<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
AMERICAN COUNTRY HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
AMERICAN COUNTRY HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
AMERICAN COUNTRY HOLDINGS INC.
________________________________________________________________________________
April 22, 1998
Dear Stockholder:
American Country Holdings Inc.'s ("Holdings") annual meeting of
stockholders will be held at 10:00 a.m. local time on Friday, May 22, 1998, at
The Downtown Association, 60 Pine Street, New York, New York 10005.
The notice of meeting, proxy statement and proxy card are included with
this letter. The formal business of the meeting is described in the attached
notice of meeting. After completion of that business, there will be an update
on developments in Holdings' products and markets.
It is important that your shares are represented and voted at the annual
meeting, regardless of the size of your holdings. Whether or not you plan to
attend, please complete and return the enclosed proxy to ensure that your
shares will be represented at the annual meeting. If you attend the annual
meeting, you may, of course, withdraw your proxy should you wish to vote in
person.
Sincerely,
/s/ Martin L. Solomon
Martin L. Solomon
President and Chief Executive Officer
________________________________________________________________________________
222 N. LASALLE STREET - SUITE 1600 * CHICAGO, ILLINOIS 60601 * TEL: (312)
456-2000 * FAX: (312) 456-2020
<PAGE> 3
AMERICAN COUNTRY HOLDINGS INC.
________________________________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1998
The annual meeting of stockholders of American Country Holdings Inc., a
Delaware corporation (the "Company"), will be held at The Downtown
Association, 60 Pine Street, New York, New York, at 10:00 a.m. local time, on
Friday, May 22, 1998, for the following purposes:
(1) To elect five directors of the Company for the ensuing year.
(2) To ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ended December
31, 1998.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on April 17, 1998 has been fixed as the record
date for determination of those stockholders entitled to vote at the meeting.
Only holders of record of shares of the Company's Common Stock on that date
will be entitled to vote.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY. THE PROXY IS
REVOCABLE AT ANY TIME. IF YOU ARE PRESENT AT THE ANNUAL MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
By Order of the Board of Directors,
William J. Barrett
Secretary
April 22, 1998
________________________________________________________________________________
222 N. LASALLE STREET - SUITE 1600 * CHICAGO, ILLINOIS 60601 * TEL: (312)
456-2000 * FAX: (312) 456-2020
<PAGE> 4
AMERICAN COUNTRY HOLDINGS INC.
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601
_____________________________
PROXY STATEMENT
______________________________
This proxy statement and the enclosed proxy card are being mailed on or
about April 22, 1998, to stockholders of American Country Holdings Inc. (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board of Directors") for use at the annual
meeting (the "Meeting") of stockholders to be held on May 22, 1998, and any
adjournments thereof.
The total cost of this solicitation will be borne by the Company. In
addition to the mails, proxies may be solicited by officers and other employees
of the Company, without extra remuneration, by personal interviews, telephone
and telecopy. It is anticipated that banks, brokerage houses and other
custodians, nominees and fiduciaries will forward soliciting material to
beneficial owners of shares entitled to vote at the Meeting, and such parties
will be reimbursed for their reasonable out-of-pocket expenses incurred in
connection therewith.
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on April 17, 1998, the record date for
determining stockholders entitled to notice of and to vote at the Meeting (the
"Record Date"), there were 32,009,438 shares of Common Stock outstanding and
entitled to vote. All of the outstanding shares of Common Stock are entitled
to vote on all matters which properly come before the Meeting, and each
stockholder will be entitled to one vote for each share of Common Stock held.
Each proxy that is properly signed and received prior to the Meeting will,
unless revoked, be voted in accordance with the instructions on such proxy. If
no instruction is indicated, the shares will be voted FOR the election of the
five nominees for director listed in this Proxy Statement and FOR ratification
of the appointment of Coopers & Lybrand L.L.P. A stockholder that has given a
proxy may revoke such proxy at any time before it is voted at the Meeting by
delivering a written notice of revocation or a duly executed proxy bearing a
later date to the Secretary of the Company or by attending the meeting and
voting in person.
A quorum of stockholders is necessary to take action at the Meeting. A
majority of the outstanding shares of Common Stock of the Company, represented
in person or by proxy, will constitute a quorum. Votes cast by proxy or in
person at the Meeting will be tabulated by the inspectors of election appointed
for the Meeting. The inspectors of election will determine whether or not a
quorum is present at the Meeting. Under certain circumstances, a broker or
other nominee may have discretionary authority to vote certain shares of Common
Stock if instructions have not been received from the beneficial owner or other
person entitled to vote. The inspectors of election
<PAGE> 5
will treat directions to withhold authority, abstentions and broker non-votes
(which occur when a broker or other nominee holding shares for a beneficial
owner does not vote on a particular proposal, because such broker or other
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner) as representing shares
present and entitled to vote for purposes of determining the presence of a
quorum for the transaction of business at the Meeting. Directions to withhold
authority will have no effect on the election of directors, because directors
are elected by a plurality of votes cast. Broker non-votes are not counted in
the vote totals and will have no effect on any proposal scheduled for
consideration at the Meeting, because they are not considered votes cast.
The five nominees for director who receive the greatest number of votes
cast in person or by proxy at the Meeting will be elected directors of the
Company. The vote required for ratification of the appointment of Coopers &
Lybrand L.L.P. as independent accountants for the year 1998 is the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the Meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of April 17, 1998, the ownership of
Common Stock and Common Warrants by each director of the Company, by each of
the Named Officers (as defined below under "EXECUTIVE COMPENSATION"), by all
current executive officers and directors of the Company as a group, and by all
persons known to the Company to be beneficial owners of more than five percent
of the Common Stock or the Common Warrants. The Common Stock is the Company's
only outstanding class of voting securities. The information set forth in the
table as to directors and officers is based upon information provided to the
Company by such persons in connection with the preparation of this proxy
statement. Except where otherwise indicated, the mailing address of each of
the stockholders named in the table is c/o American Country Holdings Inc., 222
N. LaSalle Street, Chicago, Illinois 60601.
-2-
<PAGE> 6
<TABLE>
<CAPTION>
Common Stock Common Warrants(A)
---------------------------------------------------------
Name and Position of Percent of
Beneficial Owner Ownership(1) Class(2) Ownership Percent of Class(2)
- --------------------- ------------ ---------- ---------- -------------------
<S> <C> <C> <C> <C>
Martin L. Solomon 8,000,343 24.99 14,705 *
Wilmer J. Thomas, Jr. 8,000,343 24.99 -- --
Frontier Insurance
Group, Inc.(3) 8,000,343 24.99 -- --
William J. Barrett 610,540(4) 1.90 100,468(5) 4.88
Edwin W. Elder 36,300(6) * -- --
Peter H. Foley(7) 1,500 * -- --
Herbert M. Gardner 411,844(8) 1.28 35,410(9) 1.72
James P. Byrne 19,075(10) * 0 --
All directors and
executive officers
as a group (7
persons) 17,079,945 53.35 150,583 7.32
</TABLE>
____________________________
(A) Common Warrants are not entitled to vote.
(1) Each holder has sole voting and investment power with respect to the
shares listed unless otherwise indicated.
(2) Percentages less than one percent are indicated by an asterisk.
(3) The address of Frontier Insurance Group, Inc. is 915 Lake Louise Marie
Road, Rockhill, New York 12775.
(4) Includes 381, 480 shares owned by Mr. Barrett's qualified plan, 120,214
shares beneficially owned of record by Mr. Barrett's spouse, with respect
to which Mr. Barrett disclaims beneficial ownership.
(5) Includes 44,117 warrants owned by Mr. Barrett's qualified plan and 17,646
warrants owned by Mr. Barrett's spouse.
(6) Includes 36,300 shares which may be acquired upon exercise of outstanding
options.
-3-
<PAGE> 7
(7) Mr. Foley is currently an Executive Vice President of Frontier Insurance
Company, a position he has held since October 1996. Frontier Insurance
Company is a wholly owned subsidiary of Frontier Insurance Group, Inc.
(8) Includes 234,240 shares held by Mr. Gardner's qualified plan, 8,333 shares
held by Mr. Gardner's IRA and 34,969 shares beneficially owned of record by
Mr. Gardner's spouse, with respect to which Mr. Gardner disclaims
beneficial ownership.
(9) Includes 22,058 warrants held by Mr. Gardner's qualified plan and 7,352
warrants held by Mr. Gardner's spouse.
(10) Includes 18,075 shares which may be acquired upon exercise of outstanding
options.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Five members of the Board of Directors are proposed to be elected at the
Meeting to serve until the 1999 annual meeting and until their successors have
been elected and qualified. Each of the nominees is currently a director of
the Company and has served continuously as such since the date indicated in his
biography below. In the event that any nominee is unable or declines to serve
as a director at the time of the Meeting (which is not anticipated), proxies
will be voted for the election of such person or persons as may be designated
by the present Board of Directors. Directors will be elected at the Meeting by
a plurality of the votes cast at the Meeting by the holders of shares
represented in person or by proxy.
Set forth below is information as to each nominee for director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES FOR DIRECTOR.
MARTIN L. SOLOMON, 61, was elected a director and Chairman of the Board of
Directors of the Company in July, 1997. Mr. Solomon also serves as the
President and Chief Executive Officer of the Company. From 1986 to 1996, Mr.
Solomon was a director and Vice Chairman of Great Dane Holdings, Inc., formerly
in the businesses of manufacturing truck trailers and automobile stampings,
taxicab company operations and, through American Country Insurance Company,
property and casualty insurance. Mr. Solomon is a director of the following
publicly- held corporations: XTRA Corporation, a transportation equipment
leasing company, DLB Oil & Gas, Inc., an oil exploration and production company,
Hexcel Corp., a manufacturer of composites, and Telephone and Data Systems,
Inc., a diversified telecommunications company.
WILLIAM J. BARRETT, 58, has served as a director of the Company since
January 1992. Mr. Barrett also has served as the Secretary of the Company since
August 1992. Mr. Barrett has been employed as a Senior Vice President of
Janney Montgomery Scott Inc., an investment banking firm, for more than five
years. Mr. Barrett is a director of the following publicly-held corporations:
Supreme Industries, Inc., a specialized truck body manufacturer;
-4-
<PAGE> 8
and TGC Industries, Inc., a provider of geophysical services to the oil and gas
industries.
EDWIN W. ELDER, 55, was elected a director of the Company in July, 1997.
Mr. Elder also serves as Executive Vice President and Chief Operating Officer of
the Company. Mr. Elder also has served as President and a director of American
Country Insurance Company since 1993. From 1985 to 1993, he served as Senior
Vice President of Operations for Employers' Health Insurance Company and IDS
Property Casualty. Mr. Elder has 28 years of experience in the insurance
industry and started his career with State Farm Insurance Company after leaving
the United States Army, where he attained the rank of captain. He is a CPU
(Chartered Property & Casualty Underwriter) and an FLMI (Fellow Life Management
Institute).
PETER H. FOLEY, 50, was elected a director of the Company in July, 1997.
Mr. Foley has been Executive Vice President of Frontier Insurance Company since
October 1996, and from June 1995 to October 1996, served as a Vice President of
Frontier. Mr. Foley served as Vice President of Aegis Security Insurance
Company from September 1993 to June 1995, as Executive Vice President and
co-founder of Connecticut Surety Insurance Company from May 1993 to September
1993, and as Senior Vice President of E.W. Blanch, Inc. from November 1991 to
May 1993. Mr. Foley has served in various executive officer positions in the
insurance industry for more than 22 years.
WILMER J. THOMAS, JR., 71, was elected as a director of the Company in
July, 1997. Mr. Thomas is a private investor and financial consultant. From
1986 to 1996, Mr. Thomas was a director and Vice Chairman of Great Dane
Holdings,Inc., formerly in the businesses of manufacturing truck trailers and
automobile stampings, taxicab company operations and, through American Country
Insurance Company, property and casualty insurance.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has a standing Audit Committee that consists
exclusively of nonemployee directors. The Audit Committee meets with the
Company's independent auditors, reviews audit procedures, receives
recommendations and reports from the auditors and reviews internal controls. The
Audit Committee currently consists of Mr. Herbert M. Gardner (Chairman) and,
Messrs. Foley and Thomas. (Mr. Gardner is not standing for reelection as a
director.) The Audit Committee met four times during fiscal 1997.
The Board of Directors has a standing Compensation Committee that consists
exclusively of nonemployee directors. The Compensation Committee is responsible
for reviewing and recommending to the full Board of Directors compensation of
officers and directors and administration of the Company's various employee
benefit plans. The Compensation Committee currently consists of Mr. Barrett
(Chairman) and Messrs. Foley and Gardner. The Compensation Committee met four
times during fiscal 1997.
-5-
<PAGE> 9
The Board of Directors serves as the nominating committee for directors.
The Board of Directors held four meetings during fiscal 1997. No director
attended fewer than 75 percent of the meetings of the Board of Directors or any
committee on which he served.
COMPENSATION OF DIRECTORS
Messrs. Barrett and Gardner each receives a monthly retainer fee of $1000
for his services as a director. Messrs. Barrett and Gardner each also receives
$500 plus travel expenses for each Board of Directors meeting that he attends.
The other directors of the Company have waived all fees, but are reimbursed for
their out-of-pocket expenses.
EXECUTIVE OFFICERS
The following table lists all non-director executive officers of the
Company. Officers are elected to serve until their successors are duly elected
and qualified.
Name Age Position with the Company and Business Experience
- -------------- --- -----------------------------------------------------------
James P. Byrne 57 Mr. Byrne serves as the Treasurer, Chief Financial Officer
and Vice President of the Company. Mr. Byrne has served
as the Vice President and Controller of American Country
Insurance Company, the Company's principal subsidiary,
since 1988. He has over thirty years of experience in the
insurance industry. From 1984 to 1988, Mr. Byrne served
as President and Treasurer of Fairlin Associates/Reliable
Insurance Company and from 1971 to 1984 served as
Treasurer of State Security Insurance Company in Chicago.
Mr. Byrne is a member of the Society of Insurance
Accountants and Insurance Accounting and Systems
Association.
EXECUTIVE COMPENSATION
Set forth in the table below is information regarding the annual and
long-term compensation for the fiscal years ended December 31, 1997, 1996 and
1995, for the Chief Executive Officer, executive officers of the Company and
certain executive officers of American Country Insurance Company (collectively,
the "Named Officers").
-6-
<PAGE> 10
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term
Annual Compensation Compensation
--------------------------------- -----------------
Stock
Name and Fiscal Other Annual Options All Other
Present Position(1) Year Salary Bonus Compensation (# of Shares) (2) Compensation(3)
- ------------------------------ ------ ---------- ------- ------------ ----------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Martin L. Solomon, President 1997 -- -- -- --
and Chief Executive 1996 -- -- -- --
Officer(4) 1995 $_________ -- -- -- --
Edwin E. Elder, Executive 1997 193,600 130,000 -- -- 13,842
Vice President and Chief 1996 180,000 75,000 -- -- 17,938
Operating Officer 1995 155,833 75,00 -- -- 14,775
James P. Byrne, Treasurer,
Chief Financial Officer and 1997 120,500 55,000 -- -- 7,327
Vice President 1996 113,700 37,730 -- -- 7,374
1995 107,800 37,730 -- -- 5,688
Daniel R. DeLeo, Executive 1997 $125,100 47,000 -- -- 7,015
Vice President of American 1996 118,000 38,850 -- -- 551
Country Insurance Company 1995 111,000 38,850 -- -- 4,759
Robert S. Silver, Vice
President- Marketing 1997 $119,700 43,625 -- -- 9,369
of American Country 1996 112,900 37,625 -- -- 8,627
Insurance Company 1995 107,500 37,625 -- -- 8,021
Patrick Lynch, Vice President- 1997 $107,100 42,000 -- -- 5,061
Claims of American Country 1996 101,000 33,250 -- -- 5,736
Insurance Company 1995 95,000 33,250 -- -- 4,532
</TABLE>
_________________________________
(1) Mr. William J. Barrett, Secretary of the Company, does not receive any
compensation for his services as Secretary.
(2) The Company did not grant any stock options during the fiscal year ended
December 31, 1997.
(3) The compensation reported represents expense reimbursement, car allowance
and travel allowance and, in the case of Mr. Elder, supplemental life
insurance.
(4) Mr. Solomon's tenure as President and Chief Executive Officer of the
Company began in July, 1997. Mr. Solomon does not receive any salary or
other compensation for his services as President and Chief Executive
Officer.
OPTION GRANTS IN 1997
In connection with the change in ownership of the Company in July 1997,
the Company obtained a Stock Option Plan (the "Plan"), as amended, under which
options to purchase up to a maximum of 750,000 shares of common stock may be
granted to officers and other key employees. Stock options granted under this
Plan, which may be either incentive stock options or nonqualified stock options
for federal income tax purposes, expire up to ten years after the date of
-7-
<PAGE> 11
grant and become exercisable over a three-year period. Employee who have left
the Company have 90 days to exercise their options.
The Company did not grant any options during the fiscal year ended
December 1997.
All options granted in 1998 become exercisable in annual cumulative
installments of 20%, commencing prior to one year from date of grant, with full
vesting occurring on the fourth anniversary date of the date of grant. All
options outstanding would become immediately exercisable, without regard to
vesting provisions, upon the sale of the assets of the Company.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
56,000 options to purchase Common Stock were exercised at a weighted
average exercise price of $1.39 during the fiscal year ended December 31, 1997.
PENSION AND RETIREMENT PLANS
Prior to December 4, 1996, substantially all salaried employees of the
Company were covered by a defined benefit pension plan sponsored by its former
parent. Benefits were based on the employee's length of service and wages and
benefits, as defined by the plan. The former parent's funding policy of the
plan was generally to contribute amounts required to maintain funding standards
in accordance with the Employee Retirement Income Security Act.
In connection with a change in ownership of the Company in July 1997, the
former parent's plan was split up and a separate defined benefit pension plan
was established for the Company. Accordingly, effective December 4, 1996,
substantially all salaried employees of the Company were covered by a defined
benefit pension plan sponsored by the Company. Benefits and funding for the
plan are consistent with the plan in which employees were previously
participants.
Effective December 31, 1997, the Company's defined benefit pension plan was
frozen.
Substantially all salaried employees of the Company who are at least 21
years of age are eligible to participate in a 401(k) retirement plan. Employees
may contribute from 1% to 5% of their eligible compensation to the plan. The
Company previously matched 25% of employee contributions up to a maximum of 8%
of eligible compensation. Beginning in 1998, the Company matches 50% of
employee contributions up to a maximum of 8% of eligible compensation.
In addition to the defined benefit plan and the 401(k) retirement plan,
substantially all salaried employees of the Company are covered by a
postretirement benefit plan. The plan is noncontributory and provides medical
and life insurance for employees who retire after attaining age 62 with 25 years
of service.
-8-
<PAGE> 12
EMPLOYMENT AGREEMENTS WITH NAMED OFFICERS
Mr. Elder is employed as the President and Chief Executive Officer of
American Country Insurance Company through June 30, 1999 pursuant to an
Employment Agreement dated May 25, 1993, as amended (the "Agreement"). Pursuant
to the Agreement, Mr. Elder receives an annual base salary of $180,000, with an
annual cash incentive bonus, determined by the Board of Directors but not less
than one percent (1%) of the net after tax earnings of American Country
Insurance Company. If Mr. Elder is terminated for cause or voluntarily
terminates his employment, no additional amounts are payable, but if he is
terminated other than for cause, he is entitled to receive his annual base
salary through the end of the term of the Agreement.
COMPENSATION COMMITTEE REPORT ON COMPENSATION OF EXECUTIVE OFFICERS
The Compensation Committee of the Board of Directors (the "Committee") is
pleased to present its report on executive compensation. The Committee reviews
and makes recommendations to the Board of Directors regarding salaries,
compensation and benefits of officers and other key employees of the Company and
grants options to purchase Common Stock. This report documents the components
of the Company's executive officer compensation programs and describes the bases
upon which compensation is determined by the Committee with respect to the
executive officers of the Company, including the Named Officers.
This report shall not be deemed filed, and shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing, under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), except to the
extent that the Company specifically incorporates this information by reference.
COMPENSATION PHILOSOPHY. The compensation philosophy of the Company is to
endeavor to directly link executive compensation to continuous improvements in
corporate performance and increases in stockholder value. The Committee has
adopted the following objectives as guidelines for compensation decisions.
* Display a willingness to pay levels of compensation that are
necessary to attract and retain highly qualified executives.
* Be willing to compensate executive officers in recognition of
superior individual performance, new responsibilities or new
positions within the Company.
* Take into account historical levels of executive compensation
and the overall competitiveness of the market for high quality
executive talent.
* Implement a balance between short and long-term compensation
to complement the Company's annual and long-term business
objectives and
-9-
<PAGE> 13
* strategies and encourage executive performance furtherance of
the fulfillment of those objectives.
* Provide variable compensation opportunities based on the
performance of the Company, encourage stock ownership by
executives and align executive remuneration with the interests
of stockholders.
COMPENSATION PROGRAM COMPONENTS. The Committee regularly reviews the
Company's compensation program to ensure that pay levels and incentive
opportunities are competitive with the market and reflect the performance of
the Company. The particular elements of the compensation program for executive
officers are further explained below.
Base Salary. The Company's base pay levels are largely determined
by evaluating the responsibilities of the position held and the experience
of the individual and by comparing the salary scale with companies of
similar size and complexity. Actual base salaries are kept within a
competitive salary range for each position that is established through job
evaluation and market comparisons and approved by the Committee as
reasonable and necessary.
Annual Incentives. The Company has historically awarded cash
bonuses to certain salaried employees (including the Named Officers) of
the Company. Bonuses are based on various factors, including prior year
profitability, management development and the procurement and assimilation
of acquisitions.
Stock Option Program. The Committee strongly believes that by
providing those persons who have substantial responsibility over the
management and growth of the Company with an opportunity to increase their
ownership of the Company's stock, the interests of stockholders and
executives will be closely aligned. Therefore, the Company's officers
(including the Named Officers) and other key employees are eligible to
receive either incentive stock options or nonqualified stock options as
the Committee may determine from time to time, giving them the right to
purchase shares of Common Stock at an exercise price equal to 100 percent
of the fair market value of the Common Stock at the date of grant. The
number of stock options granted to executive officers is based on
competitive practices.
PRESIDENT AND CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Martin Solomon,
President and Chief Executive Officer of the Company, does not receive any
compensation for his services.
-10-
<PAGE> 14
SUMMARY. After its review of all existing programs, the Committee
continues to believe that the total compensation program for executives of the
Company is focused on enhancing corporate performance and increasing value for
stockholders. The foregoing report has been approved by all members of the
Committee.
Respectfully submitted,
William J. Barrett
Peter H. Foley
Herbert M. Gardner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Barrett, Foley and
Gardner. None of the executive officers of the Company serves on the board of
directors of another company in any instance where an executive officer of the
other company serves on the Board of Directors.
-11-
<PAGE> 15
PERFORMANCE GRAPH
Rules promulgated by the Securities and Exchange Commission (the "SEC")
under the Exchange Act require that the Company include in this proxy statement
a line-graph presentation comparing cumulative shareholder returns for the last
five fiscal years with the Nasdaq Composite Index and either a nationally
recognized industry index or an index of peer group companies selected by the
Company. The Company chose the Nasdaq Industrial Index for purposes of this
comparison. The following graph assumes the investment of $100 on December 31,
1993, and the reinvestment of dividends (rounded to the nearest dollar).
<TABLE>
<CAPTION>
NASDAQ Composite NASDAQ Industrial American Country
Index Index Holdings Inc.
Common Stock
---------------- ----------------- ---------------
<S> <C> <C> <C>
3/31/98 236.30 168.98 59.71
3/31/97 157.26 126.32 48.28
3/31/96 141.78 127.16 42.85
3/31/95 105.19 99.48 110.71
3/31/94 95.70 96.67 110.71
12/31/93 100 100 100
</TABLE>
-12-
<PAGE> 16
PROPOSAL NO. 2 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ending December 31, 1998.
Coopers and Lybrand L.L.P. will replace Ernst & Young LLP as the principal
accountants to the Company. Ernst & Young LLP had been engaged as the principal
accountants to audit the Company's financial statements effective July 29, 1997
following the Company's acquisition of the assets of American Country Insurance
Company. Ernst & Young LLP had been the auditors of American Country Insurance
Company and its affiliates and replaced Lazar, Levine & Company LLP, which had
been the principal accountants to The Western Systems Corp., the predecessor of
the Company, and audited the Company's financial statements for the prior two
fiscal years ended December 31, 1996. As a result of the acquisition, the
financial statements of the Company were restated and accordingly Ernst & Young
LLP has opined on the Company's financial statements for the fiscal years ended
December 31, 1997 and December 31, 1996. The Company had no disagreement with
Ernst & Young LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, but decided, upon the
recommendation of its Board of Directors, to retain Coopers & Lybrand L.L.P. as
the Company's independent auditors following completion of Ernst & Young LLP's
audit of the Company's financial statements for the year ended December 31,
1997. As noted above, prior to the engagement of Ernst & Young LLP, the
Company's prior accountants had been Lazar, Levine & Company LLP. The Company
had no disagreement with Lazar, Levine & Company LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, but in view of the acquisition by the Company of American Country
Insurance Company, decided, upon the recommendation of its Board of Directors,
it would be advisable to retain Ernst & Young LLP (which was then serving as the
independent auditors for American Country Insurance Company) as its independent
auditors effective after the closing of the acquisition of American Country
Insurance Company on July 29, 1997.
Although the selection of auditors does not require ratification, the
Board of Directors has directed that the appointment of Coopers & Lybrand L.L.P.
be submitted to stockholders for ratification due to the significance of such
firm's appointment to the Company. Approval by holders of the majority of
shares of Common Stock represented in person or by proxy at the Meeting is
necessary for stockholder ratification of the appointment of Coopers & Lybrand
LLC. If stockholders do not ratify the appointment of Coopers & Lybrand L.L.P.,
the Board of Directors will consider the appointment of other certified public
accountants.
It is expected that representatives of Ernst & Young LLP and Coopers &
Lybrand L.L.P. will be present at the Meeting, will have an opportunity to make
a statement if they so desire and will be available to answer appropriate
questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
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<PAGE> 17
CERTAIN INTERESTS AND TRANSACTIONS
On April 30, 1997, the Company entered into an agreement with Frontier
Insurance Group, Inc. ("Frontier") and Messrs. Barrett, Gardner, Solomon and
Thomas pursuant to which the Company agreed to pay a fee to any of them (or any
investment banking firm or other entity which the individual is then
affiliated), if he or it introduces to the Company a merger or other
acquisition transaction which he or it actively works on behalf of the Company
and the transaction is closed by either of the Company's subsidiaries, American
Country Insurance Company or American Country Financial Services, Corp. The fee
to be paid is a percentage of the value of the transaction. The agreement also
provides that if Frontier or any of Messrs. Barrett, Gardner, Solomon or Thomas
introduces American Country Insurance Company to a portfolio of business which
American Country Insurance Company acquires, he or it is entitled to a fee of 1%
of the gross premiums written with respect to the portfolio of business over the
three-year period from the acquisition. If Frontier reinsures any of the
portfolio business, it is not entitled to the fee.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than ten percent of a registered
class of the Company's equity securities to file with the SEC reports of
securities ownership on Form 3 and changes in such ownership on Forms 4 and
5. Officers, directors and more-than-ten-percent beneficial owners also are
required by rules promulgated by the SEC to furnish the Company with copies of
all such Section 16(a) reports that they file.
Based solely upon a review of the copies of Forms 3, 4, and 5 furnished to
the Company or written representations that no Form 5 filings were required,
the Company believes that during the period from January 1, 1997 through
December 31, 1997, its officers, directors and more-than-ten-percent beneficial
owners filed in a timely manner all reports required to be filed pursuant to
Section 16(a).
OTHER BUSINESS
At the date of this proxy statement, the Company has no knowledge of any
business other than that described above that will be presented at the Meeting.
If any other business should come before the Meeting, the proxies will be
voted in the discretion of the proxyholders.
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<PAGE> 18
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the Company's next
annual meeting of stockholders must be received by the Company at its principal
executive offices on or before December 7, 1998, to be included in the
Company's proxy statement and form of proxy relating to that meeting.
By Order of the Board of Directors,
William J. Barrett
Secretary
April 22, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997, AS FILED WITH THE SEC, WILL BE FURNISHED TO
STOCKHOLDERS FREE OF CHARGE UPON WRITTEN REQUEST TO JAMES P. BYRNE, CHIEF
FINANCIAL OFFICER, VICE PRESIDENT AND TREASURER OF THE COMPANY, AT 222 NORTH
LASALLE STREET, CHICAGO, ILLINOIS 60601.
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<PAGE> 19
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
AMERICAN COUNTRY HOLDINGS INC.
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601
The undersigned hereby appoints Martin L. Solomon, as proxy, with power of
substitution and vocation, acting by a majority of those present and voting to
vote the stock of American Country Holdings Inc., (the "Company") that the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
on May 22, 1998, and at any adjournment or postponement thereof, with all powers
that the undersigned would possess if present, with respect to the following:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR AND FOR THE RATIFICATION OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT AUDITORS.
<PAGE> 20
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING ITEMS:
1. Election of Directors
WITHHOLD
FOR AUTHORITY
NOMINEES TO VOTE FOR ALL NOMINEES
[ ] [ ]
Election of Martin L. Solomon, William J. Barrett, Edwin W.
Elder, Peter H. Foley and Wilmer J. Thomas, Jr.
WITHHOLD AUTHORITY to
vote for the following nominee(s)__________________________
2. Ratification of Independent Auditors: FOR AGAINST ABSTAIN
Ratification of the Board of Directors' [ ] [ ] [ ]
appointment of Coopers & Lybrand L.L.P.
as the Company's independent auditors
for the 1998 fiscal year
THIS PROXY WHEN PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR EACH
NOMINEE FOR DIRECTOR AND FOR THE RATIFICATION
OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
AUDITORS FOR 1998.
PLEASE SIGN EXACTLY AS NAMES APPEAR ON THIS
PROXY. JOINT OWNERS SHOULD EACH SIGN.
TRUSTEES, EXECUTORS, ETC. SHOULD INDICATE
THE CAPACITY IN WHICH THEY ARE SIGNING.
_____________________________________________
Signed
_____________________________________________
Signed
Dated:_________________________________, 1998
