-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J4Sokwf6rHC0ncCMenn1rYLe+1nWzDxGpetkT5ZCrCK4KH0H+RDwgDvUCsVJG4Ki eVEO5xvssyEynkCTikMMPQ== 0000912057-01-003003.txt : 20010129 0000912057-01-003003.hdr.sgml : 20010129 ACCESSION NUMBER: 0000912057-01-003003 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20010126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN COUNTRY HOLDINGS INC CENTRAL INDEX KEY: 0000315411 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 060995978 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-54396 FILM NUMBER: 1516365 BUSINESS ADDRESS: STREET 1: 222 N LASALLE STREET STREET 2: C/O JOHN DE ELORZA CITY: CHICAGO STATE: IL ZIP: 60601-1105 BUSINESS PHONE: 3124562000 MAIL ADDRESS: STREET 1: 222 N LASALLE STREET CITY: CHICAGO STATE: IL ZIP: 60601-1105 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN SYSTEMS CORP DATE OF NAME CHANGE: 19970326 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN TRANSMEDIA CO INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VIGILANCE SYSTEMS CORP DATE OF NAME CHANGE: 19920202 S-3 1 a2036122zs-3.txt S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------ AMERICAN COUNTRY HOLDINGS INC. (Exact name of Registrant as specified in its charter) DELAWARE 36-3525574 (State or other jurisdiction (I.R.S. Employer of Identification Number) incorporation or organization)
222 N. LASALLE STREET CHICAGO, ILLINOIS 60601 (312) 456-2000 (Address, including zip code, and telephone number, including area code of registrant's principal executive offices) JOHN A. DORE CO-CHAIRMAN AND CHIEF EXECUTIVE OFFICER 222 N. LASALLE STREET CHICAGO, ILLINOIS 60601 (312) 456-2000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: STUART L. GOODMAN, ESQ. MARK R. PACIONI, ESQ. SCHIFF HARDIN & WAITE 7300 SEARS TOWER CHICAGO, ILLINOIS 60606 (312) 258-5711 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. ------------------------------ If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended ("the Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / / ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE Common Stock, $.01 par value................ 814,286 $2.00(1) $1,628,572 $408 Class A Warrants to purchase Common Stock... 814,286 $1.925(2) $1,567,500 $392 Common Stock issuable upon exercise of the Class A warrants being registered hereby.................................... 814,286 (3)(4) -- -- Common Stock issuable upon conversion of outstanding shares of Preferred Stock..... 2,314,283 $2.00(1)(5) $4,628,566 $1,158 Total Registration Fee...................... $1,958
(1) Calculated pursuant to Rule 457(c) based upon the average of the high and low sale price of the common stock on the Nasdaq SmallCap Market on January 22, 2001. (2) Calculated pursuant to Rule 457(i) using the exercise price, ($1.925 per share) multiplied by the 814,286 shares of common stock issuable upon exercise of each Class A warrant. (3) 814,286 shares of common stock are issuable initially upon conversion of the Class A warrants registered by this Registration Statement, with each Class A warrant exercisable for one share of common stock. The Company is also registering an indeterminate number of shares of common stock as may be issuable upon exercise of the Class A warrants pursuant to antidilution adjustments. (4) Pursuant to Rule 457(g) and 457(i), no separate fee is payable for the common stock issuable upon exercise of the Class A warrants. (5) 2,314,283 shares of common stock of the Company are issuable upon conversion of the Series A convertible preferred stock obtained by dividing the stated value of $10 (plus all accrued but unpaid dividends) by the initial conversion price of $1.75. The Company is also registering an indeterminate number of shares of common stock as may be issuable as dividends upon the Series A convertible preferred stock and pursuant to antidilution adjustments. THIS REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL AND IT IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JANUARY 26, 2001 PRELIMINARY PROSPECTUS AMERICAN COUNTRY HOLDINGS INC. COMMON STOCK WARRANTS TO PURCHASE COMMON STOCK COMMON STOCK UNDERLYING WARRANTS COMMON STOCK UNDERLYING PREFERRED STOCK The selling shareholders listed in this prospectus are offering from time to time: - 814,286 shares of our common stock; - 814,286 Class A warrants, which are each initially exercisable for one share of our common stock at an exercise price of $1.925 per share, subject to anti-dilution adjustments; - 814,286 shares of our common stock that are issuable upon the exercise of the Class A warrants; and - 2,314,283 shares of our common stock that are issuable upon conversion of the Series A convertible preferred stock, subject to anti-dilution adjustments. The securities offered by this prospectus were issued to the selling shareholders in transactions exempt from registration under the Securities Act. We will not receive any of the proceeds from the sale of the offered securities. We will, however, receive the exercise price of the Class A warrants if and when they are exercised. The securities being offered by the selling shareholders may be sold from time to time in transactions on the Nasdaq SmallCap Market, in the over-the-counter market or in negotiated transactions. The selling shareholders directly, or through agents or dealers designated from time to time, may sell the offered securities at fixed prices, which may change, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Our common stock is listed on the Nasdaq SmallCap Market under the symbol ACHI. On January 25, 2001, the last reported sale price of the common stock on the Nasdaq SmallCap Market was $2.50 per share. Investing in our securities involves a high degree of risk. See "Risk Factors" beginning on page 6. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. ------------------------ The date of this prospectus is , 2001 TABLE OF CONTENTS
PAGE -------- ABOUT THIS PROSPECTUS....................................... 2 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 3 WHERE YOU CAN FIND MORE INFORMATION ABOUT US................ 3 OUR COMPANY................................................. 5 RISK FACTORS................................................ 6 USE OF PROCEEDS............................................. 12 DESCRIPTION OF THE OFFERED SECURITIES....................... 13 SELLING SHAREHOLDERS........................................ 17 CERTAIN TRANSACTIONS........................................ 18 DESCRIPTION OF CAPITAL STOCK................................ 19 PLAN OF DISTRIBUTION........................................ 23 LEGAL MATTERS............................................... 24 EXPERTS..................................................... 24
In this prospectus, the "Company," "we," "us," and "our" refer to American Country Holdings Inc. ------------------------ You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The selling shareholders are offering the offered securities only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus. ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the "SEC"). The prospectus relates to 814,286 shares of our common stock, 814,286 Class A warrants to purchase shares of our common stock, 814,286 shares of our common stock underlying the Class A warrants, and 2,314,283 shares of common stock issuable upon conversion of the Series A convertible preferred stock, all of which the selling stockholders named in this prospectus may sell from time to time. We will not receive any of the proceeds from these sales but we will receive proceeds from the exercise of the Class A warrants. We have agreed to pay the expenses incurred in registering the offered securities, including legal and accounting fees. This prospectus describes certain risk factors that you should consider before purchasing the offered securities. See "Risk Factors" beginning on page 6. You should read this prospectus together with the additional information described under the heading "Where You Can Find More Information About Us." 2 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains or incorporates by reference "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. We caution readers regarding certain forward-looking statements contained in this prospectus and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the SEC. Forward-looking statements are statements not based on historical facts. In particular, statements using verbs such as "expect," "intend," "plan," "anticipate," "believe" or similar words generally involve forward-looking statements. Forward-looking statements include but may not be limited to, statements relating to future plans, targets and objectives, financial results, cyclical industry conditions, government and regulatory policies, the uncertainties of the reserving process and the competitive environment in which we operate. Forward-looking statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control and subject to change. These uncertainties can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforseeable events or developments, some of which may be national in scope, such as general economic conditions and interest rates. Some of these events or developments may be related to the insurance industry generally, such as pricing competition, regulatory developments and industry consolidation. Others may relate to the Company specifically, such as credit, volatility and other risks associated with our investment portfolio, and other factors. Investors are also directed to consider other risks and uncertainties discussed in documents we filed with the SEC, including Exhibit 99 to the Annual Report to the SEC on Form 10-K for the year ended December 31, 1999. We disclaim any obligation to update forward-looking information. WHERE YOU CAN FIND MORE INFORMATION ABOUT US We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the Public Reference Room at the SEC, at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information concerning the Public Reference Room. The SEC also makes these documents available on its web site at http://www.sec.gov. Our common stock is quoted on the Nasdaq SmallCap Market and documents filed by us are also available at the offices of the Nasdaq Stock Market, 1735 K Street N.W., Washington, D.C. 20006. We have filed with the SEC a registration statement on Form S-3 under the Securities Act of 1933, as amended ("Securities Act") relating to the securities offered by this prospectus. This prospectus constitutes a part of the registration statement but does not contain all of the information presented in the registration statement and its exhibits. For further information, we refer you to the registration statement and its exhibits. The SEC allows us to "incorporate by reference" the information we file with it, which means that we can disclose important information to you by referring you to another document we have filed with the SEC. The information incorporated by reference is an important part of this prospectus and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the following: - Annual Report on Form 10-K for the fiscal year ended December 31, 1999 filed with the SEC on March 30, 2000; - Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000 filed with the SEC on May 15, 2000; 3 - Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000 filed with the SEC on August 14, 2000; - Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000 filed with the SEC on November 14, 2000; - Current Report on Form 8-K filed with the SEC on January 12, 2001; - Definitive Proxy Statement on Schedule 14A filed with the SEC on May 1, 2000; - Information Statement on Schedule 14C filed with the SEC on April 17, 2000; - the description of our common stock contained in the Registration Statement on Form 8-A, filed with the SEC on November 23, 1993, as amended by the description of the change in par value of the common stock contained in our Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, filed with the SEC on November 14, 1997, and all amendments or reports filed for the purpose of updating that description; - the description of our redeemable common stock purchase warrants contained in the Registration Statement on Form 8-A, filed with the SEC on November 23, 1993, and all amendments or reports filed for the purpose of updating that description; and - any future filings under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, ("Exchange Act") that we make with the SEC until the selling shareholders sell all of the securities offered by them pursuant to the prospectus. You may request a copy of these filings, other than exhibits, at no cost, by writing or telephoning us at the following address or telephone number: American Country Holdings Inc. 222 North LaSalle Street Chicago, Illinois 60601 Attention: Karla M. Violetto, Vice President and Chief Financial Officer (312) 456-2000 4 OUR COMPANY American Country Holdings Inc. is an insurance holding company which has as its direct subsidiaries American Country Insurance Company ("American Country"), American Country Financial Services Corp. ("Financial Services"), American Country Professional Services Corp. ("Professional Services") and American Country Underwriting Agency Inc. Our principal subsidiary, American Country, is an Illinois domestic insurance company that specializes in the underwriting and marketing of commercial property and casualty insurance. American Country concentrates on types of insurance in which it has expertise: transportation, hospitality and other commercial lines. American Country previously wrote a nominal amount of personal lines, automobile and homeowners insurance, which has not been renewed and is currently being run off. Although American Country's specialty public livery coverages, taxicab and limousine, are primarily written on risks in the City of Chicago and the surrounding suburbs, American Country has extended its geographic coverage as part of its expansion program. American Country is licensed in the states of Connecticut, Illinois, Indiana, Iowa, Massachusetts, Michigan, Minnesota, New York, Pennsylvania, Wisconsin and the District of Columbia and intends to pursue licenses in Kansas, Missouri, Nevada, Maryland, Ohio, and Virginia. American Country also is admitted as an excess and surplus lines carrier in 21 states. American Country currently maintains an A.M. Best Company, Inc. rating of "A-" (Excellent). American Country writes transportation, hospitality and other commercial insurance. Transportation lines, which include automobile liability, physical damage and workers' compensation coverages for taxicabs and limousines, accounted for 63.3% of total gross premiums written in 2000. Hospitality lines, which include coverage for restaurants, taverns and banquet halls, accounted for 14.6% of total gross premiums written in 2000. Commercial lines, which include multi-peril risks, workers' compensation and automobile liability and physical damage, accounted for 22.1% of total gross premiums written in 2000. American Country's business is written by salaried employees and through approximately 40 independent agents located in the states in which American Country is licensed. Financial Services operates principally as a premium finance company. Professional Services provides collateralized loans for certain of American Country's larger customers. American Country Underwriting Agency was created in December 2000 to operate as a managing general underwriter and third party claims administrator for other insurance companies. American Country Holdings Inc. became a public reporting company in 1997 through a reverse acquisition of Western Systems Corp. American Country Holdings Inc. is a Delaware corporation. Our principal offices are located at 222 North LaSalle Street, Chicago, Illinois 60601 and our telephone number is (312) 456-2000. 5 RISK FACTORS You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our stock could decline due to any of these risks and you may lose all or part of your investment in the offered securities. INCREASED COMPETITION IN THE PROPERTY AND CASUALTY INSURANCE BUSINESS COULD HAVE A MATERIAL ADVERSE AFFECT ON US. The property and casualty insurance business is highly competitive on the basis of both price and service. In recent years, the property and casualty insurance industry has been characterized by relatively high levels of competition and aggressive pricing and marketing. Continued or increased levels of highly competitive conditions could have a material adverse effect on our subsidiary, American Country. American Country faces active competition in public transportation lines from managing general agency insurance programs as well as national and regional insurance carriers. Managing general agency insurance programs are put together by agents and reinsurers using an insurance company that writes the insurance business as a fronting carrier and then reinsures all of the business with the reinsurer. Many of these programs are short-lived but they generally enter the market with extremely aggressive pricing. Besides creating instability, they generally do not provide continuity of claims practices and settlements, which adversely affects future pricing for property and casualty insurance. However, American Country's long-term agreements with the taxi companies tend to mitigate this circumstance. Presently, there are two national carriers still pursuing taxi/livery business through general agents, but both of these carriers have reduced their presence in certain geographic areas such as the Midwest, California, and New Jersey. A few smaller regional carriers remain that continue to target smaller accounts. In Illinois, the competition for coverage of artisan contractors is primarily from national carriers, regional carriers and mono-line workers' compensation carriers. The competition for restaurants is mainly from regional carriers. Competition for workers' compensation insurance, which is American Country's largest commercial lines product, resulted in a decrease in average premiums for 2000. Due to this competition, American Country believes that the commercial lines products are currently under-priced and therefore American Country has decided to restrict writings in this market and refocus its underwriting efforts in the public transportation lines. IF OUR LOSS RESERVES PROVE INADEQUATE, IT COULD HAVE A MATERIAL ADVERSE AFFECT ON OUR REPORTED FINANCIAL RESULTS. The liabilities for unpaid losses and loss adjustment expenses are estimated by American Country management utilizing methods and procedures which they believe are reasonable. These liabilities are necessarily subject to the impact of future changes in claim severity and frequency, judicial theories of liability and numerous other factors. Although management believes that the estimated liabilities for losses and loss adjustment expenses are reasonable, because of the extended period of time over which such losses are reported and settled, the subsequent development of these liabilities may not conform to the assumptions inherent in their determination and has in the past and may in the future vary significantly from the estimated amounts included in the accompanying financial statements. To the extent that the actual loss experience varies from the assumptions used in the determination of these liabilities, the liabilities are adjusted to reflect actual experience. These adjustments, to the extent they occur, are reported in the period recognized and may materially adversely affect American Country's 6 reported financial results. For the years ended December 31, 1998, 1997 and 1996, American Country had cumulative reserve deficiencies of $4,389,000, $7,042,000 and $6,827,000, respectively. OUR FINANCIAL RESULTS MAY FLUCTUATE SIGNIFICANTLY. The financial results of American Country, similar to those of many other property and casualty insurers, have been subject to significant fluctuations. Profitability is affected significantly by volatile and unpredictable developments including catastrophes, changes in loss reserves resulting from changing legal environments as different types of claims arise and judicial interpretations develop relating to the scope of insurers' liability, the uncertainty inherent in judgments determined by juries, fluctuations in interest rates and other changes in the investment environment which affect returns on invested capital, and inflationary pressures that affect the size of losses. Further, underwriting results have been cyclical in the property and casualty insurance industry, with protracted periods of overcapacity adversely impacting premium rates, resulting in higher combined ratios, followed by periods of under capacity and escalating premium rates, resulting in lower combined ratios. An insurance company's statutory combined ratio (its loss plus its expense ratio) expresses losses as a percentage of earned premium and expenses as a percentage of written premium and is the traditional measure of underwriting experience. Generally speaking, if the statutory combined ratio is below one hundred percent (100%), an insurance company has an underwriting profit and if it is above one hundred 100%, the insurance company has an underwriting loss. For 1999, 1998 and 1997, American Country's combined ratio was 110.7%, 100.9%, and 109.6%, respectively. American Country, similar to many other property and casualty insurers, has experienced underwriting losses on its insurance business and depends primarily on interest income from its investment portfolio for a substantial portion of its earnings. Its statutory combined ratio for the years ended December 31, 1999, 1998 and 1997 was 110.7%, 100.9% and 109.6%, respectively. A significant decline in investment yields could have a material adverse effect on American Country's financial results. WE ARE DEPENDENT UPON OUR MANAGEMENT AND THE LOSS OF ANY OF THEM COULD ADVERSELY AFFECT US. Our future success depends on the continued service of our key personnel. The loss of services of any of our executive officers or the loss of the services of other key employees could have a material adverse affect on our business and financial results. Our future success also depends on our ability to attract, retain and motivate skilled employees and we may not be able to do so. WE ARE A HOLDING COMPANY SUBJECT TO VARIOUS REGULATIONS INCLUDING THOSE RELATING TO INSURANCE COMPANIES. We are a holding company whose principal asset is all of the outstanding common stock of American Country, which is an insurance company organized under the laws of the State of Illinois. Our ability to pay expenses and pay dividends to our stockholders depends primarily on our ability to obtain dividends and other payments from American Country. Illinois permits insurance companies to pay dividends only out of earned surplus, and limits the annual amount payable without prior approval of the Department of Insurance to the greater of 10% of policyholders' surplus or the amount of the prior year's statutory net income. American Country's surplus as of December 31, 1999 was $37.2 million, and its statutory net losses for 1999 was $2.0 million. American Country is subject to varying degrees of regulation and supervision in the jurisdictions in which it transacts business under statutes which delegate regulatory, supervisory and administrative 7 powers to state insurance commissioners. Such regulation is designed to protect policyholders rather than investors and relates to such matters as: - standards of solvency, which must be met and maintained; - the licensing of insurers and their agents and producers; - the nature and amount of insurance the company can write; - the examination of the affairs of insurance companies, which includes periodic financial and market conduct examinations by the regulatory authorities; - annual and other reports, prepared on a statutory accounting principles basis, required to be filed on the financial condition of insurers or for other purposes; - establishment and maintenance of reserves for unearned premiums, losses and loss adjustment expenses; and - requirements regarding numerous other matters. In general, American Country must file all rates for insurance directly underwritten with the insurance department of each state in which it operates on an admitted basis. Accordingly, state regulation may adversely affect American Country. American Country is also subject to statutes governing insurance holding company systems in various jurisdictions. These statutes require American Country to file an annual Holding Company System Registration Statement with the state insurance regulatory authorities, which includes information concerning its capital structure, ownership, financial condition and general business operation. Under the terms of applicable state statutes, any person or entity desiring to purchase more than a specified percentage (commonly 10%) of American Country's outstanding voting securities is required to obtain regulatory approval for the purchase of such voting securities. Section 131.2 of the Illinois Insurance Code relating to holding companies, to which American Country is subject, requires disclosure of transactions between American Country and its subsidiaries and affiliates. These transactions must satisfy certain standards, including that they be fair, equitable and reasonable and that certain material transactions be specifically non-disapproved by the Director of Insurance. Further, prior approval by the Director is required of affiliated sales, purchases, exchanges, loans or extensions of credit, or investments, any of which involve 10% or more of American Country's admitted assets as of the preceding December 31st. The National Association of Insurance Commissioners facilitates the regulation of multi-state companies through uniform reporting requirements, standardized procedures for financial examinations, and uniform regulatory procedures embodied in model acts and regulations. The NAIC has developed Property-Casualty Risk-Based Capital standards that relate an insurer's reported statutory capital and surplus to the risks inherent in its overall operations. The risk-based capital formula uses the capital and surplus reported in the statutory annual statement to calculate the minimum indicated capital level to support asset (investment and credit) risk and underwriting (loss reserves, premiums written, and unearned premium) risk. The NAIC model law calls for various levels of regulatory action based on the magnitude of an indicated capital deficiency, if any. At December 31, 1999, American Country's reported capital and surplus was $37.2 million and its required risk-based capital and surplus was $7.3 million. ANY FUTURE DOWNGRADE IN OUR RATINGS COULD HAVE A MATERIAL ADVERSE AFFECT ON OUR OPERATIONS. Increased public and regulatory concerns with the financial stability of insurers have resulted in greater emphasis by policyholders upon insurance company ratings, with a resultant potential competitive advantage for carriers with higher ratings. American Country currently is rated "A-" 8 (Excellent) by A.M. Best Company, Inc. Ratings for the industry range from "A++" (Superior) to "F" (In Liquidation) and some companies are not rated. The "A" and "A-" (Excellent) ratings are assigned to those companies that in A.M. Best's opinion have achieved excellent overall performance when compared to the standards established by A.M. Best and have a strong ability to meet their obligations to policyholders over a long period of time. In evaluating a company's financial and operating performance, A.M. Best considers the following: - the company's profitability, leverage and liquidity, as well as its spread of risk; - the quality and appropriateness of its reinsurance; - the quality and diversification of its assets; - the adequacy of its policy or loss reserves; - the adequacy of its surplus; - its capital structure; and - the experience and objectives of its management. A.M. Best's ratings are based on factors relevant to policyholders, agents, insurance brokers and intermediaries and are not directed to the protection of investors. Standard & Poor's also rates American Country. Standard & Poor's recently informed us that it intends to lower its rating of American Country from "BBBpi" (Rated Good) to "BBpi" (Rated Marginal). Standard & Poor's ratings range from "AAA" (Extremely Strong) to "CC" (situations where a default is expected imminently on any financial obligation). The "BB" rating is assigned to companies with marginal security characteristics, for which positive attributes exist, but adverse business conditions could lead to insufficient ability to meet financial commitments. The "pi" subscript indicates that the rating is based solely on publicly available financial information and was not requested by the Company. There can be no assurance that American Country will maintain its ratings and any downgrade could materially adversely affect its operations. A.M. Best's and Standard & Poor's ratings are based on an analysis of the financial condition and operations of American Country as they relate to the industry in general, and are not designed for the protection of investors. WE ARE DEPENDENT ON KEY CUSTOMERS. In 1999, 1998 and 1997, the Chicago Yellow Cab Company accounted for 14%, 17% and 16%, respectively, and Chicago Checker Taxi Association accounted for 8%, 10% and 11%, respectively, of American Country's total gross premiums written. The loss of this business could have a material adverse impact on American Country. American Country anticipates that the percentage of its business from Yellow Cab and Checker Taxi will become less significant as American Country expands its transportation business into additional geographic areas. OUR EXPANSION INTO NEW GEOGRAPHIC MARKETS IS NOT ASSURED. Becoming licensed as an authorized insurer and writing business in additional states is one of the foundations of American Country's growth strategy. American Country intends on pursuing licenses in Kansas, Missouri, Nevada, Maryland, Ohio and Virginia. American Country's ability to enter and write new business in these markets is contingent upon its becoming licensed by the insurance department of each jurisdiction. Each jurisdiction has its own licensing requirements and it may be difficult for American Country to obtain a license in a particular jurisdiction. 9 OUR ABILITY TO WRITE ADDITIONAL INSURANCE IS DEPENDENT ON REINSURERS. The majority of American Country's reinsurance is placed with a limited number of reinsurers. The availability and cost of reinsurance affect American Country's ability to write additional insurance and the profitability of that insurance and are subject to prevailing market conditions that are beyond the control of American Country. A contingent liability exists to the extent that American Country's reinsurers may be unable to meet their contractual obligations. A LARGE PERCENTAGE OF OUR COMMON STOCK IS OWNED BY A FEW STOCKHOLDERS WHO ARE ABLE TO CONTROL MATTERS RELATING TO STOCKHOLDERS. Our executive officers and directors, together with Frontier Insurance Group, Inc., a principal stockholder, beneficially own approximately 81%, in the aggregate, of the outstanding shares of our common stock. Consequently, such officers, directors and stockholder could, by acting together, control the outcome of matters submitted to a vote of our stockholders, such as the election of our board of directors and our direction and future operations. The concentration of ownership of our common stock could also have the effect of discouraging, delaying or preventing a change in control and may impair the liquidity of the common stock by adversely affecting the ability of an active market to develop for the common stock on the Nasdaq SmallCap Market or otherwise due to the relatively small number of shares of common stock that are publicly held by our other stockholders. THERE IS NO TRADING MARKET FOR THE CLASS A WARRANTS AND PRICES FOR THE CLASS A WARRANTS COULD BE VOLATILE. There is no public market for the Class A warrants. We have applied to list the Class A warrants on the Nasdaq SmallCap Market, but no assurance can be given that our application will be approved. Furthermore, no assurance can be given that an active trading market will develop for the Class A warrants, or if one develops, that it will be maintained. There can also be no assurance as to the prices at which the Class A warrants will trade. Unless and until a stable market develops for the Class A warrants, the price at which such securities trade may fluctuate significantly. Prices for the Class A warrants will be determined in the marketplace and may be influenced by many factors, including: - the depth and liquidity of the market for the Class A warrants; - investor perception of our company and the industry in which we operate; - the results of our operations; and - general economic and market conditions. FAILURE TO SATISFY REQUIREMENTS FOR MAINTAINING LISTING OF SECURITIES ON THE NASDAQ SMALLCAP MARKET. Our common stock is listed on, and an application has been filed for the Class A warrants to be listed on, the Nasdaq SmallCap Market. The rules of the Nasdaq SmallCap Market establish criteria for the continued listing of securities. If, among other requirements, the minimum bid price for the common stock does not equal or exceed $1.00 per share for 30 consecutive days, or if less than 100,000 Class A warrants are outstanding at any time, the common stock or the Class A warrants, as the case may be, may be de-listed from the Nasdaq SmallCap Market and the respective holders may be unable to sell their common stock or Class A warrants. There can be no assurance that we will be able to maintain the standards for continued listing. In the event that the common stock or the Class A warrants are de-listed from the Nasdaq SmallCap Market, we intend to make an application to qualify the de-listed securities for quotation in the over-the-counter market in the "pink sheets" or on the OTC Electronic Bulletin Board, although no assurance can be given that any such application will be approved, and if approved, an investor may find it more difficult to dispose of, and in the case of the "pink sheets," to obtain accurate quotations as to the price of, the de-listed securities. 10 FUTURE ISSUANCES OR SALES OF OUR COMMON STOCK COULD AFFECT THE MARKET PRICE OF OUR COMMON STOCK. As of January 23, 2001, we had 8,184,207 shares of common stock issued and outstanding. All of the shares of common stock offered hereby, including the shares issuable upon conversion or exercise of the other offered securities, will be freely transferable without restriction under the Securities Act. In addition, as of January 23, 2001, we had approximately 3,101,181 shares of common stock reserved for issuance upon exercise of other options and warrants outstanding and in connection with our stock option plan and employee stock purchase plan, which have been registered, or are being registered, under the Securities Act on Form S-8 registration statements. Accordingly, the shares issued upon exercise of such options or warrants or in connection with the stock option plan or employee stock purchase plan, will be freely transferable unless held by our affiliates. The future sale pursuant to Rule 144 under the Securities Act or pursuant to a registration statement for the outstanding restricted shares of common stock or the common stock underlying the options and warrants, the future sale of common stock for our own account, or the exercise of registration rights by any security holder or the perception that such sales or exercise could occur, could have an adverse effect on the market price of the common stock and could impair our ability to raise capital through an offering of common stock. ANTI-TAKEOVER PROVISIONS AFFECTING US COULD PREVENT OR DELAY A CHANGE OF CONTROL THAT IS BENEFICIAL TO YOU. Provisions of applicable Delaware law and applicable federal and state regulations may discourage, delay or prevent a merger or other change of control that shareholders may consider favorable. These provisions could: - delay, defer or prevent a change in control of our company; - discourage bids for our securities at a premium over the market price; - affect adversely the market price of, and the voting and other rights of the holders of, our securities; or - impede the ability of the holders of our securities to change our management. 11 USE OF PROCEEDS All of the securities offered pursuant to this prospectus are being offered by the selling shareholders listed under "Selling Shareholders." We will not receive any proceeds from sales of the offered securities. We will receive proceeds to the extent the Class A warrants are exercised, up to an aggregate of $1,567,500 if all of the Class A warrants are exercised. However, there can be no assurance with respect to the amount of proceeds, if any, that we will receive. We intend to use any proceeds from the exercise of the Class A warrants for working capital and general corporate purposes. 12 DESCRIPTION OF THE OFFERED SECURITIES In December 2000, we sold 814,286 units and 405,000 shares of Series A convertible preferred stock to the selling shareholders listed below in transactions exempt from registration under the Securities Act. The units consisted of one share of common stock and one Class A warrant. The common stock and the Class A warrants that comprised the units were separately transferable immediately upon issuance. This prospectus is registering the common stock and the Class A warrants that comprised the units, the common stock that is issuable upon exercise of the Class A warrants and the common stock issuable upon conversion of the Series A convertible preferred stock. The following summary of the material features of the offered securities is not complete and is qualified in its entirety by reference to our amended and restated certificate of incorporation and the Class A warrant agreement which has been filed as an exhibit to this registration statement. COMMON STOCK OUTSTANDING SHARES All outstanding shares of common stock are fully paid and non-assessable. As of January 23, 2001, 8,184,207 shares of common stock were issued and outstanding. VOTING RIGHTS The holders of common stock are entitled to one vote per share on every question submitted to them at a meeting of shareholders. Our amended and restated certificate of incorporation does not provide for cumulative voting. Under our by-laws, at least a majority of the issued and outstanding voting securities present at a duly called shareholders' meeting constitutes a quorum. Generally, if a quorum is present, the affirmative vote of the majority of the voting securities represented at the meeting constitutes an act of the shareholders. Any action required or that may be required at an annual or special meeting of our stockholders may be taken by written consent of the minimum number of shareholders necessary to authorize such action at a meeting. DIVIDENDS Subject to the rights of holders of our Series A convertible preferred stock, holders of common stock are entitled to share ratably on a share-for-share basis with respect to any dividends, when, as and if declared by the board of directors out of funds legally available. LIQUIDATION In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are, subject to the liquidation preference of the holders of preferred stock, entitled to share ratably in the net assets legally available for distribution to shareholders after payment of all debts. The common stock is not entitled to conversion or pre-emptive rights and is not subject to redemption. ANTI-TAKEOVER STATUE Section 203 of the Delaware General Corporation Law generally prohibits a publicly held Delaware corporation from engaging in various "business combination" transactions with any interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless: - the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; 13 - upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting power of the corporation outstanding at the time the transaction commenced; or - on or subsequent to such date the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting power which is not owned by the interested stockholder. A "business combination" is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder. In general, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within three years, did own, 15% or more of a corporation's voting power. LISTING Our common stock is quoted on Nasdaq SmallCap Market under the symbol ACHI. CLASS A WARRANTS The terms of the Class A warrants are set forth in the Class A warrant agreement dated as of December 29, 2000 between the Company and our transfer agent. Each Class A warrant entitles the holder to purchase one share of common stock, at an exercise price of $1.925 per share, subject to the adjustments in certain cases described below. The Class A warrants expire on December 29, 2005. ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon exercise of the Class A warrants are subject to adjustment from time to time upon the occurrence of any of the following events: - If, at any time, we (A) pay a dividend or make a distribution with respect to our common stock in any shares of any class or series of our capital stock or other securities, (B) subdivide or combine outstanding shares of common stock into a greater or smaller number of shares, as applicable, or (C) issue any shares of capital stock in a reclassification of our common stock; - If, at any time, we (A) reclassify or change any shares of common stock issuable upon exercise of the Class A warrants, (B) consolidate or merge with another corporation, (C) sell or convey all or substantially all of our assets followed by a distribution to holders of our common stock; - If, at any time we issue, sell, grant or distribute any warrants, options or rights entitling the holders thereof to acquire shares of common stock at a price per share of common stock that is below the current market value per share of the common stock, determined as of the record date for the issuance of the convertible securities or is lower than the exercise price of the Class A warrants; or - If, at any time we issue or sell any shares of common stock at a price per share of common stock that is lower than the current market value per share of the common stock on the date for the issuance or is lower than the exercise price of the Class A warrants. No adjustment to the exercise price and the number of shares of common stock issuable upon exercise of the Class A warrants will be made due to the following events: - the issuance of shares pursuant to any warrants outstanding as of the date the Class A warrants were issued; 14 - the issuance of shares pursuant to any bona-fide equity compensation plan, including any stock option plan and employee stock purchase plan; - shares issued upon exercise of the Class A warrants registered by this prospectus; - the issuance of shares pursuant to the conversion of the Series A convertible preferred stock; and - shares issued in connection with a merger, acquisition or other similar business combination in which the Company is the surviving corporation. If, at any time after any adjustment is made, the exercise price shall change or any options or convertible securities shall have expired unexercised then the exercise price of the Class A warrants or the number of shares of common stock issuable upon exercise of the Class A warrant will be adjusted based on such change or expiration. EXERCISE The Class A warrants are exercisable at any time on or after the date that they were issued until the date of expiration, December 29, 2005. The Class A warrants may be exercised by surrendering to the warrant agent the warrant certificate, evidencing the warrants to be exercised, with the accompanying subscription form duly filled in and signed, together with payment of the exercise price. The exercise price may be paid by cash, certified check, bank draft, posted or express money order or by wire transfer to an account designated by us for such purpose. Upon the exercise of any of the Class A warrants in accordance with the warrant agreement, we will transfer promptly to or upon the written order of the holder of such warrant certificate appropriate evidence of ownership of warrant shares or other securities or property to which it is entitled, registered or otherwise, to the person entitled to receive the same. All warrant shares or other securities issuable by us upon the exercise of the Class A warrants will be validly issued, fully paid and non-assessable. RESERVATION OF SHARES We have authorized and will reserve and keep available such number of shares of our common stock as will be issuable upon the exercise of all outstanding Class A warrants. Such shares of our common stock, when paid for and issued, will be duly and validly issued, fully paid and non-assessable, free of preemptive rights and free from all taxes, liens, charges and security interests created by or imposed upon the Company. AMENDMENT Any provision of the Class A warrant agreement may be amended only with our consent and that of the majority of the number of the then outstanding unexercised Class A warrants affected. However, no modification, amendment or supplement may be made to the warrant agreement without the consent of each holder of the then outstanding Class A warrants affected thereby if such modification, amendment or supplement adversely affects the exercise price, the expiration date, the antidilution adjustments or otherwise materially adversely affects the rights of the holders of the Class A warrants. We and the warrant agent may cure any ambiguity or correct or supplement the Class A warrant agreement without the approval of the holders of the Class A warrants so long as the interests of the holders of the Class A warrants are not materially adversely affected. 15 VOTING The holder of the Class A warrants will have no right to vote on matters submitted to shareholders and will have no right to receive dividends and will not be deemed a holder of common stock. LISTING There is no established public trading market for the Class A warrants. We have applied to list the Class A warrants on the Nasdaq SmallCap Market, but no assurance can be given that the application will be approved. We will take all action which may be necessary to cause the shares of common stock underlying the Class A warrants to be duly listed on the Nasdaq SmallCap Market or any other securities exchange on which our shares of common stock are listed. FRACTIONAL SHARES We will not issue any fractional shares of common stock issuable upon exercise of the Class A warrants but rather pay the holder of the Class A warrant an amount in cash equal to the fraction multiplied by the then current market price per share of our common stock. 16 SELLING SHAREHOLDERS In December 2000, we sold 814,286 units and 405,000 shares of Series A convertible preferred stock to the selling shareholders listed below in transactions exempt from registration under the Securities Act. The units consisted of one share of common stock and one Class A warrant. This prospectus is registering the common stock and the Class A warrants that comprised the units, the common stock that is issuable upon exercise of the Class A warrants and the common stock issuable upon conversion of the Series A convertible preferred stock. The following table presents information, as of January 23, 2001, with respect to those securities owned by each of the selling shareholders, and as adjusted to give effect to the sale of all of the offered securities. The offered securities are being registered to permit public secondary trading of these securities, and the selling shareholders may offer the securities for resale from time to time. This registration statement is not an exchange offer that will permit holders of restricted securities to exchange them for registered securities, but rather a resale registration statement to permit them to sell their restricted securities and deliver registered securities to the purchasers. See "Plan of Distribution." We have filed with the SEC, under the Securities Act, a registration statement on Form S-3, of which this prospectus forms a part, with respect to the resale of the offered securities from time to time, pursuant to Rule 415 under the Securities Act, in the over-the-counter market, in privately- negotiated transactions, in underwritten offerings or by a combination of these methods of sale. The holders listed below and their transferees, pledgees, donees and other successors that are identified in supplements to this prospectus are the selling shareholders under this prospectus. The information provided below was supplied by the holders of the offered securities.
NUMBER OF SHARES OF COMMON STOCK NUMBER OF SHARES OFFERED ISSUABLE OF COMMON STOCK UPON CONVERSION NUMBER OF SHARES ISSUABLE UPON OF SERIES A NAME OF OF COMMON STOCK NUMBER OF CLASS A EXERCISE OF CONVERTIBLE SELLING SHAREHOLDER OFFERED (1) WARRANTS OFFERED CLASS A WARRANTS PREFERRED STOCK - --------------------------- ---------------- ----------------- ---------------- ----------------- American Service Insurance Company Inc.............. 0 0 0 114,286 Lincoln General Insurance Company.................. 0 0 0 228,571 Universal Casualty Company.................. 0 0 0 228,571 PSCO Partners Limited Partnership.............. 300,000 300,000 300,000 0 PSCO Partners Limited Partnership Two.......... 200,000 200,000 200,000 0 United Capitol Insurance Company (2).............. 0 0 0 571,428 John A. Dore (3)........... 142,857 142,857 142,857 0 Thomas M. Dore............. 57,143 57,143 57,143 0 Ernest Werlin, I.R.A....... 0 0 0 28,571 Wilmer J. Thomas (4)....... 0 0 0 571,428 Martin L. Solomon (5)...... 0 0 0 571,428 Research Underwriters...... 57,143 57,143 57,143 0 William J. Barrett (6)..... 57,143 57,143 57,143 0
- ------------------------ (1) Excludes the shares of common stock issuable upon exercise of the Class A warrants and conversion of the Series A convertible preferred stock that were issued on December 29, 2000. 17 (2) The selling shareholder is a wholly-owned subsidiary of Frontier Insurance Company which beneficially owns approximately 787,500 shares of our common stock as of January 23, 2001. In calculating that amount, we did not include the offered securities. (3) Mr. Dore, who serves as Co-Chairman of our board of directors and Chief Executive Officer, beneficially owns approximately 180,572 shares of our common stock as of January 23, 2001 of which he beneficially owns 2,000 shares in an IRA, 4,000 shares through a Keough account, 2,600 shares as trustee for Christopher L. Dore, 3,565 shares as trustee for John A. Dore II and options to purchase 500,000 shares of common stock. In calculating that amount, we did not include the offered securities. (4) Mr. Thomas, who serves on our board of directors, beneficially owns approximately 2,001,586 shares of our common stock as of January 23, 2001 and options to purchase 67,500 shares of common stock. In calculating that amount, we did not include the offered securities. (5) Mr. Solomon, who serves as Co-Chairman of our board of directors, beneficially owns approximately 2,012,585 shares of our common stock as of January 23, 2001 and options to purchase 130,000 shares of common stock. In calculating that amount, we did not include the offered securities. Mr. Solomon also owns redeemable common stock purchase warrants to purchase 16,529 shares of common stock. (6) Mr. Barrett, who serves on our board of directors, beneficially owns approximately 128,494 shares of our common stock as of January 23, 2001, which includes 101,283 shares owned by Mr. Barrett's qualified retirement plan. Mr. Barrett also has options to purchase 67,500 shares of common stock. Additionally, 30,052 shares of common stock are beneficially owned by Mr. Barrett's spouse with respect to which he disclaims beneficial ownership. In calculating that amount, we did not include the offered securities. Mr. Barrett also owns redeemable common stock purchase warrants to purchase 56,654 shares of common stock. Additionally, Mr. Barrett's spouse owns redeemable common stock purchase warrants to purchase 12,846 shares of common stock with respect to which he disclaims beneficial ownership. Because the selling shareholders may offer all or some portion of the offered securities pursuant to this prospectus or in transactions exempt from registration under the Securities Act, no estimate can be given as to the amount of the offered securities that will be held by the selling shareholders upon termination of any sales pursuant to this prospectus. Only selling shareholders identified above who beneficially own the securities listed opposite their names in the foregoing table may use this prospectus to sell the offered securities. Prior to any use of this prospectus in connection with an offering by any holder not named above, this prospectus will be supplemented to include the name and number of shares beneficially owned by the selling shareholders intending to sell the securities and the number of securities to be offered. The prospectus supplement will also disclose whether any selling shareholders selling in connection with the prospectus supplement has held any position or office with, been employed by or otherwise has had a material relationship with, us or any of our affiliates during the three years prior to the date of the prospectus supplement if that information has not been disclosed herein. CERTAIN TRANSACTIONS Janney Montgomery Scott LLC, an investment banking firm, acted as our placement agent in connection with our sale of 814,286 units and 405,000 shares of Series A convertible preferred stock in December 2000. The proceeds of the offering were $5,475,000 with the Company receiving net proceeds, after deduction of the selling concessions and estimated offerings expenses, of approximately $5,255,000. Janney Montgomery Scott received $187,500 for their services as our placement agent. William J. Barrett, who serves on our board of directors, is a senior vice president of Janney Montgomery Scott. Mr. Barrett, who is listed above as a selling shareholder, purchased 57,143 units in our December 2000 offering. 18 DESCRIPTION OF CAPITAL STOCK The following summary of the material features of our amended and restated certificate of incorporation and by-laws is not complete and is qualified in its entirety by reference to those documents, copies of which have been filed with the SEC. GENERAL Our authorized capital stock consists of 62,000,000 shares of capital stock, consisting of 60,000,000 shares of common stock, par value $.01 per share, and 2,000,000 shares of preferred stock, par value $.10 per share. On January 23, 2001, we had: - 8,184,207 shares of common stock issued and outstanding; - 2,054,129 redeemable common stock purchase warrants that are quoted on Nasdaq SmallCap Market and entitle the holder the right to purchase .728 shares of our common stock at a price of $5.50 through August 31, 2002; - 814,286 Class A warrants that entitle the holder the right to purchase one share of our common stock at a price of $1.925 through December 29, 2005; and - 500,000 shares of Series A convertible preferred stock of which 405,000 were outstanding. COMMON STOCK Please see "Description of Offered Securities--Common Stock" for a description of our common stock. PREFERRED STOCK The preferred stock may be issued from time to time without stockholder approval in one or more classes or series, and the board of directors is authorized to fix the dividend rights, dividend rates, conversion rights, rights of exchange, voting rights, rights and terms or redemption (including sinking fund provisions), redemption prices, liquidation preferences and any other rights, preferences, privileges and restrictions of any class or series of preferred stock as well as the number of shares constituting such class or series and the designation thereof. The shares of any class or series of preferred stock need not be identical. Depending upon the rights of such preferred stock, the issuance of preferred stock could have an adverse effect on holders of common stock by delaying or preventing a change in control of the Company, making removal of the present management more difficult, or resulting in restrictions upon the payment of dividends and other distributions to the holders of common stock. SERIES A CONVERTIBLE PREFERRED STOCK We are authorized to issue 500,000 shares of Series A convertible preferred stock, of which 405,000 shares were outstanding as of January 23, 2001. We issued those shares to the selling shareholders in December 2000. Each share of Series A convertible preferred stock has an initial stated value of $10 and an initial conversion price of $1.75. The Series A convertible preferred stock ranks senior to our common stock and on parity with any class or series of capital stock we subsequently create. DIVIDENDS Shares of the Series A convertible preferred stock accrue dividends on a quarterly basis at an annual rate of 6.0% per share payable out of any assets or funds legally available for payment of dividends payable on January 1, April 1, July 1 and October 1, commencing April 1, 2001. Dividends are cumulative and accrue, whether or not declared by our board of directors, but are payable only 19 when and if declared by our board of directors. Dividends may be paid, at our option, either in cash or by the issuance of additional shares of preferred stock and, at our option, payment of cash in lieu of fractional shares. We must pay all accrued but unpaid dividends on any share of Series A convertible preferred stock upon conversion of the shares of preferred stock. We may not pay any dividends or any distribution on any class or series of capital stock on parity with or ranking junior to the Series A convertible preferred stock, and we may not repurchase, redeem or otherwise retire nor set funds apart for payment on any junior stock or parity stock without the consent of a majority of the holders of the Series A convertible preferred stock. VOTING RIGHTS The holders of the Series A convertible preferred stock are entitled to vote on all matters submitted to a vote of our stockholders. In addition, if we fail to pay any dividends for four or more dividend periods then the holders are entitled to elect two directors to our board until the default is remedied. LIQUIDATION The liquidation preference of the Series A convertible preferred stock is $10 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of the Company, each holder of the Series A convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series A convertible preferred stock before any amounts may be paid to any class or series of capital stock on parity with or ranking junior to the Series A convertible preferred stock. If the assets available for distribution to the holders of Series A convertible preferred stock and any other parity security with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series A convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series A convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series A convertible preferred stock will not be entitled to any further distribution of assets. RESERVATION OF SHARES We have authorized and will reserve and keep available 2,500,000 shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series A convertible preferred stock and dividends payable thereon. These shares of our common stock, when paid for and issued, will be duly and validly issued, fully paid and non-assessable, and free of preemptive rights. OPTIONAL REDEMPTION The preferred stock will be redeemable at our option, in whole or in part, at any time on or after December 29, 2002, in an amount equal to the liquidation preference which is the stated value and an amount equal to all accrued and unpaid dividends. If we redeem less than all outstanding shares of Series A convertible preferred stock, we will redeem the shares of preferred stock ratably among the holders. OPTIONAL CONVERSION Shares of Series A convertible preferred stock are convertible, at any time, at the option of the holder into shares of common stock. Each share of the Series A convertible preferred stock is 20 convertible into such shares of our common stock as is determined by dividing the stated value plus all accrued but unpaid dividends by the then effective conversion price. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series A convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) pay a dividend or make a distribution with respect to our common stock in any shares of any class or series of our capital stock or other securities, (B) subdivide or combine our outstanding shares of common stock into a greater or smaller number of shares, as applicable, or (C) issue any shares of capital stock in a reclassification of our shares of common stock; - If there occurs a change in control, which includes any merger, consolidation, exchange of shares, recapitalization, reorganization or conveyance of all or substantially all of our assets; - If we declare or make any distribution of our assets to holders of our common stock; - If we issue or sell warrants, rights, options or other convertible security entitling the holders thereof to acquire shares of common stock at a price per share of common stock that is below the conversion price; or - If we issue or sell any shares of common stock at a price that is lower than the conversion price. If the options expire or the convertible securities are not exercised that caused an adjustment in the conversion price, then the conversion price will be readjusted to the conversion price which would have been in effect had the options or convertible securities never been issued. FRACTIONAL SHARES We will not issue any fractional shares of common stock issuable upon the conversion of the Series A convertible preferred stock. PROTECTIVE PROVISIONS Without first obtaining the approval of a majority of the then outstanding shares of Series A convertible preferred stock, we may not: - issue any security senior to or on par with the Series A convertible preferred stock; - alter, repeal or amend the rights, preferences or privileges of the Series A convertible preferred stock; - create any new class or series of capital stock having a preference over or ranking on par with the Series A convertible preferred stock as to distribution of assets upon liquidation, dissolution or winding up of the Company; - increase the authorized number of shares of the Series A convertible preferred stock; and - increase the par value of the common stock. REDEEMABLE COMMON STOCK PURCHASE WARRANTS As of January 23, 2001 we have issued and outstanding 2,054,129 redeemable common stock purchase warrants that entitle the holder the right to purchase .728 shares of common stock at $5.50. These warrants may be exercised at any time through August 31, 2002. The redeemable common stock 21 purchase warrants that are not exercised by the expiration date will expire. The redeemable common stock purchase warrants are quoted on the Nasdaq SmallCap Market under the symbol ACHIW. WARRANTS Please see "Description of Offered Securities--Class A Warrants" for a description of the terms of the Class A warrants being sold by this prospectus. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar of our common stock is American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005. 22 PLAN OF DISTRIBUTION We will receive no proceeds from this offering, other than in connection with the exercise of the Class A warrants by the exercising holders. The securities offered by this prospectus may be sold by the selling shareholders, their donees or transferees or by their other successors in interest from time to time in transactions in the over-the-counter market, in negotiated transactions, in underwritten offerings, or a combination of such methods of sale, at fixed prices which may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market price, or at negotiated prices. The selling shareholders may effect such transactions by selling the offered securities to or through broker-dealers, and those broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling shareholders and/or the purchasers of the offered securities for whom those broker-dealers may act as agents or to whom they sell as principals, or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. The selling shareholders reserve the right to accept or reject, in whole or in part, any proposed purchase of the offered securities, whether the purchase is to be made directly or through agents. The selling shareholders may offer these securities at various times in one or more of the following transactions: - in ordinary brokers' transactions and transactions in which the broker solicits purchasers; - in transactions involving cross or block trades or otherwise on the Nasdaq SmallCap Market; - in transactions in which brokers, dealers or underwriters purchase the shares as principal and resell the shares for their own accounts pursuant to this prospectus; - in transactions "at the market" to or through market markers of our common stock or into an existing market for the common stock; - in other ways not involving market makers or established trading markets, including direct sales of the shares to purchasers or sales of the shares effected through agents; - through transactions in options, swaps or other derivatives which may or may not be listed on an exchange; - in face-to-face transactions between sellers and purchasers without a broker-dealer; - in transactions to cover short sales; and - in a combination of any of the foregoing transactions. The selling shareholders also may sell the offered securities in accordance with Rule 144 under the Securities Act. The selling shareholders may sell short the offered securities. The selling shareholders may deliver this prospectus in connection with such short sales and use the offered securities to cover such short sales. The selling shareholders may enter into hedging transactions with broker-dealers. The broker-dealers may engage in short sales of the offered securities in the course of hedging the positions they assume with the selling shareholders. The selling shareholders also may enter into options or other transactions with broker-dealers that involve the delivery of the offered securities to the broker-dealers, who may then resell or otherwise transfer the offered securities. In addition, the selling shareholders may loan or pledge the offered securities to a financial institution or a broker-dealer, which may sell the loaned securities or, upon a default by the selling shareholder of the secured obligations, may sell or otherwise transfer the pledged securities. 23 The selling shareholders may use brokers, dealers, underwriters or agents to sell these offered securities and may enter into customary forms of underwriting agreements in connection with the sale. Any underwriter or agent involved in the offer and sale will be named in the applicable prospectus supplement. The persons acting as agents may receive compensation in the form of commissions, discounts or concessions, and will be set forth in the applicable prospectus supplement. This compensation may be paid by the selling shareholders or the purchasers of the offered securities for whom such persons may act as agent, or to whom they may sell as principal, or both. The compensation as to a particular person may be less than or in excess of customary commissions. The selling shareholders and any broker-dealers or agents that participate with the selling shareholders in the distribution of the offered securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any commissions received by them and any profit on the resale of the offered securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each selling shareholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, which provisions may limit the timing of purchases and sales of shares of our common stock by the selling shareholders. Pursuant to agreements entered into among us and the selling shareholders, we have agreed to pay all costs and expenses associated with the registration of the securities to be sold pursuant to this prospectus under the Securities Act. In addition, we have agreed to indemnify Janney Montgomery Scott LLC, who acted as placement agent in connection with the sale of the offered securities to the selling shareholders, against certain liabilities arising in connection with the offer and sale of the securities to be sold by this prospectus. It is possible that a significant number of the offered securities could be sold at the same time. These sales, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. LEGAL MATTERS The validity of the issuance of the securities offered by this prospectus will be passed upon by Schiff Hardin & Waite, Chicago, Illinois. EXPERTS The financial statements incorporated in this prospectus by reference to the Annual Report filed on Form 10-K for the year ended December 31, 1999 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 24 AMERICAN COUNTRY HOLDINGS INC. COMMON STOCK WARRANTS TO PURCHASE COMMON STOCK COMMON STOCK UNDERLYING WARRANTS COMMON STOCK UNDERLYING PREFERRED STOCK --------------------- PROSPECTUS --------------------- JANUARY 26, 2001 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses (all of which are estimated other than the SEC fee) in connection with the distribution of the securities being registered, all of which are to be paid by the Registrant, are as follows: Securities and Exchange Commission Registration Fee......... $ 1,958 Printing and Engraving Expenses............................. 10,000 Legal Fees and Expenses..................................... 40,000 Accounting Fees and Expenses................................ 10,000 Miscellaneous Fees and Expenses............................. 1,042 ------- Total....................................................... $63,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Certificate of Incorporation of the Registrant provides that (i) any person may be indemnified against all expenses, liabilities or other matters to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware (the "DGCL") and (ii) the liability of directors may be limited or eliminated to the fullest extent permitted by the DGCL except for liability (a) for any breach of a director's duty of loyalty to the Company or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL or (d) for any transactions from which a director derived an improper personal benefit. Section 145 of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interest of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145 also empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted under similar standards, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless, and only to the extent that, the Delaware Court of Chancery or the court in which such action was brought shall determine that despite the adjudication of liability such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of chancery or such other court shall deem proper. II-1 Section 145 further provides that to the extent a director, officer, employee or agent of a corporation has been successful in the defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and that the corporation is empowered to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under Section 145. We also have in effect directors' and officers' liability insurance. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits The following documents are filed as a part of this Registration Statement:
EXHIBIT DOCUMENT --------------------- -------- 4.1 Specimen Common Stock Certificate. 4.2 Class A Warrant Agreement, dated as of December 29, 2000, between the Registrant and American Stock Transfer & Trust Company, as Warrant Agent. 4.3 Form of Warrant Certificate. 4.4 Certificate of Designations, Preferences, and Rights of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed January 12, 2001). 4.5 Certificate of Amendment of Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock. 5.1 Opinion of Schiff Hardin & Waite. 23.1 Consent of PricewaterhouseCoopers LLP. 23.2 Consent of Schiff Hardin & Waite (included in Exhibit 5.1).
------------------------ (b) Financial Statement Schedules Schedules are omitted because they are either not required, are not applicable or because equivalent information has been included in the financial statements, the notes thereto or elsewhere herein. ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (a) To include any prospectus required by Section 10(a)(3) of the Securities Act; (b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; II-2 (c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(a) and (1)(b) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the SEC by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under "Item 15--Indemnification of Directors and Officers" above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment to the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on the 26th day of January, 2001. AMERICAN COUNTRY HOLDINGS INC. By: /s/ JOHN A. DORE ----------------------------------------- John A. Dore CO-CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN A. DORE Co-Chairman of the Board ------------------------------------------- and Chief Executive Officer, January 26, 2001 John A. Dore and Director (Principal Executive Officer) /s/ MARTIN L. SOLOMON ------------------------------------------- Co-Chairman of the Board January 26, 2001 Martin L. Solomon /s/ EDWIN W. ELDER President, Chief Operating ------------------------------------------- Officer and Director January 26, 2001 Edwin W. Elder Chief Financial Officer and /s/ KARLA M. VIOLETTO Vice ------------------------------------------- President (Principal January 26, 2001 Karla M. Violetto Financial and Accounting Officer) /s/ RONALD JAY GOLD ------------------------------------------- Secretary January 26, 2001 Ronald Jay Gold /s/ WILLIAM J. BARRETT ------------------------------------------- Director January 26, 2001 William J. Barrett ------------------------------------------- Director January 26, 2001 Wilmer J. Thomas, Jr. ------------------------------------------- Director January 26, 2001 John G. McMillian
II-4 EX-4.1 2 a2036122zex-4_1.txt SPECIMEN COMMON STOCK CERT. EXHIBIT 4.1 [FORM OF COMMON STOCK CERTIFICATE] AMERICAN COUNTRY HOLDINGS INC. Incorporated under the Laws of the State of Delaware No. ____ Shares CUSIP __________ THIS CERTIFIES THAT IS THE OWNER OF Fully paid and non-assessable shares of $.01 par value of American Country Holdings Inc. transferable only on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This Certificate and the shares represented hereby are issued and subject to all of the provisions of the Certificate of Incorporation, and all amendments thereto, filed in the office of the Secretary of State of Delaware, to all of which the holder, by the acceptance hereof, assents. This Certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. WITNESS the facsimile Seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: [SEAL] /s/ /s/ Secretary President Countersigned American Stock Transfer and Trust Company By:________________________________ Transfer Agent and Registrar Authorized Person 1 Reverse Side of Stock Certificate THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT-_____Custodian_______ TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right under Uniform Gifts to Minors of survivorship and not as Act__________________________ tenants in common (State)
Additional abbreviations may also be used though not in the above list. For Value Received,______________________hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _________________________________________ _________________________________________ (Please print or typewrite name and address including zip code of assignee) _________________________________________ shares represented by the within Certificate, and do hereby irrevocably constitute and appoint _________________________________________ Attorney to transfer the said shares on the books of the within-named Corporation with full power of substitution in the premises. Dated_________________________ Signature Guaranteed ______________________________ _____________________________________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. 2 EX-4.2 3 a2036122zex-4_2.txt CLASS A WARRANT AGREEMENT EXHIBIT 4.2 AMERICAN COUNTRY HOLDINGS INC. CLASS A WARRANT AGREEMENT CLASS A WARRANT AGREEMENT dated as of December 29, 2000, between American Country Holdings Inc., a Delaware corporation (hereinafter called the "Company"), and American Stock Transfer and Trust Company, having a corporate trust office in New York, New York, as warrant agent (hereinafter called the "Warrant Agent"). WITNESSETH THAT: WHEREAS, the Company proposes to issue five year common stock purchase warrants (the "Class A Warrants" or the "Warrants") entitling the holders thereof to purchase an aggregate of 814,286 shares of common stock of the Company, par value $.01 per share, (the "Common Stock" or the "Shares") at an initial cash purchase price of $1.925 per Share, subject to adjustment, at any time prior to 3:30 p.m., New York City time, on December 29, 2005 (hereinafter called the "expiration date") (unless extended as provided in Section 9 hereof); and WHEREAS, the Warrants will be offered in Units, each of which consists of one share of Common Stock and one five year common stock purchase Warrant to purchase one share of Common Stock at $1.925; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, registration, transfer, exchange and exercise of Warrants to be issued from time to time by the Company, NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: Section 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions hereinafter in this Agreement set forth, and the Warrant Agent hereby accepts such appointment. Section 2. FORM OF WARRANT. A. The text of the Warrants and the form of election to purchase Shares to be set forth on the reverse thereof shall be substantially as set forth in Exhibit A attached hereto. Each Warrant shall, subject to the terms of this Warrant Agreement, entitle the registered holder thereof to initially purchase the number of Shares specified therein at an initial exercise price of $1.925 per Share; provided, however, that the warrant exercise price and the number of Shares issuable upon exercise of Warrants are subject to adjustment upon the occurrence of certain events, all as hereinafter provided. The Warrants shall be executed on behalf of the Company by the manual or facsimile signature of the present or any future Chairman of the Board, President or Vice President of the Company, under its seal, affixed or in facsimile, and by the manual or facsimile signature of the present or any future Secretary or Assistant Secretary of the Company. B. The Company shall promptly notify the Warrant Agent from time to time in writing of the number of Warrants to be issued and furnish written instructions in connection therewith signed by an executive officer of the Company; such notification and instructions may, but need not be, in the form of a general or continuing authorization to the Warrant Agent. C. The Warrants shall be dated by the Warrant Agent as of the date of each initial issuance, and as of the date of issuance thereof upon any transfer or exchange thereof. Section 3. COUNTERSIGNATURE AND REGISTRATION. The Warrant Agent shall maintain books for the transfer and registration of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective registered holders thereof. The Warrants shall be countersigned by the Warrant Agent (or by any successor to the Warrant Agent then acting as warrant agent under this Agreement) and shall not be valid for any purpose unless so countersigned. Such Warrants may be so countersigned, however, by the Warrant Agent (or by its successor as warrant agent) and be delivered by the Warrant Agent, notwithstanding that the persons whose manual or facsimile signatures appear thereon as proper officers of the Company shall have ceased to be such officers at the time of such countersignature or delivery. Upon 1 issuance of any Warrant, the Company will present the same, or cause the same to be presented, to the Warrant Agent for countersignature of such Warrant. Section 4. TRANSFERS AND EXCHANGES. The Warrant Agent shall transfer, from time to time, any outstanding Warrants upon the books to be maintained by the Warrant Agent for that purpose, upon the surrender thereof for transfer properly endorsed or accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant of like tenor shall be issued to the transferee and the surrendered Warrant shall be cancelled by the Warrant Agent. All such Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time. The Warrants may be exchanged at the option of the holder thereof, when surrendered at the office in New York City of the Warrant Agent, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares. The Warrant Agent is hereby irrevocably authorized to countersign and deliver, in accordance with the provisions of this Section and Section 3 of this Agreement, such new Warrants required pursuant to the provisions of this Section, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose. Section 5. EXERCISE OF WARRANTS. The registered holder of each Warrant shall have the right, which may be exercised as in such Warrant expressed, to purchase from the Company (and the Company shall issue and sell to such registered holder) the number of Shares specified in such Warrants, upon surrender to the Company, at the office in New York, New York of the Warrant Agent of such Warrant, with the form of election to purchase on the reverse thereof duly filled in and signed, and upon payment to the Warrant Agent for the account of the Company of the warrant exercise price, determined in accordance with the provisions of Section 9 of this Agreement, for the number of Shares in respect of which such Warrant is then exercised. Payment of such warrant exercise price may be made in cash, or by certified check or bank draft or postal or express money order, payable in United States dollars, to the order of the Warrant Agent. No adjustment shall be made for any dividends on any Shares issuable upon exercise of any Warrant. Subject to Section 6, upon such surrender of Warrants, and payment of the warrant exercise price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the registered holder of such Warrants, and in such name or names as such registered holder may designate, a certificate or certificates for the number of full Shares so purchased upon the exercise of such Warrants, together with cash, as provided in Section 9 of this Agreement, in respect of any fraction of a Share otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Shares as of the date of the surrender of such Warrants and payment of the warrant exercise price as aforesaid; provided, however, that if, at the date of surrender of such Warrants and payment of such warrant exercise price, the transfer books for the Shares purchasable upon the exercise of such Warrants shall be closed, no such surrender of such Warrants and no such payment of such warrant exercise price shall be effective to constitute the person so designated to be named therein as the holder of record of such Shares on such date, but shall be effective to constitute such person as the holder of record of such Shares for all purposes at the opening of business on the next succeeding day on which the transfer books for the Shares purchasable upon the exercise of such Warrants shall be opened, and the certificates for the Shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened, and until such date the Company shall be under no duty to deliver any certificate for such Shares. The rights of purchase represented by the Warrants shall be exercisable, at the election of the registered holders thereof, either as an entirety or from time to time for part only of the Shares specified therein and, in the event that any Warrant is exercised in respect of less than all of the Shares specified therein at any time prior to the date of expiration of the Warrants, a new Warrant or Warrants of like tenor will be issued for the remaining number of Shares specified in the Warrant so surrendered, and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrants pursuant to the provisions of this Section and of Section 3 of this Agreement, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose. Section 6. PAYMENT OF TAXES. The Company will pay any documentary stamp taxes attributable to the initial issuance of Shares issuable upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any certificates for Shares in a name other than that of the registered holder of Warrants in respect of which such Shares are issued and the Company shall not be required to issue and deliver the certificates for such Shares unless and until the holder has paid to the Company the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Company that such tax has been paid. 2 Section 7. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall be mutilated, lost, stolen or destroyed, the Company will issue and the Warrant Agent will countersign and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company and the Warrant Agent of such loss, theft or destruction of such Warrants and indemnity, if requested, also satisfactory to them. Applicants for such substitute Warrants shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe. Any such new Warrant shall constitute an original contractual obligation of the Company whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. Section 8. RESERVATION OF SHARES, ETC. Prior to the issuance of any Warrants there shall have been reserved, and the Company shall at all times through the expiration date keep reserved, out of its authorized and unissued Common Stock, a number of Shares sufficient to provide for the exercise of the rights of purchase represented by the Warrants, and the Transfer Agent for the Shares and every subsequent Transfer Agent for the Shares issuable upon the exercise of any of the rights of purchase aforesaid are hereby irrevocably authorized and directed at all times to reserve such number of authorized and unissued Shares as shall be requisite for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent for the Shares and with every subsequent Transfer Agent for the Shares issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent certificates required to honor outstanding Warrants that have been exercised. The Company will supply such Transfer Agent with duly executed certificates for such purpose and will itself provide or otherwise make available any cash which may be issuable as provided in Section 9 of this Agreement. All Warrants surrendered in the exercise of the rights thereby evidenced or surrendered for transfer, exchange or partial exercise shall be cancelled by the Warrant Agent and shall thereafter be delivered to the Company. Section 9. AJUSTMENT OF UNDERLYING SHARE PURCHASE PRICE AND NUMBER OF UNDERLYING SHARES. The number of Shares that are the subject of the Warrants (the "Underlying Shares") purchasable upon the exercise of the Warrants and the payment of the Underlying Share purchase price which shall mean $1.925 ("Underlying Share Purchase Price") shall be subject to adjustment from time to time as follows: (a) Stock Splits, Combinations, etc. In case the Company shall hereafter, but prior to 5:00 p.m. (New York City time) on the Underlying Share Expiration Date: (i) pay a dividend or make a distribution on its Common Stock in shares of its capital stock (whether such distribution consists of shares of Common Stock or of capital stock of any other class); (ii) subdivide its outstanding shares of Common Stock; (iii) combine its outstanding shares of Common Stock into a smaller number of shares; or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, the Underlying Share Purchase Price in effect and the number of Underlying Shares issuable upon exercise of the Warrants immediately prior to such action shall be adjusted so that the Warrant Holder shall be entitled to receive that number of shares of capital stock of the Company at the same aggregate Underlying Share Purchase Price that the Warrant Holder would have owned immediately following such action had the Warrants been exercised immediately prior thereto. An adjustment made pursuant to this paragraph shall become effective on the day which is immediately after the record date in the case of a dividend and shall become effective on the day which is immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this paragraph, the Warrant Holder shall become entitled to receive shares of two or more classes of capital stock of the Company, the Board of Directors of the Company (whose determination shall be conclusive) shall determine the allocation of the adjusted Underlying Share Purchase Price between or among shares of such classes of capital stock. (b) Reclassification, Combination, Mergers, etc. In case of any reclassification or change of outstanding shares of Common Stock issuable upon exercise of the Warrants (other than as set forth in paragraph (a) above and other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation or entity (other than a merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the then outstanding shares of Common Stock or other capital stock issuable upon exercise of the Warrants), or in the case of any sale or conveyance of all or substantially all of the assets of the Company followed by a related distribution to holders of shares of Common Stock or cash, securities or other property, then as a condition of such reclassification, change, consolidation, merger, or sale of assets, the Company or such successor corporation or entity, as the case may be, shall forthwith make lawful and 3 adequate provision whereby the Warrant Holder shall have the right thereafter to receive on exercise of the Warrants (provided such exercise occurs prior to 5:00 p.m. (New York City time) on the Underlying Share Expiration Date) the kind and amount of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, or sale of assets, by a holder of shares of Common Stock immediately prior to such reclassification, change, consolidation, merger, or sale of assets, and the Company or such successor corporation or entity shall enter into a supplemental warrant agreement with the Warrant Holder so providing. Such provisions shall include provision for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. If the issuer of securities deliverable upon exercise of the Warrants under the supplemental warrant agreement is an affiliate of the formed or surviving corporation or other entity, that issuer shall join in the supplemental warrant agreement. (c) Issuance of Options or Convertible Securities. In the event the Company shall, at any time or from time to time after the date hereof, but prior to 5:00 p.m. (New York City time) on the Underlying Share Expiration Date, issue, sell, distribute or otherwise grant in any manner (including by assumption) any rights to subscribe for or to purchase, or any warrants or options for the purchase of, Common Stock or any stock or securities convertible into or exchangeable for Common Stock (any such rights, warrants or options being herein called "Options" and any such convertible or exchangeable stock or securities being herein called "Convertible Securities"), whether or not such Options or rights to convert or exchange such Convertible Securities are immediately exercisable, and the price per share at which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (1) the aggregate amount, if any, received or receivable by the Company as consideration for the issuance, sale, distribution or granting of such Options or such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options or upon conversion or exchange of all such Convertible Securities, plus, in the case of Options to acquire Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the conversion or exchange of all such Convertible Securities, by (2) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all such Convertible Securities or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options) shall be less than the current market price per share of the Common Stock on the record date that the Company becomes obligated to make such issuance, sale, distribution or granting of such Options or Convertible Securities (any such event being herein called an "Option Issuance"), then, effective upon such Option Issuance: (1) the Underlying Share Purchase Price shall be reduced to the price (calculated to the nearest one tenth of one cent ($0.001)) determined by multiplying the Underlying Share Purchase Price in effect immediately prior to such Option Issuance by a fraction, the numerator of which shall be the sum of (X) the number of shares of Common Stock outstanding (exclusive of any treasury shares) immediately prior to such Option Issuance multiplied by the current market price per share of Common Stock on the date of such Option Issuance, plus (Y) the consideration, if any, received by the Company upon such Option Issuance, and the denominator of which shall be the product of (A) the total number of shares of Common Stock outstanding (exclusive of any treasury shares) immediately after such Option Issuance, multiplied by (B) the current market price per share of Common Stock on the record date for such Option Issuance; and (2) the number of Underlying Shares purchasable upon the exercise of the Warrants shall be increased to a number determined by multiplying the number of Underlying Shares so purchasable immediately prior to the record date for such Option Issuance by a fraction, the numerator of which shall be the Underlying Share Purchase Price in effect immediately prior to the adjustment required by clause (i) of this Section 4(c) and the denominator of which shall be the Underlying Share Purchase Price in effect immediately after such adjustment. For purposes of the foregoing, the total maximum number of shares of Common Stock issuable upon exercise of all such Options or upon conversion or exchange of all such Convertible Securities or upon the conversion or exchange of the total maximum amount of the Convertible Securities issuable upon the exercise of all such Options shall be deemed to have been issued as of the date of such Option Issuance and thereafter shall be deemed to be outstanding and the Company shall be deemed to have received as consideration therefor such price per share, determined as provided above. Except as provided in paragraphs (j) and (k) below, no additional adjustment of the Underlying Share Purchase Price shall be made upon the actual exercise of such Options or upon conversion or exchange of the Convertible Securities or upon the conversion or exchange of the Convertible Securities issuable upon the exercise of such Options. 4 (d) Sale of Common Stock Below its Current Market Price. In the event the Company shall, at any time or from time to time after the date hereof, issue or sell any shares of Common Stock and the price per share at which such shares were issued or sold shall be less than the current market price per share of the Common Stock on the date the Company becomes obligated to make such issuance or sale, then, effective upon such issuance or sale: (1) the Underlying Share Purchase Price shall be reduced to the price (calculated to the nearest one tenth of one cent ($0.001)) determined by multiplying the Underlying Share Purchase Price in effect immediately prior to such issuance or sale by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding (exclusive of any treasury shares) immediately prior to such issuance or sale multiplied by the current market price per share of Common Stock on the date of such issuance or sale, plus (B) the consideration received by the Company upon such issuance or sale, and the denominator of which shall be the product of (X) the total number of shares of Common Stock outstanding (exclusive of any treasury shares) immediately after such issuance or sale, multiplied by (Y) the current market price per share of Common Stock on the date of such issuance or sale; and (2) the number of Underlying Shares purchasable upon the exercise of the Warrants shall be increased to a number determined by multiplying the number of Underlying Shares so purchasable immediately prior to the date of such issuance or sale by a fraction, the numerator of which shall be the Underlying Share Purchase Price in effect immediately prior to the adjustment required by clause (i) of this sentence and the denominator of which shall be the Underlying Share Purchase Price in effect immediately after such adjustment. (e) In the event the Company shall, at any time or from time to time after the date hereof, sell any shares of Common Stock or Convertible Securities for a consideration per share less than the Underlying Share Purchase Price in effect immediately prior to such sale then, and thereafter upon Each further such sale, the Underlying Share Purchase Price in effect immediately prior to such sale shall be changed to a price (including any applicable fraction of a cent) determined by multiplying the Underlying Share Purchase Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares and the number of shares of Common Stock which the aggregate consideration received for the issuance of such additional shares would purchase at the Underlying Share Purchase Price in effect immediately prior to such sale, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. Upon each adjustment of the warrant exercise price pursuant to this Section 9(e), the total number of shares of Common Stock purchasable upon the exercise of each Warrant shall be such number of shares (calculated to the nearest tenth) purchasable at the Underlying Share Purchase Price in effect immediately prior to such adjustment multiplied by a fraction, the numerator of which shall be the Underlying Share Purchase Price in effect immediately prior to such adjustment and the denominator of which shall be the Underlying Share Purchase Price in effect immediately after such adjustment. (f) Current Market Price. For the purpose of any computation of current market price under this Agreement, the current market price per share of the Common Stock at any date shall be the closing price on the Business Day immediately prior to the date in question. The closing price for any day shall be the last reported sale price or, in case no such reported sale takes place on such day, the average of the closing bid and asked prices for such day, in each case in the over-the-counter market as included for quotation on Nasdaq or any comparable system or if the Common Stock is not included for quotation on Nasdaq or a comparable system, as furnished by two members of the National Association of Securities Dealers, Inc. selected from time to time in good faith by the Board of Directors of the Company for that purpose. In the absence of all of the foregoing, or if for any reason the current market price per share cannot be determined pursuant to the foregoing provisions of this paragraph, the current market price per share shall be the fair market value thereof as determined in good faith by the Board of Directors of the Company. (g) Consideration Received. If any shares of Common Stock, Options or Convertible Securities shall be issued, sold or distributed for consideration other than cash, the amount of the consideration other than cash received by the Company in respect thereof shall be deemed to be the then fair market value of such consideration (as determined in good faith by the Board of Directors of the Company). If any Options shall be issued in connection with the issuance and sale of other securities of the Company, together comprising one 5 transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration. If the Company shall pay a dividend or make any other distribution payable in Options or Convertible Securities, then such Options or Convertible Securities shall be deemed to have been issued or sold without consideration. (h) Deferral of Certain Adjustments. No adjustment to the Underlying Share Purchase Price (including the related adjustment to the number of Underlying Shares) shall be required hereunder unless such adjustment, together with other adjustments carried forward as provided below, would result in an increase or decrease of at least one percent (1%) of the Underlying Share Purchase Price. No adjustment need be made for a change in the par value of the Common Stock. All calculations under this Section 4 shall be made to the nearest one tenth of one cent ($0.001) or to the nearest whole share, as the case may be. (i) Changes in Options and Convertible Securities. If the exercise price provided for in any Options referred to in paragraph (c) above, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in paragraph (c) above, or the rate at which any Convertible Securities referred to in paragraph (c) above are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution upon an event which results in a related adjustment pursuant to this Section), the Underlying Share Purchase Price then in effect and the number of Underlying Shares purchasable upon the exercise of the Warrants shall forthwith be readjusted (effective only with respect to any exercise of the Warrants after such readjustment) to the Underlying Share Purchase Price and number of Underlying Shares so purchasable that would then be in effect had the adjustment made upon the issuance, sale, distribution or granting of such Options or Convertible Securities been made based upon such changed purchase price, additional consideration or conversion rate, as the case may be, but only with respect to such Options and Convertible Securities as then remain outstanding. (j) Expiration of Options and Convertible Securities. If, at any time after any adjustment to the number of Underlying Shares purchasable upon the exercise of the Warrants shall have been made pursuant to paragraph (c) or (h) above or this paragraph, any Options or Convertible Securities shall have expired unexercised, the number of Underlying Shares so purchasable with respect to any then outstanding Warrants shall, upon such expiration, be readjusted and shall thereafter be such as they would have been had the Warrants outstanding at the time of the original adjustment been adjusted (or had the original adjustment not been required, as the case may be) as if (i) the only shares of Common Stock deemed to have been issued in connection with such Options or Convertible Securities were the shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or Convertible Securities and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale, distribution or granting of all such Options or Convertible Securities, whether or not exercised; provided that no such readjustment shall have the effect of decreasing the number of such Underlying Shares so purchasable by an amount (calculated by adjusting such decrease to account for all other adjustments made pursuant to this Section following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale, distribution or granting of such Options or Convertible Securities. (k) Other Adjustments. In the event that at any time, as a result of an adjustment made pursuant to this Section, the Warrant Holder shall become entitled to receive any securities of the Company other than Underlying Shares, thereafter the number of such other securities so receivable upon exercise of the Warrants and the Underlying Share Purchase Price applicable to such exercise shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Section. (l) Common Stock. As used in this Section, the term "Common Stock" shall mean and include the Common Stock issued and outstanding on the date hereof and shall also include any capital stock of any class of the Company thereafter authorized for issuance that is not limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary liquidation, dissolution or winding up of the Company; provided, however, that the Underlying Shares shall include only shares of such class designated in the Company's Certificate of Incorporation as Common Stock or (i) in the case of any reclassification, change, consolidation, merger, or sale of assets of the character referred to in Section 9(b) hereof, the stock, securities or property provided for in such section or (ii) in the case of any reclassification or change in the number of Underlying Shares as a result of a subdivision or combination or consisting of a change in 6 par value, or from par value to no par value, or from no par value to par value, such Underlying Shares as so reclassified or changed. (m) Determination of Net Sales Price. In case of the sale for cash of any shares of Common Stock, Options, or Convertible Securities, the consideration received by the Company therefor shall be deemed to be the net sales price therefor (after deducting therefrom any expense paid or incurred by the Company or any underwriting discounts or commissions or concessions paid or allowed by the Company in connection therewith). (n) Events Resulting in no Adjustments. No adjustment to the Underlying Share Purchase Price or to the number of Underlying Shares, however, ill be made upon (i) the exercise of any stock options issued under the Company's Stock Option Plan (the "Stock Option Plan") or the Employee Stock Purchase Plan of the Company under the terms of such plans, (ii)the exercise of any warrants by officers and directors of the Company that are outstanding as of the date hereof, (iii) the sale of any shares of Common Stock pursuant to the exercise of the Warrants (collectively, the "Exempt Securities"), (iv) any shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock and (v) any shares of Common Stock issued in connection with a merger, acquisition or other similar business combination in which the Company is the surviving corporation. (o) Notice of Change in Underlying Share Purchase Price. Upon any adjustment pursuant to this Section, the Company shall promptly thereafter (i) cause to be prepared a certificate of the President and Chief Financial Officer of the Company setting forth the Underlying Share Purchase Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Underlying Shares (or portion thereof) issuable after such adjustment in the Underlying Share Purchase Price, upon exercise of the Warrants and payment of the adjusted Underlying Share Purchase Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein absent manifest error and (ii) send to the Warrant Holder at the address appearing on the registry books maintained by the Company and to the Warrant Agent written notice of such adjustments by first-class mail, postage prepaid. Notice of Certain Events. With respect to any Notice Event, the Company shall cause to be given to the Warrant Holder at such Warrant Holder's address on the registry books maintained by the Company, and to the Warrant Agent at least 20 days prior to the applicable record date hereinafter specified, or in the case of events for which there is no record date, at least fifteen (15) days prior to the taking of such proposed action, by certified mail, return receipt requested, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock entitled to receive any such rights, options, warrants or distribution is to be determined, (iii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 4(q) or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, or liquidation or winding up, or the vote upon any action. Section 10. OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDERS. A. Warrant Holder not a Stockholder. The Warrant Holder, as such, shall not be entitled to vote or receive dividends or be deemed holders of Common Stock for any purpose whatsoever, nor shall anything contained in this Agreement be construed to confer upon the Warrant Holder, as such, any of the rights of a stockholder of the Company including, but not limited to, the right to vote for the election of directors or on any other matter, give or withhold consent to any action by the Company (whether upon any recapitalization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings or other action affecting stockholders (except for notices provided for in this Agreement), receive dividends or subscription rights, or otherwise until Warrants shall have been exercised to purchase Underlying Shares, at which time the person or persons in whose name or names the certificate or certificates for the shares of Common Stock are registered shall be deemed the holder or holders of record of such shares of Common Stock for all purposes. B. Fractional Shares. Anything contained herein to the contrary notwithstanding, the Company shall not be required to issue any fractional shares of Common Stock in connection with the exercise of the Warrants. In any case where the Warrant Holder would, except for the provisions of this Section, be entitled under the terms of this 7 Agreement to receive a fraction of a share of Common Stock upon the exercise of the Warrants, the Company shall, upon the exercise of the Warrants and receipt of the Underlying Share Purchase Price, issue the largest number of whole shares of Common Stock purchasable upon exercise of the Warrants. The Warrant Holder expressly waives his or her right to receive a certificate of any fraction of a share of Common Stock upon the exercise hereof. However, with respect to any fraction of a share of Common Stock called for upon any exercise hereof, the Company shall pay to the Warrant Holder an amount in cash equal to such fraction multiplied by the current market price per share of Common Stock determined pursuant to Section 9 hereof. Section 11. CERTAIN COVENANTS OF THE COMPANY. A. So long as any unexpired Warrants remain outstanding and if required in order to comply with the Securities Act of 1933, as amended (the "Act"), Company covenants and agrees that it will obtain and keep effective all permits, consents and approvals of governmental agencies and authorities, and will use its best efforts to take all action which may be necessary to qualify the Shares for sale under the securities laws of such of the United States, as may be necessary to permit the free exercise of the Warrants, and the issuance, sale, transfer and delivery of the Shares issued upon exercise of the Warrants, and to maintain such qualifications during the entire period in which the Warrants are exercisable. B. The Company covenants and agrees that it shall take all such action as may be necessary to ensure that all Shares will at the time of delivery of certificates for such Shares (subject to payment of the warrant exercise price) be duly and validly authorized and issued and fully paid and nonassessable Shares, free from any preemptive rights and taxes, liens, charges and security interests created by or imposed upon the Company. C. The Company covenants and agrees that it will take all action which may be necessary to cause the Shares to be duly listed on the Nasdaq National Market or any securities exchange on which the other shares of Common Stock of the Company are listed. Section 12. DISPOSITION OF PROCEEDS, ETC. A. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all moneys received by the Warrant Agent for the purchase of Shares through the exercise of such Warrants. B. The Warrant Agent shall keep copies of this Agreement available for inspection by holders of Warrants during normal business hours at its principal office in the City of New York. Section 13. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the corporate trust business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Warrant Agent under the provisions of (S)15 of this Agreement. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, and if any of the Warrants shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent and deliver such Warrants so countersigned; and in case at that time any of the Warrants shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrants either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Warrant shall have the full force provided in the Warrants and in this Agreement. In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrants shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Warrants so countersigned; and in case at that time any of the Warrants shall not have been countersigned, the Warrant Agent may countersign such Warrants either in its prior name or in its changed name; and in all such cases such Warrants shall have the full force provided in the Warrants and in this Agreement. Section 14. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: 8 A. The statements contained herein and in the Warrants shall be taken as statements of the Company, and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrants except as herein otherwise provided. B. The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrants to be complied with by the Company. C. The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys, agents or employees, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys, agents or employees or for any loss to the Company resulting from such neglect or misconduct, provided reasonable care shall have been exercised in the selection and continued employment thereof. D. The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company), and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. E. The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant for any action taken in reliance on any notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. F. The Company agrees to pay to the Warrant Agent agreed upon compensation for all services rendered by the Warrant Agent in the execution of this Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement and to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of the Warrant Agent's negligence, bad faith or willful misconduct. G. The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrants shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as the Warrant Agent may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrants or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent, and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear. H. The Warrant Agent and any shareholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. I. The Warrant Agent shall act hereunder solely as agent and not in a ministerial capacity, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own gross negligence or bad faith. Section 15. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be discharged from its duties under this Agreement by giving to the Company notice in writing, and to the holders of the Warrants notice by publication, of such resignation, specifying a date when such resignation shall take effect, which notice shall be published at the expense of the Company at least once a week for two consecutive weeks in a newspaper of general circulation in the City of New York prior to the date so specified. The Warrant Agent may be removed by the Company by like notice from the Company to the Warrant Agent and the holders of Warrants at the expense of 9 the Company. If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by the registered holder of a Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then, at the expense of the Company, the Warrant Agent or the registered holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or by such a court, shall be a bank or trust company, in good standing, incorporated under the laws of any State or of the United States of America, having at the time of its appointment as Warrant Agent a combined capital and surplus of at least $50,000,000. After appointment the successor Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent shall deliver and transfer to the successor Warrant Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to file or publish any notice provided for in this Section, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Warrant Agent or the appointment of the successor Warrant Agent, as the case may be. Section 16. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment of any Transfer Agent for the Shares or of any subsequent Transfer Agent for Shares issuable upon the exercise of the rights of purchase represented by the Warrants, the Company will file with the Warrant Agent a statement setting forth the name and address of such Transfer Agent. Section 17. NOTICES. Any notice pursuant to this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent) as follows: American Country Holdings Inc. 222 N. LaSalle Street Chicago, IL 60601 ATTN: Chief Financial Officer Any notice pursuant to this Agreement to be given or made by the Company or by the registered holder of any Warrant to or on the Warrant Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) as follows: 59 Maiden Lane New York, NY 10038 Any notice pursuant to this Agreement to be given or made by the Company or the Warrant Agent to the registered holder of any Warrant shall be sufficiently given or made (unless otherwise specifically provided for herein) if sent by first-class mail, postage prepaid, addressed to said registered holder at his address appearing on the Warrant register. Section 18. SUPPLEMENTS AND AMENDMENTS. The parties hereto may from time to time supplement or amend this Agreement without the approval of any holders of Warrants in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which will not materially adversely affect the interest of the registered holders of the Warrants. The parties hereto may also modify or amend this Agreement and the terms of the Warrants with the consent of the holders of not less than a majority in number of the then outstanding unexercised Warrants affected thereby; provided that no such modification or amendment that accelerates the expiration date, increases the exercise price, reduces the number of outstanding Warrants the consent of the holders of which is required for any such modification or amendment, or otherwise materially adversely affects the rights of the holders of the Warrants, may be made without the consent of each holder affected thereby. Section 19. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. 10 Section 20. LAW GOVERNING CONTRACT. This Agreement and each Warrant issued hereunder shall be deemed to be a contract made under the laws of the State of Illinois and for all purposes shall be construed in accordance with the laws of said State. Section 21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or entity other than the Company and the Warrant Agent and the holders of Warrants any legal or equitable right, remedy or claim under this Agreement, but this Agreement shall be for the sole and exclusive benefit of the Company and the Warrant Agent and the holders of Warrants. Section 22. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written. AMERICAN COUNTRY HOLDINGS INC. By: /s/ JOHN A. DORE ------------------------ Name: John A. Dore Its: Co-Chairman and Chief Executive Officer WARRANT AGENT By: /s/ HERBERT J. LEMMER ------------------------ Name: Herbert J.Lemmer Its: Vice President 11 EX-4.3 4 a2036122zex-4_3.txt FORM OF WARRANT CERT. EXHIBIT 4.3 [FORM OF WARRANT CERTIFICATE] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT. No. WTW- _________________ Warrants CUSIP____________ WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK VOID AFTER DECEMBER 29, 2005 AMERICAN COUNTRY HOLDINGS INC. a Delaware Corporation This certifies that FOR VALUE RECEIVED _______________ or registered assigns (the "Registered Holder") is the owner of the number of Warrants ("Warrants") specified above. Each Warrant initially entitles the Registered Holder to purchase, subject to the term and conditions set forth in this Certificate and the Warrant Agreement (as hereinafter defined), one fully paid and non-assessable share of Common Stock, $.01 par value ("Common Stock"), of American Country Holdings Inc., a Delaware corporation (the "Company"), at any time prior to the Expiration Date (as hereinafter defined) upon the presentation and surrender of this Warrant Certificate with the Subscription Form on the reverse hereof duly executed, at the corporate office of American Stock Transfer & Trust Company as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of $1.925 per share of Common Stock, if exercised at any time after the date hereof and on or before 3:30 p.m. New York time on December 29, 2005 (the "Purchase Price") in lawful money of the United States of America in cash or by official bank or certified check made payable to the Company. This Warrant Certificate and each Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the "Warrant Agreement") dated as of December 29, 2000 between the Company and the Warrant Agent. In certain events provided for in the Warrant Agreement, the Purchase Price or the number of shares of Common Stock subject to purchase upon the exercise of each Warrant represented hereby are subject to modification or adjustment. Each Warrant represented hereby is exercisable at the option of the Registered Holder, but no fractional shares of Common Stock will be issued. In the case of the exercise of less than all the Warrants represented hereby, the Company shall cancel this Warrant Certificate upon the surrender hereof and shall execute and deliver a new Warrant Certificate or Warrant Certificates of like tenor, which the Warrant Agent shall countersign, for the balance of such Warrants. The term "Expiration Date" shall mean 3:30 P.M. New York time on December 29, 2005 or such earlier date as the Warrants shall expire. If such date shall in the State of New York be a holiday or a day on which the banks are authorized to close, then the Expiration Date shall mean 3:30 P.M. New York time the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close. 2 This Warrant shall not be exercisable by a Registered Holder in any state where such exercise would be unlawful. This Warrant Certificate is exchangeable, upon the surrender hereof by the Registered Holder at the corporate offices of the Warrant Agent, for a new Warrant Certificate or Warrant Certificates of like tenor representing an equal aggregate number of Warrants, each of such new Warrant Certificates to represent such number of Warrants as shall be designated by such Registered Holder at the time of such surrender. Upon due presentment together with any tax or other governmental charge imposed in connection therewith, for registration of transfer of this Warrant Certificate at such office, a new Warrant Certificate or Warrant Certificates representing an equal aggregate number of Warrants will be issued to the transferee in exchange therefor, subject to the limitations provided in the Warrant Agreement. Prior to the exercise of any Warrant represented hereby, the Registered Holder shall not be entitled to any rights or a stockholder of the Company, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided in the Warrant Agreement. Prior to due presentment for registration of transfer hereof, the Company and the Warrant Agent may deem and treat the Registered Holder as the absolute owner hereof and of each Warrant represented hereby (notwithstanding any notations of ownership or writing hereon made by anyone other than a duly authorized officer of the Company or the Warrant Agent) for all purposes and shall not be affected by any notice to the contrary. 3 This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of Illinois. This Warrant Certificate is not valid unless countersigned by the Warrant Agent. 4 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed, manually or in facsimile by two of its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted hereon. AMERICAN COUNTRY HOLDINGS INC. Dated: ___________________________ By __________________________________ This Warrant is one of the warrants referred to in the above-mentioned Warrant Agreement Countersigned: AMERICAN STOCK TRANSFER & TRUST COMPANY as Warrant Agent By _________________________________________ Authorized Officer 5 [FORM OF REVERSE OF WARRANT CERTIFICATE] SUBSCRIPTION FORM To Be Executed by the Registered Holder in Order to Exercise Warrants The undersigned Registered Holder hereby irrevocably elects to exercise, upon the terms and subject to the conditions set forth in the Warrant Agreement dated December 29, 2000, Warrants represented by this Warrant Certificate and to purchase the securities issuable upon the exercise of such Warrants, and requests that certificates for such securities shall be issued in the name of PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER _________________________________________ _________________________________________ _________________________________________ [please print or type name and address] and be delivered to _________________________________________ _________________________________________ _________________________________________ [please print or type name and address] and if such number of Warrant shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below. In full payment of the Purchase Price with respect to the Warrants exercised, the undersigned hereby tenders payment of $_______ in cash or by official bank or certified check payable to the order of American Country Holdings Inc. and undertakes to provide the Warrant Agent any additional tax or charge within five (5) business days. The undersigned represents that the exercise of the within Warrant was solicited by a member of the National Association of Securities Dealers, Inc. if not solicited by an NASD member, please write "unsolicited" in the space below. Unless otherwise indicated by listing the name of another NASD member firm, it will be assumed that the exercise was solicited by Janney Montgomery Scott Inc. 6 ______________________________________________ (Name of NASD Member if other than Janney Montgomery Scott, Inc. or write "unsolicited.") Dated: _______________________ x ____________________________________________ ______________________________________________ ______________________________________________ Address ______________________________________________ Taxpayer Identification Number ______________________________________________ Signature Guaranteed ______________________________________________ 7 ASSIGNMENT To Be Executed by the Registered Holder in Order to Assign Warrants FOR VALUE RECEIVED, __________________________________ hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER _________________________________________ _________________________________________ _________________________________________ [please print or type name and address] ______________________ of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints____________________ Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises. Dated: x ______________________ ___________________________________________ (Signature) ____________________________________________ Name (Please Print) ____________________________________________ (Address) ____________________________________________ (Taxpayer Identification number) Signature Guaranteed ____________________________________________ THE SIGNATURE TO THIS ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR MIDWEST STOCK EXCHANGE. 8 EX-4.5 5 a2036122zex-4_5.txt CERTIFICATE OF AMENDMENT EXHIBIT 4.5 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK OF AMERICAN COUNTRY HOLDINGS INC. (PURSUANT TO SECTION 151 OF THE DELAWARE GENERAL CORPORATION LAW) AMERICAN COUNTRY HOLDINGS INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST, that the Certificate of Designations, Preferences, and Rights of Series A Convertible Preferred Stock of the Corporation (the "Certificate of Designations") be amended by deleting in its entirety Article Fourth and substituting in lieu thereof the following: The holders of the Series A Preferred Stock shall be entitled to receive dividends on a quarterly basis at a rate of 6% per annum per share, payable out of any assets or funds legally available for that purpose and payable on January 1, April 1, July 1, October 1, commencing April 1, 2001. Such dividends shall be cumulative and shall accrue, whether or not declared by the Board of Directors, but shall be payable only when, as and if declared by the Board of Directors. Accrued but unpaid dividends will be paid upon conversion of the Series A Preferred Stock. The Corporation shall have the option to pay such dividends on the Series A Preferred Stock in additional Series A Preferred Stock or in cash. In no event, so long as any Series A Preferred Stock shall remain outstanding, shall any dividend whatsoever be declared or paid upon, nor shall any distribution be made upon any Pari Passu Securities or Common Stock, nor shall any such securities be purchased or redeemed by the Corporation nor shall any moneys be paid to or made available for a sinking fund for the purchase or redemption of any such securities (other than a distribution of Pari Passu Securities or Common Stock), without, in each such case, the written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock, voting together as a class. SECOND, that the Certificate of Designations be amended by adding to the first sentence of paragraph A of Article Fifth "or Common Stock" following "Pari Passu Securities." THIRD, that the Certificate of Designations be amended by deleting in its entirety paragraph A of Article Sixth and substituting in lieu thereof the following: The outstanding shares of Series A Preferred Stock may be redeemed at the option of the Corporation (the "Optional Redemption"), in whole or in part, commencing two years after the Issue Date, out of funds legally available therefor. The Corporation may redeem the Series A Preferred Stock by payment in cash, for each share of Series A Preferred Stock to be redeemed, in an amount equal to the Liquidation Preference, as defined in Article V. The date on which the Liquidation Preference is payable is referred to herein as the "Series A Redemption Date." If less than all of the outstanding shares of Series A Preferred Stock are to be redeemed, the Corporation shall redeem a pro rata portion of the shares of Series A Preferred Stock held by each holder. FOURTH, that the Certificate of Designations be amended by deleting in its entirety paragraph B of Article Seventh and substituting in lieu thereof the following: The "Conversion Price" as used herein, shall initially be $1 3/4 per share, and shall be subject to adjustment as set forth in this Certificate. All such adjustments shall be successive. FIFTH, that the Certificate of Designations be amended by deleting from the second sentence to subparagraph 5 of paragraph D of Article Seventh "2,000,000" and inserting "2,5000,000." SIXTH, that this amendment to the Certificate of Designations was duly adopted in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, AMERICAN COUNTRY HOLDINGS INC. has caused this Certificate to be executed by John A. Dore, Co-Chairman and Chief Executive Officer of the Corporation this 18th day of January, 2001. AMERICAN COUNTRY HOLDINGS INC. By: /s/ JOHN A. DORE ------------------- John A. Dore Co-Chairman and Chief Executive Officer EX-5.1 6 a2036122zex-5_1.txt OPINION OF SCHIFF EXHIBIT 5.1 January 26, 2001 American Country Holdings Inc. 222 North LaSalle Street Chicago, Illinois 60601 Re: AMERICAN COUNTRY HOLDINGS INC. Ladies and Gentlemen: We have acted as counsel to American Country Holdings Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing by the Company of a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to which the Company is registering (i) 814,286 shares of the Company's common stock, par value $.01 per share (the "Common Stock"); (ii) 814,286 Class A warrants which are initially exercisable for one share of Common Stock (the "Class A Warrants"); (iii) 814,286 shares of Common Stock that are issuable upon the exercise of the Class A Warrants; and (iv) 2,314,283 shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock for resale to the public. The Common Stock and Class A Warrants, if and when sold, will be sold by certain shareholders of the Company. This opinion is being rendered in connection with the filing of the Registration Statement. In connection with the foregoing, we have made such examination as we have deemed necessary for the purpose of this opinion. Based upon such examination it is our opinion that, when the Registration Statement has become effective under the Securities Act, and when the Common Stock and Class A Warrants included therein have been qualified as required under the laws of those jurisdictions in which they are to be issued and when the Common Stock and Class A Warrants included therein have been sold, issued and paid for in the manner described in the Registration Statement, the Common Stock and Class A Warrants will have been validly issued and will be fully paid and non-assessable. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement. Very truly yours, /s/ STUART L. GOODMAN ---------------------- Stuart L. Goodman EX-23.1 7 a2036122zex-23_1.txt CONSENT OF PRICEWATERHOUSE EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated March 29, 2000, relating to the financial statements which appear in American Country Holding Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999. We also consent to the incorporation by reference of our report dated March 29, 2000 relating to the financial statement schedules, which appears in such Annual Report on Form 10-K. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PRICEWATERHOUSECOOPERS LLP - --------------------------------------- PricewaterhouseCoopers LLP Chicago, Illinois January 26, 2001 -----END PRIVACY-ENHANCED MESSAGE-----