<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AMERICAN COUNTRY HOLDINGS INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
AMERICAN COUNTRY HOLDINGS INC.
- ------------------------------------------------------------
April 22, 1999
Dear Stockholder:
American Country Holdings Inc.'s ("Holdings") annual meeting of stockholders
will be held at 10:30 a.m. local time on Tuesday, May 18, 1999, 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,
[SIGNATURE]
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>
AMERICAN COUNTRY HOLDINGS INC.
- ------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1999
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 10:30 a.m. local time, on Tuesday, May
18, 1999, for the following purposes:
(1) To elect five directors of the Company for the ensuing year.
(2) To approve the amendment and restatement of the Company's Stock Option
Plan to, among other things, increase the number of shares reserved for
issuance under such plan.
(3) To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ended December 31, 1999.
(4) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The close of business on April 13, 1999 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,
[SIGNATURE]
Ronald J. Gold
SECRETARY
April 22, 1999
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222 N. LASALLE STREET - SUITE 1600 - CHICAGO, ILLINOIS 60601 - TEL: (312)
456-2000 - FAX: (312) 456-2020
<PAGE>
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 26, 1999, 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 18, 1999, 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 13, 1999, the record date for determining
stockholders entitled to notice of and to vote at the Meeting (the "Record
Date"), there were 32,023,627 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, FOR approval of the
amendment and restatement of the Company's Stock Option Plan and FOR
ratification of the appointment of PricewaterhouseCoopers LLP. 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 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.
<PAGE>
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 the approval of the amendment and restatement of the
Company's Stock Option Plan is the affirmative vote of a majority of the shares
of Common Stock present in person or represented by proxy at the Meeting. The
vote required for ratification of the appointment of PricewaterhouseCoopers LLP
as independent accountants for the year 1999 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 13, 1999, 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 North
LaSalle Street, Chicago, Illinois 60601.
<TABLE>
<CAPTION>
COMMON STOCK COMMON WARRANTS(A)
------------------------- ------------------------
NAME AND POSITION OF PERCENT OF PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS(2) OWNERSHIP CLASS(2)
- --------------------------------------------------------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Martin L. Solomon.............................................. 8,050,343 25.14 22,705 1.1
Wilmer J. Thomas, Jr........................................... 8,006,343 25.00 -- --
Frontier Insurance Group, Inc.(3).............................. 8,000,343 24.98 -- --
William J. Barrett............................................. 610,540(4) 1.90 100,468(5) 4.89
Edwin W. Elder................................................. 36,300(6) * -- --
William J. Shively............................................. -- -- -- --
James P. Byrne................................................. 19,075(7) * -- --
All directors and executive officers
as a group (6 persons)........................................ 16,722,601 52.22 123,173 5.99
</TABLE>
- ------------------------
(A) Common Warrants are not entitled to vote. Each Common Warrant entitles the
holder to purchase 2.19 shares of Common Stock for $1.83 per share through
August 31, 1999.
(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 retirement 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 retirement 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.
(7) Includes 18,075 shares which may be acquired upon exercise of outstanding
options.
2
<PAGE>
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 2000 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, 62, 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., which was a
manufacturer of truck trailers and automobile stampings, taxicab company
operations and, through its ownership of American Country Insurance Company
prior to July 1997, property and casualty insurance. Mr. Solomon is a director
of the following publicly- held corporations: XTRA Corporation, a transportation
equipment leasing company; Hexel Corp., a manufacturer of composites, and
Telephone and Data Systems, Inc., a diversified telecommunications service
company with established wireless and wireline operations. Effective March 1999,
Mr. Solomon was named a director of MFN Financial Corporation, a consumer
finance company.
WILLIAM J. BARRETT, 59, has served as a director of the Company since
January 1992. Mr. Barrett served as the Secretary of the Company from August
1992 until March 9, 1999. 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;
and TGC Industries, Inc., a provider of geophysical services to the oil and gas
industries.
EDWIN W. ELDER, 56, 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).
JOHN G. MCMILLIAN, 72, is standing for election as a new director. In 1973,
Mr. McMillian founded Northwest Energy Company, a natural gas supplier, and from
1973 through 1983 served as its first chairman and chief executive officer. From
1987 to 1995, Mr. McMillian was also the chairman, president and chief executive
officer of Allegheny & Western Energy Corporation, an oil and gas company. Mr.
McMillian is currently the chairman and chief executive officer of Chaparral
Resources, Inc., a gas and oil exploration and production company. He also
serves on the board of directors of Excalibur Technologies Corp., a designer of
knowledge retrieval software products, the U.S. Ski Team Foundation and the
Steadman Hawkins Sports Medicine Foundation.
WILMER J. THOMAS, JR., 71, was elected 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.,
which was a manufacturer of truck trailers and automobile stampings, taxicab
company operations and, through its ownership of American Country Insurance
Company prior to
3
<PAGE>
July 1997, property and casualty insurance. Mr. Thomas is a director of Moore
Medical Corp., a publicly held pharmaceutical and surgical supply company.
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. Barrett (Chairman) and, Messrs.
Shively and Thomas. (Mr. Shively is not standing for reelection as a director.)
The Audit Committee met four times during fiscal 1998.
The Board of Directors has a standing Compensation Committee that currently
consists of Mr. Barrett (Chairman) and Messrs. Solomon and Shively. 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 met
four times during fiscal 1998.
The Board of Directors serves as the nominating committee for directors.
The Board of Directors held four meetings during fiscal 1998. All of the
directors attended each meeting of the Board of Directors, with the exception of
Mr. Shively who became a director in November 1998.
COMPENSATION OF DIRECTORS
Messrs. Barrett and Shively each receives and, if elected, Mr. McMillian
will receive, a monthly retainer fee of $1,000 for his services as a director.
Messrs. Barrett and Shively each also receives and, if elected, Mr. McMillian
will receive, $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.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY AND BUSINESS EXPERIENCE
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
James P. Byrne...................... 58 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.
</TABLE>
4
<PAGE>
EXECUTIVE COMPENSATION
Set forth in the table below is information regarding the annual and
long-term compensation for the fiscal years ended December 31, 1998, 1997 and
1996, for the Chief Executive Officer, executive officers of the Company and
certain executive officers of American Country Insurance Company (collectively,
the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
STOCK
NAME AND FISCAL OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION(1) YEAR SALARY BONUS COMPENSATION (# OF SHARES) COMPENSATION(2)
- ------------------------------------ ----------- --------- --------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Martin L. Solomon, President........ 1998 $ $ -- -- --
and Chief Executive Officer(3) 1997 $ $ -- -- --
1996 $ $ -- -- --
Edwin W. Elder, III................. 1998 $ 193,600 50,000 -- 36,300 19,162
Executive Vice President and 1997 193,600 130,000 -- -- 13,842
Chief Operating Officer(4) 1996 180,000 75,000 -- -- 17,938
James P. Byrne, Treasurer,.......... 1998 $ 126,500 28,000 -- 18,075 6,915
Chief Financial Officer 1997 120,500 55,000 -- -- 7,327
and Vice President 1996 113,700 37,730 -- -- 7,374
Daniel R. DeLeo, Executive.......... 1998 $ 131,400 28,000 -- 18,930 4,867
Vice President of American 1997 125,100 47,000 -- -- 7,015
Country Insurance Company 1996 118,000 38,850 -- -- 551
Robert S. Silver, Vice.............. 1998 $ 119,700 30,000 -- 9,389 9,389
President-Marketing of 1997 119,700 43,625 -- -- 9,369
American Country Insurance 1996 112,900 37,625 -- -- 8,627
Company(5)
</TABLE>
- --------------------------
(1) Mr. William J. Barrett, served as Secretary of the Company until March 9,
1999. Mr. Barrett did not receive any compensation for his services as
Secretary.
(2) The compensation reported represents expense reimbursement, car allowance
and travel allowance and, in the case of Mr. Elder, supplemental life
insurance.
(3) 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.
(4) 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
$193,600, with an annual cash incentive bonus, determined by the Board of
Directors 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 recover his
annual base salary through the end of the term of the Agreement.
(5) Mr. Silver is employed as the Vice President-Operations of American Country
Insurance Company through July 15, 2001, pursuant to an Employment Agreement
dated December 28, 1998. He receives an annual base salary of $150,000, with
annual increases of 7% and bonuses of $30,000 or, if he satisfies certain
performance requirements, he can elect to receive a bonus based on the
Officers' Bonus Program. If Mr. Silver remains employed until the expiration
date, he will receive a bonus of $195,000. Upon termination of his
employment, he is entitled to a $225,000 severance payment.
OPTION GRANTS IN 1998
In connection with the acquisition of substantially all of the assets and
the assumption of substantially all of the liabilities of American Country
Insurance Company in July 1997, the Company assumed a Stock Option Plan (the
"Plan"), as amended, under which options to purchase up to a maximum of 750,000
shares of common stock may be granted to directors, officers and other key
employees. Stock options
5
<PAGE>
granted under this Plan, which may be either incentive stock options or
nonqualified stock options for federal income tax purposes, expire up to ten
years after the date of grant and become exercisable over a three-year period.
Employees who leave the Company have 90 days to exercise their options.
In January 1998, the Company granted options to purchase 175,982 shares to
employees of the Company. These additional options have five-year terms and vest
at 20% per year and become fully exercisable five years after the date of grant.
All options outstanding would become immediately exercisable, without regard to
vesting provisions, upon the sale of the assets of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE ($ PER EXPIRATION --------------------
GRANTED(#) FISCAL YEAR SHARE) DATE 5%($) 10%($)
----------- ------------- ------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Edwin W. Elder........................ 36,300 20.62% $ 1.8125 Jan. 2, 2005 $ 69,083 $ 72,373
James P. Byrne........................ 18,075 10.27% $ 1.8125 Jan. 2, 2005 34,399 36,037
Ronald J. Gold........................ 9,713 5.51% $ 1.8125 Jan. 2, 2005 18,485 19,365
Daniel R. DeLeo....................... 18,930 10.75% $ 1.8125 Jan. 2, 2005 36,026 37,792
Robert S. Silver...................... 9,389 5.33% $ 1.8125 Jan. 2, 2005 17,868 18,719
</TABLE>
- --------------------------
(1) No options to purchase Common Stock were granted in 1998 to Messrs. Barrett,
Shively, Solomon or Thomas.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
No options to purchase Common Stock were exercised during the fiscal year
ended December 31, 1998.
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 matches 50% of employee contributions up to a maximum of 8% of eligible
compensation.
6
<PAGE>
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.
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 $193,600, 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.
Mr. Silver is employed as the Vice President-Operations of American Country
Insurance Company through July 15, 2001, pursuant to an Employment Agreement
dated December 28, 1998. He receives an annual base salary of $150,000, with
annual increases of 7% and bonuses of $30,000 or, if he satisfies certain
performance requirements, he can elect to receive a bonus based on the Officers'
Bonus Program. If Mr. Silver remains employed until the expiration date, he will
receive a bonus of $195,000. Upon termination of his employment, he is entitled
to a $225,000 severance payment.
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 or the Securities
Exchange Act of 1934 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 (in the form
of stock options) to complement the Company's annual and long-term
business objectives and strategies and encourage executive performance in
furtherance of the fulfillment of those objectives.
7
<PAGE>
- 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 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. 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.
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
William J. Shively
Martin L. Solomon
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Barrett, Shively and
Solomon. 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.
8
<PAGE>
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 $250 million Property & Casualty Insurance
Company Asset-Size 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).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AMERICAN $250M PROPERTY
COUNTRY NASDAQ - & CASUALTY INSURANCE COMPANY
HOLDINGS INC. TOTAL US ASSET-SIZE INDEX
<S> <C> <C> <C>
12/31/93 $100.00 $100.00 $100.00
12/31/94 $117.86 $97.75 $76.14
12/31/95 $46.43 $138.26 $97.17
12/31/96 $25.00 $170.01 $98.34
12/31/97 $51.80 $208.58 $128.48
12/31/98 $46.43 $293.21 $104.98
</TABLE>
9
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PROPOSAL NO. 2--APPROVAL OF THE
AMENDMENT AND RESTATEMENT
OF THE COMPANY'S STOCK OPTION PLAN
The Board of Directors has approved and adopted an amendment and restatement
of the Stock Option Plan of the Company (the "Plan") to, among other things,
increase the maximum number of shares of Common Stock which may be issued under
the Plan and to permit greater transferability of options granted under the
Plan. Approval by holders of the majority of shares of Common Stock represented
in person or by proxy at the Meeting is necessary for the amendment and
restatement of the Plan.
The Company will furnish to stockholders without charge a copy of the
Amended and Restated Plan upon request. Any request for a copy of the Plan
should be in writing addressed to: American Country Holdings Inc., 222 North
LaSalle Street, Suite 1600, Chicago, Illinois, 60601, Attention: Mr.James P.
Byrne, Chief Financial Officer, Vice President and Treasurer. The following
summary of the Plan is qualified in its entirety by reference to the complete
text of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT AND RESTATEMENT
OF THE PLAN.
PRINCIPAL FEATURES OF THE EXISTING PLAN
The primary purpose of the Plan is to promote the interests of the Company
and its stockholders in attracting and retaining knowledgeable officers,
directors, employees, consultants and advisors to the Company and to stimulate
the performance of such individuals. The Company may grant either incentive
stock options or nonqualified stock options under the Plan. Incentive stock
options are intended to be treated as such within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). Nonqualified stock
options are, in general, options which do not have the special income tax
advantages associated with the incentive stock options.
The major provisions of the existing Plan are as follows:
ADMINISTRATION. The Plan is administered by the Compensation and Stock
Option Committee (the "Committee") appointed by the Board of Directors . The
Committee determines which eligible participants will be granted options, the
number of shares of Common Stock subject to an option granted to any
participant, whether the option is an incentive stock option or nonqualified
stock option, the manner in and the price at which the option may be exercised
and other terms and conditions governing the option (including the vesting
schedule applicable to the option).
ELIGIBILITY. Employees of the Company or its subsidiaries are eligible to
receive incentive stock options under the Plan. Employees, nonemployee
directors, consultants and advisors to the Company are eligible to receive
nonqualified stock options under the Plan.
EXERCISE PRICE. The exercise price of all options are determined by the
Committee at the time of the grant, but for incentive stock options shall not be
less than 100% of the fair market value of the share on the date of grant and
for nonqualified stock options shall not be less than 75% of the fair market
value of the share on the date of grant.
TERM OF OPTIONS. The term of each option is determined by the Committee but
will in no event be greater than ten years from the date of grant. An option
will terminate upon an option holder's voluntary retirement or termination of
his employment without the written consent of the Company or a subsidiary or if
the Company terminates the option holder's employment for cause. If the option
holder voluntarily retires or terminates his employment with the Company's
consent or is terminated by the Company for other than cause, the option holder
shall have the right to exercise his option at any time prior to the earlier of
(i) the expiration of the original option period or (ii) three months after the
termination, to the extent of the number of shares subject to such option that
were purchasable by him on the date of termination of his employment.
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<PAGE>
PAYMENT. The Plan provides that the payment of the exercise price for
options granted under the Plan shall be (i) in cash; (ii) at the discretion of
the Committee, shares of Common Stock having a fair market value at the time of
exercise equal to the aggregate exercise price or a combination of cash and such
shares; or (iii) by any other method approved by the Committee.
TRANSFERABILITY. Options granted under the Plan are transferable by will,
the laws of descent and distribution and pursuant to a qualified domestic
relations order.
DESCRIPTION OF PROPOSED AMENDMENTS
INCREASE IN NUMBER OF SHARES AVAILABLE FOR ISSUANCE. The Plan currently
provides that the maximum number of shares of Common Stock which may be issued
under the Plan is 750,000. The amendment of the Plan would provide that the
maximum numbers of shares that may be available for the grant of stock options
under the Plan at any date shall be an amount equal to five percent (5%) of the
shares issued and outstanding on the January 1st last preceding such date. As of
January 1, 1999 there were 32,023,672 shares issued and outstanding. If the
amended Plan is approved by the stockholders at the Meeting, there will be
1,601,181 shares available for the granting of stock options. The maximum number
of those shares that would be subject to incentive stock options in any calender
year is 1,000,000.
ELIMINATION OF MAXIMUM GRANT TO CERTAIN INDIVIDUALS. The amendment of the
Plan would eliminate the limitation on the number of shares that may be granted
to any individual in any calendar year. Grants of options to executive officers
named in the summary compensation table in the Company's annual meeting proxy
statement and who are employed by the Company on the last day of the taxable
year in any calendar year, however, shall not exceed 500,000 shares, an increase
from 100,000 shares under the current Plan.
INCREASED TRANSFERABILITY. The Plan currently provides that options are
transferable only by will, the laws of descent and distribution and pursuant to
qualified domestic relations orders. The amendment of the Plan would authorize
the option holder to assign all or any portion of a nonqualified stock option to
a (i) spouse or lineal descendant; (ii) trustee of a trust for the primary
benefit of spouse or lineal descendant; (iii) partnership of which spouse and
lineal descendants are the only partners; or (iv) tax exempt organization as
described in Section 501(c)(3)of the Code.
ACCELERATION OF VESTING AND EXTENDED PERIOD OF EXERCISE UPON DEATH OR
DISABILITY. The amended Plan would provide that in the event of death or
disability of the option holder, the Committee may authorize the option holder
or his personal representative, legatee or assignee, to exercise all of the
options, regardless of the extent to which such options were previously
exercisable and to extend the period of exercise for such options for a period
not to exceed one year from the date of death or disability.
BROADENED PAYMENT PROVISIONS. The amended Plan provides that the payment of
the exercise price for options granted under the Plan may be paid (i) in cash;
(ii) in cash received from a broker-dealer to whom the option holder has
submitted an exercise notice which includes the fully endorsed option; (iii) by
the option holder delivering previously owned shares of Common Stock (held by
the option holder for at least 6 months prior to delivery or purchased on the
open market) having an aggregate fair market value on the date of exercise equal
to the option price; (iv) by directing the Company to withhold such number of
shares otherwise issuable upon exercise of such options having an aggregate fair
market value on the date of exercise equal to the option price; (v) by the
option holder agreeing to surrender options then exercisable valued at the
excess of the aggregate fair market value of the shares of Common Stock over the
aggregate option price of such shares of Common Stock; or (vi) any combination
of the above.
BROADENED CASHLESS WITHHOLDING PROVISION. The amended Plan would also allow
an option holder to satisfy his tax withholding obligation by directing the
Company to withhold a portion of shares otherwise
11
<PAGE>
distributable to the option holder or by transferring to the Company a certain
number of shares to satisfy the withholding obligation.
EXPANDED AMENDMENT PROVISION. The amended Plan permits the Board of
Directors, without further action on the part of the Company's stockholders, to
the extent permitted by law, regulation and the requirements of any stock
exchange or nationally recognized quotation service, to amend or suspend the
Plan or any option granted under the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. Options granted under the Plan may
be incentive stock options or nonqualified stock options. There are no federal
income tax consequences to an option holder or the Company by reason of the
grant of an option under the Plan.
INCENTIVE STOCK OPTIONS. On exercise of an incentive stock option, the
option holder generally will not recognize any taxable income for federal income
tax purposes; however, exercise of the option may subject the option holder to
alternative minimum tax liability.
Taxable income is not recognized by the holder of an incentive stock option
until the holder sells or otherwise disposes of the common stock acquired on
exercise of the option. For federal income tax purposes, sales of stock acquired
on exercise of an incentive stock option are divided into two categories:
qualifying dispositions and disqualifying dispositions. In order for a sale to
be a "qualifying disposition", the holder must not sell the stock until two
years after the grant date of the incentive stock option and one year after the
exercise date of the incentive stock option. If one or both of these holding
periods are not met, the sale will be a "disqualifying disposition."
Upon a qualifying disposition, the selling employee generally will recognize
a long-term capital gain equal to the excess, if any, of the sale price of the
shares over the exercise price of the incentive stock option. Upon a
disqualifying disposition, the selling employee generally will recognize (a)
ordinary income equal to the excess, if any, of the fair market value of the
shares on the exercise date over the exercise price of the incentive stock
option, and (b) a capital gain equal of the excess, if any, on the sale price of
the shares over the fair market value of the shares on the exercise date. In the
event of a disqualifying disposition, the Company may be entitled to a business
expense deduction in the year and to the extent that ordinary income is
recognized by the selling employee.
NONQUALIFIED STOCK OPTIONS. On the exercise of a nonqualified stock option,
the option holder will recognize ordinary income for federal income tax purposes
equal to the excess, if any, of the then fair market value of the shares of
common stock acquired over the exercise price of the option. Such excess also
will be subject to employment taxes if the option holder is an employee. The
Company will be entitled (subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code and the satisfaction of certain tax
reporting obligations) to a corresponding business expense deduction in the year
and to the extent that ordinary income is recognized by the option holder on
exercise of a nonqualified stock option.
ADDITIONAL INFORMATION REGARDING NEW PLAN BENEFITS. Options granted under
the Plan are at the discretion of the Committee. Accordingly, future grants of
options under the Plan are not determinable at this time. Subject to stockholder
approval of the amendments to the Plan, the Committee has recommended that (i)
options to purchase 500,000 shares of Common Stock be granted to Mr. Solomon;
(ii) options to purchase 250,000 shares of Common Stock be granted to each of
Mr. Barrett and Mr. Thomas; and (iii) options to purchase 100,000 shares of
Common Stock be granted to Mr. McMillian (assuming their election as directors
at the Meeting). The exercise price of such options will be $1.19, the closing
price per share of the Company's Common Stock on April 20, 1999 as reported by
The Nasdaq Stock Market, Inc.
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PROPOSAL NO. 3-- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ending December 31, 1999.
Although the selection of auditors does not require ratification, the Board
of Directors has directed that the appointment of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP If
stockholders do not ratify the appointment of PricewaterhouseCoopers LLP, the
Board of Directors will consider the appointment of other certified public
accountants.
It is expected that representatives of PricewaterhouseCoopers LLP 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 PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
CERTAIN INTERESTS AND TRANSACTIONS
On April 30, 1997, the Company entered into an agreement with Frontier
Insurance Group, Inc. ("Frontier") and Messrs. Barrett, 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, 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 after 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, 1998 through December
31, 1998, 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>
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, 1999, to be included in the Company's
proxy statement and form of proxy relating to that meeting.
By Order of the Board of Directors,
[SIGNATURE]
Ronald J. Gold
Secretary
April 22, 1999
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998, 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.
14
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APPENDIX A
AMERICAN COUNTRY HOLDINGS INC.
STOCK OPTION PLAN
(as amended and restated effective January 1, 1999)
1. PURPOSES
The purpose of the American Country Holdings Inc. Stock Option Plan (the
"Plan") is to provide additional incentive to the officers, directors
and employees of the Company who are primarily responsible for the
management and growth of the Company, and to consultants and advisors to
the Company who otherwise materially contribute to the conduct and
direction of its business, operations and affairs, in order to
strengthen their desire to remain in the employ of, or related to, the
Company and to stimulate their efforts on behalf of the Company, and to
retain and attract to the Company persons of competence. Each option
granted pursuant to the Plan shall be designated at the time of grant as
either an "incentive stock option," or as a "non-qualified stock
option." The terms and conditions of the Plan shall be set forth or
incorporated by reference in the option agreements evidencing the
options.
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and that transactions of the type specified
in Rule 16b-3 by officers and directors of the Company pursuant to the
Plan will be exempt from the operation of Section 16(b) of the Exchange
Act. Further, the Plan is intended to satisfy the performance-based
compensation exception to the limitation on the Company's tax deductions
imposed by Section 162(m) of the Code. In all cases, the terms,
provisions, conditions and limitations of the Plan shall be construed
and interpreted consistent with the Company's intent as stated in this
Section 1.
2. DEFINITIONS
For the purposes of the Plan, unless the context otherwise requires, the
following definitions shall be applicable:
(a) "Board" or "Board of Directors" means the Company's Board of
Directors.
(b) "Cause" means the willful and continued failure of the Employee,
Non-Employee Director or consultant or advisor to the Company or
any Subsidiary to perform substantially the duties of such
Employee, Non-Employee Director or consultant or advisor as those
duties exist on the date of the termination of the Employee's
employment, the Non-Employee Director's service on the Board or
the consultant or advisor's relationship with the Company (other
than any failure resulting from action or inaction of a third
party or circumstances outside the control of the Employee,
Non-Employee Director or consultant or advisor, or from incapacity
of such Employee, Non-Employee Director or consultant or advisor
due to physical or mental illness), after a written demand for
substantial performance is delivered to the
<PAGE>
Employee, Non-Employee Director or consultant or advisor, which
demand specifically identifies the manner in which the Company or
any Subsidiary believes the Employee, Non-Employee Director or
consultant or advisor has not substantially performed his duties
satisfactorily, and the Employee, Non-Employee Director or
consultant or advisor has been given a period of at least thirty
days to cure his failure in performance, or the commission of an
act by the Employee, Non-Employee Director consultant or advisor
that would be deemed a felony under the Illinois criminal statutes
and that is materially injurious to the Company or a Subsidiary.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Stock Option Committee composed of two or
more directors who are Non-Employee Directors and Outside
Directors who shall be elected by, and who shall serve at the
pleasure, of the Board of Directors, and who shall be responsible
for administering the Plan.
(e) "Company" means American Country Holdings Inc.
(f) "Employee" means an employee of the Company or of a Subsidiary
(including a director or officer of the Company or a Subsidiary
who is also an employee).
(g) "Fair Market Value" of the Shares means the closing price of
publicly traded Shares on the national securities exchange on
which the Shares are listed (if the Shares are so listed) or on
the Nasdaq National Market or Small Cap Market (if the Shares are
regularly quoted on the Nasdaq National Market or Small Cap
Market), or if not so listed or regularly quoted, the mean between
the closing bid and asked prices of publicly traded Shares in the
over-the-counter market, or, if such bid and asked prices shall
not be available, as reported by any nationally recognized
quotation service selected by the Company, or as determined by the
Committee in a manner consistent with the provisions of the Code.
(h) "ISO" means an option intended to qualify as an incentive stock
option under Section 422 of the Code.
(i) "Non-Employee Director" means a non-employee director as defined
in Rule 16b-3
(j) "NQO" means an option that does not qualify as an ISO.
(k) "Outside Director" means an outside director as defined in Section
162(m) of the Code.
(l) "Plan" means the American Country Holdings Inc. Stock Option Plan.
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(m) "Rule 16b-3" means Rule 16b-3 under the Exchange Act.
(n) "Securities Act" means the Securities Act of 1933, as amended.
(o) "Shares" means shares of the Company's Common Stock, $.01 par
value, including authorized but unissued shares and shares that
have been previously issued and reacquired by the Company.
(p) "Subsidiary" of the Company means and includes a "Subsidiary
Corporation," as that term is defined in Section 424(f) of the
Code.
3. ADMINISTRATION
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret and construe the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the terms and
conditions of the respective option agreements (which need not be
identical) and to make all other determinations necessary or advisable
for the administration of the Plan. Subject to the express provisions
of the Plan, the Committee, in its sole discretion, shall from time to
time determine the persons from among those eligible under the Plan to
whom, and the time or times at which, options shall be granted, the
number of Shares to be subject to each option, whether an option shall
be designated an ISO or an NQO and the manner in and price at which such
option may be exercised. In making such determination, the Committee
may take into account the nature and period of service rendered by the
respective optionees, their level of compensation, their past, present
and potential contributions to the Company and such other factors as the
Committee shall in its discretion deem relevant. The determination of
the Committee with respect to any matter referred to in this Section 3
shall be conclusive.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, option or other acquisition
under the Plan of options or Shares does not consist of two or more
Non-Employee Directors, then any such grant, option or other acquisition
may be approved or ratified in any other manner contemplated by
subparagraph (d) of Rule 16b-3.
4. ELIGIBILITY FOR PARTICIPATION
Any Employee shall be eligible to receive ISOs or NQOs granted under the
Plan. Consultants and advisors to the Company and directors of the
Company who are not Employees shall be eligible to receive NQOs.
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<PAGE>
5. LIMITATION ON SHARES SUBJECT TO THE PLAN
Subject to adjustment as hereinafter provided, the total number of
Shares that may be available for the grant of stock options under the
Plan at any date shall be an amount equal to five percent (5%) of the
Shares issued and outstanding on the January 1 last preceding such date.
The aforementioned total number of Shares shall be adjusted in
accordance with the provisions of Section 7(b). Notwithstanding the
foregoing, the total number of Shares that may be subject to ISOs under
the Plan shall be 1,000,000 Shares, adjusted in accordance with the
provisions of Section 7(b) hereof.
The maximum number of Shares that may be subject to options granted
under Plan to any person who qualifies as an executive officer named
from time to time in the summary compensation table in the Company's
annual meeting proxy statement and who is employed by the Company on the
last day of the taxable year ("SCT Executive") in any calendar year
shall not exceed 500,000 Shares, adjusted in accordance with the
provisions of Section 7(b) hereof, and the method of counting such
Shares shall conform to any requirements applicable to performance-based
compensation under Section 162(m) of the Code.
The Shares issued may be Shares held in the treasury, Shares which are
authorized but unissued, or Shares acquired by the Company through open
market purchases by an independent administrator selected by the
Committee, as elected by the Board. Any Shares subject the issuance
upon exercise of options but which are not issued because of a
surrender, lapse, expiration, cancellation or termination of any such
option that are subsequently canceled or forfeited, to the extent
consistent with applicable law, rules and regulations, shall once again
be available for issuance in satisfaction of options.
6. TERMS AND CONDITIONS OF OPTIONS
Each option granted under the Plan shall be subject to the following
terms and conditions:
(a) Except as provided in Subsection 6(k), the option price per Share
shall be determined by the Committee, but (i) as to an ISO shall
not be less than 100% of the Fair Market Value of a Share on the
date such ISO is granted; and (ii) as to an NQO, shall not be less
than 75% of the Fair Market Value of a Share on the date such NQO
is granted.
(b) The Committee shall, in its discretion, fix the term of each
option, provided that the maximum length of the term of each
option granted hereunder shall be 10 years and provided further
that the provisions of Subsection 6(k) hereof shall be applicable
to the grant of ISOs to Employees therein identified.
(c) If a holder of an option becomes disabled, within the meaning of
Section 22(e)(3) of the Code, or dies while he is employed by the
Company or a Subsidiary, serving on the Board of the Company or a
Subsidiary or acting as a consultant or advisor to the
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<PAGE>
Company or a Subsidiary or, if the Committee so determines in its
discretion at the time such option is granted or at any time
thereafter, such option may, regardless of the extent that the
holder of the option was entitled to exercise such option on the
date of his disability or death, be exercised during a period
after his disability or death fixed by the Committee, in its
discretion, at the time such option is granted, but in no event to
exceed one year, by the holder of the option or his personal
representative or representatives or by the person or persons to
whom the holder's rights under the option shall pass by will or by
the applicable laws of descent and distribution; provided,
however, that no option granted under the Plan may be exercised to
any extent by anyone after its expiration.
(d) In the event that a holder of an option shall voluntarily retire,
quit his employment or service on the Board, or terminate his
relationship as a consultant or advisor to the Company or a
Subsidiary, without the written consent of the Company or a
Subsidiary, or if the Company or a Subsidiary shall terminate the
employment, service on the Board, or consulting or advising
relationship of a holder of an option for Cause, the options held
by such holder shall forthwith terminate. Except as otherwise
provided in Section 6(l), if a holder of an option shall
voluntarily retire, quit his employment or service on the Board,
or terminate his relationship as a consultant or advisor to the
Company or a Subsidiary with the written consent of the Company or
a Subsidiary, or if the employment, service on the Board, or
consulting or advising relationship of such holder shall have been
terminated by the Company or a Subsidiary for reasons other than
Cause, such holder may (unless his option shall have previously
expired pursuant to the provisions hereof) exercise his option at
any time prior to the first to occur of the expiration of the
original option period or three months after the termination of
employment, service on the Board, or consulting or advising
relationship, to the extent of the number of Shares subject to
such option that were purchasable by him on the date of
termination of his employment, service on the Board or consulting
or advising relationship. Options granted under the Plan shall
not be affected by any change of employment, service on the Board
or consulting or advising relationship so long as the holder
thereof continues to be an Employee, Non-Employee Director or
consultant or advisor to the Company or a Subsidiary.
(e) Notwithstanding anything to the contrary contained herein or in
any option agreement executed and delivered hereunder, no option
shall be exercisable unless and until the Plan has been approved
by stockholders of the Company in accordance with Section 17
hereof.
(f) Except as provided in subsection (g) below, options granted under
the Plan and any rights and privileges pertaining thereto, may not
be transferred, assigned, pledged or hypothecated in any manner,
by operation of law or otherwise, other than by will or by the
laws of descent and distribution, or pursuant to a qualified
domestic relations
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<PAGE>
order (as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder).
(g) Notwithstanding the provisions of subsection (f) above, an
Employee, Non-Employee Director or consultant or advisor, at any
time prior to his death, may assign all or any portion of a
non-qualified stock option granted to him to (i) his spouse or
lineal descendant, (ii) the trustee of a trust for the primary
benefit of his spouse or lineal descendant (iii) a partnership of
which his spouse and lineal descendants are the only partners, or
(iv) a tax exempt organization as described in Section 501(c)(3)
of the Code. In such event, the spouse, lineal descendant,
trustee, partnership or tax exempt organization will be entitled
to all the rights of the optionee with respect to the assigned
portion of such non-qualified stock option, and such portion of
the non-qualified stock option will continue to be subject to all
of the terms, conditions and restrictions applicable to the
non-qualified stock option, as set forth herein and in the related
option agreement immediately prior to the effective date of the
assignment. Any such assignment will be permitted only if (i) the
optionee does not receive any consideration therefore, and (ii)
the assignment is expressly permitted by the applicable option
agreement as approved by the Committee. Any such assignment shall
be evidenced by an appropriate written document executed by the
optionee, and a copy thereof shall be delivered to the Company on
or prior to the effective date of the assignment.
(h) An option holder desiring to exercise an option shall exercise
such option by delivering to the Company written notice of such
intent to exercise, specifying the number of Shares to be
purchased, together with payment of the option price therefor;
provided, however that no option may be exercised in part with
respect to fewer than 50 Shares, except to purchase the remaining
Shares purchasable under such option. Except as otherwise
provided in the Plan or in any option agreement, the option holder
shall pay the option price of Shares upon exercise of any option:
(a) in cash; (b) in cash received from a broker-dealer to whom the
option holder has submitted an exercise notice consisting of a
fully endorsed option (however, in the case of an option holder
subject to Section 16 of the Exchange Act, this payment option
shall only be available to the extent such insider complies with
Regulation T issued by the Federal Reserve Board); (c) by
delivering (either actual delivery or by attestation procedures
established by the Company) previously owned Shares (which the
option holder has held for at least six months prior to the
delivery of such Shares or which the option holder purchased on
the open market and in each case for which the option holder has
good title, free and clear of all liens and encumbrances) having
an aggregate Fair Market Value on the date of exercise equal to
the option price; (d) by directing the Company to withhold such
number of Shares otherwise issuable upon exercise of such option
having an aggregate Fair Market Value on the date of exercise
equal to the option price; (e) by agreeing to surrender options
then exercisable valued at the excess of the aggregate Fair Market
Value of the Shares
-6-
<PAGE>
subject to such options on the date of exercise over the aggregate
option price of such Shares; (f) by such other medium of payment
as the Committee, in its discretion, shall authorize at the time
of grant; or (g) by any combination of (a), (b), (c), (d), (e) and
(f). In the case of an election pursuant to (a) or (b) above,
cash shall mean cash or a check issued by a federally insured bank
or savings and loan association, and made payable to the Company.
The Company shall issue, in the name of the option holder, stock
certificates representing the total number of Shares issuable
pursuant to the exercise of any option as soon as reasonably
practicable after such exercise, provided that any Shares
purchased by an option holder through a broker-dealer pursuant to
clause (b) above shall be delivered to such broker-dealer in
accordance with 12 C.F.R. ' 220.3(e)(4) or other applicable
provision of law.
(i) In order to assist an option holder with the acquisition of Shares
pursuant to the exercise of an option granted under the Plan, the
Committee may, in its discretion, and subject to the requirements
of applicable statutes, rules and regulations, whenever, in its
judgment, such assistance may reasonably be expected to benefit
the Company or a Subsidiary, authorize, either at the time of the
grant of the option or thereafter (i) the extension of a loan to
the option holder by the Company or a Subsidiary, (ii) the payment
by the option holder of the purchase price of the Shares in
installments, or (iii) the guaranty by the Company or a Subsidiary
of a loan obtained by the option holder from a third party. The
Committee shall determine the terms of any such loan, installment
payment arrangement or guaranty, including the interest rate and
other terms of repayment thereof. Loans, installment payment
arrangements and guaranties may be authorized with or without
security and the maximum amount thereof shall be the option price
for the Shares being acquired plus related interest payments.
(j) The aggregate Fair Market Value (determined at the time an ISO is
granted) of the Shares as to which an Employee may first exercise
ISOs in any one calendar year under all incentive stock option
plans of the Company, its parent and its Subsidiaries may not
exceed $100,000.
(k) An ISO may be granted to an Employee owning, or who is considered
as owning, by applying the rules of ownership set forth in Section
424(d) of the Code, over 10% of the total combined voting power of
all classes of stock of the Company or any Subsidiary if the
option price of such ISO equals or exceeds 110% of the Fair Market
Value of a Share on the date the option is granted and such ISO
expires not more than five years after the date of grant.
(l) In the event of a change of control, as defined in the option
agreement between the Company and the optionee, each outstanding
option shall become exercisable in whole or in part, without
regard to any vesting provisions or employment conditions that may
be contained in the Plan or in any agreement between the optionee
and the
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<PAGE>
Company, and shall remain exercisable, in whole or in part, until it
expires by its terms.
(m) If an option granted to the Company's Chief Executive Officer or
to any of the Company's SCT Executives is intended to qualify as
"performance-based" compensation under Section 162(m) of the Code,
the option price of such option shall not be less than 100% of the
Fair Market Value of a Share on the date such option is granted.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) Subject to any required regulatory approval, new option rights may
be substituted for the option rights granted under the Plan, or
the Company's duties as to options outstanding under the Plan may
be assumed, by a corporation other than the Company, or by a
parent or subsidiary of the Company or such corporation, in
connection with any merger, consolidation, acquisition, sale of
all or substantially all assets, separation, reorganization,
liquidation or like occurrence in which the Company is involved.
(b) The existence of outstanding options shall not affect in any way
the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the
Company, or any issuance of Shares or subscription rights or any
merger or consolidation of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or
affecting the Shares or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise; provided,
however, that if the outstanding Shares shall at any time be
changed or exchanged by declaration of a stock dividend, stock
split, reverse stock split, combination of Shares or
recapitalization, the number and kind of Shares subject to the
Plan or subject to any options theretofore granted, and the option
prices, shall be appropriately and equitably adjusted so as to
maintain the proportionate number of Shares without changing the
aggregate option price.
(c) Adjustments under this Section 7 shall be made by the Committee
whose determination as to what adjustments, if any, shall be made,
and the extent thereof, shall be final.
8. PRIVILEGES OF STOCK OWNERSHIP
No option holder shall be entitled to any of the privileges of stock
ownership as to any Shares not actually issued and delivered to him.
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<PAGE>
9. SECURITIES REGULATION
(a) Each option shall be subject to the requirement that if at any
time the Board of Directors or Committee shall in its discretion
determine that the listing, registration or qualification of the
Shares subject to such option upon any securities exchange or
under any Federal or state law, or the approval or consent of any
governmental regulatory body, is necessary or desirable in
connection with the issuance or purchase of Shares thereunder,
such option may not be exercised in whole or in part unless such
listing, registration, qualification, approval or consent shall
have been effected or obtained free from any conditions not
reasonably acceptable to the Board of Directors or Committee.
(b) Unless at the time of the exercise of an option and the issuance
of the Shares thereby purchased by any option holder hereunder
there shall be in effect as to such Shares a Registration
Statement under the Securities Act and the rules and regulations
of the Securities and Exchange Commission, or there shall be
available an exemption from the registration requirements of the
Securities Act, the option holder exercising such option shall
deliver to the Company at the time of exercise a certificate (i)
acknowledging that the Shares so acquired may be "restricted
securities" within the meaning of Rule 144 promulgated under the
Securities Act, (ii) certifying that he is acquiring the Shares
issuable to him upon such exercise for the purpose of investment
and not with a view to their sale or distribution; and (iii)
containing such option holder's agreement that such Shares may not
be sold or otherwise disposed of except in accordance with
applicable provisions of the Securities Act. The Company shall
not be required to issue or deliver certificates for Shares until
there shall have been compliance with all applicable laws, rules
and regulations, including the rules and regulations of the
Securities and Exchange Commission and of any securities exchange
or automated quotation system on which the Shares may be listed or
traded.
10. EMPLOYMENT OR RETENTION OF OPTION HOLDERS
Nothing contained in the Plan or in any option agreement executed and
delivered thereunder shall confer upon any option holder any right to
continue in the employ or retention of the Company or any Subsidiary, as
a member of the Board or as a consultant or advisor to the Company or
any Subsidiary or to interfere with the right of the Company or any
Subsidiary to terminate such employment or retention at any time.
11. WITHHOLDING: DISQUALIFYING DISPOSITION
(a) Whenever the Company proposes or is required to issue or transfer
Shares to an option holder under the Plan, the Company shall have
the right to require the option holder to remit to the Company an
amount sufficient to satisfy all federal, state and local
withholding tax requirements prior to the delivery of any
certificate or
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<PAGE>
certificates for such Shares. If such certificates have been
delivered prior to the time a withholding obligation arises, the
Company shall have the right to require the option holder to
remit to the Company an amount sufficient to satisfy all federal,
state or local withholding tax requirements at the time such
obligation arises and to withhold from other amounts payable to
the option holder, as compensation or otherwise, as necessary. An
option holder may elect to satisfy his tax withholding obligation
incurred with respect to the taxable date of the option by (a)
directing the Company to withhold a portion of the Shares
otherwise distributable to the option holder, or (b) by
transferring to the Company a certain number of Shares, such
Shares being valued at the Fair Market Value thereof on the
taxable date. Notwithstanding any provisions of the Plan to the
contrary, an option holder=s election pursuant to the preceding
sentence (a) must be made on or prior to the taxable date with
respect to such option, and (b) must be irrevocable. In lieu of a
separate election on each taxable date of an option, an option
holder may make a blanket election with the Committee that shall
govern all future taxable dates until revoked by the option
holder. If the holder of Shares purchased in connection with the
exercise of an ISO disposes of such Shares within two years of the
date such an ISO was granted or within one year of such exercise,
he shall notify the Company of such disposition and remit an
amount necessary to satisfy applicable withholding requirements
including those arising under federal, state or local income tax
laws. If such holder does not remit such amount, the Company may
withhold all or a portion of any compensation then or in the
future owed to such holder as necessary to satisfy such
requirements. Taxable date means the date an option holder
recognizes income with respect to option under the Code or any
applicable state or local income tax law.
(b) In the case of disposition by an option holder of Shares acquired
upon exercise of an ISO within (i) two years after the date of
grant of such ISO, or (ii) one year after the transfer of such
Shares to such option holder, such option holder shall give
written notice to the Company of such disposition not later than
30 days after the occurrence thereof, which notice shall include
all such information as may be required by the Company to comply
with applicable provisions of the Code and shall be in such form
as the Company shall from time to time determine.
12. AMENDMENT, SUSPENSION AND TERMINATION OF THE PLAN
The Committee may correct any defect or supply an omission or reconcile
any inconsistency in the Plan or in any option granted hereunder in the
manner and to the extent it shall deem desirable, in its sole
discretion, to effectuate the Plan. The Board, without further action
on the part of the shareholders of the Company to the extent permitted
by law, regulation and the requirements of any stock exchange or
nationally recognized quotation service, may from time to time alter,
amend or suspend the Plan or any option granted hereunder or at any time
terminate the Plan; provided, however, with respect to ISOs, the Board
may not effect a change inconsistent with Section 422 of the Code or
regulations issued thereunder.
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<PAGE>
No amendment or termination of the Plan may in any manner affect any
option theretofore granted without the consent of the option holder,
except that the Committee may amend the Plan in a manner that does
affect options theretofore granted upon a finding by the Committee that
such amendments are in the best interest of holders of outstanding
options affected thereby.
Unless the Plan shall theretofore have been terminated by the Board of
Directors or Committee, the Plan shall terminate on April 9, 2002. No
option may be granted during the term of any suspension of the Plan or
after termination of the Plan.
13. GOVERNING LAW
The Plan and all agreements hereunder shall be construed in accordance
with governed by the laws of the State of Delaware, to the extent not
inconsistent with Section 422 of the Code and regulations thereunder.
14. NOTICE
Every direction, revocation or notice authorized or required by the Plan
shall be deemed delivered to the Company (a) on the date it is
personally delivered to the Secretary of the Company at its principal
executive offices or (b) three business days after it is sent by
registered or certified mail; postage prepaid, addressed to the
Secretary at such offices; and shall be deemed delivered to an option
holder or assignee (a) on the date it is personally delivered to him or
(b) three business days after it is sent by registered or certified
mail, postage prepaid, addressed to him at the last address shown on the
records of the Company or of any Subsidiary.
15. SUCCESSORS
In the event of a sale of substantially all of the assets of the
Company, or a merger, consolidation or share exchange involving the
Company, all obligations of the Company under the Plan with respect to
options granted hereunder shall be binding on the successor of the
transaction. Employment of an Employee with such a successor shall be
considered employment of the Employee with the Company for purposes of
the Plan.
16. INDEMNIFICATION OF THE COMMITTEE
In addition to such other rights of indemnification as they may have as
members of the Board, or as members of the Committee, or as its
delegatees, the members of the Committee and its delegatees shall be
indemnified by the Company against (a) the reasonable expenses (as such
expenses are incurred), including attorneys' fees actually and
necessarily incurred in connection with the defense of any action, suit
or proceeding (or in connection with any appeal therein), to which they
or any of them may be a party by reason of any action taken
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<PAGE>
or failure to act under or in connection with the Plan, or any option
granted hereunder; and (b) against all amounts paid by them on
settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction
of a judgment in such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member or delegatee is liable for gross
negligence or misconduct in the performance of his duties; provided that
within 60 days after institution of the such action, suit or proceeding
a Committee member of delegatee shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
17. EFFECTIVE DATE
The effective date of the Plan, as amended and restated herein, shall be
January 1, 1999, subject to its approval by stockholders of the Company
not later than April 19, 2000.
18. GENDER
Except when otherwise required by the context, any masculine terminology
in this document shall include the feminine, and any singular
terminology shall include the plural.
IN WITNESS WHEREOF, the Company has caused the Plan, as amended and
restated, to be executed on its behalf by its duly authorized officer on
April 20, 1999, effective as of January 1, 1999.
AMERICAN COUNTRY HOLDINGS INC.
By: /s/ Martin L. Solomon
---------------------
Its: President and Chief Executive Officer
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<PAGE>
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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 revocation, 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 18, 1999, 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, FOR THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF
THE COMPANY'S STOCK OPTION PLAN AND FOR THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
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<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE USING
DARK INK ONLY.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING ITEMS
FOR WITHHOLD AUTHORITY
NOMINEES TO VOTE FOR ALL NOMINEES
1. Election of / / / /
Directors.
Election of Martin L. Solomon, William J. Barrett, Edwin W. Elder, John G.
McMillian and Wilmer J. Thomas, Jr.
WITHHOLD AUTHORITY to vote for the following nominee(s)
_________________________________________
FOR AGAINST ABSTAIN
/ / / / / /
2. Approval of the amendment and restatement
of the Company's Stock Option Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. Ratification of Independent Auditors;
Ratification of the Board of Directors'
appointment of Pricewaterhouse Coopers LLP
as the Company's independent auditors for the
1999 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, FOR THE APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE COMPANY'S STOCK OPTION PLAN AND FOR THE RATIFICATION OF
PRICEWATERHOUSECOPPERS LLP AS INDEPENDENT AUDITORS FOR 1999.
Date: , 1999
- ------------------------- ------------------------- ------------
Signed Signed
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.
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