such date, any liabilities or obligations (absolute, accrued, contingent or
otherwise) greater than $100,000, taken as a whole and since that date neither
Amwest nor any Affiliated Entities has incurred any liabilities or obligations
material to Amwest and Affiliated Entities taken as a whole except those
incurred in the ordinary and usual course of business and consistent with past
practice or in connection with or as a result of the transactions contemplated
by this Agreement to which Amwest is or is to be a party.
Section 4.11 Disclosure
To the best of Amwest's knowledge, no representation or
warranty by Amwest in this Agreement and no statement contained or to be
contained in any document, certificate or other writing furnished or to be
furnished by Amwest to Condor, contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
Section 4.12 Post-Retirement and Post-Employment
Benefit Obligations
Except as described in Section 4.12 of the Amwest Disclosure
Schedule, all obligations associated with benefits to be provided to present and
former employees after retirement or termination have been properly recognized
as liabilities on Amwest's balance sheet at December 31, 1994 in accordance with
Financial Accounting Standards Board Statements Nos. 106 and 112.
Section 4.13 Employee Benefit Plans
(a)......Except as set forth in Section 4.13(a) to the Amwest
Disclosure Schedule, (i) neither Amwest nor any entity that together with Amwest
is treated as a single employer pursuant to Section 414(b) or (c) of the Code or
Section 3(5) or 4001(b) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (an "ERISA Affiliate"), maintains or in the past has
maintained any Employee Benefit Plan, as defined in ERISA, under which Amwest or
any of its Affiliated Entities has any present or future obligation or liability
or under which any present or former employee of Amwest or its Affiliated
Entities has any present or future rights to benefits, (ii) each Employee
Benefit Plan listed in Section 4.13(a) of the Amwest Disclosure Schedule has
been administered in accordance with the applicable requirements of ERISA and
the Code, and in the case of any Employee Benefit Plan listed in Section 4.13(a)
of the Amwest Disclosure Schedule that is funded for purposes of ERISA and the
Code, has not incurred any federal income or excise tax liability which would
have a Material Adverse Effect on Amwest, (iii) all material reports and
information required to be filed with the United States Department of Labor,
Internal Revenue Service or Pension Benefit Guaranty Corporation, or distributed
to participants and their beneficiaries with respect to each Employee Benefit
Plan listed in Section 4.13(a) of the Amwest Disclosure Schedule, has been
timely filed or distributed and, with respect to each Employee Benefit Plan for
which an Annual Report has been filed, no change has occurred with respect to
the matters covered by the Annual Report since the date of the most recent such
Annual Report which could reasonably be expected to have a Material Adverse
Effect on Amwest, and (iv) there have been no non-exempt "prohibited
transactions" (as that term is defined in the Code or in ERISA) with respect to
any Employee Benefit Plan listed in Section 4.13(a) of the Amwest Disclosure
Schedule and no material penalty or tax under ERISA or the Code has been imposed
upon Amwest or any of its Affiliated Entities and there are no pending or, to
Amwest's Knowledge, threatened claims by or on behalf of any Employee Benefit
Plan listed in Section 4.13(a) of the Amwest Disclosure Schedule, by any
employee or beneficiary covered by Employee Benefit Plan listed in Section
4.13(a) of the Amwest Disclosure Schedule, or otherwise involving an Employee
Benefit Plan listed in Section 4.13(a) of the Amwest Disclosure Schedule, other
than claims for benefits in the ordinary course and other than claims which
would not have a Material Adverse Effect on Amwest.
(b)......Each Employee Benefit Plan listed in Section 4.13(a)
of the Amwest Disclosure Schedule which is an "employee pension benefit plan,"
as defined in ERISA and which is intended to be "qualified" within the meaning
of Section 401(a) of the Code, is so qualified, and, except as set forth in
Section 4.13(b) of the Amwest Disclosure Schedule, a favorable determination
letter has been issued by the Internal Revenue Service with respect to such plan
and no such plan has been amended since the issuance of the most recent
determination letter issued by the Internal Revenue Service with respect
thereto. No Employee Benefit Plan listed in Section 4.13(a) of the Amwest
Disclosure Schedule is subject to Title IV of ERISA or Section 412 of the Code.
(c)......Amwest has not maintained or contributed to, or been
obligated or required to contribute to, a "multiemployer plan," as such term is
defined in Section 3(37) of ERISA.
Section 4.14 Environmental Matters
(a)......Except as disclosed in Section 4.14 of the Amwest
Disclosure Schedule, Amwest is in full compliance with all laws, rules,
regulations, and other legal requirements relating to the prevention of
pollution and the protection of human health or the environment, including all
such legal requirements pertaining to human health and safety (collectively,
"Environmental Laws"), except for noncompliance that could not reasonably be
expected to have a Material Adverse Effect on Amwest, which compliance includes,
but is not limited to, the possession by Amwest of all material permits, and
other governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof. Except as disclosed in
Section 4.14 of the Amwest Disclosure Schedule, Amwest or an Affiliated Entity
has not received written notice of, or, to the best Knowledge of Amwest, is the
subject of, an Environmental Claim that could reasonably be expected to have a
Material Adverse Effect on Amwest; and to the best Knowledge of Amwest, there
are no circumstances that are reasonably likely to prevent or interfere with
such material compliance in the future.
(b)......Except as disclosed in Section 4.14 of the Amwest
Disclosure Schedule, there are no Environmental Claims which could reasonably be
expected to have a Material Adverse Effect on Amwest or an Affiliated Entity
that are pending or, to the best Knowledge of Amwest, threatened against Amwest
or an Affiliated Entity or, to the best Knowledge of Amwest, against any person
or entity whose liability for any Environmental Claim Amwest or an Affiliated
Entity has or may have retained or assumed either contractually or by operation
of law.
Section 4.15 Absence of Questionable Payments
(a)......Neither Amwest nor any Affiliated Entity nor any
director, officer, agent or employee or any other person authorized to act on
behalf of Amwest nor any Affiliated Entity has used any corporate or other funds
on behalf of Amwest or any Affiliated Entity in any significant amount for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures in any significant amount relating to political activity,
government officials or others and neither Amwest nor any Affiliated Entity nor
any director, officer, agent or employee or any other person authorized to act
on behalf of Amwest or any Affiliated Entity has accepted or received any
unlawful contributions, payments, gifts or expenditures in any significant
amount.
(b)......Neither Amwest, nor any director, officer, employee
or agent of Amwest acting in such person's capacity as such, or any Affiliated
Entity (1) has solicited or received any remuneration (including any kickback,
bribe, rebate or other payment, whether in cash or in kind), directly or
indirectly, overtly or covertly in return for (A) referring a Person to another
Person in connection with the furnishing or arranging for the furnishing of any
item, product or service or (B) purchasing, leasing, ordering or arranging for
or recommending the purchase, lease or order of any good, facility, service or
item, where any of the foregoing has violated, or could be deemed to violate,
any applicable law, (2) has offered or paid any such remuneration directly or
indirectly, overtly or covertly, to any Person to induce such Person to so refer
a Person or to so purchase, lease, order, arrange for or recommend, and (3) is a
party to any agreement or arrangement, written or oral, that may result in any
of the events described in clauses (1) or (2).
Section 4.16 Certain Fees
Neither Amwest, nor any of its Affiliated Entities nor any of
their directors, officers or stockholders has employed any broker or finder or
incurred any liability for any financial advisory, brokerage or finders' fees or
similar fees or commissions in connection with the transactions contemplated by
this Agreement.
Section 4.17 Taxes
(a)......Section 4.17 of the Amwest Disclosure Schedule sets
forth: (i) the taxable years of Amwest and Tax Affiliates as to which the
respective statutes of limitations on the assessment of United States federal
income and any applicable state, local or foreign income, franchise and premium
Taxes have not expired, and (ii) with respect to such taxable years sets forth
those years for which examinations by the Internal Revenue Service or the state,
local or foreign taxing authority have been completed, those years for which
examinations by such agencies are presently being conducted, those years for
which notice of pending or threatened examination or adjustment has been
received, those years for which examinations by such agencies have not been
initiated, and those years for which required Returns for such Taxes have not
yet been filed. Except to the extent indicated in Section 4.17 of the Amwest
Disclosure Schedule, all deficiencies asserted or assessments made as a result
of any examinations by the Internal Revenue Service or state, local or foreign
taxing authority have been fully paid, or are fully reflected as a liability in
the Required Amwest Reports, or are set forth in Section 4.17 of the Amwest
Disclosure Schedule, are being contested and an adequate reserve therefor has
been established and is fully reflected in the Required Amwest Reports to the
extent required by GAAP. Section 4.17 of the Amwest Disclosure Schedule sets
forth all Returns not otherwise described above that are presently under
examination with respect to Taxes and all assessments and deficiencies with
respect to the Returns that are presently being contested by Amwest and Tax
Affiliates.
(b)......Amwest represents and warrants to Condor that, except
as described in Section 4.17 of the Amwest Disclosure Schedule:
(i) Amwest and its Tax Affiliates have filed on a timely basis all Returns
required to have been filed by it and have paid on a timely basis all Taxes
shown thereon as due. All such Returns are true, complete and correct in all
material respects. The provisions for taxes in the Required Amwest Reports set
forth in all material respects the maximum liability of Amwest and the
Affiliated Entities for Taxes relating to periods covered thereby. No liability
for Taxes has been incurred by Amwest and the Affiliated Entities since the
dates of the Required Amwest Reports other than in the ordinary course of their
business. No director, officer or employee of Amwest or any of the Affiliated
Entities having responsibility for Tax matters has reason to believe that any
Taxing authority has valid grounds to claim or assess any material additional
Tax with respect to Amwest or the Tax Affiliates in excess of the amounts shown
on the Required Amwest Reports for the periods covered thereby.
(ii) With respect to all amounts in respect of Taxes imposed upon Amwest or
Tax Affiliates, or for which Amwest or Tax Affiliates are or could be liable,
whether to taxing authorities (as, for example, under law) or to other persons
or entities (as, for example, under tax allocation agreements), and with respect
to all taxable periods or portions of periods ending on or before the Effective
Time, all applicable Tax laws and agreements have been fully complied with, and
all such amounts required to be paid by Amwest and Tax Affiliates to taxing
authorities or others have been paid, in all material respects.
(iii) None of the Returns required to be filed by Amwest and Tax Affiliates
contains, or were required to contain (in order to avoid the imposition of a
penalty), a disclosure statement under Section 6662 (or any predecessor
provision) of the Code, or any similar provision of state, local or foreign law;
(iv) Neither Amwest nor any Tax Affiliate has received notice that the IRS or
any other taxing authority has asserted against Amwest or such Tax Affiliate any
deficiency or claim for additional Taxes in connection with any Return, and no
issues have been raised (and are currently pending) by any taxing authority in
connection with any Return. Neither Amwest nor any Tax Affiliate has received
notice that it is or may be subject to Tax in a jurisdiction in which it has not
filed or does not currently file Returns;
(v) There is no pending or, to Amwest's Knowledge, threatened action, audit,
proceeding, or investigation with respect to (i) the assessment or collection of
Taxes or (ii) a claim for refund made, of or by Amwest and Tax Affiliates with
respect to Taxes;
(vi) All Tax deficiencies asserted or assessed against Amwest and Tax
Affiliates have been paid or finally settled with no further amounts owed;
(vii) All amounts that were required to be collected or withheld by Amwest and
Tax Affiliates have been duly collected or withheld in all material respects,
and all such amounts that were required to be remitted to any taxing authority
have been duly remitted in all material respects;
(viii) Amwest and Tax Affiliates have not requested an extension of time to file
any Return not yet filed, and have not granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No power of attorney granted by Amwest or Tax Affiliates with respect
to Taxes is in force;
(ix) Amwest and Tax Affiliates have not taken any action not in accordance
with past practice that would have the effect of deferring any material Tax
liability of Amwest or any Tax Affiliate from any taxable period ending on or
before or including the Effective Time to any subsequent taxable period;
(x) Other than the Affiliated Entities, Amwest has had no Tax Affiliates
during any period with respect to which the applicable statue of limitations on
the assessment of Taxes remains open;
(xi) Amwest was not acquired in a "qualified stock purchase" under Section
338(d)(3) of the Code and no elections under Section 338(g) of the Code,
protective carryover basis elections, offset prohibition elections or similar
election are applicable to Amwest or any Tax Affiliate;
(xii) Neither Amwest nor any Tax Affiliate is required to include in income any
adjustment pursuant to Sections 481 or 263A of the Code (or similar provisions
of other law or regulations) by reason of a change in accounting method or
otherwise, following the Effective Time, and Amwest has no Knowledge that the
IRS (or other taxing authority) has proposed, or is considering, any such change
in accounting method or other adjustment;
(xiii)There are no liens for Taxes (other than for current Taxes not yet due
and payable) upon the assets of Amwest or the Affiliated Entities;
(xiv) Neither Amwest nor any of the Affiliated Entities are party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code, whether by reason of
the Merger or otherwise;
(xv) Neither Amwest nor any Affiliated Entity is, and has not been, a United
States real property holding corporation (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code (or any corresponding provision of state, local or foreign Tax law);
(xvi) Neither Amwest nor any of the Affiliated Entities has or has had a
permanent establishment in any foreign country, as defined in any applicable Tax
treaty or convention between the United States of America and such foreign
country and neither Amwest nor any of the Affiliated Entities has engaged in a
trade or business within any foreign country;
(xvii)Amwest and the Affiliated Entities are not party to any joint venture,
partnership, or other arrangement or contract which could be treated as a
partnership for federal income tax purposes;
(xviii)Neither Amwest nor any of the Affiliated Entities has not made a "waters
edge election" pursuant to California Revenue and Taxation Code Section 25110;
(xix) There are no excess loss accounts, deferred intercompany gains or losses,
or intercompany items, as such terms are defined in the Treasury Regulations,
that will be required to be recognized or otherwise taken into account as a
result of the acquisition of the Amwest Common Stock pursuant to this Agreement;
(xx) Neither Amwest nor any of the Affiliated Entities has filed a consent
under Section 341(f) of the Code (or any corresponding provision of state, local
or foreign Tax law); and
(xxi) Neither Amwest nor any of the Affiliated Entities is a party to or bound
by any Tax sharing agreement nor has any current or contingent contractual
obligation to indemnify any other person with respect to Taxes, other than
obligations to indemnify a lessor for property Taxes, sales/use Taxes or gross
receipts Taxes (but not income, franchise or premium Taxes) imposed on lease
payments arising from terms that are customary for leases of similar property.
Section 4.18 Affiliated Entities
(a)......Except as set forth in Section 4.18(a) of the Amwest
Disclosure Schedule, Amwest has no direct or indirect Affiliated Entities. Each
Affiliated Entity of Amwest listed on Section 4.18(a) of Amwest Disclosure
Schedule is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, with all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted, and is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or conduct of business requires such
qualification or licensing, except where the failure to be so qualified would
not have a Material Adverse Effect on Amwest. Amwest has delivered to Condor
complete and correct copies of the Articles or Certificate of Incorporation and
Bylaws of each such Affiliated Entity as in effect on the date hereof.
(b)......Except as set forth in Section 4.18(b) of the Amwest
Disclosure Schedule, Amwest is, directly or indirectly, the record and
beneficial owner of all of the outstanding shares of capital stock of each of
its Affiliated Entities, and all of the outstanding shares of capital stock of
each such Affiliated Entity are duly and validly issued, were not issued in
violation of any preemptive rights, are fully paid and non-assessable and are
owned free and clear of any claim, lien, encumbrance or agreement with respect
thereto. Except as and to the extent set forth in Section 4.18(b) of the Amwest
Disclosure Schedule, there are not any options, warrants, subscriptions,
conversion or other rights, agreements, or commitments, arrangements or
understandings with respect to the issuance of capital stock of any Affiliated
Entity of Amwest or any other securities convertible into, exchangeable for or
evidencing the right to subscribe for any such shares.
Section 4.19 Reinsurance.
Section 4.19 of the Amwest Disclosure Schedule contains a list
of all reinsurance or coinsurance treaties or agreements, including
retrocessional agreements, to which Amwest or any Insurance Subsidiary is a
party or under which Amwest or any Insurance Subsidiary has any existing rights,
obligations or liabilities. All reinsurance and coinsurance treaties or
agreements, including retrocessional agreements, to which Amwest or any
Insurance Subsidiary is a party or under which Amwest or any Insurance
Subsidiary has any existing rights, obligations or liabilities are in full force
and effect. Neither Amwest nor any Insurance Subsidiary, nor, to the knowledge
of Amwest, any other party to a reinsurance or coinsurance treaty or agreement
to which Amwest or any Insurance Subsidiary is a party, is in default in any
material respect as to any provision thereof, and no such agreement contains any
provision providing that the other party thereto may terminate such agreement by
reason of the transactions contemplated by this Agreement. Amwest has not
received any notice to the effect that the financial condition of any other
party to any such agreement is impaired with the result that a default
thereunder may reasonably be anticipated, whether or not such default may be
cured by the operation of any offset clause in such agreement.
Section 4.20 Insurance: Licenses, Permits and Filings
Amwest is duly organized and registered as a California
insurance holding company, and each Insurance Subsidiary is duly organized and
licensed as an insurance company in California and is duly licensed or
authorized as an insurer or reinsurer in any other jurisdiction where it is
required to be so licensed or authorized to conduct its business, or is subject
to no liability or disability that would have a Material Adverse Effect by
reason of the failure to be so licensed or authorized in any such jurisdiction.
Since January 1, 1994, Amwest has made all required filings under applicable
insurance holding company statutes. Each of Amwest and its Insurance
Subsidiaries has all other necessary Insurance Licenses to conduct their
businesses as currently conducted and all such Insurance Licenses are valid and
in full force and effect, except such Insurance Licenses which the failure to
have or to be in full force and effect individually or in the aggregate would
not have a Material Adverse Effect. Section 4.20 of the Amwest Disclosure
Schedule lists each order and written understanding or agreement of or with the
Department currently in effect and applicable to Amwest or any of its Insurance
Subsidiaries. Neither Amwest nor any Affiliated Entity has received any
notification (which notification has not been withdrawn or otherwise resolved
prior to the date of this agreement) from the Department or any other insurance
regulatory authority to the effect that any additional Insurance License from
such insurance regulatory authority is needed to be obtained by Amwest or any
Affiliated Entity in any case where it could be reasonably expected that (x)
Amwest or any Affiliated Entity would in fact be required either to obtain any
such additional Insurance License, or cease or otherwise limit writing certain
business and (y) obtaining such Insurance License or the limiting of such
business would have a Material Adverse Effect. Each Insurance Subsidiary is in
compliance with the requirements of the insurance laws and regulations of
California and the insurance laws and regulations of any other jurisdiction
which are applicable to such Insurance Subsidiary, and has filed all notices,
reports, documents or other information required to be filed thereunder or in
any such case is subject to no Material Adverse Effect by reason of the failure
to so comply or file.
Section 4.21 Guaranties.
Other than risks or liabilities assumed pursuant to insurance
policies or contracts issued by any of Amwest's Affiliated Entities, neither
Amwest nor any of its Affiliated Entities is a guarantor or otherwise liable for
any liability or obligation of any other person other than Amwest and the
Affiliated Entities.
Section 4.22 Material Contracts.
(a)......Section 4.22(a) of the Amwest Disclosure Schedule
lists all of the following contracts not otherwise listed on the Amwest
Disclosure Schedule to which Amwest is a party or by which any of its properties
or assets are bound: (i) employment, consulting, non-competition, severance,
golden parachute or indemnification contract (including, without limitation, any
contract to which Amwest is a party involving employees of Amwest, but excluding
any insurance policies issued by Amwest's Affiliated Entities); (ii) material
licensing, merchandising or distribution agreements; (iii) contracts granting a
right of first refusal or first negotiation; (iv) partnership or joint venture
agreements; (v) agreements for the acquisition, sale or lease of material
properties or assets of Amwest (by merger, purchase or sale of assets or stock
or otherwise) entered into since January 1, 1993; (vi) contracts or agreements
with any governmental entity; (vii) other contracts which materially affect the
business, properties or assets of Amwest and its Affiliated Entities taken as a
whole and are not otherwise disclosed in this Agreement or were entered into
other than in the ordinary course of business; and (viii) all commitments and
agreements to enter into any of the foregoing (collectively, for purposes of
this Section 4.22 only, the "Contracts"). Amwest has delivered or otherwise made
available to Condor true, correct and complete copies of the Contracts listed in
Section 4.22(a) of the Amwest Disclosure Schedule, together with all amendments,
modifications and supplements thereto and all side letters to which Amwest is a
party affecting the obligations of any party thereunder.
(b)......Except as set forth in Section 4.22(b) of the Amwest
Disclosure Schedule:
...........................(i) Each of the Contracts is valid and enforceable in
accordance with its terms, and there is no material default under any Contract
so listed either by Amwest or, to the Knowledge of Amwest, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a material default thereunder by Amwest or, to
the Knowledge of Amwest, any other party.
...........................(ii) No party to any such Contract has given
notice to Amwest of or made aclaim against Amwest with respect to any material
breach or material default thereunder.
(c)......With respect to those Contracts that were assigned or
subleased to Amwest by a third party, all necessary consents to such assignments
or subleases have been obtained.
Section 4.23 Insurance Contracts and Rates.
All Insurance Contracts regarding insurance, written or issued
by Amwest or any of its Insurance Subsidiaries as now in force are in all
material respects, to the extent required under applicable law, on forms
approved by applicable insurance regulatory authorities or which have been filed
and not objected to by such authorities within the period provided for
objection, and such forms comply in all material respects with the insurance
statutes, regulations and rules applicable thereto. True, complete and correct
copies of such forms have been furnished or made available to Condor and there
are no other forms of Insurance Contracts used in connection with Amwest's and
its Insurance Subsidiaries' business. Premium rates established by Amwest or its
Insurance Subsidiaries which are required to be filed with or approved by
insurance regulatory authorities have been so filed or approved, the premiums
charged conform thereto in all material respects, and such premiums comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto.
Section 4.24 Loss Reserves; Solvency.
Except as set forth in Section 4.24 of the Amwest Disclosure
Schedule, the reserve for loss and loss adjustment expense liabilities set forth
in the most recent Amwest SEC Filing and subsequent Amwest SEC Filings provided
to Condor after the date hereof was or will be determined in accordance with
generally accepted actuarial standards and principles consistently applied, is
fairly stated in accordance with sound actuarial principles and statutory
accounting principles and meets the requirements of the insurance statutes, laws
and regulations of the State of California. Except as disclosed in Section 4.24
of the Amwest Disclosure Schedule, the reserves for loss and loss adjustment
expense liabilities reflected in the most recent Amwest SEC Filing and
subsequent Amwest SEC Filings provided to Condor after the date hereof and
established on the books of Amwest for all future insurance and reinsurance
losses, claims and expenses make or will make a reasonable provision for all
unpaid loss and loss adjustment expense obligations of Amwest and its Insurance
Subsidiaries under the terms of its policies and agreements. Amwest and each of
its Insurance Subsidiaries owns assets which qualify as admitted assets under
California state insurance laws in an amount at least equal to the sum of all of
their respective required insurance reserves and minimum statutory capital and
surplus as required by Sections 700.01 through 700.05 of the Insurance Code. The
value of the assets of Amwest and its Affiliated Entities at their present fair
saleable value is greater than their total liabilities, including contingent
liabilities, and Amwest and its Affiliated Entities have assets and capital
sufficient to pay their liabilities, including contingent liabilities, as they
become due.
ARTICLE V
COVENANTS
Section 5.01 Conduct of Business of Condor and Amwest
Except as contemplated by this Agreement or to the extent that
the other party to this Agreement shall otherwise consent in writing, during the
period from the date of this Agreement to the Effective Time, Condor and its
Affiliated Entities and Amwest and its Affiliated Entities, respectively, will
conduct their respective operations only in, and Condor and its Affiliated
Entities and Amwest and its Affiliated Entities, respectively, will not take any
action, except in the ordinary course of business, and Condor and its Affiliated
Entities and Amwest and its Affiliated Entities, respectively, will use all
reasonable efforts to preserve intact in all material respects their respective
business organizations, assets, prospects and advantageous business
relationships, to keep available the services of their respective officers and
key employees and to maintain satisfactory relationships with their respective
licensors, licensees, suppliers, contractors, distributors, customers and others
having advantageous business relationships with them. Without limiting the
generality of the foregoing, except as contemplated by this Agreement, neither
Condor or any of its Affiliated Entities nor Amwest or any of its Affiliated
Entities, respectively, will, without the prior written consent of the other
parties to this Agreement:
(a)......amend its Articles or Certificate of Incorporation or
Bylaws or change its authorized number of directors, except that each of Amwest
Surety Insurance Company and its subsidiary, Far West Insurance Company, may
reincorporate or redomesticate under the laws of the State of Nebraska;
(b)......split, combine or reclassify any shares of its
capital stock, declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock, or directly or indirectly, redeem,
purchase or otherwise acquire any shares of its capital stock or other
securities, except that Amwest may pay regular quarterly cash dividends in
accordance with past practice;
(c)......authorize for issuance, issue, sell or deliver or
agree or commit to issue, sell, or deliver (whether through the issuance or
granting of any options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any of its capital stock or any securities convertible
into or exercisable or exchangeable for shares of its capital stock, other than
the issuance by Condor or Amwest of shares of its Common Stock pursuant to the
exercise of employee stock options and other rights set forth in the Condor or
Amwest Disclosure Schedule;
(d)......other than in the ordinary course of business, incur
any material liability or obligation (absolute, accrued, contingent or
otherwise) or issue any debt securities or assume, guarantee, endorse or
otherwise as an accommodation become responsible for, the obligations of any
other individual or entity, or change any assumption underlying, or methods of
calculating, any bad debt, contingency or other reserve;
(e)......enter into, adopt or, except as determined by Condor
or Amwest to be necessary to comply with applicable law or maintain tax-favored
status (and any nonmaterial changes incidental thereto), amend any Employment
Related Agreement or Employee Benefit Plan or grant, or become obligated to
grant, any increase in the compensation payable or to become payable to any of
their officers or directors or any general increase in the compensation payable
or to become payable to their employees (including, in each case, any such
increase pursuant to any Employment Related Agreement or Employee Benefit Plan,
other than an increase pursuant to the terms of such an Employment Related
Agreement or Employee Benefit Plan in effect on the date of this Agreement and
reflected on the Condor or Amwest Disclosure Schedule), other than in connection
with individual performance reviews in the ordinary course of business and
consistent with past practice;
(f)......acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or make any investment either by purchase of stock or
securities, contributions to capital, property transfer, or purchase of an
amount in excess of $50,000 individually, or in the aggregate, of properties or
assets of any other individual or entity, provided, however, Condor and Amwest
may each continue to make investment portfolio purchases and sales at their
respective subsidiary levels in the ordinary course of their respective
businesses and provided, further, that Amwest may make additional investments or
acquisitions in an aggregate amount not to exceed $5 million;
(g)......pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of business
of liabilities reflected or reserved against on Condor's or Amwest's Latest
Balance Sheet, or subsequently incurred in the ordinary course of business, or
disclosed pursuant to this Agreement;
(h)......acquire (including by lease) any material assets or
properties or dispose of, mortgage or encumber any material assets or
properties, other than in the ordinary course of business, except that Amwest
may enter into a new real property lease or purchase agreement for a new
corporate headquarters facility and that Amwest may purchase from Amwest Surety
Insurance Company shares of Condor Common Stock;
(i)......waive, release, grant or transfer any material rights
or modify or change in any material respect any material existing license,
lease, contract or other document, other than in the ordinary course of business
and consistent with past practice, except that Amwest may amend or modify its
existing real property lease for its existing corporate headquarters facility;
(j)......except as may be required as a result of a change in
law or in generally acceptedaccounting principles, change any of the accounting
principles or practices used by it;
(k)......revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary course of
business;
(l)......make or revoke any Tax election or settle or
compromise any material Tax liability or change (or make a request to any taxing
authority to change) any material aspect of its method of accounting for Tax
purposes;
(m)......settle or compromise any pending or threatened suit,
action or claim relating tothe transactions contemplated hereby;
(n)......settle or compromise any pending or threatened suit,
action or claim in the ordinary course of Amwest's or Condor's respective
businesses, except that Amwest may settle, compromise or make payments with
respect to its existing litigation relating to California Proposition 103; or
(o)......take any action or agree, in writing or otherwise, to
take any of the foregoing actions or any action which would at any time make any
representation or warranty in Article III (other than Section 3.09 solely as it
relates to payment, Sections 3.12 with respect to the defense of any litigation,
arbitration or claim, and Section 3.13) or Article IV (other than Section 4.17
solely as it relates to payment and Section 4.07 with respect to the defense of
any litigation, arbitration or claim) untrue or incorrect.
Section 5.02 Access to Information
(a)......Between the date of this Agreement and the Effective
Time, Amwest and Condor will upon reasonable notice give to each other and the
other's authorized representatives access during regular business hours to all
of its personnel, plants, offices, warehouses and other facilities and to all of
its books and records and will permit the other to make such inspections as it
may require and will cause its officers and those of its Affiliated Entities to
furnish the other with such financial and operating data and other information
with respect to its business and properties as the other may from time to time
reasonably request.
(b)......Information obtained by the parties hereto pursuant
to this Section 5.02 shall be subject to the provisions of the confidentiality
agreement between Amwest and Condor dated November 15, 1995, which agreement
remains in full force and effect. If this Agreement is terminated, each party
will (i) deliver to the other all documents, work papers and other material
(including copies) obtained by such party or on its behalf from the other party
as a result of this Agreement or in connection herewith, and (ii) destroy or
provide to outside counsel for retention all material working papers reflecting
any of the confidential information contained in such documents, work papers and
other material. In addition, if this Agreement is terminated neither party shall
disclose, except as required by law, the basis or reason for such termination,
without the consent of the other party.
Section 5.03 All Reasonable Efforts
Upon the terms and subject to the conditions hereof, and
subject to the fiduciary duties of the Board of Directors of Condor and of
Amwest under applicable law, Amwest and Condor each agree to use all reasonable
efforts promptly to take, or cause to be taken, all appropriate action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and will use all reasonable efforts
to obtain all waivers, permits, consents and approvals and to effect all
registrations, filings and notices with or to third parties or governmental or
public bodies or authorities which are in the opinion of Amwest or Condor
necessary or desirable in connection with the transactions contemplated by this
Agreement, including, without limitation, filings and approvals to the extent
required under the DGCL, the Securities Act, the Exchange Act, the Insurance
Code and the HSR Act or any rule of the ASE or NASD. If at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers or directors of Amwest and
Condor will take such action.
Section 5.04 Public Announcements
Amwest, on the one hand, and Condor, on the other hand, will
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the transactions
contemplated hereby and will not issue any such press release or make any such
public statement prior to such consultation. Notwithstanding the foregoing,
Amwest and Condor shall not be prohibited from issuing any press release or
making any public statement as may be required under applicable law, but in any
such event, Amwest or Condor, as the case may be, shall notify the other party
prior to taking such action.
Section 5.05 Notification of Certain Matters
Amwest and Condor will give prompt notice to one another of
(i) the occurrence, or failure to occur, of any event which occurrence or
failure would or would be likely to cause any of their respective
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect or would or would likely cause any condition
in Article VII to become impossible to fulfill, or unlikely to be fulfilled, at
any time from the date hereof to the Effective Time, and (ii) any failure on its
part or on the part of any of their respective officers, directors, employees,
representatives or agents to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by them under this Agreement;
provided, however, that no such notification will alter or otherwise affect such
representations, warranties, covenants, conditions or agreements.
Section 5.06 Indemnification and Insurance
(a)......From and after the Effective Time, Amwest shall
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective Time, an
officer or director of Condor or any Affiliated Entity or a holder of Condor
Common Stock (the "Indemnified Parties") against (i) all losses, claims,
damages, costs, expenses (including attorney's fees), liabilities or judgments
or amounts that are paid in settlement (which settlement shall require the prior
written consent of Amwest, which consent shall not be unreasonably withheld) of
or in connection with any claim, action, suit, proceeding or investigation (a
"Claim") in which an Indemnified Party is, or is threatened to be made, a party
or a witness based in whole or in part on or arising in whole or in part out of
the fact that such person is or was an officer, director or employee of Condor
or any Affiliated Entity, whether such Claim pertains to any matter or fact
arising, existing or occurring at or prior to the Effective Time (including,
without limitation, the Merger and other transactions contemplated by this
Agreement), regardless of whether such Claim is asserted or claimed prior to, at
or after the Effective Time (the "Indemnified Liabilities"), and (ii) all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby; in each case to the full extent Condor would have been permitted under
Delaware law and its Certificate of Incorporation and Bylaws to indemnify such
person (and Amwest shall pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent permitted
by law and under such Certificate of Incorporation or Bylaws, upon receipt of
any undertaking required by such Certificate of Incorporation, Bylaws or
applicable law). Any Indemnified Party wishing to claim indemnification under
this Section 5.06(a), upon learning of any Claim, shall notify Amwest (but the
failure to so notify Amwest shall not relieve it from any liability which Amwest
may have under this Section 5.06(a) except to the extent such failure prejudices
Amwest) and shall deliver to Amwest any undertaking required by such Certificate
of Incorporation, Bylaws or applicable law. Amwest shall use its best efforts to
assure, to the extent permitted under applicable law, that all limitations of
liability existing in favor of the Indemnified Parties as provided in Condor's
Certificate of Incorporation and Bylaws, as in effect as of the date hereof,
with respect to claims or liabilities arising from facts or events existing or
occurring prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), shall survive the Merger. The
obligations of Amwest described in this Section 5.06(a) shall continue in full
force and effect, without any amendment thereto, for a period of three years
from the Effective Time; provided, however, that all rights to indemnification
in respect of any Claim asserted or made within such period shall continue until
the final disposition of such Claim; and provided further that nothing in this
Section 5.06(a) shall be deemed to modify applicable Delaware law regarding
indemnification of former officers and directors. Notwithstanding anything
contained in this Section 5.06, the indemnification provided hereunder shall not
exceed the coverage provided by the insurance currently provided the Indemnified
Parties by Condor.
(b)......The obligations of Amwest under this Section 5.06 are
intended to benefit, and be enforceable against Amwest directly by the
Indemnified Parties, and shall be binding on all respective successors of
Amwest.
Section 5.07 Regulatory Approvals
Condor and Amwest will take all such action as may be
necessary under federal or state securities laws or the HSR Act or the
California Insurance Code applicable to or necessary for, and will file and, if
appropriate, use their best efforts to have declared effective or approved all
documents and notifications with the SEC, the California Department of
Insurance, the Arizona State Department of Insurance and other governmental or
regulatory bodies which they deem necessary or appropriate for, the consummation
of the Merger and the transactions contemplated hereby, and each party shall
give the other information reasonably requested by such other party pertaining
to it and Affiliated Entities to enable such other party to take such actions,
and Condor and Amwest shall file in a timely manner all reports and documents
required to be so filed by or under the Exchange Act or the Insurance Code which
they deem necessary or appropriate in relation to the Merger.
Section 5.08 Employee Matters
(a)......Amwest will cause service with Condor and its
Affiliated Entities and their predecessors prior to the Effective Time to be
taken into account for eligibility and vesting purposes in connection with any
benefit or payroll plan, practice, policy or agreement of Amwest or any of its
affiliates in which any employee of Condor or an Affiliated Entity may become
entitled to participate at or after the Effective Time.
(b)......Amwest hereby assumes and agrees to perform and pay
or cause to be performed and paid all of Condor's duties and obligations under
the employment and option agreements listed in Section 3.03 of the Condor
Disclosure Schedule, to the extent they have not been terminated prior to the
Effective Time.
(c)......The obligations of Amwest under Sections 5.08(a) and
5.08(b) are intended to benefit, and be enforceable against Amwest directly by,
the parties (other than Condor) to such agreements and the participants or
former participants in such plans and their respective beneficiaries and other
successors in interest, and shall be binding on all successors of Amwest.
Section 5.09 No Actions Inconsistent With Tax-Free
Reorganization
Condor shall take no action with respect to its capital stock,
assets or liabilities that would cause the Merger not to qualify as a
"reorganization" within the meaning of Sections 368(a)(1)(A) of the Code.
Section 5.10. Other Potential Acquirors
(a)......Condor, its Affiliated Entities and their respective
officers, directors, employees, representatives and agents shall immediately
cease any existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition of all or any material
portion of the assets of, or any equity interest in, Condor or its Affiliated
Entities or any business combination with Condor or its Affiliated Entities.
Condor may, directly or indirectly, furnish information and access, in each case
only in response to unsolicited requests therefor, to any corporation,
partnership, person or other entity or group pursuant to confidentiality
agreements, and may participate in discussions and negotiate with such entity or
group concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction involving Condor or any Affiliated Entity or division of
Condor, if such entity or group has submitted a written proposal to the Condor
board of directors (the "Condor Board") relating to any such transaction and the
Condor Board by a majority vote determines in its good faith judgment, after
consultation with and based upon the advice of outside legal counsel that it is
required to do so to comply with its fiduciary duties to stockholders under
applicable law. The Condor Board shall provide a copy of any such written
proposal and a summary of any oral proposal to Amwest immediately after receipt
thereof and thereafter keep Amwest promptly advised of any development with
respect thereto. Except as set forth above, neither Condor nor any of its
Affiliated Entities shall, nor shall Condor authorize or permit any of its or
their respective officers, directors, employees, representatives or agents to
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Amwest,
any Affiliated Entity of Amwest or any designee of Amwest) concerning any
merger, sale of assets, sale of shares of capital stock or similar transaction
involving Condor or any Affiliated Entity or division of Condor; provided,
however, that nothing herein shall prevent the Condor Board from taking, and
disclosing to Condor's stockholders, a position contemplated by Rules 14d-9 and
14e-2 promulgated under the Exchange Act with regard to any tender offer;
provided, further, that nothing herein shall prevent the Condor Board from
making such disclosure to Condor's stockholders as, in the good faith judgment
of the Condor Board, after consultation with and based upon the advice of
outside legal counsel, is required to comply with its fiduciary duties to
stockholders under applicable law.
(b)......Except as set forth in this Section 5.10, the Condor
Board shall not approve or recommend, or cause Condor to enter into any
agreement with respect to, any Third Party Acquisition (as defined below).
Notwithstanding the foregoing, if the Condor Board, after consultation with and
based upon the advice of outside legal counsel, determines in good faith that it
is necessary to do so in order to comply with its fiduciary duties to
stockholders under applicable law, the Condor Board may withdraw, modify or
change its approval or recommendation of this Agreement or the Merger and
approve or recommend a Superior Proposal (as defined below) or cause Condor to
enter into an agreement with respect to a Superior Proposal, but in each case
only (i) after providing reasonable written notice to Amwest (a "Notice of
Superior Proposal") advising Amwest that the Condor Board has received a
Superior Proposal and identifying the person making such Superior Proposal and
(ii) if Amwest does not make within seven business days of Amwest's receipt of
the Notice of Superior Proposal, an offer which the Condor Board, after
consultation with its financial advisors, determines is superior to such
Superior Proposal. In addition, if Condor proposes to enter into an agreement
with respect to any Third Party Acquisition, it shall concurrently with entering
into such an agreement pay, or cause to be paid, to Amwest the fee required by
Section 8.03(a) hereof. For purposes of this Agreement, a "Superior Proposal"
means any bona fide proposal to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the Condor
Common Stock then outstanding or all or substantially all the assets of Condor
or any merger or similar transaction involving Condor or any Affiliated Entity
or division of Condor and otherwise on terms which the Condor Board determines
in its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to Condor's stockholders
than the Merger.
Section 5.11 Letter of Condor's Accountants
Condor shall use its best efforts to cause to be delivered to
Amwest a letter from KPMG Peat Marwick, Condor's independent auditors, dated a
date within two business days before the date on which the S-4 shall become
effective and addressed to Amwest, in form and substance reasonably satisfactory
to Amwest and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4.
Section 5.12 Stock Exchange Listing
Amwest shall use all reasonable efforts to cause the shares of
Amwest Common Stock to be issued in the Merger and the shares of Amwest Common
Stock to be reserved for issuance upon exercise of Amwest Options granted
pursuant to Section 2.01(a) to be approved for listing on the ASE, subject to
official notice of issuance, prior to the date of Closing.
Section 5.13 Pooling of Interests
Condor and Amwest each agrees that it will not take any action
which could prevent the Merger from being accounted for as a
"pooling-of-interests" for accounting purposes and each of Condor and Amwest
will bring to the attention of the other any actions which could reasonably
likely prevent Amwest from accounting for the Merger as a
"pooling-of-interests."
Section 5.14 Employment Agreement
Amwest shall, as of or prior to the Effective Time, enter into
an employment agreement with Guy Main on substantially the terms set forth in
the form of Employment Agreement agreed to as of the date hereof. Pursuant to
the Employment Agreement, Guy Main will be employed by Amwest for a four year
term at compensation levels consistent with the compensation for comparable
Amwest executives. The employment agreement will provide that Guy Main will have
the titles of Executive Vice President of Amwest and President of Condor
Insurance Company during the term of his employment.
Section 5.15 Condor Affiliates
Prior to the date of Closing, Condor shall deliver to Amwest a
letter identifying all persons who are, at the time this Agreement is submitted
for approval to the stockholders of Condor, "affiliates" of Condor for purposes
of Rule 145 under the Securities Act. Condor shall use its best efforts to cause
each such person to deliver to Amwest on or prior to the date of Closing a
written agreement, substantially in the form attached as Exhibit B hereto.
Section 5.16 Agreement with Guy A. Main
Condor and Amwest agree that, as of the Effective Time, Amwest
and Guy Main will enter into an Agreement substantially in the form attached as
Exhibit C hereto.
ARTICLE VI CLOSING
Section 6.01 Time and Place
Subject to the provisions of Articles VII and VIII, the
consummation of the transactions contemplated by this Agreement (the "Closing")
will take place at the offices of Xxxxxx, Xxxx & Xxxxxxxx, 000 X. Xxxxx Xxxxxx,
Xxx Xxxxxxx, Xxxxxxxxxx 00000, immediately after the approvals by stockholders
of Amwest and Condor referred to in Section 2.02 hereof and the fulfillment of
the other conditions to the Merger set forth in Article VII hereof has been
obtained or at such other place or at such other time as may be mutually agreed
upon by Amwest and Condor.
Section 6.02 Deliveries at the Closing
Subject to the provisions of Articles VII and VIII, at the
Closing:
(a)......There will be delivered to Amwest and Condor the
certificates and other documents and instruments the delivery of which is
contemplated under Article VII; and
(b)......Amwest and Condor will cause appropriate documents
necessary to effect the Merger to be filed in accordance with the provisions of
Section 251 of the DGCL and shall take any and all other lawful actions and do
any and all other lawful things necessary to cause the Merger to become
effective.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.01 Conditions to the Obligations of Amwest
and Condor
The respective obligations of Amwest and Condor to effect the
Merger are subject to fulfillment at or prior to the date of the Closing of the
following conditions:
(a)......Any waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have expired or been
terminated, and any other governmental or regulatory notices or approvals
required with respect to the transactions contemplated hereby shall have been
either filed or received;
(b)......The Merger shall have been approved by the requisite
vote of the stockholders of Condor required by the DGCL, NASD and Condor's
Certificate of Incorporation and Bylaws;
(c)......The Merger shall have been approved by the requisite
vote of the stockholders of Amwest required by the DGCL, ASE and Amwest's
Articles of Incorporation and Bylaws;
(d)......The Registration Statement shall have become
effective and no stop order suspending the effectiveness thereof shall be in
effect and no proceedings for such purpose shall be pending or threatened before
the Commission;
(e)......The shares of Amwest Common Stock issuable in the
Merger shall be approved for quotation on the ASE upon notice of issuance;
(f)......No order, statute, rule, regulation, executive order,
stay, decree, judgment, or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority which prohibits
or restricts the effectuation of the Merger;
(g)......No governmental action or proceeding shall have been
commenced or threatened seeking any injunction, restraining or other order which
seeks to prohibit, restrain, invalidate or set aside the effectuation of the
Merger;
(h)......The Merger and the transactions contemplated thereby
shall have been approved by the Commissioners of the California Department of
Insurance and the Arizona State Department of Insurance; and
(i)......Amwest shall have received from Union Bank a written
waiver with respect to consummation of the Merger and the transactions
contemplated thereby.
Section 7.02 Additional Conditions to the Obligations
of Amwest
The obligations of Amwest to effect the Merger are also
subject to the fulfillment at or prior to the date of the Closing of the
following additional conditions:
(a)......Condor shall have performed and complied in all
material respects with the agreements and obligations contained in this
Agreement that are required to be performed and complied with by it at or prior
to the date of the Closing;
(b)......The representations and warranties of Condor
contained in this Agreement shall be true and correct in all material respects,
as of the date hereof and shall be deemed to have been made again at and as of
the date of the Closing and shall then be true and correct in all material
respects except on each date, for breaches or inaccuracies, the combination of
which would not constitute a Material Adverse Effect on Condor;
(c)......All corporate actions on the part of Condor necessary
to authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby or thereby shall have been
duly and validly taken;
(d)......Condor shall have received consents to the Merger
from all persons from whom such consent or waiver is required, as referred to in
Section 4.06;
(e)......Amwest shall have received the opinions of counsel
from Xxxxxx & Xxxxxxxx, counsel to Condor covering such matters and in the form
and substance agreed upon as of the date hereof;
(f)......Amwest shall have received such certificates of
officers of Condor and such certificates of others to evidence compliance with
the conditions set forth in this Section 7.02 and in Section 7.01 as may be
reasonably requested by Amwest;
(g)......Since the date of this Agreement, there shall have
been no material adverse change in, and no event, occurrence or development in
the business of Condor that, taken together with other events, occurrences and
developments with respect to such business, would have or would reasonably be
expected to have a Material Adverse Effect on Condor;
(h)......Condor shall deliver to Amwest an agreement of
stockholder in the form ofExhibit A, executed by the Condor Stockholder;
(i)......The Conversion Number shall not exceed 0.6;
(j)......Condor shall have delivered to Amwest an opinion of
Condor's consulting actuary, executed by Xxx Xxxx, as of the most recently
completed monthly period of which actuarial information is available prior to
the date of Closing, opining that as of such date the reserves for loss and loss
adjustment expense reflected on such balance sheet of Condor and its Affiliated
Entities have been established in conformity with generally accepted actuarial
principles and practices consistently applied, that such reserves were
established in conformity with the requirements of the California Department of
Insurance and that such reserves make a reasonable provision for all unpaid loss
and loss adjustment expense obligations of Condor under the terms of its
policies and agreements;
(k)......Amwest shall have received from its consulting
actuary, an opinion of actuary as of the most recently completed monthly period
of which actuarial information is available prior to the date of Closing,
opining that as of such date the reserves for loss and loss adjustment expense
reflected on such balance sheet of Condor and its Affiliated Entities have been
established in conformity with generally accepted actuarial principles and
practices consistently applied, that such reserves were established in
conformity with the requirements of the California Department of Insurance and
that such reserves make a reasonable provision for all unpaid loss and loss
adjustment expense obligations of Condor under the terms of its policies and
agreements;
(l)......Guy Main and all members of the Condor Board and any
other person deemed an Affiliate shall have performed his obligations under the
Affiliates Letter and Continuity of Interest Certificate in the form of Exhibit
B hereto, and Amwest shall have received a certificate signed by such persons to
such effect;
(m)......A.M. Best Company's ratings for each of Amwest Surety
Insurance Company and Far West Insurance Company shall not, as of the Effective
Time (and after taking into account the Merger and the transactions contemplated
thereby), be lower than "A" (Excellent);
(n)......Amwest shall have received an Officers' Certificate
Regarding Certain Tax Mattersfrom the Chief Financial Officer and the Chief
Executive Officer of Condor; and
(o)......Amwest shall have received from Condor a
certification of non-foreign status described in Treasury Regulation Section
1.1445-2(c)(2), and shall have received from Condor and each Affiliated Entity
owned directly by Condor a certification that such entities are not and have not
been "United States real property holding corporations" during the periods set
forth in, and in a the form described in, Treasury Regulation Section
1.1445-2(c)(3).
Section 7.03 Additional Conditions to the Obligations
of Condor
The obligations of Condor to effect the Merger are also
subject to the fulfillment at or prior to the date of the Closing of the
following additional conditions:
(a)......Amwest shall have performed and complied in all
material respects with the agreements and obligations contained in this
Agreement that are required to be performed and complied with by them at or
prior to the date of the Closing;
(b)......The representations and warranties of Amwest
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and shall be deemed to have been made again at and as of
the date of the Closing and shall then be true and correct in all material
respects except on each date, for breaches or inaccuracies, the combination of
which would not constitute a Material Adverse Effect on Amwest;
(c)......All corporate actions on the part of Amwest necessary
to authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken;
(d)......Condor shall have received the opinion of counsel
from Xxxxxx, Xxxx & Xxxxxxxx, counsel to Amwest, covering such matters and in
the form and substance agreed upon as of the date hereof;
(e) Since the date of this Agreement, there shall have been no
material adverse change in, and no event, occurrence or development in the
business of Amwest that, taken together with other events, occurrences and
developments with respect to such business, would have or would reasonably be
expected to have a Material Adverse Effect on Amwest;
(f)......Condor shall have received such certificates of
officers of Amwest and such certificates of others to evidence compliance with
the conditions set forth in this Section 7.03 and in Section 7.01 as may be
reasonably requested by Condor;
(g)......Amwest shall have delivered to Condor an opinion of
Amwest's consulting actuary as of December 31, 1995, opining that as of such
date the reserves for loss and loss adjustment expense reflected on such balance
sheet of Amwest and its Affiliated Entities have been established in conformity
with generally accepted actuarial principles and practices consistently applied,
that such reserves were established in conformity with the requirements of the
California Department of Insurance and that such reserves make a reasonable
provision for all unpaid loss and loss adjustment expense obligations of Amwest
under the terms of its policies and agreements; and
(h)......The Conversion Number shall not be less than 0.4.
ARTICLE VIII
TERMINATION AND ABANDONMENT
Section 8.01 Termination
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time:
(a)......by mutual written consent of Amwest and Condor;
(b)......by Amwest or Condor if (i) any court of competent
jurisdiction in the United States or other United States governmental authority
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable or
(ii) the Merger has not been consummated by June 30, 1996; provided that no
party may terminate this Agreement pursuant to this clause (ii) if such party's
failure to fulfill any of its obligations under this Agreement shall have been
the reason that the Effective Time shall not have occurred on or before said
date;
(c)......by Condor if (i) there shall have been a breach of
any representation or warranty on the part of Amwest set forth in this
Agreement, or if any representation or warranty of Amwest shall have become
untrue, in either case such that the conditions set forth in Section 7.03(b)
would be incapable of being satisfied by June 30, 1996 (or as otherwise
extended), (ii) there shall have been a breach by Amwest of any of its covenants
or agreements hereunder having a Material Adverse Effect on Amwest or materially
adversely affecting (or materially delaying) the consummation of the Merger, and
Amwest has not cured such breach within twenty business days after notice by
Condor thereof, provided that Condor has not breached any of its obligations
hereunder, (iii) Condor enters into a definitive agreement relating to a
Superior Proposal in accordance with Section 5.10(b), provided that such
termination under this clause (iii) shall not be effective until payment of the
fee required by Section 8.03(a) hereof, or (iv) Amwest shall have convened a
meeting of its stockholders to vote upon the Merger and shall have failed to
obtain the requisite vote of its stockholders; or
(d)......by Amwest if (i) there shall have been a breach of
any representation or warranty on the part of Condor set forth in this
Agreement, or if any representation or warranty of Condor shall have become
untrue, in either case such that the conditions set forth in Section 7.02(b)
would be incapable of being satisfied by June 30, 1996 (or as otherwise
extended), (ii) there shall have been a breach by Condor of its covenants or
agreements hereunder having a Material Adverse Effect on Condor or materially
adversely affecting (or materially delaying) the consummation of the Merger, and
Condor has not cured such breach within twenty business days after notice by
Amwest thereof, provided that Amwest has not breached any of its obligations
hereunder, (iii) Condor shall engage in negotiations with any entity or group
(other than Amwest) that has proposed a Third Party Acquisition (as defined
below) and such negotiations shall have continued for more than 20 business days
after Condor has first furnished information to such entity or group or
commenced negotiations with such party (whichever is earlier), (iv) the Condor
Board shall have withdrawn, modified or changed its approval or recommendation
of this Agreement or the Merger, shall have recommended to the Condor
stockholders a Third Party Acquisition or shall have failed to call, give notice
of, convene or hold a stockholders' meeting to vote upon the Merger, or shall
have adopted any resolution to effect any of the foregoing, (v) Amwest shall
have convened a meeting of its stockholders to vote upon the Merger and shall
have failed to obtain the requisite vote of its stockholders or (vi) Condor
shall have convened a meeting of its stockholders to vote upon the Merger and
shall have failed to obtain the requisite vote of its stockholders.
"Third Party Acquisition" means the occurrence of any of the
following events (i) the acquisition of Condor by merger or otherwise by any
person (which includes a "person" as such term is defined in Section 13(d)(3) of
the Exchange Act) or entity other than Amwest or any affiliate thereof (a "Third
Party"); (ii) the acquisition by a Third Party of more than 30% of the total
assets of Condor and its Affiliated Entities, taken as a whole; or (iii) the
acquisition by a Third Party of 30% or more of the outstanding Shares.
Section 8.02 Effect of Termination
In the event of the termination and abandonment of this
Agreement pursuant to Section 8.01, this Agreement shall forthwith become void
and have no effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or stockholders, other than the provisions of
this Section 8.02 and Sections 5.02(b), 5.04, 8.03 and Article IX hereof.
Nothing contained in this Section 8.02 shall relieve any party from liability
for any breach of this Agreement.
Section 8.03 Fees and Expenses
(a)......In the event that this Agreement shall be terminated
pursuant to:
(i) Section 8.01(c)(iii);
(ii) Sections 8.01(d)(i), (ii) or (iii) and, within
twelve months thereafter, Condor enters into an agreement with
respect to a Third Party Acquisition, or a Third Party
Acquisition occurs, involving any party (or any affiliate
thereof) (x) with whom Condor (or its agents) had negotiations
with a view to a Third Party Acquisition, (y) to whom Condor
(or its agents) furnished information with a view to a Third
Party Acquisition or (z) who had submitted a proposal or
expressed an interest in a Third Party Acquisition, in the
case of each of clauses (x), (y) and (z) after the date hereof
and prior to such termination;
(iii) Section 8.01(d)(iv); or
(iv) Section 8.01(d)(vi);
Amwest would suffer direct and substantial damages, which damages cannot be
determined with reasonable certainty. To compensate Amwest for such damages,
Condor shall pay to Amwest the amount of $700,000 in cash as liquidated damages
immediately upon such a termination. It is specifically agreed that the amount
to be paid pursuant to this Section 8.03(a) represents liquidated damages and
not a penalty.
(b)......Upon the termination of this Agreement pursuant to
Sections 8.01(d)(i), (ii), (iii), (iv) or (vi), Condor shall reimburse Amwest
and its affiliates (not later than ten business days after submission of
statements therefor) for all actual documented out-of-pocket fees and expenses,
actually and reasonably incurred by any of them or on their behalf in connection
with the Merger and the consummation of all transactions contemplated by this
Agreement (including, without limitation, fees payable to investment bankers,
counsel to any of the foregoing, and accountants). Amwest shall have provided
Condor with an estimate of the amount of such fees and expenses and, if Amwest
shall have submitted a request for reimbursement hereunder, will provide Condor
in due course with invoices or other reasonable evidence of such expenses upon
request. Condor shall in any event pay the amount requested within ten business
days of such request, subject to Condor's right to demand a return of any
portion as to which invoices are not received in due course.
(c)......Upon the termination of this Agreement pursuant to
Sections 8.01(c)(i), (ii) or (iv), Amwest shall reimburse Condor and its
affiliates (not later than ten business days after submission of statements
therefor) for all actual documented out-of-pocket fees and expenses, actually
and reasonably incurred by any of them or on their behalf in connection with the
Merger and the consummation of all transactions contemplated by this Agreement
(including, without limitation, fees payable to investment bankers, counsel to
any of the foregoing, and accountants). Condor shall have provided Amwest with
an estimate of the amount of such fees and expenses and, if Condor shall have
submitted a request for reimbursement hereunder, will provide Amwest in due
course with invoices or other reasonable evidence of such expenses upon request.
Amwest shall in any event pay the amount requested within ten business days of
such request, subject to Amwest's right to demand a return of any portion as to
which invoices are not received in due course.
(d)......Except as specifically provided in this Section 8.03,
each party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Amendment and Modification
Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of Amwest and Condor at any
time prior to the Effective Time with respect to any of the terms contained
herein except that after the approvals by stockholders contemplated by Section
2.02, the amount or form of consideration to be received by the holders of
voting shares of Condor may not be decreased or altered without the approval of
such holders.
Section 9.02 Waiver of Compliance; Consents
Any failure of Amwest, on the one hand, or Condor on the other
hand, to comply with any obligation, covenant, agreement or condition herein may
be waived in writing by Amwest or Condor, respectively, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of Amwest or Condor, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 9.02.
Section 9.03 Validity
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
Section 9.04 Parties in Interest
This Agreement shall be binding upon and inure solely to the
benefit of Amwest and Condor, and nothing in this Agreement (except the
provisions of Sections 5.06 and 5.08), express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 9.05 Survival of Representations, Warranties,
Covenants and Agreements
Except as provided in the following sentence, the respective
representations and warranties of Amwest and Condor shall not survive the
Effective Time, but covenants that specifically relate to periods, activities or
obligations subsequent to the Merger shall survive the Merger. If this Agreement
is terminated pursuant to Section 8.01, the covenants contained in Sections
5.02(b), 5.04 and 8.03 shall survive such termination.
Section 9.06 Notices
All notices and other communications hereunder shall be in
writing and shall be deemed given on the date of delivery, if delivered
personally or faxed during normal business hours of the recipient, or three days
after deposit in the U.S. Mail, postage prepaid, if mailed by registered or
certified mail (return receipt requested) as follows:
(a)....if to Amwest or to Condor after the Effective Time, to:
Amwest Insurance Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Co-Chief Executive Officers
and Chief Financial Officer
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
(b)....if to Condor prior to the Effective Time, to:
Condor Services, Inc.
0000 Xxxxxxxxx Xxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxxx & Xxxxxxxx
000 X. Xxxxxx Xx., 00xx Xx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Section 9.07 Governing Law
The Agreement shall be governed by and construed in accordance
with the law of the State of Delaware without regard to the conflicts of law
rules thereof.
Section 9.08 Counterparts
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
Section 9.09 Table of Contents and Headings
The table of contents and article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not affect in any way the meaning
or interpretation of this Agreement.
Section 9.10 Entire Agreement
This Agreement, including the exhibits and schedules hereto
and the documents and instruments referred to herein or executed
contemporaneously herewith, embodies the entire agreement and understanding of
Amwest and Condor in respect of the subject matter contained herein and
supersedes all prior agreements and understandings among them with respect to
such subject matter.
Section 9.11 Arbitration; Attorneys' Fees and Expenses
Any controversy, dispute, or claim arising out of, in
connection with, or in relation to, the interpretation, performance or breach of
this Agreement, including, without limitation, the validity, scope and
enforceability of this Section 9.11, may at the election of any party, be solely
and finally settled by arbitration conducted in California, by and in accordance
with the then existing rules for commercial arbitration of the American
Arbitration Association, or any successor organization. Judgment upon any award
rendered by the arbitrator(s) may be entered by the state or federal court
having jurisdiction thereof. Any of the parties may demand arbitration by
written notice to the other and to the American Arbitration Association ("Demand
for Arbitration"). Any Demand for Arbitration pursuant to this Section 9.11
shall be made before the earlier of (i) the expiration of the applicable statute
of limitations with respect to such claim, or (ii) 60 days from the date on
which a lawsuit is brought by any other party with respect to such claim. The
parties intend that this agreement to arbitrate be valid, enforceable and
irrevocable. Time is of the essence in the resolution of any such dispute, and
the parties agree to instruct the arbitrator to institute accelerated procedures
to resolve any dispute. The losing party shall reimburse the prevailing party in
such arbitration, or in any legal proceeding arising out of, in connection with
or in relation to this Agreement, including this Section 9.11, in any state or
federal court, for the prevailing party's legal fees and expenses reasonably
incurred in connection with such arbitration or proceeding. The parties being
represented by counsel hereby waive any and all rights to punitive or special
damages arising from or relating to this Agreement or the transactions
contemplated herein.
Section 9.12 Miscellaneous
(a) For purposes of this Agreement, the term "Knowledge" of an
entity means knowledge actually possessed by any Director or officer of such
entity.
(b) If the SEC does not allow or the parties believe the SEC
will not allow the use of a Registration Statement on Form S-4 to register
Amwest Common Stock being issued to Stockholders or Condor believes it is no
longer in the interest of Stockholders to use Form S-4, Condor may elect to
require Amwest to file and maintain in effect for a two-year period a
Registration Statement on Form S-3 as soon as is practicable after the Effective
Time to register such shares, subject to a limitation that no stockholder
receiving such shares may, pursuant to such registration, sell more than 1% of
the amount of Amwest Common Stock Outstanding during any calendar quarter.
IN WITNESS WHEREOF, Amwest and Condor have caused this
Agreement to be signed on their behalf by their respective duly authorized
officers on the date first above written.
AMWEST INSURANCE GROUP, INC.
By:___________________________________
Xxxxxxx X. Xxxxxx
Chairman of the Board and
Co-Chief Executive Officer
CONDOR SERVICES, INC.
By:___________________________________
Guy A. Main
Chairman of the Board, President
and Chief Executive Officer
EXHIBIT A
STOCKHOLDER AGREEMENT
This Stockholder Agreement (this "Agreement") dated as of
November 30, 1995, is entered into by and between Amwest Insurance Group, Inc.,
a Delaware corporation ("Amwest") and the undersigned stockholder (the
"Stockholder") of Condor Services, Inc., a Delaware corporation ("Condor").
RECITALS
A........Concurrently with the execution of this Agreement,
Condor is entering into an Agreement and Plan of Merger with Amwest dated
November 30, 1995 (the "Merger Agreement"), pursuant to which, among other
things, Condor shall merge with and into Amwest (the "Merger"), as a result of
which the stockholders of Condor immediately prior to such merger shall become
stockholders of Amwest.
B........As a condition to the execution of the Merger
Agreement, the Stockholder is willing to enter into and be bound by this
Agreement.
C........As of the date hereof, the Stockholder owns in the
aggregate 957,310 shares of Condor common stock, $.01 par value per share (the
"Main Shares").
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties agree as follows:
1........AGREEMENT TO RETAIN SHARES.
1.1 Transfer and encumbrances. The Stockholder agrees not to
transfer (except as may be specifically required by court order), sell,
exchange, pledge or otherwise dispose of or encumber any of the Main
Shares, or to make any offer or agreement relating thereto, at any time
prior to the Expiration Date. As used herein, the term "Expiration
Date" shall mean the earlier to occur of (i) such date and time as the
Merger shall become effective in accordance with the terms and
provisions of the Merger Agreement and (ii) such date and time as the
Merger Agreement shall be terminated pursuant to the terms thereof.
2........AGREEMENT TO VOTE SHARES AND CALL STOCKHOLDER
MEETING. At every meeting of the stockholders of Condor called with respect to
any of the following, and at every adjournment thereof, and on every action or
approval by written consent of the stockholders of Condor on or before the
Expiration Date with respect to any of the following, the Stockholder shall vote
the Main Shares: (i) in favor of approval of the Merger Agreement and the Merger
and any matter that could reasonably be expected to facilitate the Merger; and
(ii) against approval of any proposal made in opposition to or competition with
consummation of the Merger and against any liquidation or winding up of Condor
(each of the foregoing is referred to as a "Opposing Proposal"). In the event a
meeting of Condor stockholders to consider and approve the Merger and the
transactions contemplated thereby has not taken place on or before May 1, 1996,
Stockholder agrees to immediately call and cause to occur a special meeting of
Condor stockholders to consider and approve the Merger and to vote in favor of
same as provided in Section 2(i) above.
3........OPTION TO PURCHASE SHARES. The Stockholder hereby
grants to Amwest the irrevocable option to purchase 825,000 of the Main Shares
at a per share exercise price equal to the Merger Consideration as defined and
subject to comparable adjustments as set forth in the Merger Agreement. The
option granted hereby is exercisable for the period commencing immediately upon
the termination of the Merger Agreement, if any, and ending on December 31,
1996. Amwest shall in no event be obligated to exercise such option at any time.
4........REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
STOCKHOLDER. The Stockholder hereby represents, warrants and covenants to
Amwest as follows:
4.1 Ownership of shares. The Stockholder (i) is the beneficial
owner of the Main Shares, which at the date hereof and at all times up
until the Expiration Date will be free and clear of any liens, claims,
options, charges or other encumbrances; and (ii) has full power and
authority to make, enter into and carry out the terms of this
Agreement.
4.2 No proxy solicitations. The Stockholder will not, and will
not permit any entity under the Stockholder's control to: (i) solicit
proxies or become "participants" in a "solicitation" (as such terms are
defined in Regulation 14A under the Exchange Act) with respect to an
Opposing Proposal or otherwise encourage or assist any party in taking
or planning any action that would compete with, restrain or otherwise
serve to interfere with or inhibit the timely consummation of the
Merger in accordance with the terms of the Merger Agreement; (ii)
initiate a stockholders' vote or action by consent of Condor
stockholders with respect to an Opposing Proposal; or (iii) become a
member of a "group" (as such term is used in Section 13(d) of the
Exchange Act) with respect to any voting securities of Condor with
respect to an Opposing Proposal. Notwithstanding the above, the
Stockholder may take any actions in such Stockholder's role as director
and/or officer of Condor permitted under the Merger Agreement.
5........ADDITIONAL DOCUMENTS. The Stockholder hereby
covenants and agrees to execute and deliver any additional documents necessary
or desirable, in the reasonable opinion of Amwest to carry out the intent of
this Agreement.
6........CONSENT AND WAIVER. The Stockholder hereby gives any
consents or waivers that are reasonably required for the consummation of the
Merger under the terms of any agreements to which the Stockholder is a party or
pursuant to any rights Stockholder may have; provided that this Section 6 shall
not be deemed a consent of Stockholder in lieu of a meeting as contemplated by
Section 228 of the Delaware General Corporation Law.
7........TERMINATION. This Agreement shall terminate and shall
have no further force or effect after the later of: (i) the Expiration Date and,
(ii) the expiration of the option granted pursuant to Section 3 hereof.
8........MISCELLANEOUS.
8.1 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remainder
of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
8.2 Binding effect and assignment. This Agreement and all of
the provisions hereof shall be binding with respect to the specific
matters set forth herein and shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, but, except as otherwise specifically provided
herein, neither this Agreement nor any of the rights, interests or
obligations of the Stockholder may be assigned by the Stockholder
without the prior written consent of the others.
8.3 Amendments and modification. This Agreement may not be
modified, amended, altered or supplemented except upon the execution
and delivery of a written agreement executed by the party against whom
enforcement is sought.
8.4 Specific performance; injunctive relief. The parties
hereto acknowledge that a violation of any of the covenants or
agreements of one party set forth herein will result in the other
parties being irreparably harmed (such other parties hereafter referred
to as an "Injured Party") and will leave an Injured Party with no
adequate remedy at law. Therefore, it is agreed that, in addition to
any other remedies that may be available to an Injured Party upon any
such violation, an Injured Party shall have the right to enforce such
covenants and agreements by specific performance, injunctive relief or
by any other means available to an Injured Party at law or in equity.
8.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given on the date of delivery,
if delivered personally or faxed during normal business hours of the
recipient, or three days after deposit in the U.S. Mail, postage
prepaid, if mailed by registered or certified mail (return receipt
requested) as follows:
If to Amwest: Amwest Insurance Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Co-Chief Executive Officers
and Chief Financial Officer
With a copy to: Xxxxxx, Xxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
If to the Stockholder: c/o Condor Services, Inc.
0000 Xxxxxxxxx Xxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
or to such other address as any party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
8.6 Governing law. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the
State of Delaware.
8.7 Entire agreement. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof,
and supersedes all prior negotiations and understandings between the
parties with respect to such subject matter.
8.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
8.9 Effect of headings. The section headings herein are for
convenience only and shall not affect the construction of
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Stockholder
Agreement to be duly executed on the day and year first above written.
AMWEST INSURANCE GROUP, INC.
By:______________________________
Xxxxxxx X. Xxxxxx
Chairman of the Board and
Co-Chief Executive Officer
STOCKHOLDER:
_________________________________
Guy A. Main
MAIN FAMILY TRUST:
By:_______________________________
Guy A. Main
Trustee
By:_______________________________
Xxxxx Main
Trustee
EXHIBIT B
AFFILIATES LETTER AND
CONTINUITY OF INTEREST CERTIFICATE
This Affiliates Letter and Continuity of Interest Certificate
(this "Agreement") is delivered in connection with the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of November 30, 1995, by and between
Amwest Insurance Group, Inc., a Delaware corporation ("Amwest") and Condor
Services, Inc., a Delaware corporation ("Condor"), which provides for the merger
of Condor with and into Amwest (the "Merger"). Capitalized terms not otherwise
defined herein shall have the meanings ascribed to those terms in the Merger
Agreement.
RECITALS
A........The undersigned stockholder of Condor ("Affiliate")
is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
shares of the outstanding capital stock of Condor.
B........Affiliate understands that the parties to the Merger
Agreement intended to adopt the Merger Agreement as a plan of reorganization
within the meaning of Section 354 of the Internal Revenue Code of 1986, as
amended (the "Code"), and to consummate the Merger in accordance with Sections
368(a)(1)(A) of the Code, and that the Merger be treated for accounting purposes
as a "pooling of interests" under Opinion No. 16 of the Accounting Principals
Board. Affiliate also understands that the foregoing is dependent upon the
accuracy of the representations and warranties and the compliance with the
covenants made by Affiliate in this Agreement. Affiliate also understands that,
as a result of the foregoing, the Amwest Shares (as defined below) may only be
disposed of in conformity with the limitations described herein.
NOW THEREFORE, Affiliate, in connection with the Merger and
issuance pursuant to the Merger by Amwest of shares of Amwest common stock (the
"Amwest Shares") in exchange for Condor capital stock (including options to
purchase Condor Common Stock assumed by Amwest), hereby covenants, represents
and certifies to Amwest and Condor as follows:
1........In consideration of the receipt by Affiliate of the
Amwest Shares, and for other good and valuable consideration, Affiliate hereby
represents and warrants as follows:
1.1 Affiliate is currently the owner of that number of shares of Condor
capital stock set forth on the signature page hereto (the "Condor Shares") and
has sole voting and investment power with respect to the Condor Shares and (a)
Affiliate has held the Condor Shares at all times since _________, 19__ and (b)
did not acquire any shares of Condor capital stock in contemplation of the
Merger. These securities constitute Affiliate's entire interest in the
outstanding capital stock of Condor.
1.2 Affiliate is a bona fide resident of the State of ____________ and
files income tax returns as a resident of that State.
1.3 Affiliate has full power and authority to execute this Agreement,
to make the representations, warranties and covenants herein contained and to
perform Affiliate's obligations hereunder.
2........Affiliate's intention is to treat the Merger as a
"reorganization" described in Section 368 of the Code for purposes of filing
Affiliate's federal and, if applicable, state and local, income tax returns. One
condition to qualification of the Merger as a reorganization is the retention of
a significant continuing equity interest in Amwest by the holders of Condor
capital stock through their ownership of the Amwest Shares, and one of the
purposes of this Agreement is to determine whether this stockholder continuity
of interest requirement will be satisfied with respect to the Merger. In
addition, Affiliate understands that counsel to Amwest may rely on this
Agreement in rendering an opinion regarding the tax consequences of the Merger.
In light of the foregoing, Affiliate hereby covenants, represents and warrants
to Amwest as follows:
2.1 Affiliate has no plan or intention to sell, exchange, transfer,
distribute, pledge, dispose of or otherwise engage in a transaction which
results in a reduction in Affiliate's risk of ownership, whether directly or
indirectly, and has not entered into a formal or informal agreement to effect
such a transaction (such actions or agreements being collectively referred to as
a "Sale"), of any of the Condor Shares or Amwest Shares.
2.2 Affiliate will not engage in a Sale of Condor Shares, other than
pursuant to the Merger, and Affiliate will not exercise insiders or appraisal
rights with respect to the Merger.
2.3 Affiliate will not engage in a Sale of any Amwest Shares unless:(i) a
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the Amwest Shares proposed to be sold, transferred or otherwise
disposed of, describing the manner and terms of the proposed sale, transfer or
other disposition, and containing a current prospectus, shall have been filed
with the Securities and Exchange Commission (the "SEC") and made effective under
the 1933 Act; or (ii) such transaction is permitted pursuant to Rule 145(d)
under the 1933 Act; provided however, if counsel for Amwest reasonably believes
that the provisions of Rule 145(d) have not been complied with, or if requested
by Amwest in connection with a proposed disposition (other than pursuant to Rule
145(d) in a registered offering) counsel representing Affiliate, which counsel
is reasonably satisfactory to Amwest, shall have advised Amwest in a written
opinion letter satisfactory to Amwest and Amwest's legal counsel, and upon which
Amwest and its legal counsel may rely, that no registration under the 1933 Act
would be required in connection with the proposed sale, transfer or other
disposition.
2.4 Affiliate agrees that he will not make a Sale of any of the Amwest
Shares, or reduce Affiliate's interest in or Affiliate's risk relating to the
Amwest Shares, prior to the time that financial results covering at least 30
days post-Merger combined operations of Amwest and Condor have been published.
2.5 Affiliate will not take a position on any federal or state income tax
return that is inconsistent with the treatment of the Merger as a
"reorganization" for federal and state income tax purposes.
2.6 To the best of Affiliate's Knowledge, all of the statements set forth
in that certain "Officers' Certificate Regarding Certain Tax Matters" are
true, correct and complete.
3........Affiliate understands that, in addition to the
restrictions imposed under Section 2 of this Agreement, the provisions of Rule
145 limit Affiliate's public resale of Amwest Shares, in the manner set forth
below:
(a) Unless and until the restriction "Cut-off" provisions of
Rule 145(d)(2) or Rule 145(d)(3) set forth below become available,
public resales of Amwest Shares may only be made by Affiliate in
compliance with the requirements of Rule 145(d)(1). Rule 145(d)(1)
permits such resales only: (i) while Amwest meets the public
information requirements of Rule 144(c); (ii) in brokers' transactions
or in transactions with a market maker; and (iii) where the aggregate
number of Amwest Shares sold at any time together with all sales of
restricted shares of Amwest Common Stock sold for Affiliate's account
during the preceding three-month period does not exceed the greater of
(A) 1% of the Amwest Common Stock outstanding or (B) the average weekly
column of trading in Amwest Common Stock on all national securities
exchange, or reported through the automated quotation system of a
registered securities association, during the four calendar weeks
preceding the date of receipt of the order to execute the sale.
(b) Affiliate may make Sales of Amwest Shares that need not
comply with the limitations set forth in 3(a) above pursuant to Rule
145(d)(2) if: (i) Affiliate has beneficially owned (within the meaning
of Rule 144(d) under the Securities Act) the Amwest Shares for at least
two years after the Effective Date of the Merger; (ii) Affiliate is not
at the time of the Sale an affiliate of Amwest; and (iii) Amwest meets
the public information requirements of Rule 144(c).
(c) Affiliate may make Sales of Amwest Shares that need not
comply with the limitations set forth in 3(a) above pursuant to Rule
145(d)(3) if Affiliate has beneficially owned (within the meaning of
Rule 144(d) under the Securities Act) the Amwest Shares for at least
three years and is not, and has not been for the three months prior to
such sale, an affiliate of Amwest.
4........Affiliate also understands and agrees that stop
transfer instructions will be given to Amwest's transfer agent with respect to
certificates evidencing the Amwest Shares and that there may be placed on the
certificates evidencing the Amwest Shares legends stating in substance:
"ANY SALE, TRANSFER, PLEDGE OR DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE ONLY AFTER THE DATE ON
WHICH AMWEST INSURANCE GROUP, INC. ("AMWEST") SHALL HAVE FIRST PUBLICLY
RELEASED FINANCIAL RESULTS OF AMWEST FOR A PERIOD THAT INCLUDES AT
LEAST 30 DAYS COMBINED OPERATIONS OF AMWEST AND CONDOR SERVICES, INC.
AND THEN ONLY IN ACCORDANCE WITH THE PROVISIONS OF RULE 145(d)
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
Amwest agrees to remove promptly such stop transfer instructions and legend upon
full compliance with this Agreement by the undersigned.
5........The covenants, representations and warranties
contained herein shall be true and correct at all times from the date hereof
until the Effective Date of the Merger. Affiliate agrees to promptly notify
Amwest and Condor prior to the Merger if at any time after the date hereof and
prior to the Merger, Affiliate would no longer be able to make the covenants,
representations and warranties and agreements set forth herein.
6........Affiliate has consulted such legal and financial
counsel as Affiliate deems appropriate in connection with the execution of this
Agreement. Affiliate acknowledges that neither Amwest nor Condor have made any
representations, covenants or warranties that the Merger will constitute a
"reorganization" within the meaning of Section 368 of the Code.
7........In consideration of the receipt of the Amwest Shares
by Affiliate and for other good and valuable consideration, Affiliate agrees
that, if suit or action is filed by any party to enforce this Agreement or
otherwise with respect to the subject matter of this Agreement, including,
without limitation, any suit or action arising under state or federal securities
laws, the prevailing party shall be entitled to recover reasonable attorneys'
fees incurred in preparation for and prosecution of such suit or action.
IN WITNESS WHEREOF, I have executed this Agreement this 30th
day of November, 1995.
--------------------------------------
Print Name
--------------------------------------
Signature
Total Number of shares of Condor
Capital stock owned on the date
hereof: _____________
EXHIBIT C
AGREEMENT WITH GUY A. MAIN AND MAIN FAMILY TRUST
This Agreement (this "Agreement") is entered into as of
______________, 1996 by and between Amwest Insurance Group, Inc., a Delaware
corporation (the "Company") and Guy A. Main and the Main Family Trust (together,
"Main").
RECITALS
WHEREAS, the Company and Condor Services, Inc., a Delaware
corporation ("Condor") are parties to an Agreement and Plan of Merger dated as
of November __, 1995 (the "Merger Agreement") pursuant to which, among other
things, Condor shall merge with and into the Company, and the Company will
conduct the business previously conducted by Condor (the "Merger");
WHEREAS, as a result of the transactions contemplated by the
Merger Agreement, Main as a principal stockholder of Condor will be a
significant stockholder of the Company; and
WHEREAS, it is a condition to the transactions contemplated by
the Merger Agreement and the desire of the parties hereto that this Agreement be
entered into to establish certain terms and conditions concerning certain
affairs of the Company.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and covenants set forth in this Agreement, Main
and the Company hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01.....Definitions. For the purposes of this Agreement, the
following terms have the following meanings:
"Affiliate" with respect to any Person, means any other Person
directly or indirectly controlling, controlled by or under common control with,
such Person. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" or "under common
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Common Stock" means the common stock of the Company, whether
or not issued or authorized on the date hereof.
"Director" means a member of the Board of Directors of the
Company.
"Encumbrance" means any lien, security interest, pledge,
claim, option, right of first refusal or other encumbrance.
"outstanding" with respect to any Shares, means, as of any
date of determination, all Shares that have been issued on or prior to such
date, other than Shares repurchased or otherwise reacquired by the Company, or
held by a controlled Affiliate thereof, on or prior to such date.
"Permitted Transferee" means any member of Mr. Main's
immediate family or trusts for their benefit and, upon Mr. Main's death, his
executors, administrators, testamentary trustees, legatees and beneficiaries.
"Person" means an individual, a partnership, a joint venture,
a corporation, an association, a trust or any other entity or organization,
including a government or any department or agency thereof.
"Sale" means any sale, assignment, transfer, allocation,
distribution or other disposition of Shares or of a participation therein and
"Sell" shall have a correlative meaning.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Share" means any share of Common Stock.
"Third Party" means (a) with respect to Main, any other
Person, other than (i) any Permitted Transferee of Main and (ii) the Company and
its subsidiaries and, (b) with respect to the Company, any other Person, other
than (i) Main and (ii) any subsidiary of the Company.
ARTICLE II
BOARD OF DIRECTORS
2.01.....Nomination of Directors. Effective as of the
Effective Time (as such term is used in the Merger Agreement), the Company shall
cause Mr. Main to be elected to the Board of Directors of the Company. In
addition, for so long as Mr. Main shall be a member of the management executive
committee of the Company, at any special or annual meeting of the stockholders
of the Company at which Directors are to be elected (or pursuant to written
consent if permitted by applicable law), if Mr. Main is not currently serving as
a Director or is currently a Director whose term expires at such meeting of
stockholders to elect Directors, the Company shall nominate Mr. Main to serve as
Director.
ARTICLE III
RESTRICTIONS ON TRANSFER
3.01.....General Restriction. Main shall not, directly or
indirectly, make or offer to make any Sale of, or create, incur, suffer or
assume any Encumbrance with respect to, any Shares (or solicit the opportunity
to make any Sale of any Shares), except in compliance with the Securities Act,
the laws of the State of California, and as permitted by this Agreement. This
Section 3.01 shall have no force or effect unless the condition set forth in
Section 5.01 has been satisfied in full.
3.02.....Legends. (a) The Company shall be entitled to affix
to each certificate representing outstanding Shares that is issued to Main a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AGREEMENT
DATED AS OF ________________, 1996 AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OF TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER
UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED
WITH."
(b)......In the event that any Shares shall cease to be
subject to the restrictions on transfer set forth in this Agreement, the Company
shall, upon the written request of the holder thereof, issue to such holder a
new certificate representing such Shares without the legend required by Section
3.02(a).
3.03.....Certain Restrictions on Transfer. For the two (2)
year period following the date hereof, Main shall not (except as required by
law), directly or indirectly, make any Sale or create, incur, suffer or assume
any Encumbrance with respect to any Shares held by Main other than a Sale to a
Permitted Transferee who becomes a party hereto; and after such two (2) year
period, Main shall not (except as required by law), directly or indirectly, make
any Sale or create, incur, suffer or assume any Encumbrance with respect to any
Shares held by Main other than in compliance with the procedures, and subject to
the limitations, set forth in Section 3.04, except for any Sale to a Permitted
Transferee who becomes a party hereto. Main agrees that, except as otherwise
expressly provided herein, all Sales permitted by the foregoing shall be subject
to, and shall not be made other than in compliance with, the applicable
provisions of Sections 3.01, 3.02 and 3.04. This Section 3.03 shall have no
force or effect unless the condition set forth in Section 5.01 has been
satisfied in full.
3.04.....Right of First Refusal. (a) If Main shall have a bona
fide current intention to sell or otherwise dispose of any Shares owned or held
by Main to any Third Party or Third Parties (whether or not any such Third Party
shall then have been identified) for cash, securities or any other form of
consideration, Main shall, not later than 20 business days prior to consummating
any such sale or disposition, deliver to the Company a written notice of such
intention (for purposes of this Section 3.04, a ("Notice of Intention")). The
Notice of Intention shall state that Main has such a bona fide current
intention, identify the number of Shares with respect to which Main has such an
intention (for purposes of this Section 3.04, the ("Offered Shares"), and the
price per Share at which a sale is proposed to be made (for purposes of this
Section 3.04, the "Offer Price").
(b)......The receipt of a Notice of Intention by the Company
from Main shall constitute an offer by Main to sell to the Company the Offered
Shares at the Offer Price in cash. Such offer shall be irrevocable for 20
business days after receipt of such Notice of Intention by the Company. The
Company shall have the right to accept such offer as to all or any portion of
the Offered Shares by delivering to Main a written notice of acceptance (for
purposes of this Section 3.04, the "Notice of Acceptance") prior to the
expiration of such 20-business day period. If the Company so accepts Main's
offer, the Company will purchase for cash from Main, and Main will sell to the
Company, the Offered Shares. The price per Share to be paid by the Company shall
be the Offer Price specified in the Notice of Intention.
(c)......The consummation of any such purchase by and sale to
the Company shall take place on such date, not later than 45 days after receipt
of the Notice of Acceptance from the Company by Main, as the Company and Main
shall select. Upon the consummation of such purchase and sale, Main shall (i)
deliver to the Company certificates evidencing the Offered Shares purchased and
sold duly endorsed in blank or accompanied by written instruments of transfer in
form satisfactory to the Company duly executed by Main, and (ii) shall assign
all its rights under this Agreement with respect to the offered Shares purchased
and sold pursuant to an instrument of assignment reasonably satisfactory to the
Company.
(d)......In the event that (i) Main shall not have received
from the Company the Notice of Acceptance as to all the Offered Shares prior to
the expiration of the 20-business day period following receipt by the Company of
the Notice of Intention or (ii) the Company shall have given a Notice of
Acceptance to Main but shall have failed to consummate, other than as a result
of the fault of Main, a purchase of the Offered Shares within 45 days after
receipt of the Notice of Acceptance by Main, Main shall have the right to make a
sale of the Offered Shares so long as all the Offered Shares that are sold or
otherwise disposed of by Main (which number of Offered Shares shall be not more
than the number of Offered Shares specified in such Notice of Intention) are
sold (A) within 120 days after the expiration of (1) such 20-business day period
or (2) such 45-day period, as the case may be, and (B) at an amount not less
than the Offer Price included in such Notice of Intention, except that Main may
sell the Offered Shares for an amount less than the Offer Price in such Notice
of Intention if such Shares are sold at the market price for the Shares on the
American Stock Exchange or such other stock exchange in which the Shares may be
subsequently listed so long as such market price is greater than or equal to 95%
of such Offer Price.
(e)......This Section 3.04 shall have no force or effect
unless the condition set forth in Section 5.01 has been satisfied in full.
3.05.....Improper Transfer. Any attempt to make any Sale of,
or to create, incur or assume any Encumbrance with respect to, any Shares not in
compliance with this Agreement shall be null and void and neither the Company
nor any transfer agent shall give any effect in the Company's stock records to
such attempted Sale or Encumbrance.
ARTICLE IV
REGISTRATION RIGHTS
4.01.....Registration Rights Agreement. Concurrently with the
execution of this Agreement, the Company and Main agree to enter into a
Registration Rights Agreement in substantially the form attached hereto as
Appendix A.
ARTICLE V
POOLING-OF-INTEREST
5.01.....Pooling-of-Interest. In the event the Merger does not
qualify for pooling-of-interest accounting treatment (as determined by Amwest no
later than the time that financial results covering at least 30 days of
post-Merger combined operations of Amwest and Condor have been published), then,
and only then, will the provisions of Sections 3.01, 3.03 and 3.04 have any
effect or validity.
ARTICLE VI
MISCELLANEOUS
6.01.....Representations. Each of the parties hereto
represents that this Agreement has been duly authorized, executed and delivered
by it and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms.
6.02.....Certain Remedies. Without intending to limit the
remedies available to any of the parties hereto, each of the parties hereto
agrees that damages at law will be an insufficient remedy in the event such
party violates the terms of Articles II or III hereof and each of the parties
hereto further agrees that each of the other parties hereto may apply for and
have injunctive or other equitable relief in any court of competent jurisdiction
to restrain the breach or threatened breach of, or otherwise specifically to
enforce, any of such party's agreements set forth in such Articles.
6.03.....Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of all parties hereto.
6.04.....Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given on the date of delivery,
if delivered personally or faxed during normal business hours of the recipient,
or three days after deposit in the U.S. Mail, postage prepaid, if mailed by
registered or certified mail (return receipt requested) as follows:
If to Amwest: Amwest Insurance Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Co-Chief Executive Officers
and Chief Financial Officer
With a copy to: Xxxxxx, Xxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
If to the Stockholder: c/o Condor Services, Inc.
0000 Xxxxxxxxx Xxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
or to such other address as any party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
6.05.....Successors and Assigns; Benefit; Binding Effect.
Except as otherwise provided herein, this Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors, Permitted
Transferees and permitted assigns. Main may not assign any of the rights
hereunder to any Person other than in compliance with the requirements of
Article III in all respects. Nothing in this Agreement ether express or implied
is intended to confer on any Person, other than the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, any rights, remedies or obligations under or
by reason of this Agreement, or subject any party hereto to any obligation other
than as set forth herein. Mr. Main intends to bind himself solely in his
capacity as a stockholder. Nothing in this Agreement shall obligate Mr. Main, in
his capacity as an officer, employee or director of the Company or any of its
subsidiaries, to take or refrain from taking any action in any such capacity or
shall otherwise affect the rights or obligations of Mr. Main in any such
capacity.
6.06.....Consent to Jurisdiction. Main and the Company hereby
irrevocably submit to the jurisdiction of any California State or Federal Court
sitting in the city of Los Angeles in any action or proceeding arising out of
any breach of any representation or warranty, or the failure to perform any
covenant or other agreement to be performed by Main contained in or contemplated
by this Agreement. Each of the undersigned also hereby irrevocably waives, to
the fullest extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of any such action or proceeding.
6.07.....Miscellaneous. This Agreement sets forth the entire
agreement and understanding among the parties hereto, and supersedes all prior
agreements and understandings, relating to the subject matter hereof. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, regardless of any investigation made by any party
hereto or on such party's behalf. This Agreement shall be construed and enforced
in accords with and governed by the law of the State of California. The headings
in this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized signatories
thereunto duly authorized as of the day and year first above written.
AMWEST INSURANCE GROUP, INC.
By:______________________________
Xxxxxxx X. Xxxxxx
Chairman of the Board and
Co-Chief Executive Officer
_________________________________
Guy A. Main
MAIN FAMILY TRUST:
By:_______________________________
Guy A. Main
Trustee
By:_______________________________
Xxxxx Main
Trustee
APPENDIX A
TO EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is made as of the ___ day
of _______, 1996 (this "Agreement") by and between Amwest Insurance Group, Inc.,
a Delaware corporation (the "Company") and the Main Family Trust and Guy A.
Main, an individual (the Main Family Trust and Guy Main are hereinafter
collectively referred to as "Main").
WITNESSETH:
WHEREAS, the Company and Condor Services, Inc., a Delaware
corporation ("Condor") are parties to an Agreement and Plan of Merger dated as
of November 30, 1995 (the "Merger Agreement"), pursuant to which, among other
things, Condor shall merge with and into the Company (the "Merger"), as a result
of which the stockholders of Condor immediately prior to such merger shall
become stockholders of the Company.
WHEREAS, pursuant to the Merger Agreement, the Company agrees
to issue, and Main as the principal stockholder of Condor shall receive, certain
shares of Common Stock of the Company.
WHEREAS, in order to induce Condor to enter into the Merger
Agreement, the Company desires to grant to Main, as provided herein, certain
registration rights with respect to the shares of Common Stock he shall own
subsequent to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS.
1.1......"Business Day" means any Day on which the American
Stock Exchange is open for trading.
1.2......"Closing Date" means the date of this Agreement.
1.3......"Common Stock" means the Common Stock, $.01 par value
per share, of the Company, and any securities of the Company or any successor
which may be issued on or after the date hereof in respect of, or in exchange
for, shares of Common Stock pursuant to merger, consolidation, stock split,
stock dividend, recapitalization of the Company or otherwise.
1.4......"Eligible Securities" means any shares of Common
Stock originally acquired by Main pursuant to the Merger, whether held by Main
or any permissible direct transferee of Main.
As to any proposed offer or sale of Eligible Securities, such
securities shall cease to be Eligible Securities with respect to such proposed
offer or sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement or (ii) all of such securities are permitted to be distributed
concurrently pursuant to Rule 144 (or any successor provision to such Rule)
under the Securities Act or are otherwise freely transferable to the public
without registration pursuant to Section 4(1) of the Securities Act. In the
event the Company prepares a registration statement pursuant to Article III
hereof which becomes effective and the Holder fails to dispose of Eligible
Securities pursuant to said registration statement, the securities shall remain
Eligible Securities but the Holder shall be responsible for assuming that
portion of the Registration Expenses in connection with such registration as
equals the portion of Eligible Securities originally to be sold pursuant to such
registration which were to be sold by such Holder.
1.5......"Holder" means Main and each of Main's respective
permissible direct transferees who acquire Eligible Securities, directly or
indirectly, from Main.
1.6......"Person" means an individual, a partnership (general
or limited), corporation, joint venture, business trust, cooperative,
association or other form of business organization, whether or not regarded as a
legal entity under applicable law, a trust (inter vivos or testamentary), an
estate of a deceased, insane or incompetent person, a quasi-governmental entity,
a government or any agency, authority, political subdivision or other
instrumentality thereof, or any other entity.
1.7......"Registration Expenses" means all expenses incident
to the Company's performance of or compliance with the registration requirements
set forth in this Agreement including, without limitation, the following: (a)
the fees, disbursements and expenses of the Company's counsel and accountants in
connection with the registration of Eligible Securities to be disposed of under
the Securities Act; (b) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering document and amendments and supplements
thereto and the mailing and delivering of copies thereof to the underwriters and
dealers; (c) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreements(s) and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Eligible Securities to be disposed of; (d) all
expenses in connection with the qualification of Eligible Securities to be
disposed of for offering and sale under state securities laws, including the
fees and disbursements of counsel for the
underwriters in connection with such qualifications and in connection with any
blue sky and legal investment surveys; (e) the filing fees incident to securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of Eligible Securities to be disposed of; and (f) fees and
expenses incurred in connection with the listing of Eligible Securities on each
securities exchange on which securities of the same class are then listed;
provided, however, that Registration Expenses with respect to any registration
pursuant to this Agreement shall not include (x) underwriting discounts or
commissions attributable to Eligible Securities, (y) transfer taxes applicable
to Eligible Securities or (z) SEC filing fees with respect to shares of Common
Stock to be sold by the Holder thereof.
1.8......"SEC" means the Securities and Exchange Commission.
1.9......"Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations of the SEC thereunder, all as
the same shall be in effect at the relevant time.
ARTICLE II
EFFECTIVENESS
2.1......Effectiveness of Registration Rights. The
registration rights pursuant to Articles III and IV hereof shall become
effective on the Closing Date, and terminate when the Holder or Holders shall
have required the Company to register, and the Company shall have registered,
one (1) registration of Eligible Securities pursuant to Article III and two (2)
registrations of Eligible Securities pursuant to Article IV.
ARTICLE III
DEMAND REGISTRATION.
3.1......Notice. At any time or from time to time following
the second anniversary of the Closing Date, upon written notice from any Holder
or Holders requesting that the Company effect the registration under the
Securities Act of all or part of the Eligible Securities held by them pursuant
to Section 3.1(d) below, which notice shall specify the number and class of
Eligible Securities intended to be registered and the intended method or methods
of disposition of such Eligible Securities, the Company will use reasonable
efforts to effect (at the earliest possible date) the registration, under the
Securities Act, of such Eligible Securities for disposition in accordance with
the intended method or methods of disposition stated in such request, provided
that:
(a)......the Company shall be obligated to register the
Eligible Securities upon receipt of a registration request only if the Eligible
Securities to be registered have a fair market value, at both the time of
receipt of the request and the filing of the Registration Statement, of at least
$1,500,000;
(b)......if, following receipt of a registration request
pursuant to this Article III but prior to the filing of a registration statement
or the effective date of a registration statement filed in respect of such
request, (i) the Board of Directors of the Company, in its reasonable judgment
and in good faith, resolves that (a) the filing of a registration statement or a
sale of Eligible Securities pursuant thereto would materially interfere with any
significant acquisition, corporate reorganization or other similar transactions
involving the Company or (b) the filing of a registration statement or a sale of
Eligible Securities pursuant thereto would require disclosure of material
information that the Company has a bona fide material business purpose for
preserving as confidential or (c) the Company is unable to comply with SEC
requirements, and (ii) the Company gives the Holders having made such request
written notice of such determination (which notice shall include a copy of such
resolution), the Company shall, notwithstanding the provisions of this Article
III, be entitled to postpone for up to 90 days the filing or effectiveness of
any registration statement otherwise required to be prepared and filed by it
pursuant to this Article III; provided, however, that the Company shall not be
entitled to postpone such filing or effectiveness if, within the preceding
twelve months, it had effected a postponement pursuant to this clause (b) and,
following such postponement, the Eligible Securities to be sold pursuant to the
postponed registration were not sold (for any reason);
(c)......if the Company shall have previously effected a
registration with respect to Eligible Securities pursuant to Article IV hereof,
the Company shall not be required to effect a registration pursuant to this
Article III until a period of one hundred and eighty (180) days shall have
elapsed from the effective date of the most recent such previous registration;
and
(d)......the Company shall not be required to register any
Eligible Securities or Other Securities if the intended method or methods of
distribution for the Eligible Securities is from time to time in multiple
transactions.
3.2......Registration Expenses. With respect to the
registration requested pursuant to this Article III, the Company shall pay all
Registration Expenses.
ARTICLE IV
PIGGYBACK REGISTRATION.
4.1. Notice and Registration. If the Company proposes to
register Eligible Securities or any other securities issued by it ("Other
Securities") (whether proposed to be offered for sale by the Company or any
other Person) on a form and in a manner which would permit registration of
Eligible Securities for sale to the public under the Securities Act, it will
give prompt written notice to all Holders of its intention to do so, including
the identities of any Holders exercising registration rights pursuant to Article
III hereof. Such notice shall specify, at a minimum, the number and class of
Eligible Securities or Other Securities so proposed to be registered, the
proposed date of filing of such registration statement, any proposed means of
distribution of such Eligible Securities or Other Securities, any proposed
managing underwriter or underwriters of such Eligible Securities
or Other Securities and a good faith estimate by the Company of the proposed
maximum offering price thereof, as such price is proposed to appear on the
facing page of such registration statement. Upon the written request of any
Holder delivered to the Company within fifteen (15) Business Days after the
giving of any such notice (which request shall specify the number of Eligible
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof) the Company will use reasonable efforts to effect, in
connection with the registration of the Other Securities, the registration under
the Securities Act of all Eligible Securities which the Company has been so
requested to register by such Holder (the "Selling Stockholder"), to the extent
required to permit the disposition (in accordance with the intended method or
methods thereof as aforesaid) of Eligible Securities so to be registered,
provided that:
(a)......if, at any time after giving such written notice of
its intention to register any Other Securities and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall be unable to or shall determine for any reason not to register the
Other Securities the Company may, at its election, give written notice of such
determination to such Holder and thereupon the Company shall be relieved of its
obligation to register such Eligible Securities in connection with the
registration of such Other Securities (but not from its obligation to pay
Registration Expenses to the extent incurred in connection therewith as provided
in Section 4.2), without prejudice, however, to the rights (if any) of such
Holder immediately to request that such registration be effected as a
registration under Article III;
(b)......In the event that the Company proposes to register
Other Securities for purposes of a primary offering, and any managing
underwriter shall advise the Company and the Selling Stockholders in writing
that, in its opinion, the inclusion in the registration statement of some or all
of the Eligible Securities sought to be registered by such Selling Stockholders
creates a substantial risk that the price per unit the Company will derive from
such registration would be materially and adversely affected or that the primary
offering would otherwise be materially and adversely affected, then the Company
would include in such registration statement such number of Eligible Securities
or Other Securities as the Company and such Selling Stockholders are so advised
can be sold in such offering without such an effect (the "Primary Maximum
Number"), as follows and in the following order of priority: (i) first, such
number of Other Securities in the primary offering as the Company, in its
reasonable judgment and acting in good faith and in accordance with sound
financial practice, shall have determined and (ii) second, if and to the extent
that the number of Eligible Securities or Other Securities to be registered
under clause (i) is less than the Primary Maximum Number, Eligible Securities of
each Selling Stockholder, pro rata in proportion to the number sought to be
registered by such Selling Stockholder relative to the number sought to be
registered by all the Selling Stockholders;
(c)......In the event that the Company proposes to register
Eligible Securities or Other Securities for purposes of a secondary offering,
upon the request or for the account of any holder thereof (each a "Requesting
Stockholder"), and any managing underwriter shall advise the Requesting
Stockholder or
Stockholders and the Selling Stockholders in writing that, in its opinion, the
inclusion in the registration statement of some or all of the Eligible
Securities sought to be registered by the Selling Stockholders creates a
substantial risk that the price per unit that such Requesting Stockholder or
Stockholders and such Selling Stockholders will derive from such registration
will be materially and adversely affected or that the secondary offering would
otherwise be materially and adversely affected, the Company will include in such
registration statement such number of Eligible Securities or Other Securities as
the Requesting Stockholders and the Selling Stockholders are so advised can
reasonably be sold in such offering, or can be sold without such an effect (the
"Secondary Maximum Number"), as follows and in the following order of priority:
(i) first, the number of Eligible Securities sought to be registered by the
Requesting Stockholders and (ii) second, if and to the extent that the number of
Eligible Securities to be registered under clause (i) is less than the Secondary
Maximum Number, such number of Eligible Securities or Other Securities sought to
be registered by such Selling Stockholder or Stockholders;
(d)......In the event that the Company proposes to register
Eligible Securities or Other Securities for purposes of a combined offering, and
any managing underwriter shall advise the Company, the Requesting Stockholder or
Stockholders and the Selling Stockholders in writing that, in its opinion, the
inclusion in the registration statement of some or all of the Eligible
Securities sought to be registered by the Selling Stockholders creates a
substantial risk that the price per unit the Company will derive from such
registration will be materially and adversely affected or that the combined
offering would otherwise be materially and adversely affected, then the Company
would include in such registration statement such number of Eligible Securities
or Other Securities as the Company, the Requesting Stockholders and the Selling
Stockholders are so advised can be sold in such offering without such an effect
(the "Combined Maximum Number"), as follows and in the following order of
priority: (i) first, such number of Other Securities in the primary offering as
the Company, in its reasonable judgment and acting in good faith and in
accordance with sound financial practice, shall have determined and (ii) second,
if and to the extent that the number of Eligible Securities or Other Securities
sought to be registered under clause (i) is less than Combined Maximum Number,
Eligible Securities or Other Securities sought to be registered by each Selling
Stockholder, pro rata, if necessary, in proportion to the number sought to be
registered by such Selling Stockholder relative to the number sought to be
registered by all Selling Stockholders and (iii) third, if and to the extent
that the number of Eligible Securities or Other Securities sought to be
registered under clauses (i) and (ii) is less than the Combined Maximum Number,
Eligible Securities or Other Securities sought to be registered by each other
such Person pro rata in proportion to the value of the Eligible Securities or
Other Securities sought to be registered by all such parties;
(e)......The Company shall not be required to effect any
registration of Eligible Securities under this Article IV incidental to the
registration of any of its securities in connection with mergers, acquisitions,
exchange offers, subscription offers, dividend reinvestment plans or stock
options or other employee or non-employee director benefit plans; and
(f)......The Company shall not be required to register any
Eligible Securities or Other Securities if the intended method or methods of
distribution for the Eligible Securities is from time to time in multiple
transactions.
No registration of Eligible Securities effected under this Article IV shall
relieve the Company of its obligation (if any) to effect registrations of
Eligible Securities pursuant to Article III.
4.2...... Registration Expenses. The Company (as between the
Company and any Holder) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article IV.
ARTICLE V
REGISTRATION PROCEDURES.
5.1......Registration and Qualification. If and whenever the
Company is required to use reasonable efforts to effect the registration of any
Eligible Securities under the Securities Act as provided in Articles III and IV,
the Company will as promptly as is practicable:
(a)......prepare, file and use reasonable efforts to cause to
become effective a registration statement under the Securities Act regarding the
Eligible Securities to be offered, provided that such reasonable efforts
obligation shall not require the Company to yield to an SEC accounting or other
comment which it is discussing, resisting or otherwise addressing in good faith
and which the Board of Directors of the Company determines that such discussing,
resisting or addressing is materially in the best interests of the Company;
(b)......prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Eligible Securities until the earlier of such time as all of
such Eligible Securities have been disposed of in accordance with the intended
methods of disposition by the Holders set forth in such registration statement
or the expiration of six (6) months after such Registration Statement becomes
effective;
(c)......furnish to all Holders and to any underwriter (which
term for purposes of this Agreement shall be a person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act and any
placement agent or sales agent) of such Eligible Securities one executed copy
each and such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus),
in conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and
such other documents as any Holder or such underwriter may reasonably
request;
(d)......use reasonable efforts to register or qualify all
Eligible Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as any Holder or any
underwriter of such Eligible Securities shall reasonably request, and do any and
all other acts and things which may be necessary or advisable to enable any
Holder or any underwriter to consummate the disposition in such jurisdictions of
the Eligible Securities covered by such registration statement, except the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, or to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(e)......promptly notify the selling Holders of Eligible
Securities and the managing underwriter or underwriters, if any, thereof and
confirm such advice in writing, (i) when such registration statement or the
prospectus included therein or any prospectus amendment or supplement or
post-effective amendment has been filed, and, with respect to such registration
statement or any post-effective amendment, when the same has become effective,
(ii) of any comments by the SEC and by the Blue Sky or securities commissioner
or regulator of any state with respect thereto or any request by the SEC for
amendments or supplements to such registration statement or prospectus or for
additional information, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company contemplated by Section 5.1(h) or
Section 5.2(b) hereof cease to be true and correct in all material respects, (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification of the Eligible Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, or (vi) at any
time when a prospectus is required to be delivered under the Securities Act,
that such registration statement, prospectus, prospectus amendment or supplement
or post-effective amendment, or any document incorporated by reference in any of
the foregoing, contains an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
(f)......use its reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date, provided that
such reasonable efforts obligation shall not require the Company to yield to a
material SEC accounting or other comment which it is discussing, resisting or
otherwise addressing in good faith and which the Board of Directors of the
Company determines that such discussing, resisting or addressing is materially
in the best interests of the Company;
(g)......use its reasonable efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state or
local, which may be required to effect such registration or the offering or sale
in connection therewith or to enable the Holders to offer, or to consummate the
disposition of, the Eligible Securities, provided that such reasonable efforts
obligation shall not require the Company to yield to a material accounting or
other comment issued by such governmental agency or authority which it is
discussing, resisting or otherwise addressing in good faith and which the Board
of Directors of the Company determines that such discussing, resisting or
addressing is materially in the best interests of the Company;
(h)......whether or not an agreement of the type referred to
in Section 5.2 hereof is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten offering
or is made through a placement or sales agent or any other entity, (i) make such
representations and warranties to the Holders and the underwriters, if any,
thereof in form, substance and scope as are customarily made in connection with
an offering of common stock or other equity securities pursuant to any
appropriate agreement and/or to a registration statement filed on the form
applicable to such registration; (ii) obtain opinions of inside and outside
counsel to the Company in customary form and covering such matters, of the type
customarily covered by such opinions, as the managing underwriters, if any, and
as the Holders may reasonably request; (iii) obtain a "cold comfort" letter or
letters from the independent certified public accountants of the Company
addressed to the Holders and the underwriters, if any, thereof, dated (I) the
effective date of such registration statement and (II) the date of the closing
under the underwriting agreement relating thereto, such letter or letters to be
in customary form and covering such matters of the type customarily covered,
from time to time, by letters of such type and such other financial matters as
the managing underwriters, if any, and as the Holders may reasonably request;
(iv) deliver such documents and certificates, including officers' certificates,
as may be reasonably requested by the Holders and the placement or sales agent,
if any, therefor and the managing underwriters, if any, thereof to evidence the
accuracy of the representations and warranties made pursuant to clause (i) above
and the compliance with or satisfaction of any agreements or conditions
contained in the underwriting agreement or other agreement entered into by the
Company; and (v) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Article VII hereof,
(i)......comply with all applicable rules and regulations of
the SEC, and make generally available to its security holders, as soon as
practicable but in any event not later than eighteen months after the effective
date of such registration statement, an earning statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act (including, at
the option of the Company, Rule 158 thereunder); and
(j)......use its best efforts to list prior to the effective
date of such registration statement, subject to notice of issuance, the Eligible
Securities covered by such registration statement on any securities exchange on
which securities of the same class are then listed or, if such class is not
then so listed, to have the Eligible Securities accepted for quotation for
trading on the American Stock Exchange (or a comparable interdealer quotation
system then in effect).
The Company may require any Holder to furnish the Company such information
regarding such Holder and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
or by the SEC in connection with any registration.
5.2......Underwriting. (a) If requested by the underwriters
for any underwritten offering of Eligible Securities pursuant to a registration
requested hereunder, the Company would enter into an underwriting agreement with
such underwriters for such offering, such agreement to contain such
representations and warranties by the Company and such other terms and
provisions as are then customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation, indemnities
and contribution and the provision of opinions of counsel and accountants'
letters to the effect and to the extent provided in Section 5.1(h). The Holders
on whose behalf Eligible Securities are to be distributed by such underwriters
shall be parties to any such underwriting agreement. Such agreement shall
contain such representations and warranties by the Holders and such other terms
and provisions as are then customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation, indemnities
and contribution to the effect and to the extent provided in Article VII. The
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holders of Eligible Securities.
(b)......In the event that any registration pursuant to
Article IV hereof shall involve, in whole or in part, an underwritten offering,
the Company may require Eligible Securities requested to be registered pursuant
to Article IV to be included in such underwriting on the same terms and
conditions as shall be applicable to the Other Securities being sold through
underwriters under such registration. In such case, the Holders of Eligible
Securities on whose behalf Eligible Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement. Such agreement
shall contain such representations and warranties by the Holders and such other
terms and provisions as are then customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnities and contribution to the effect and to the extent
provided in Article VII. The representations and warranties in such underwriting
agreement by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Eligible Securities.
5.3......Blackout Periods. (a) At any time when a registration
statement effected pursuant to Article III hereunder relating to Eligible
Securities is effective, upon written notice from the Company to all Holders
that either:
(i)......the Board of Directors of the Company, in its
reasonable judgment and in good faith, resolves that such Holder's or Holders'
sale of Eligible Securities pursuant to the registration statement would
materially interfere with any significant acquisition, corporate reorganization
or other similar transaction involving the Company (a "Transaction Blackout");
or
(ii).....(A) the Company determines in good faith, based upon
the advice of outside counsel to the Company, that such Holder's or Holders'
sale of Eligible Securities pursuant to the registration statement would require
disclosure of material information and the Company's Board of Directors, in its
reasonable judgment and in good faith, resolves that the Company has a bona fide
business purpose for preserving such information confidential or (B) the Company
determines, after taking into account the advice of outside counsel and/or
independent accountants, that the Company is unable to comply with SEC
requirements (an "Information Blackout"),
such Holder or Holders shall suspend sales of Eligible Securities pursuant to
such registration statement until the earlier of:
(X)......(i) in the case of a Transaction Blackout, the
earliest of (A) one month after the completion of such acquisition, corporate
reorganization or other similar transaction, (B) promptly after abandonment of
such acquisition, corporate reorganization or other similar transaction and (C)
three months after the date of the Company's written notice of such Transaction
Blackout, or
...........................(ii) in the case of an Information Blackout, the
earlier of (A) the date upon which such material information is disclosed to the
public or ceases to be material and (B) 90 days after the Company makes such
good faith determination, and
(Y)......such time as the Company notifies such Holder or
Holders that sales pursuant to such registration statement may be resumed (the
number of days from such suspension of sales by such Holder or Holders until the
day when such sales may be resumed hereunder is hereinafter called a "Sales
Blackout Period");
provided, however, that (i) the Company may not impose a Transaction Blackout
within 30 days after the initial effectiveness of any registration statement of
equity securities prepared pursuant to a request hereunder and (ii) the Company
may not impose a Transaction Blackout or an Information Blackout if, within the
preceding twelve months, it had effected a postponement pursuant to this Section
5.3 and, following such postponement, the Eligible Securities subject to the
postponement were not sold (for any reason);
5.4......Withdrawals. Any Holder having notified or directed
the Company to include any or all of his or its Eligible Securities in a
registration statement pursuant to Article III or IV hereof shall have the right
to withdraw such notice or direction with respect to any or all of the Eligible
Securities designated for registration thereby by giving written notice to such
effect to the Company at least two business days prior to the anticipated
effective date of such registration statement. In
the event of any such withdrawal, the Company shall amend such registration
statement and take such other actions as may be necessary so that such Eligible
Securities are not included in the applicable registration and not sold pursuant
thereto, and such Eligible Securities shall continue to be Eligible Securities
in accordance herewith; and in the case of a registration pursuant to Article
III hereof, the Withdrawing Holder shall be responsible for assuming that
portion of the Company's expenses in connection with such registration as equals
the portion of Eligible Securities originally to be sold pursuant to such
registration which were to be sold by Withdrawing Holder, provided, however,
that if the Company causes a postponement pursuant to Section 5.3 hereof of the
Eligible Securities originally to be sold pursuant to such registration, the
Withdrawing Holder shall not be responsible for assuming any of the Company's
expenses for its Eligible Securities withdrawn pursuant to this Section 5.4
which were subject to such postponement. No such withdrawal shall affect the
obligations of the Company with respect to Eligible Securities not so withdrawn,
provided, however, that in the case of a registration pursuant to Article III
hereof, if such withdrawal shall reduce the total number of the Eligible
Securities to be registered so that the requirements set forth in Section 3.1(a)
are not satisfied, then the Company shall, prior to the filing of such
registration statement or, if such registration statement (including any
amendment thereto) has therefore been filed, prior to the filing of any further
amendment thereto, give each Holder of Eligible Securities so to be registered
notice, referring to this Agreement, of such fact and, within ten business days
following the giving of such notice, either the Company or the Holders of a
majority of such Eligible Securities may, by written notice to each Holder of
such Eligible Securities or the Company, as the case may be, elect that such
registration statement not be filed or, if it has therefore been filed, that it
be withdrawn.
ARTICLE VI
PREPARATION; REASONABLE INVESTIGATION.
6.1......Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement registering
Eligible Securities under the Securities Act, the Company will give all Holders
and the underwriters, if any, and their respective counsel and accountants, such
reasonable and customary access to its books and records and such opportunities
to discuss the business of the Company with its directors, officers, employees,
counsel and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of any Holder and such
underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
ARTICLE VII
INDEMNIFICATION AND CONTRIBUTION.
7.1......Indemnification and Contribution. (a) In the event of
any registration of any Eligible Securities hereunder, the Company will enter
into customary indemnification arrangements to indemnify and hold harmless
all selling Holders, their directors and officers (if any), each Person who
participates as an underwriter in the offering or sale of such securities, each
officer and director of each underwriter, and each Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act
against any losses, claims, damages, liabilities and expenses, joint or several,
to which such Person may be subject under the Securities Act or otherwise
insofar as such losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus included therein,
or any amendment or supplement thereto, or any document incorporated by
reference therein, or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will periodically reimburse each such
Person for any legal or any other expenses reasonably incurred by such Person in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus or final
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by any selling Holder or such
underwriter for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
any Holder or any such Person and shall survive the transfer of such securities
by such selling Holder. The Company also shall agree to provide provision for
contribution as shall be reasonably requested by such selling Holder or any
underwriters in circumstances where such indemnity is held unenforceable.
(b)......All selling Holders, by virtue of exercising their
registration rights hereunder, agree and undertake to enter into customary
indemnification arrangements to indemnify and hold harmless (in the same manner
and to the same extent as set forth in clause (a) of this Article VII) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement, each Person who participates as an underwriter
in the offering or sale of such securities, each officer and director of each
underwriter, each Person, if any, who controls the Company or any such
underwriter within the meaning of the Securities Act, with respect to any
statement in or omission from such registration statement, any preliminary
prospectus or final prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information concerning such Holder furnished by it to
the Company. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of the registered
securities by any Holder. Holders also shall agree to provide provision for
contribution as shall be reasonably requested by the Company or any underwriters
in circumstance where such indemnity is held unenforceable. The
indemnification and contribution obligations of any Holder shall in every
case be limited to the aggregate proceeds received (net of any underwriting fees
and expenses and other transaction costs) by such Holder in such registration.
ARTICLE VIII
TRANSFER OF REGISTRATION RIGHTS.
8.1......Transfer of Registration Rights. Any Holder may
transfer the registration rights granted hereunder to any other Person only in
connection with a Transfer permitted pursuant to the Merger Agreement to such
Person of Eligible Securities held by such Holder.
ARTICLE IX
UNDERWRITTEN OFFERINGS.
9.1......Selection of Underwriters. If any of the Eligible
Securities covered by any registration statement filed pursuant to Article III
hereof, or pursuant to Article IV hereof in connection with a secondary
offering, are to be sold pursuant to an underwritten offering, the managing
underwriter or underwriters thereof shall, in the case of any registration
statement filed pursuant to Article III hereof, be designated by the Company
after consultation with the Holder or Holders demanding or requesting
registration, as the case may be.
ARTICLE X
RULE 144.
10.1. Rule 144. The Company covenants to and with each Holder
of Eligible Securities that to the extent it shall be required to do so under
the Exchange Act, the Company shall use its best efforts to timely file the
reports required to be filed by it under the Exchange Act or the Securities Act
(including, but not limited to, the reports under Section 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the SEC
under the Securities Act) and the rules and regulations adopted by the SEC
thereunder, and shall use its best efforts to take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable the Holders to sell Eligible Securities without registration under the
Securities Act within the limitations of the exemption provided by Rule 144
under the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC. Upon the request of any
Holder of Eligible Securities, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
ARTICLE XI
MISCELLANEOUS.
11.1.....Captions. The captions or headings in this Agreement
are for convenience and reference only, and in no way define, describe, extend
or limit the scope or intent of this Agreement.
11.2.....Severability. If any clause, provision or section of
this Agreement shall be invalid, illegal or unenforceable, the invalidity,
illegality or unenforceability of such clause, provision or section shall not
affect the enforceability or validity any of the remaining clauses, provisions
or sections hereof to the extent permitted by applicable law.
11.3.....Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws or the State of
California without giving effect to conflicts of law principles.
11.4.....Consent to Jurisdiction; Service of Process; Waiver
of Jury Trial. (a) The parties to this Agreement hereby irrevocably submit to
the exclusive jurisdiction of any Federal court located in Los Angeles,
California, over any suit, action or proceeding arising out of or relating to
this Agreement. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such suit, action or proceeding brought in such
court. The parties agree that, to the fullest extent permitted by applicable
law, final and nonappealable judgment in any suit, action, or proceeding brought
in such court shall be conclusive and binding upon the parties.
(b)......The parties hereby irrevocably waive any rights they
may have in any court, state or federal, to a trial by jury in any case of any
type that relates to or arises out of this Agreement or the actions contemplated
herein.
11.5.....Specific Performance. The Company acknowledges that
it would be impossible to determine the amount of damages that would result from
any breach by it of any of the provisions of this Agreement and that the remedy
at law for any breach, or threatened breach, of any of such provisions would
likely be inadequate and, accordingly, agrees that each Holder shall, in
addition to any other rights or remedies which it may have, be entitled to seek
such equitable and injunctive relief as may be available from any court of
competent jurisdiction to compel specific performance of, or restrain the
Company from violating any of, such provisions. In connection with any action or
proceeding for injunctive relief, the Company hereby waives the claim or defense
that a remedy at law alone is adequate and agrees, to the maximum extent
permitted by law, to have each provision of this Agreement specifically enforced
against it, without the necessity of posting bond or other security against it,
and consents to the entry of injunctive relief against it enjoining or
restraining any breach or threatened breach of this Agreement.
11.6.....Modification and Amendment. This Agreement may not
be changed, modified, discharged or amended, except by an instrument signed by
all of the parties hereto.
11.7.....Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
11.8.....Entire Agreement. This Agreement constitutes the
entire agreement and understanding among the parties and supersedes any prior
understandings and/or written or oral agreements among them respecting the
subject matter herein.
11.9.....Notices. All notices, requests, demands, consents and
other communications required or permitted to be given pursuant to this
Agreement shall be in writing and delivered by hand, by overnight courier
delivery service or by certified mail, return receipt requested, postage
prepaid. Notices shall be deemed given when actually received, which shall be
deemed to be not later than the next Business Day if sent by overnight courier
or after five Business Days if sent by mail.
11.10....Successors to Company, Etc. This Agreement shall be
binding upon, and inure to the benefit of, the Company's successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed as of the day and year first
above written.
AMWEST INSURANCE GROUP, INC.
By:________________________________________
Xxxxxxx X. Xxxxxx
Chairman of the Board and
Co-Chief Executive Officer
MAIN FAMILY TRUST
By:________________________________________
Guy A. Main
Trustee
By:________________________________________
Xxxxx Main
Trustee
------------------------------------------
Guy A. Main
CONDOR SERVICES, INC.
CONDOR DISCLOSURE SCHEDULES TO AGREEMENT AND PLAN OF MERGER BY AND BETWEEN
AMWEST INSURANCE GROUP, INC. AND CONDOR SERVICES, INC. DATED NOVEMBER 30, 1995.
The matters contained or referred to in this schedule constitute responses
and/or exceptions to the representations, warranties and covenants given by
Condor Services, Inc. (the "Company") to Amwest Insurance Group, Inc. ("Amwest")
under the Agreement and Plan of Merger pursuant to which this schedule is
delivered (the "Agreement").
The Company hereby records the following preliminary matters in relation to this
schedule:
(a) The disclosures contained in this schedule are not to be taken as
any admission by the Company that any of the disclosures are
required by the terms of the Agreement, such disclosures being
merely made for such purposes as they may serve in disclosing
matters which might arise from the wording of the representations,
warranties and covenants contained in the Agreement.
(b) The representations, warranties and covenants contained in the
Agreement are made and given subject to the disclosures contained
in this schedule and the Company shall not be, nor be deemed to
be, in breach of, nor may any claim be made under, any of the
representations, warranties or covenants contained in the
Agreement in respect of the matters mentioned or referred to or
disclosed in this schedule. The disclosure of any matter or
document by this schedule shall not imply any further
representation, warranty or covenant as to the same, nor shall
such disclosure be taken as extending the scope of any
representation, warranty or covenant contained in the Agreement.
(c) All of the disclosures contained in this schedule shall apply to
each and every section of Article III of the Agreement and to each
and every other warranty, indemnity, representation, covenant or
undertaking given to Amwest.
(d) Capitalized terms used in this schedule and not otherwise
defined have the meanings given them in the Agreement.
SECTION 2.01 TREATMENT OF STOCK OPTIONS
A listing of each holder of an outstanding option to purchase shares of
Condor Common Stock, other than those options held by non-employee directors of
Condor, and their respective number of options (whether or not currently
exercisable) is provided in the attachment for this section 2.01 provided with
this schedule.
SECTION 3.03 CAPITALIZATION
The authorized capital stock of the Company is 3,800,000 shares of
common ($.01 par value) and 200,000 shares of preferred ($.01 par
value).
The Company has 1,949,806 shares of common issued and outstanding which
includes 14,500 common shares held by the Company as treasury stock.
The Company has no preferred shares issued or outstanding.
1992 Non-employee Director Stock Option Plan* Dated July 31, 1992
1989 Stock Incentive Plan*
Dated January 6, 1989
As amended on April 16, 1992
This is the employee stock option plan.
Warrant Agreement*
Dated April 5, 1989
Between Xxxxx Xxxxxxx & Co., Inc. and the Company (the "Warrant
Agreement")
The warrants granted under this agreement have expired.
A listing of all stock options granted by the Company is attached to
this schedule. See attachment.
* Copies of each provided to Amwest Insurance Group, Inc.
SECTION 3.04 AFFILIATED ENTITLES
(a) The company has three affiliated entities of which the
Company owns all of the issued and outstanding capital stock
They are as follows:
1. Condor Insurance Company, a California domiciled and
licensed property and casualty insurance carrier.
2. Raven Claims Services, Inc., a California corporation
wholly owned by the Company.
3. Falcon Re-insurance Intermediaries, Inc., a California
corporation wholly owned by the Company - Falcon has
ceased operations effective June 1, 1995 and has nominal
assets.
Copies of the Certificates of Incorporation and Bylaws for'
the above affiliated entities have been provided to Amwest
Insurance Group, Inc.
(b) Not applicable
(c) Investment reports for both Condor Insurance Company and the
Company are attached to this section 3.04 (c). These reports
list all equity securities owned.
SECTION 3.05 FINANCIAL STATEMENTS
Report on Form 10-K for the year ended December 31, 1994.*
Report on Form 10-Q for the quarter ended March 31, 1995.* Report on
Form 10-Q for the quarter ended June 30, 1995.* Report on Form 10-Q for
the quarter ended September 30, 1995.* Report on Form 10-Q for the
quarter ended March 31, 1994.* Report on Form 10-Q for the quarter
ended June 30, 1994.* Report on Form 10-Q for the quarter ended
September 30, 1994.*
Notice of Annual Meeting of Stockholders and Proxy Statement dated May
5, 1994.*
Notice of Annual Meeting of Stockholders and Proxy Statement dated
April 26, 1995.*
Report on Form 8-K dated April 25, 1995.*
Response dated January 28, 1994 to comment letter from SEC dated
December 17, 1993.* Notification dated March 9, 1994 of informal
inquiry into the events surrounding the 1993 misappropriation of
funds.* Request by the Company dated June 16, 1995 for confidential
treatment in a Freedom of Information Act request.*
Various press releases issued since January 1, 1994.*
Condor reports and SEC filings did not disclose the existence of the
now expired Warrant Agreement.
* Copies of each provided to Amwest Insurance Group, Inc.
SECTION 3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS
Not applicable
SECTION 3.07 CONSENTS AND APPROVALS; NO VIOLATION
Merger provisions in Guy A. Main's Employment Agreement: Section 15 of the
Executive Employment Agreement dated January 1, 1993 between Condor and Guy A.
Main provides that, in the event of a merger with another corporation during the
term of the agreement, the other corporation shall assume the agreement and
become obligated to perform all of its terms and conditions; provided that if
Mr. Main does not consent to the merger, he may resign and shall then be
entitled to receive from the other corporation either (i) his annual
compensation for the remainder of the term of the agreement, or (ii) twice his
annual compensation, whichever is greater. He would also be entitled to
additional compensation based on Condor's operating profit accrued to the date
of closing of the merger.
The Condor office lease provides that consent is to be obtained for any change
in control of the Company.
An insurance package policy held by the Company provides that consent is to be
obtained for any change in control of the Company.
SECTION 3.09 TAXES
Federal Tax Sharing Agreement*
Covering 1989 and subsequent years
Undated
Between Condor Insurance Company and the Company
Note: The other Condor subsidiaries have through practice and verbal
agreement also shared in a similar arrangement with the Company,
although no formal written contract has been executed.
IRS audit of the Company's Form 1120 for the period ended December 31,
1991 Audit completed Letter Dated May 25, 1995 showed no change
necessary in the reported tax.*
IRS audit of the Company for compliance with the Federal Insurance
Contributions Act (FICA) For the period January 1, 1991 through
December 31, 1992 Audit completed Field auditor by telephone solicited
an offer to settle on November XX, 1995 The offer was for $17,000
without penalty or interest for a dispute over the status of an
independent contractor the Company uses for Dictaphone transcriptions.
The company feels there is no merit to the finding and is deciding
whether to appeal to higher levels of authority within the IRS.
The statute of limitations has not expired for any tax years since and
including the 1992 tax year of the Company's consolidated tax entity.
The statute of limitations has been extended to December 31, 1996 by
agreement with the Company and the IRS for the 1991 tax year for which
the audit above has been completed. No tax examinations are currently
in process other than already mentioned nor has the Company received
notice of examinations to be conducted in the future.
* Copies of each provided to Amwest Insurance Group, Inc.
SECTION 3.10 INSURANCE: LICENSES, PERMITS AND FILINGS
Condor Insurance Company has received notice from the California Department of
Insurance of a rating and underwriting examination scheduled to begin December
4, 1995.
SECTION 3.11 PATENTS, TRADEMARKS, AND OTHER INTELLECTUAL PROPERTY
License Agreement*
Effective September 22.1989
As amended
Between Policy Management Systems Corporation ("PMSC") and Condor
Insurance Company This license covers the vast majority of Condor
Insurance Company's policy processing system.
* Copies of each provided to Amwest Insurance Group, Inc.
SECTION 3.12 LITIGATION
The Company is currently involved in litigation regarding an employment contract
and related matters with Xxxxxxx Xxxx Xxxx III, the former President and Chief
Operating Officer of the Falcon Reinsurance Intermediaries, Inc. affiliate. Xx.
Xxxx resigned effective May 26, 1995 and has since filed suit against the
Company for wrongful termination claiming he was forced to resign under duress.
See attached first page of lawsuit for description of complaint. This employment
contract would have expired December 31, 1997 should the contract not have been
terminated according to the terms of the agreement.
The Company and its affiliates currently have no known outstanding claims of bad
faith pending or threatened.
A reinsurance loss run, which shows all potential material insurance claims
against Condor Insurance Company and the related reserves over $50,000 for such
claims based upon information known as of October 31, 1995, has been provided to
Amwest Insurance Group, Inc. Condor will update the report to November 30, 1995
and provide the report to Amwest as soon as it is available, no later than 3
p.m. of November 30, 1995.
Other than these claims reserves and other disclosures under this section 3.12,
Condor does not know of any Proceedings against it or its affiliates that would
result in any Material Adverse Effect.
SECTION 3.15 EMPLOYEE BENEFIT PLANS
(a) Condor Retirement, Health and Disability Plan*
Dated August 24, 1994
Given a favorable determination by the IRS on September 20,
1995
(b) Not applicable
* Copy provided to Amwest Insurance Group, Inc.
SECTION 3.16 EMPLOYMENT RELATED AGREEMENTS
Executive Employment Agreement*
Dated January 1, 1993
Between Guy A. Main and the Company
Contract of Employment* Dated October 8.1991 Between K. Xxxx Xxxx III
See discussion under section 3.12 of this schedule.
Form of Indemnity Agreement
Between the Company and each of Guy A. Main, Xxxxxx X. Xxxxxxx, M.
Xxxxxxxx Xxxx, Xxxx X. Xxxxxxx, Xxxx X. Xxxxxxxxxx, Xx., Xxxxxxx X.
Xxxxx, and Xxxxx X. Xxxxxx.
* Copies of each provided to Amwest Insurance Group, Inc.
SECTION 3.18 ENVIRONMENTAL MATTERS
Not applicable
SECTION 3.25 MATERIAL CONTRACTS
(a) Allocation Expenditure Agreement*
Undated
Between Condor Insurance Company and the Company
Standard Office Lease - Gross*
Dated December 1, 1991
Between Continental Development Corporation and the Company
Agreement*
Effective May 1, 1989
Between The Safety Association and the Condor Insurance
Company
Investment Advisory Agreement for the Condor Retirement,
Health and Disability Plan*
Dated June 21, 1991
Between Tocqueville Asset Management and the Company
The President of Tocqueville Asset Management is a Director on
the Board of Directors of the Company
Investment Advisory Agreement*
Dated June 21, 1991
Between Tocqueville Asset Management and the Condor Insurance
Company
The President of Tocqueville Asset Management, Xxxxxx
Xxxxxxxxxxxx, is a Director on the Board of Directors of the
Company.
Investment Advisory Agreement*
Effective January 1, 1991
Between Xxxxxxx X. Xxxxx and the Company
Xx. Xxxxx is a Director on the Board of Directors of the
Company.
1996 Profit Sharing Agreement*
Limited Producer Addenda (Addendum DD) to Agency Agreement
Condor Insurance provides a retail incentive arrangement to 16
appointed insurance producers in addition to their agency
agreement with Condor Insurance.
Addendum GA to Limited Producer Agreement*
Condor Insurance provides an incentive arrangement to 2
appointed insurance general agencies in addition to their
agency agreement with Condor Insurance.
The Company has an agreement with The Safety Association
whereby the Association has granted the Company with the
exclusive right to provide insurance programs to its members.
Guy A. Main is a minority stockholder in The Safety
Association. There is also an understanding between The Safety
Association and the Company in which The Safety Association
reimburses the Company for operational expenses related to the
contract.*
Third Party Administrative Support Services Agreement*
Effective April 12, 1991
As amended
Between Policy Management Systems Corporation ("PMSC") and
Condor Insurance Company
Agreements disclosed under sections 3..03, 3.09, 3.11, 3.15,
3.16, and 3.27 are incorporated under this section 3.25 by
this reference.
(b) Not applicable
* Copies of each provided to Amwest Insurance Group, Inc.
SECTION 3.27 REINSURANCE
The largest amount insured on any one risk is $5,000,000 gross and $200,000 net
for liability lines. With respect to property lines, the company carries
$5,000,000 and $200,000 net.
Property is underwritten on an automatic facultative basis by General
Reinsurance Corporation. The first casualty excess of loss is $300,000 excess of
$200,000 and second excess of loss contract covers $500,000 excess of $500,000
with Xxxxxxx Global Reinsurance Corporation as the lead reinsurer. Clash
coverage for ECO and XPL is 90% of $1,000,000 excess or $1,000,000. Casualty
treaties are written on a per policy, per occurrence basis.
Condor Insurance also maintains a third casualty excess of loss for $1,000,000
excess of $1,000,000 with General Reinsurance Corporation.
All reinsurance contracts are listed and summarized on an attachment for this
section. See attachment. All reinsurance contracts have been provided to Amwest
Insurance Group, Inc.
SECTION 3.28 LOSS RESERVES; SOLVENCY
Not applicable
AMWEST DISCLOSURE SCHEDULES
TO AGREEMENT
AND PLAN OF MERGER
BY AND BETWEEN
AMWEST INSURANCE GROUP, INC.
AND CONDOR SERVICES, INC.
DATED NOVEMBER 30, 1995
Volume I
1. Section 4.03 - Capitalization
2. Section 4.04 - Financial Statements and Reports
3. Section 4.05 - Absence of Certain Changes
4. Section 4.06 - Consents and Approvals; No Violations
AMWEST DISCLOSURE SCHEDULES
TO AGREEMENT
AND PLAN OF MERGER
BY AND BETWEEN
AMWEST INSURANCE GROUP, INC.
AND CONDOR SERVICES, INC.
DATED NOVEMBER 30, 1995
Volume II
4. Section 4.06 - Consents and Approvals; No Violations
5. Section 4.07 - Litigation
6. Section 4.10 - No Undisclosed Liabilities
7. Section 4.12 - Post-Retirement and Post-Employment Benefit Obligations
8. Section 4.13 - Employee Benefit Plans
9. Section 4.14 - Environmental Matters
10. Section 4.17 - Taxes
11. Section 4.18 - Affiliated Entities
12. Section 4.19 - Reinsurance
13. Section 4.20 - Insurance: Licenses, Permits and Filings
14. Section 4.22 - Material Contracts
15. Section 4.24 - Loss Reserves; Solvency
Section 4.03
Capitalization
1. Composition of Capital Stock of Amwest.
Description Authorized Issued Outstanding
Preferred stock, $.01 par value 1,000,000 0 0
Common stock, $.01 par value 10,000,000 2,360,464 2,360,464
2. Amwest Insurance Group, Inc. Stockholder Rights Plan. *
3. Amwest Insurance Group, Inc. Stock Option Plan. *
4. Amwest Insurance Group, Inc. Non-Employee Director Stock Option Plan. *
5. Schedule of outstanding stock options.
Per
Share Outstanding
Grant Expiration Option Options
Date Date Price ($) (Shares) (#)
12/14/87 12/14/97 9.875 10,500
6/2/88 6/2/98 10.625 12,750
6/2/89 6/2/99 11.125 13,000
12/3/90 12/3/95 11.375 7,500
6/26/91 6/26/96 14.250 12,750
6/26/91 6/26/96 15.675 8,500
3/17/92 3/17/97 8.375 15,625
3/17/92 3/17/97 9.213 8,500
4/27/92 4/27/97 8.375 17,625
5/20/93 5/20/98 10.750 27,000
5/20/93 5/20/98 11.825 10,000
8/26/93 8/26/98 10.375 3,000
3/22/94 3/22/04 13.875 69,075
5/17/94 5/17/04 14.250 15,000
4/4/95 4/4/00 14.250 30,000
4/4/95 4/4/05 14.250 68,500
5/25/95 5/25/05 14.875 7,500
----------
Total 336,825
==========
---------------------------
* Copies of each provided to Condor Services, Inc.
Section 4.04
Financial Statements and Reports
(i) Report on Form 10-K for the year ended December 31, 1994. *
(ii) Report on Form 10-Q for the following quarters: *
a. March 31, 1995
b. June 30, 1995
c. September 30, 1995
(iii) a. Notice of Annual Meeting of Stockholders dated April 20, 1994. *
b. Notice of Annual Meeting of Stockholders dated April 17, 1995. *
(iv) a. Report on Form S-8 dated July 28, 1994. *
b. Report on Form 8-K dated February 18, 1994. *
c. Various Section 16 filings (Forms 3,4,5) for executive officers and
directors of Amwest. *
d. Schedule 13G dated February 2, 1994. *
(v) Various press releases issued since January 1, 1994. *
---------------------------
* Copies of each provided to Condor Services, Inc.
Section 4.05
Absence of Certain Changes
None
Section 4.06
Consents and Approvals; No Violations
1. Loan Agreement with Union Bank. *
---------------------------
* Copy provided to Condor Services, Inc.
Section 4.07
Litigation
1. California voters passed Proposition 103, an insurance initiative which
required a rollback in insurance rates for policies (and bonds) written or
renewed during the twelve month period beginning November 8, 1988 and
provided that changes in insurance premiums after November 8, 1988 must be
submitted for approval of the California Insurance Commissioner prior to
implementation. While the Proposition has the most significant impact on
automobile insurance, its provisions, as written, also apply to other
property and casualty insurers including surety insurers.
On August 26, 1991, The State of California enacted Insurance Code Section
1861.135 ("Section 1861.135") exempting surety insurance from the rate
rollback and prior approval provisions of Proposition 103. Section
1861.135 does not affect Propositions 103's prohibition against excessive,
inadequate or discriminatory rates. Due to the enactment of Section
1861.135, the Company terminated a previously established reserve for
potential premium rebates.
Subsequently, the Department of Insurance ("Department") and Voter Revolt
brought a motion for writ of mandate challenging the validity of Section
1861.135. On March 21, 1992, the Los Angeles Superior Court concluded that
Section 1861.135 did not violate the California Constitution or the
provisions of Proposition 103. The Department and Voter Revolt appealed.
On December 7, 1993, the Second District Court of Appeal overturned
Section 1861.135 by a 2-1 vote. On February 24, 1994, the California
Supreme Court agreed to hear the Company's petition for review, thereby
staying the Court of Appeals option. Such hearing has been scheduled for
December 5, 1995. The outcome of this appeal cannot be predicted; however,
if this appeal is not successful, it could have a significant impact on
the Company's earnings but is not expected to have a material adverse
impact on the Company's financial position. Proposition 103 limits the
maximum rebate to 20% of California written premiums during 1989, plus
accrued interest. Based on current estimates, this maximum potential
rebate is approximately $7,500,000.
2. Amwest and it Affiliated Entities are parties to numerous claims and
litigation in the normal course of it business, none of which will, in the
Company's opinion, have a Material Adverse Effect on Amwest.
3. Amwest's federal income tax returns for the tax years ended December 31,
1991, 1992 and 1993 (1993 is limited to items found in 1992) are currently
being audited by the Internal Revenue Service ("IRS"). No assurances can
be given regarding what impact, if any, such IRS audits may have on Amwest
and its financial position.
Section 4.10
No Undisclosed Liabilities
Amwest is expected to incur certain payments and penalties pursuant to the
early termination of its lease on its home office facility located at 0000
Xxxxxx Xxxxxx, Xxxxxxxx Xxxxx, XX, 00000. It is currently estimated that
these early termination charges, if any, will approximate $3,000,000.
Section 4.12
Post-Retirement and Post-Employment Benefit Obligations
None
Section 4.13
Employee Benefit Plans
In January 1992, the Company adopted a 401(k) savings plan entitled the
Amwest Surety Insurance Company 401(k) Plan (the "Plan"). Employees eligible
for participation in the Plan must have attained one year of service and be
at least 21 years of age. The Plan provides for employer matching
contributions at 50%, up to a maximum of the first 6% of the employee
contribution and become fully vested at the end of 5 years of employment.
Effective January 1, 1994, the Company established a Deferred Compensation
Plan (the "Deferred Plan") to provide current tax planning opportunities as
well as supplemental funds for retirement or death for a select group of
management or highly compensated employees of Amwest Surety Insurance
Company. It is intended that the Deferred Plan will aid in retaining and
attracting employees of exceptional ability by providing them with these
benefits.
Section 4.14
Environmental Matters
None
Section 4.17
Taxes
(a) (i) Statute of limitations for tax years 1992 and beyond has not expired
for tax returns of Amwest Insurance Group, Inc. and its affiliates.
Statute of limitations for the 1991 federal tax return of
Amwest Surety Insurance Company has been extended to March 31, 1996
in order to facilitate completion of an Internal Revenue Service
("IRS") audit of such year.
(ii) Examinations which have been completed are as follows:
Florida Income and Premium Tax Audit
Tax year: 1991 - 1993
Paid: $16,759
Los Angeles County Property Tax Audit
Tax year: 1990 - 1993
Paid: $24,443
The IRS has recently completed a field audit of the federal
tax returns of Amwest Surety Insurance Company for the tax years
listed below:
1991 (limited scope audit)
1992 (full return audit)
1993 (limited scope audit)
Proposed adjustments received as a result of this audit
total $708,985.
There are no other pending examinations, contested assessments
of deficiencies. All required returns have been filed and all
amounts due have been paid.
(b)(viii) Power of attorney has been granted to Xxx Xxxxx, CPA (KPMG
Peat Marwick) and to Xxxx Xxxx (Senior Tax Accountant - Amwest)
with respect to years 1991-1993 under audit by the IRS.
Section 4.18
Affiliated Entities
1. Listing of Affiliated Entities.
(a) and (b)
1 Name: Amwest Insurance Group, Inc.
Entity type: Corporation
Domiciled: Delaware
2 Name: Amwest Surety Insurance Company
Entity type: Corporation
Domiciled: California
Parent: 100% owned by Amwest Insurance Group, Inc.
3 Name: Far West Insurance Company
Entity type: Corporation
Domiciled: California
Parent: 100% owned by Amwest Surety Insurance Company
4 Name: Far West Bond Services, Inc.
Entity type: Corporation
Domiciled: Colorado
Parent: 100% owned by Amwest Surety Insurance Company
5 Name: Far West Bond Services of Arizona, Inc.
Entity type: Corporation
Domiciled: Arizona
Parent: 100% owned by Amwest Surety Insurance Company
6 Name: Far West Bond Services of Texas, Inc.
Entity type: Corporation
Domiciled: Texas
Parent: 100% owned by Amwest Surety Insurance Company
7 Name: Far West Bond Services of Pennsylvania, Inc.
Entity type: Corporation
Domiciled: Pennsylvania
Parent: 100% owned by Amwest Surety Insurance Company
8 Name: Far West Bond Services of Oregon, Inc.
Entity type: Corporation
Domiciled: Oregon
Parent: 100% owned by Amwest Surety Insurance Company
9 Name: Far West Bond Services of California, Inc. DBA:
Far West Surety Insurance Services of California
Entity type: Corporation
Domiciled: California
Parent: 100% owned by Amwest Surety Insurance Company
10 Name: Amwest General Agency
Entity type: Coporation
Domiciled: California
Parent: 100% owned by Amwest Insurance Group, Inc.
11 Name: Basic Bonding of Louisiana, Inc.
Entity type: Corporation
Domiciled: Louisiana
Parent: 100% owned by Amwest Surety Insurance Company
12 Name: Basic Bonding of Alabama, Inc.
Entity type: Corporation
Domiciled: Alabama
Parent: 100% owned by Amwest Surety Insurance Company
13 Name: The Bond Experts, Inc.
Entity type: Corporation
Domiciled: Oregon
Parent: 100% owned by Amwest Surety Insurance Company
Section 4.19
Reinsurance
1. Excess of Loss Reinsurance Treaty
Effective October 1, 1992 and amended annually thereafter, the Company
entered into an excess of loss reinsurance treaty with a syndicate of
reinsurers lead by Xxxxxx Reinsurance Company and Underwriters Reinsurance
Company, (the "Xxxxxx Treaty"). The current reinsurance participation
percentages are as follows:
Xxxxxx Reinsurance Company: 32.5%
Underwriters Reinsurance Company: 32.5%
Allstate Insurance Company: 25%
SOREMA North America Reinsurance Company: 10%
Xxxxxx Reinsurance Company is rated "A" (Excellent), Underwriters
Reinsurance Company is rated "A+" (Excellent), Allstate Insurance Company
is rated "A-" (Excellent) and SOREMA North American is rated "A-"
(Excellent) by Best.
The Xxxxxx Treaty may be canceled at the election of either party by
providing notice of cancellation 90 days prior to any anniversary. The
Xxxxxx Treaty limits the Company's exposure on any one principal to the
first $500,000 of loss and to losses in excess of $6,000,000 with an
annual aggregate deductible of $7,000,000 for losses between $500,000 and
$3,000,000 for any one principal, and with no annual aggregate deductible
for losses between $3,000,000 and $6,000,000 per principal. Coverage is
provided for most types of bonds which the Company writes with penal
amounts greater than $500,000 except SBA guaranteed bonds, which are not
covered by the treaty. The reinsurers' maximum exposure under the Xxxxxx
Treaty is $21,000,000 of losses discovered during any one contract period
(October 1 to October 1).
2. Semi-Automatic Bond Facultative Reinsurance Contract
Effective March 1, 1994, the Company entered into a semi-automatic bond
facultative reinsurance contract which was amended on October 1, 1995. The
contract applies to surety bonds classified by the Company as Contract
Surety Bonds with single bond penalty limits up to $10,000,000 or multiple
bonds under a specific aggregate work program per principal with limits up
to $20,000,000 and Commercial Surety Bonds or Accounts written by the
Company with limits up to $25,000,000. The Company's retention under the
contract is $6,000,000 plus 12% of the amount ceded to the reinsurers in
excess of $6,000,000. The Company's aggregate retention is additionally
reinsured by the aforementioned excess of loss reinsurance treaty, further
limiting the Company's net exposure.
3. Semi-Automatic Bond Quota Share Reinsurance Contract
Effective October 1, 1993, the Company entered into a semi-automatic bond
quota share reinsurance contract with Xxxxxx Reinsurance Company and
Underwriters Reinsurance Company. The contract applies to surety bonds
classified by the Company as Court Appeal Bonds with penalty limits equal
to or greater than $5,000,000 but not more than $15,000,000 and secured
with 100% collateral. The Company's retention under the contract is 33.34%
of the amount up to $15,000,000 and 100% of any amount over $15,000,000.
Xxxxxx Reinsurance Company and Underwriters Reinsurance Company
participate equally in the remaining 66.66%.
4. SBA Surety Guarantee Program
The Company's insurance subsidiaries also issue bonds under the SBA Surety
Guarantee Program. Industry practice is to account for SBA guarantees as
reinsurance transactions. The purpose of the SBA Surety Guarantee Program
is to assist small contractors, who have not established credit or who
fail to meet a surety's normal underwriting standards, in obtaining bonds.
An SBA guarantee covers between 80% and 90% of the surety's liability up
to $1,250,000 per bond.
Section 4.20
Insurance: Licenses, Permits and Filings
None
Section 4.22
Material Contracts
1. Lease Agreement dated April 1, 1986, by and between Amwest Insurance
Group, Inc. and Trillium/Woodland Hills.*
2. First amendment to Lease Agreement dated January 30, 1987, by and between
Amwest Insurance Group, Inc. and Trillium/Woodland Hills.*
3. Second amendment to Lease Agreement dated June 11, 1987, by and between
Amwest Insurance Group, Inc. and Trillium/Woodland Hills.*
4. Third amendment to Lease Agreement dated September 1, 1988, by and between
Amwest Insurance Group, Inc. and Trillium/Woodland Hills.*
5. Fourth amendment to Lease Agreement dated November 20, 1989, by and
between Amwest Insurance Group, Inc. and Trillium/Woodland Hills.*
6. Fifth amendment to Lease Agreement dated December 20, 1989, by and between
Amwest Insurance Group, Inc. and Trillium/Woodland Hills.*
7. Sixth amendment to Lease Agreement dated December 31, 1989, by and between
Amwest Insurance Group, Inc. and Trillium/Woodland Hills.*
8. Contract between the Company and Hewlett-Packard Company, dated September
16, 1991.*
9. Lease Agreement dated June 16, 1992 by and between Amwest Insurance Group,
Inc. and Hewlett-Packard Company.*
10. First Excess of Loss Reinsurance Contract effective October 1, 1992 issued
to Amwest Surety Insurance Company and Far West Insurance Company by a
syndicate of reinsurers lead by Xxxxxx Reinsurance Company.*
11. Investment Management Agreement between the Company and AAM Advisors, Inc.
dated August 11, 1992.*
12. Investment Management Agreement between the Company and Xxxxxxx, Xxxxxxx &
Xxxxx, Inc. dated August 13, 1992.*
13. First Amendment to First Excess of Loss Reinsurance Contract effective
October 1, 1993.*
14. Semiautomatic Bond Quota Share Reinsurance Contract effective October 1,
1993 issued to Amwest Surety Insurance Company by Xxxxxx Reinsurance
Company and Underwriters Reinsurance Company.*
15. First Excess of Loss Reinsurance Contract effective October 1, 1994 issued
to Amwest Surety Insurance Company and Far West Insurance Company by a
syndicate of reinsurers lead by Xxxxxx Reinsurance Company.*
16. Semiautomatic Contract Surety Reinsurance Agreement effective March 1,
1994 issued to Amwest Surety Insurance Company and Far West Insurance
Company by a syndicate of reinsurers lead by Xxxxxx Reinsurance Company.*
17. Form of Indemnity Agreement between the Company and Individual Directors
and Certain Officers Designated by the Company's Board of Directors.*
18. Form of Senior Executive Severance Agreement entered into by the Company
and certain officers.*
19. Stock Option Plan of the Company, as amended (included under Section 4.03
- Capitalization).
20. Non-Employee Director Stock Option Plan of the Company (included under
Section 4.03 - Capitalization).
21. Rights Agreement dated as of May 10, 1989 executed by the Company and
Bankers Trust Company of California, N.A., as rights agent (included under
Section 4.03 - Capitalization).
22. Revolving Credit Agreement dated August 6, 1993 between Amwest Insurance
Group, Inc. and Union Bank (included under Section 4.06 - Consents and
Approvals; No Violations).
--------------------
* Copies of each provided to Condor Services, Inc.
Section 4.24
Loss Reserves; Solvency
None
