PIONEER AMERICAN HOLDING COMPANY CORP.
---------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------------
TO OUR SHAREHOLDERS:
Notice is hereby given that the annual meeting of shareholders of
PIONEER AMERICAN HOLDING COMPANY CORP. (the "Company") will be held on June 8,
1999, at 10:00 A.M. (prevailing time), at the Corporate Office of Pioneer
American Holding Company Corp., 41 North Main Street, Carbondale, Pennsylvania
for the following purposes:
1. To elect the three Class 2 Directors named herein to serve as
Directors of the Company, as more fully described in the
accompanying Proxy Statement; and
2. To transact such other business as may properly come before
this meeting or any postponement or adjournment thereof.
The Board of Directors has fixed April 23, 1999 as the record date for
the determination of shareholders entitled to vote at the annual meeting. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the annual meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED
TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors,
/s/ John W. Reuther
John W. Reuther, President
Carbondale, Pennsylvania
May 10, 1999
<PAGE>
PIONEER AMERICAN HOLDING COMPANY CORP.
41 North Main Street
Carbondale, Pennsylvania 18407
(570) 282-2662
----------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
----------------------------
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Pioneer American Holding Company Corp. (the "Company") for use at
the annual meeting of shareholders to be held on June 8, 1999, at 10:00 A.M.
(prevailing time) at the Company's Corporate Office, 41 North Main Street,
Carbondale, Pennsylvania and at any postponement or adjournment thereof. The
approximate date on which this Proxy Statement and the accompanying form of
proxy will first be sent or given to shareholders is May 10, 1999.
Sending in a signed proxy will not affect the shareholder's right to
attend the annual meeting and vote in person since the proxy is revocable. Any
shareholder giving a proxy has the power to revoke it by, among other methods,
giving written notice to the Secretary of the Company at any time before the
proxy is exercised.
The expense of the proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph or teletype by directors, officers or employees of the
Company and its bank subsidiary, Pioneer American Bank, National Association
(the "Bank") without additional compensation. Upon request by record holders of
the Company's common stock, par value $1.00 per share (the "Common Stock"), who
are brokers, dealers, banks or voting trustees, or their nominees, the Company
is required to pay the reasonable expenses incurred by such record holders for
mailing proxy material and annual shareholder reports to any beneficial owners
of Common Stock.
A form of proxy is enclosed. If properly executed and received in time
for voting, and not revoked, the enclosed proxy will be voted as indicated in
accordance with the instructions thereon. If no directions to the contrary are
indicated, the persons named in the enclosed proxy will vote all shares of the
Company's Common Stock for election of the nominees for Class 3 directorships
hereinafter named.
The enclosed proxy confers discretionary authority to vote with respect
to any and all of the following matters that may come before the meeting: (i)
matters which the Company does not know, by March 30, 1999, or with respect to
directors 20 days prior to the annual meeting, are to be presented at the
meeting; (ii) approval of the minutes of a prior meeting of shareholders, if
such approval does not amount to ratification of the action taken at the
meeting; (iii) the election of any person to any office for which a bona fide
nominee is unable to serve or for good cause will not serve; (iv) any proposal
omitted from this Proxy Statement and form of proxy pursuant to Rules 14a-8 or
14a-9 under the Securities Exchange Act of 1934, as amended; and (v) matters
incident to the conduct of the meeting. In connection with such matters, the
persons named in the enclosed form of proxy will vote in accordance with their
best judgment.
The Company is not currently aware of any matters which will be brought
before the annual meeting (other than procedural matters) which are not referred
to in the enclosed notice of the annual meeting.
<PAGE>
The Company had 2,920,963 shares of Common Stock outstanding at the
close of business on April 23, 1999, the record date. The presence, in person or
by proxy, of shareholders entitled to cast at least a majority of the votes
which all shareholders are entitled to cast on a particular matter constitutes a
quorum for the purpose of considering such matter. Each share of Common Stock
outstanding is entitled to one vote on each matter which may be brought before
the annual meeting. The election of Directors will be determined by a plurality
vote. In any matters other than the election of directors, the affirmative vote
of the majority of shares present in person or represented by proxy at the
annual meeting and entitled to vote on the matter shall be the act of the
shareholders. Under the Pennsylvania Business Corporation Law, an abstention,
withholding of authority to vote or broker non-vote will not have the same legal
effect as an "against" vote and will not be counted in determining whether the
proposal has received the required shareholder vote.
Article 8 of the Company's Articles of Incorporation restricts the
rights of a Person (as hereafter defined) to cast more than 10% of the total
votes which all shareholders are entitled to cast at a meeting, unless
authorized to do so by the Board of Directors and subject to such conditions as
the Board of Directors may impose. The term "Person" includes not only
individuals and entities, but also groups of individuals and entities who act
together for the purpose of acquiring, holding, disposing of or voting Common
Stock.
The casting of votes by a Person as a proxy holder for other
shareholders is not counted in computing the 10% limitation to the extent that
the proxies so voted were revocable and were secured from other shareholders who
are not members of a group which includes such Person. Giving a revocable proxy
to a Person does not in itself cause the shareholder giving the proxy to be a
member of a group which includes such Person. Article 8 provides that the
determination by the Board of Directors of the existence or membership of a
group, and of a number of votes any Person or each member of a group is entitled
to cast, is final and conclusive absent clear and convincing evidence of bad
faith.
In the event of a violation of Article 8 and in addition to other
remedies afforded the Company, the judges of election cannot count votes cast in
violation of Article 8 and the Company or its nominees have an option to acquire
from the violator shares of Common Stock in excess of the 10% limit at prices
which would in certain situations be lower than the then current market prices
of such shares.
The foregoing is a brief summary of Article 8 and is qualified and
amplified in all respects by the exact provisions of the Articles of
Incorporation, which can be obtained in the same manner as the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998 (see "ANNUAL
REPORT").
PRINCIPAL BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth, as of April 23, 1999, certain
information with respect to the beneficial ownership of Common Stock by (i) each
person who owns of record or who is known by the Board of Directors to be the
beneficial owner of more than five percent of the outstanding Common Stock, (ii)
each Director, (iii) each of the Executive Officers named in the Summary
Compensation Table herein and (iv) all Executive Officers and Directors of the
Company as a group:
-2-
<PAGE>
<TABLE>
<CAPTION>
Shares of Common
Stock Beneficially Percent of
Name Position Owned(a) Class(b)
<S> <C> <C> <C>
Richard Chojnowski Director 146,456(c) 5.01%
3900 Robert Drive
Olyphant, PA
Gene E. Goldenziel Director 55,996(d) 1.92%
William K. Nasser Director 76,612(e) 2.62%
Margaret L. O'Connor Director 44,816(f) 1.54%
John W. Reuther President/ Director 86,037(g) 2.94%
Eldore Sebastianelli Treasurer/Director 47,020(h) 1.60%
John W. Walski Director 101,144(i) 3.47%
All Directors and Executive Officers
of the Company as a group (9 Persons) 589,168 19.20%
<FN>
(a) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission and, accordingly, may
include securities owned by or for, among others, the wife and/or minor
children of the individual and any other relative who has the same home as
such individual, as well as other securities as to which the individual has
or shares voting or investment power or has the right to acquire within 60
days after April 23, 1999. Beneficial ownership may be disclaimed as to
certain of the securities. Except as indicated in the footnotes of this
table, the persons named in this table have sole voting and investment
power with respect to all shares of Common Stock indicated.
(b) Does not include shares held by the ESOP except as specifically set forth
herein. As of April 23, 1999, the ESOP held 134,579 shares, all of which
have been allocated to individual accounts.
(c) All shares are owned jointly with his mother.
(d) Includes 21,736 shares owned jointly with his spouse and 4,000 shares held
in an IRA account.
(e) Includes 16,584 shares owned jointly with his spouse, 39,712 shares owned
individually by his spouse and 18,704 held as co-trustee of a family trust.
(f) Includes 200 shares owned by the estate of such director's husband and
44,616 held as trustee for family trust.
(g) Includes 46,000 shares which may be acquired upon the exercise of stock
options. Also includes 16 shares held by him as co-trustee for his son, 80
shares held jointly with his son, Michael, and 9,387 shares held by the
ESOP which have been allocated to his individual account.
(h) Includes 1,748 shares held as trustee for his grandchildren and 45,272
shares held jointly with his spouse.
(i) Includes 34,648 shares owned jointly with his spouse.
</FN>
</TABLE>
-3-
<PAGE>
ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors will be
divided into four classes and that each class shall serve for four years. The
Board of Directors has designated the persons listed below to be nominees for
election as Class 2 Directors. The nominees are being nominated to serve until
the end of their terms and until their successors are elected and qualified. The
Company has no reason to believe that any of the nominees will be unavailable
for election; however, should any nominee become unavailable for any reason, the
Board of Directors may designate a substitute nominee. The proxy agents intend
(unless authority has been withheld) to vote for the election of the Company's
nominees.
The Bylaws of the Company require that nominations for Directors to be
elected at an annual meeting of shareholders, except for those made by
management of the Company, must be submitted to the Secretary of the Company in
writing not later than the close of business on the 20th day immediately
preceding the date of the meeting. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the total number of shares of capital stock of the Company that
will be voted for each proposed nominee; (d) the name and residence address of
the notifying shareholder; and (e) the number of shares of capital stock of the
Company owned by the notifying shareholder. Nominations not made in accordance
herewith may, in such officer's discretion, be disregarded by the presiding
officer of the meeting, and upon the presiding officer's instruction, the vote
talliers may disregard all votes cast for each such nominee. In the event the
same person is nominated by more than one shareholder, the nomination shall be
honored, and all shares of capital stock of the Company shall be counted if at
least one nomination for that person complies with this provision.
Every Director must be a shareholder of the Company and shall own in
the Director's right the number of shares (if any) required by law in order to
qualify as such Director. Any Director shall forthwith cease to be a Director
when the Director no longer holds such shares, which fact shall be reported to
the Board of Directors by the Secretary, whereupon the Board of Directors shall
declare the seat of such Director vacated.
Information Concerning Nominees
The following table contains information with respect to the nominees
for Director. Gene E. Goldenziel was first elected to the Board of Directors of
the Company in 1985. William K. Nasser and John W. Walski were first elected to
the Board of Directors upon formation of the Company in 1984.
<TABLE>
<CAPTION>
Year First Elected
or Appointed Director Principal Occupation for
Name Age of the Bank Past Five Years
<S> <C> <C> <C>
Class 2 - Term to Expire 2003
Gene E. Goldenziel 51 1985 Attorney - Needle, Goldenziel &
` Pascale
William K. Nasser 83 1969 Retired Certified Public
Accountant -
William K. Nasser Accountants
John W. Walski 77 1982 Retired - Giant Markets
</TABLE>
-4-
<PAGE>
Information Concerning Continuing Directors
The following table contains certain information with respect to the
Directors whose terms of office expire in 2000, 2001 and 2002. Margaret L.
O=Connor was first elected to the Board of Directors of the Company in 1995.
Richard Chojnowski and John W. Reuther were first appointed to the Board of
Directors of the Company in 1994 and 1988, respectively. All other Directors
were first elected upon formation of the Company in 1984.
<TABLE>
<CAPTION>
Year First Elected
or Appointed Director Principal Occupation for
Name Age of the Bank Past Five Years
<S> <C> <C> <C>
Class 1 - Term to Expire in 2000
Richard Chojnowski 56 1994 Electrical Contractor
Class 3 - Term to Expire in 2002
Margaret L. O'Connor 68 1995 Former Mayor, Clarks Summit, PA
Class 4 - Term to Expire in 2001
John W. Reuther 49 1988 President of Company and Bank
Eldore Sebastianelli 78 1980 Retired - former co-owner - C&S
Excavating Company
</TABLE>
Committees of the Board of Directors and Attendance at Meetings
The Company does not have any audit, nominating or compensation
committees of the Board of Directors. Shareholders can submit to management
names of nominees for Directors for review and consideration by the entire Board
of Directors, as described above. The audit and compensation committee functions
are performed by the Bank's committees described below. The Company established
a Planning Committee in 1998, comprised of Directors Chojnowski, Goldenziel,
O'Connor, Sebastianelli and Walski, which is responsible for executive
employment issues and long-range planning at the Company level. This committee
met seven times during fiscal 1998.
The Bank has an Audit Committee which consists of three directors of
the Bank who are not employees of the Bank and are appointed annually by the
Board of Directors of the Bank. William K. Nasser, Eldore Sebastianelli and John
W. Walski are presently members of this Committee. The Bank's Audit Committee
met once during 1998 and is responsible for insuring that a suitable internal
control system is maintained and proper examination procedures are carried out
in all areas of the Bank on a continuing basis.
-5-
<PAGE>
The Bank also has a Planning Committee which is appointed annually by
the Board of Directors of the Bank. Gene E. Goldenziel, Richard Chojnowski,
Margaret L. O'Connor and Robert S. Wallis are presently members of this
Committee. The Bank's Planning Committee met twice during 1998 and is
responsible for long-range planning for the Bank including recommending the
compensation for executive officers of the Bank.
The Board of Directors of the Company held four regular and four
special meetings during 1998. The Board of Directors of the Bank held 24 regular
meetings during 1998. All incumbent Directors of the Company attended at least
75% of the aggregate of all the meetings of the Board of Directors and committee
meetings of the Bank on which such Directors serve, with the exception of John
Walski and Margaret L. O'Connor, whose absences were excused by the Board as
such individuals reside in Florida for a portion of the year.
Compensation of Directors
From January 1, 1998 through June 1998, members of the Board of
Directors were compensated at the rate of $200 per meeting of the Company and at
a rate of $300 per meeting of the Company from July through December 1998. From
January through October 1998, members of the Board of Directors of the Bank
received $500 per meeting of the Bank attended and $250 for meetings of the Bank
not attended. From October through the end of 1998, members of the Board of
Directors were compensated at $600 per meeting of the Bank attended and $300 for
meetings of the Bank not attended. Non-management Directors of the Bank also
received an additional fee of $10,000 during 1998.
Director Deferred Compensation Plan
The Bank maintains a Director Deferred Compensation Plan ("DDC Plan")
for the benefit of members of its Board of Directors. Under the terms of the DDC
Plan, each director entered into an agreement with the Bank which provided that
such director would contribute up to $6,000 of his board fees to the DDC Plan on
an annual basis for a period of four years from 1986 to 1990. In return, the
Bank agreed to pay each participating director an established sum annually for a
period of 15 years commencing on the first day of the month following the later
of the participant's reaching age 65 or the participant ceases to be a board
member for any reason whatsoever, voluntarily or involuntarily, including by
reason of death or disability. Once the election to participate in the DDC Plan
was made, no director was permitted to revoke such election. The amount of the
benefit payable under the DDC Plan varies based upon the amounts deferred by
each director and the age of each director participating in the DDC Plan. In the
event of death of the director, his or her beneficiary is entitled to receive
the remaining benefit owing to the director under the DDC Plan. Neither the
participant nor any beneficiary may assign or transfer any right to receive
benefits under the DDC Plan. The Bank purchased life insurance policies on each
participating director to fund its obligations under the DDC Plan. Such policies
name the Bank as beneficiary and the amounts payable thereunder were intended to
approximate the amount payable to each participating Director. Messrs.
Goldenziel, Hoyle, Nasser and Walski elected to participate in the DDC Plan.
Amounts payable to such individuals on an annual basis assuming retirement at
the later of age 65 or four years following deferral of director fees, and
contributions of an aggregate of $24,000 to the DDC Plan are $65,389, $14,142,
$4,355 and $4,355 for Messrs. Directors Goldenziel, Hoyle, Nasser, and Walski,
respectively.
-6-
<PAGE>
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
Executive Compensation
The following table sets forth all cash compensation paid by the
Company and the Bank for services rendered in all capacities to the Company and
its subsidiaries during the fiscal year ended December 31, 1998 to the Chief
Executive Officer of the Company and the Bank. No other executive officers of
the Company or the Bank had salary and bonus of more than $100,000 during the
year ended December 31, 1998
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Long Term All Other
Principal Position Annual Compensation Compensation Compensation (a)
Year Salary (b) Bonus Stock Options
<S> <C> <C> <C> <C> <C>
John W. Reuther 1998 $163,489 $15,000 - 0 - $44,739
President and Director of the 1997 141,250 16,807 - 0 - 41,478
Bank and the Company 1996 140,000 24,900 - 0 - 41,396
Donald A. Hoyle, Jr. 1998 $156,529 $ - 0 - - 0 - $49,648
Former President and Director 1997 190,150 26,040 - 0 - 51,119
of the Bank and the Company (c) 1996 189,350 38,192 - 0 - 55,560
<FN>
(a) For Mr. Reuther, $9,683 contributed to the Savings and Investment Plan, a
car allowance of $1,901, life insurance premiums paid by the Bank of $1,400
and split-dollar insurance premiums paid by the Bank of $31,755 in 1998.
For Mr. Hoyle, $6,798 contributed to the Savings and Investment Plan, a car
allowance of $830, life insurance premiums paid by the Bank of $2,019 and
split-dollar insurance premiums paid by the Bank of $40,000 in 1998.
(b) Includes Directors fees of $16,100 and $12,550 paid to Mr. Reuther and Mr.
Hoyle, respectively, during fiscal 1998.
(c) Effective October 12, 1998, Donald A. Hoyle, Jr., the former President and
Chief Executive Officer of the Company, retired from his positions with the
Company and the Bank. In connection with such retirement, the Company and
Mr. Hoyle entered into a Retirement Agreement and Mutual Release, dated
March 16, 1999 (collectively, the "Agreements"). Mr. Hoyle also resigned
his position as a director of the Company as of such date. The Agreements
provide for severance benefits to be paid to Mr. Hoyle in the form of a
lump sum payment of $216,190 (less applicable federal, state and local
withholding taxes). Such payment includes among other things, payment for
all accrued but unused vacation pay. The Company also agreed to continue
any fringe benefits payable to Mr. Hoyle after October 12, 1998, only to
the extent that such continuance is required by law. Mr. Hoyle is also
entitled to receive benefits due under the Executive Retirement Plan equal
to the sum of $78,560 per year for a ten year period the first payment of
which was made on March 1, 1999 and additional payments to be made on each
anniversary thereafter until the tenth and final payment is made in the
year 2008. Mr. Hoyle is also entitled to receive deferred directors fees as
provided under the Director Deferred Compensation Plan of the Bank and the
Director Deferred Compensation Agreement between Mr. Hoyle and the Bank,
dated March 1, 1986, which includes the right of Mrs. Elizabeth Hoyle to
receive such benefits in the event of Mr. Hoyle's death. The benefit due
-7-
<PAGE>
pursuant to the Director Deferred Compensation Plan and the Director
Deferred Compensation Agreement is $14,142 per year for a period of 15
years, subject to the provisions of such plan and agreement as of the date
of commencement of the benefits. Mr. Hoyle agreed to pay to the Company all
applicable taxes required to be withheld in connection with his January
1999 exercise of stock options granted by the Company. The Retirement
Agreement also provides that after October 12, 1998, no further premiums
shall be paid by the Bank on a life insurance policy on the life of Mr.
Hoyle issued by Principal Mutual Life Insurance Company. Mr. Hoyle also
acknowledged that he owed the Bank $289,560 pursuant to his obligation to
reimburse the Bank for premiums advanced by the Bank pursuant to such
policy. Mr. Hoyle agreed to repay the Bank the sum of $252,875 for life
insurance premiums paid by the Bank pursuant to this policy and the Bank
agreed to forgo the balance of the life insurance premiums paid.
In exchange for this payment, Mr. Hoyle agreed that he will receive no other
wages, bonuses, severance or other similar payments or benefits from the Company
except as provided in the Retirement Agreement. In consideration for this
retirement benefit, Mr. Hoyle agreed to release the Company and its affiliates
from any and all claims that he may have against the Company.
</FN>
</TABLE>
Executive Retirement Plan
On October 25, 1988, the Bank adopted an executive retirement plan (the
"Executive Retirement Plan") for the benefit of eligible employees. The
Executive Retirement Plan is administered by a committee of the Board which
designates the members who are eligible to participate in the Plan. The purpose
of the Executive Retirement Plan is to assist the Bank and the Company in
retaining the service of certain key employees until their retirement, to induce
these key employees to utilize their best efforts to maintain and enhance the
business of the Bank and the Company and to provide certain benefits to the key
employees. Under the Executive Retirement Plan, the Bank allocates each year an
amount on behalf of the member necessary to provide an annual income at the
member's normal retirement date payable for ten years equal to 35% of the
member's average compensation for his three most highly compensated years of
employment. While benefits under the Executive Retirement Plan are intended to
be unfunded obligations of the Bank, the Bank has elected to purchase insurance
policies to fund the obligations. The account of each member is credited with
interest at the rate of seven percent and compounded annually. A member shall
have a 100% vested interest in his account upon eligibility for retirement,
death, termination of his employment or in the event of a merger or acquisition
of the Bank by another entity. Upon retirement, the member is entitled to the
value of the account distributed in equal installments over a period of five,
ten or fifteen years at the election of the member. Prior to a member's
retirement, a member's beneficiary is entitled to the greater of the value of
the member's account at the time of death, or $200,000 or $250,000 as determined
by the Board of Directors. These benefits are not subject to offset for social
security benefits payable. Currently, John W. Reuther is eligible to participate
in the Executive Retirement Plan. At the retirement age of 65, Mr. Reuther would
be entitled to receive an annual retirement benefit equal to $148,613 per year
for 10 years. See "Executive Compensation" for information regarding benefits
payable to Mr. Hoyle under the Executive Retirement Plan.
Split-Dollar Life Insurance
The Bank purchased a split-dollar life insurance policy on the life of
John W. Reuther and will further pay the annual premium due on such policy
unless Mr. Reuther's employment with the Bank is terminated, voluntarily or
-8-
<PAGE>
involuntarily, or any other termination event described in the Bank's agreement
with Mr. Reuther were to occur. Mr. Reuther executed a split-dollar agreement
granting a collateral interest to the Bank for all premiums paid by the Bank.
Pursuant to such agreement, Mr. Reuther is required to repay the Bank for all
premiums paid on the life insurance policy upon the earlier of his death,
termination of service or other events described in such agreement. Upon the
death of the insured, Mr. Reuther's beneficiary shall receive the aggregate
death benefit of $979,925 payable under such policy less the aggregate premiums
paid by the Bank. See "Executive Compensation" for information regarding
premiums paid by the Bank on behalf of Mr. Reuther and the treatment of the
policy purchased by the Bank on behalf of Mr. Hoyle prior to his retirement.
Employee Stock Ownership Plan
The Board of Directors of the Bank adopted an Employee Stock Ownership
Plan ("ESOP") effective January l, 1985, and restated effective January l, 1989.
The ESOP is intended to invest primarily in the Common Stock of the Company
("Qualifying Employer Securities"). The assets of the ESOP are held in a trust
fund by the Company, as trustee (the "Trustee"), pursuant to a trust agreement.
Contributions from the Bank to the ESOP are generally required to be
made from net profits, and are made in amounts established in the sole
discretion of the Board of Directors. Each participant is entitled to direct the
Trustee with respect to the voting rights, if any, of any Qualifying Employer
Securities allocated to the participant's account provided that the issuer has a
"registration-type" class of securities. In other cases, the voting of shares
held by the ESOP, in general, will be determined by the Trustee. In addition,
under certain circumstances, a participant (or beneficiary) may exercise a "put
option" granted by the ESOP and require the Company to buy back any Qualifying
Employer Securities distributed to the participant (or beneficiary).
The operation and administration of the ESOP is controlled by a
committee appointed by the Board of Directors. The committee presently consists
of John W. Reuther, Patricia A. Cobb, Nina Sticker and Gene E. Goldenziel. The
committee designates investment policies under which the Trustee acts. The Board
of Directors has the sole responsibility to appoint and remove members of the
committee or the Trustee, and for determining the amount of contributions to the
ESOP by the Bank, and to amend or terminate, in whole or in part, the ESOP or
the trust agreement.
Any employee of the Bank in the eligible class of employees is eligible
to become a participant in the ESOP as of the January 1st following the date the
employee completed six months of service with the Bank, and will share in
employer contributions to the ESOP if he has completed 1,000 hours of service in
any year. Each participant shall be fully vested in his account after three
years of service. Stock purchased by the ESOP and dividends received by the ESOP
are allocated among the participants in proportion to their respective
compensation. Upon retirement, death or disability, a participant or his
beneficiaries, as the case may be, will generally be entitled to receive
specified benefits in the form of a single-sum distribution, subject to
alternative forms of distribution. At the discretion of the Committee, benefits
will be distributed in cash or in shares of Common Stock subject to the right of
the participant to elect to receive his benefits in shares of Common Stock. A
participant who separates from service prior to attainment of normal retirement
age has the right to receive distribution of his plan benefits commencing no
later than five years after the plan year in which he separated from service.
-9-
<PAGE>
Savings and Investment Plan
The Bank sponsors a Savings and Investment Plan ("Savings Plan") for
employees which became effective on September 1, 1985, and was restated
effective January 1, 1989. Any employee who was employed by the Bank on
September 1, 1985 automatically became a participant in the Savings Plan. Any
employee who completes 1,000 hours of service in any year is also eligible to
participate in the Savings Plan.
Subject to certain limitations, participants may contribute a portion
of their earnings for each year to the Savings Plan. For the first three percent
of earnings contributed by a participant, the Bank matches the contribution. On
the next three percent of earnings contributed by a participant, the Bank
matches one-half of the contribution. In addition, the Bank may contribute such
additional amounts as it determines. Federal income taxes on the participant's
and the Bank's contributions to the Savings Plan are deferred until the
participant withdraws funds from the Savings Plan. Each participant designates
one or more investment funds for the investment of the contributions made on the
participant's behalf. A participant is 100% vested in his account upon death or
termination of employment for any reason. Upon termination of employment by, or
death of, a participant, the participant or his estate has several alternatives
available for withdrawing funds from the Savings Plan. Withdrawals by a
participant of certain contributions and loans from the Savings Plan are also
permitted in certain situations.
Stock Option Plan
In February 1990, the Board of Directors of the Company adopted a stock
option plan, which was approved by the shareholders of the Company in May 1990
(the "Stock Option Plan"). Pursuant to the Stock Option Plan, stock options may
be granted which qualify under the Internal Revenue Code as incentive stock
options as well as stock options that do not qualify as incentive options. All
officers and key employees of the Company or any current or future subsidiary
who are employed on a full-time basis are eligible to receive options under the
Stock Option Plan. As of December 31, 1996, incentive stock options covering an
aggregate of 162,000 shares had been granted pursuant to the Stock Option Plan
at a $8.00 per share exercise price, incentive stock options covering an
aggregate of 60,000 shares had been granted at a $9.00 per share exercise price,
incentive stock options covering an aggregate of 18,000 shares had been granted
at a $11.50 per share exercise price and incentive stock options covering an
aggregate of 60,000 shares were granted at $13.00 per share exercise price. All
option amounts and the exercise prices thereof have been adjusted to give effect
to the two for one stock split effective June 5, 1996.
The purpose of the Stock Option Plan is to provide additional incentive
to employees of the Company by encouraging them to invest in the Company's
Common Stock and thereby acquire a proprietary interest in the Company and an
increased personal interest in the Company's continued success and progress. The
Stock Option Plan is administered by a committee which is appointed by the Board
of Directors and consists only of Directors who are not eligible to receive
options under the Stock Option Plan. The committee determines, among other
things, which officers and key employees receive an option or options under the
Stock Option Plan, the type of option (incentive stock options or non-qualified
stock options, or both) to be granted, the number of shares subject to each
option, the rate of option exercisability, and, subject to certain other
provisions to be discussed below, the option price and duration of the option.
The aggregate number of shares which may be issued upon the exercise of
options under the Stock Option Plan is 300,000 shares (as adjusted for the two
for one stock split effective June 5, 1996) of Common Stock. The option price
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<PAGE>
for options issued under the Stock Option Plan is to be at least equal to 100%
of the fair market value of the Common Stock as of the date the option is
granted. The fair market value is determined by the committee.
Except as otherwise described below, none of the options granted under
the Stock Option Plan may be exercised during the first year after the date
granted. Thereafter each optionee may exercise up to 50% of his option the
second year, up to 75% of his option the third year, and up to 100% of his
option thereafter. In the event of a "change in control" of the Company, as
defined in the Stock Option Plan, each optionee may exercise the total number of
shares then subject to the option. Unless terminated earlier by the option's
terms, incentive stock options expire ten years after the date they are granted
and non-qualified stock options expire ten years and ten days after the date
they are granted.
The following table sets forth certain information concerning the
shares acquired upon exercise of options, the number of unexercised options and
the value of unexercised options at December 31, 1998 held by the Executive
Officers listed in the Summary Table. No options were granted during the year
ended December 31, 1998.
OPTION EXERCISES AND YEAR-END VALUE TABLE
Aggregate Option Exercises In Last Fiscal Year and Option
Value at December 31, 1998
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options
December 31, at December 31, 1998(a)
1998
<S> <C> <C> <C> <C>
Shares
Name Acquired Value Exercisable/ Exercisable/
on Exercise Realized Unexercisable Unexercisable
John W. Reuther 10,000 $130,000 46,000/0 $486,000/0
Donald A. Hoyle, Jr. - 0 - 0 - 46,668/0 $478,684/0
<FN>
(a) Based upon the difference between the market value of $22.00 per share
on December 31, 1998 and the exercise price of the option (as adjusted
for the two to one stock split effective June 5, 1996).
</FN>
</TABLE>
Certain Relationships and Related Transactions
The Bank has had and expects to have in the future, loan and other
banking transactions in the ordinary course of business with many of its
Directors, officers, and their associates. All extensions of credit to such
persons have been made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and in the opinion of the
management of the Bank, do not involve more than a normal risk of collectibility
or present other unfavorable features.
The law firm of Needle Goldenziel & Pascale was paid legal fees of
approximately $66,000 by or on behalf of the Company or its subsidiaries for
legal services rendered during 1998 (of which $14,000 was paid by borrowers of
the Bank). Gene E. Goldenziel, who is a Director of the Bank and the Company, is
a partner in Needle, Goldenziel & Pascale. Needle, Goldenziel & Pascale has been
retained by the Bank and the Company to perform legal services in 1999.
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<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act (ASection 16(a)@) requires the
Company's directors, executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, if any, to file with the
SEC initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers and directors were
complied with.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pioneer American Bank, N.A., through its Board of Directors, has
determined that all matters dealing with executive compensation shall be
analyzed by the Planning Committee. The Board has mandated the exclusion of the
management director in the analysis process. The independent directors of the
Planning Committee have forwarded the following report on executive
compensation. Said report shall be included in the Pioneer American Holding
Company Corp.'s 1999 Proxy Statement.
Pioneer American Bank, N.A. through its salary administration plan has
implemented compensation policies that compensate all personnel on a fair and
equitable basis, while recognizing demonstrated performance and contribution to
the successful operation of the organization. More explicitly, a determination
has been made through the salary administration process that the relative worth
of the President/Chief Executive Officer to the Company is high, with extensive
diversification, executive management skills for the entire organization,
effective internal and external communication skills, problem-solving skills
based on analysis of long-range impact and the ability to make administrative
and policy-making decisions required. The relative worth of the other executive
officers of the Company is also high with the job requirements identified above
also essential. This relative worth of the President/Chief Executive Officer and
all executive officers has been translated into salary levels. The salary levels
have been initially determined by reviewing labor market salary data from
surveys of salaries paid in the external labor market positions comparable to
the executive positions in Pioneer American Bank, N.A. The Human Resources
department procures this salary data for use by the Planning Committee from a
third party independent salary administration firm. The survey sources, whenever
possible, included organizations of comparable size for characteristics, such as
number of employees and asset size, as well as larger financial institutions
with comparable positions.
The Committee annually evaluates and recommends base compensation,
bonus compensation and annual and longer-term incentive compensation for the
President/Chief Executive Officer, and other executive officers. Annual
increases to the base salary of the President/Chief Executive Officer, and other
executive officers are determined by industry and peer group standards, national
and regional economic conditions, and by the past and expected future
contributions of the individual executive officers. The base salary of the
President/Chief Executive Officer for 1998, 1997 and 1996 will be presented in
the Company's annual proxy statement.
Bonus compensation is determined on an annual basis by analyzing the
achievement of financial goals, including, but not limited to, growth, earnings,
-12-
<PAGE>
return on assets and return on equity. Financial statistics for 1998, as will be
presented in the 1998 annual report, reflect success in the attainment of
corporate goals. The bonus of the President/Chief Executive Officer for 1998 was
based upon corporate performance. All other executive officers were
independently analyzed in their individual performance in contributing to the
corporate success in determining each bonus.
In summary, the 1998 compensation of the President/Chief Executive
Officer was fixed separately and was based, among other factors, on a review of
competitive compensation data from surveys and peer companies. Bonus
compensation was paid to the President/Chief Executive Officer based on
corporate performance in 1998.
The foregoing report has been furnished by Gene E. Goldenziel, Esquire,
Richard Chojnowski, Margaret L. O'Connor and Robert S. Wallis.
Compensation Committee Interlocks and Insider Participation
The Bank's Planning Committee, which acts as the compensation committee, is
comprised of Directors Chojnowski, Goldenziel, O'Connor and Wallis. Gene E.
Goldenziel, a member of such committee, is a partner with the law firm of
Needle, Goldenziel & Pascale which performs legal services for the Company and
the Bank. During fiscal 1998, $66,000 (of which $14,000 was paid by borrowers of
the Bank) in legal fees were paid to Mr. Goldenziel's firm by or on behalf of
the Company and the Bank.
-13-
<PAGE>
Stock Performance Graph
The following graph shows a comparison of the five-year cumulative
return for the Company=s Common Stock, the S&P SmallCap Bank Index (the "Bank
Composite") and the S&P SmallCap 600 Index assuming an investment in each of
$100 on December 31, 1993 and the reinvestment of all dividends.
[GRAPH]
<TABLE>
<CAPTION>
Base
Period Years Ending
Dec 93 Dec 94 Dec 95 Dec 96 Dec 97 Dec 98
<S> <C> <C> <C> <C> <C> <C>
Pioneer American Holding Company Corp. $100 $164.36 $176.39 $221.32 $220.57 $232.80
S&P SmallCap 600 Index 100 95.23 123.76 150.14 188.56 186.10
Bank Composite 100 94.87 151.18 214.00 309.11 329.55
</TABLE>
-14-
<PAGE>
OFFICERS OF THE COMPANY AND THE BANK
Information concerning the Executive Officers of the Company is
provided above under AInformation Concerning Nominees@ and AInformation
Concerning Continuing Directors.@
The following table sets forth selected information about the officers
of the Bank, each of whom is elected by the Board of Directors and each of whom
holds office at the discretion of the Board of Directors. Each of the officers
of the Bank has been principally employed as an officer or employee of the Bank
for more than the past five years. "Officer of the Bank" as used herein means
those persons with the title of Executive Vice President and higher:
<TABLE>
<CAPTION>
Name Age Position with the Bank Held Since
<S> <C> <C> <C>
Eldore Sebastianelli 78 Chairman 1998
Director 1980
John W. Reuther 49 President 1998
Director 1988
Patricia A. Cobb, Esquire 41 Executive Vice President 1998
James E. Jackson 55 Executive Vice President 1998
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG LLP acted as the Company's independent
public accountants for the fiscal year ended December 31, 1998 and has been
selected to act as the Company's independent public accountant for the fiscal
year ended December 31, 1999. A representative of KPMG LLP is expected to be
present at the annual meeting of shareholders and to have the opportunity to
make a statement, if he desires to do so, and is expected to be available to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
Pursuant to the proxy rules promulgated under the Securities and Exchange
Act of 1934, as amended, (the "Exchange Act"), the deadline for providing the
Company timely notice of any stockholder proposal to be submitted outside of the
Rule 14a-8 process for consideration at the Company's Annual Meeting to be held
in 2000 (the "2000 Annual Meeting") will be March 27, 2000. As to all such
matters which the Company does not have notice on or prior to March 27, 2000,
discretionary authority shall be granted to the persons designated in the
Company=s proxy related to the 2000 Annual Meeting to vote on such proposal.
This change in procedure does not affect the Rule 14a-8 requirements applicable
to inclusion of stockholder proposals in the Company's proxy materials related
to the 2000 Annual Meeting. Shareholder proposals regarding the 2000 Annual
Meeting must be submitted to the Company by January 12, 2000 to be considered
for inclusion in the Company's proxy material.
-15-
<PAGE>
ANNUAL REPORT
This Proxy Statement is accompanied by the Annual Report to
Shareholders of the Company for the year ended December 31, 1998.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 REQUIRED
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE, EXCEPT
FOR EXHIBITS TO THE REPORT, BY SENDING A WRITTEN REQUEST THEREFOR TO:
John W. Reuther, President
Pioneer American Holding Company Corp.
41 North Main Street
Carbondale, Pennsylvania 18407
<PAGE>
PIONEER AMERICAN HOLDING COMPANY CORP.
Proxy for Annual Meeting of Shareholders
June 8, 1999
Solicited on behalf of the Board of Directors
The undersigned hereby constitutes and appoints Daniel Corazzi, John Kuna and
Basil Telep and each of them, as attorneys-in-fact and proxies of the
undersigned, with full power of substitution for and in the name, place and
stead of the undersigned to appear at the Annual Meeting of Shareholders of
Pioneer American Holding Company Corp. ("Pioneer"), to be held on the 8th day of
June, 1999, and at any postponement or adjournment thereof, and to vote all of
the shares of Common Stock of Pioneer which the undersigned is entitled to vote,
with all the powers and authority the undersigned would possess if personally
present. The undersigned directs that this proxy be voted as follows:
Please mark your votes as in this example. [X]
1. For [ ] the election of Gene E. Goldenziel, William K. Nasser and John W.
Walski, as Directors of Pioneer for terms of four years, as more fully
described in the accompanying Proxy Statement (to withhold authority to
vote for all nominees, check this box: [ ])
To withhold authority to vote for an individual nominee, write that
nominee's name on the space provided below.
____________________________________
2. To transact such other business as may properly come before this meeting or
any postponement or adjournment thereof.
This proxy will, when properly executed, be voted as directed. If no
directions to the contrary are indicated, the persons named herein intend to
vote for the election of the named nominees for director.
(Continued, and to be signed on the reverse side)
<PAGE>
THE PROXY AGENTS PRESENT AND ACTING IN PERSON OR BY THEIR SUBSTITUTES
(OR, IF ONLY ONE IS PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE ALL THE
POWERS CONFERRED BY THIS PROXY. DISCRETIONARY AUTHORITY IS CONFERRED BY THIS
PROXY AS TO CERTAIN MATTERS DESCRIBED IN THE COMPANY'S PROXY STATEMENT.
The undersigned hereby acknowledges receipt of Pioneer's 1998 Annual Report
to Shareholders, Notice of the Company's 1999 Annual Meeting of Shareholders and
the Proxy Statement relating thereto.
DATE:___________________________, 1999
(Please date this Proxy)
--------------------------------------
--------------------------------------
Signature(s)
It would be helpful if you signed your name
exactly as it appears on your stock
certificate(s), indicating any official
position or representative capacity. If
shares are registered in more than one name,
all owners should sign.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
