April 2, 1996
VIA EDGAR
United States Securities & Exchange Commission
450 Fifth Street, N.W.
Washington DC 20549
Re: 1996 Proxy Statement
Dear Sir/Madam:
Pursuant to Rule 14a-6(a) under the Securities Exchange Act of 1934,
enclosed please find the Company's preliminary proxy statement and form of
proxy intended for use in connection with the 1996 Annual Meeting of
Shareholders of the company. Please note that the Company intends to mail
definitive copies of such documents on April 19, 1996 to shareholders of
record on April 4, 1996. If the Staff intends to review the preliminary proxy
materials, the Company would appreciate receiving comments, if any,
sufficiently in advance of the intended mail date so that any outstanding
issues can be resolved by such date. The proxy statement is being filed in
preliminary form solely because the Company is seeking shareholder approval of
the authorization of additional shares of common stock.
The Company has paid the appropriate filing fee to the Commission's
lockbox.
Pursuant to Instruction 5 to Item 10(b)(2), please be advised that the
options and the shares called for under the 1996 Stock Option Plan will be
registered under the Securities Act on Form S-8 prior to any offer or sales of
such securities in connection with such plan.
Please do not hesitate to contact the undersigned if you have any
comments or questions.
Thank you.
Very truly yours,
Susan T. Mankowski
Vice President - Administration
SM:clm
Preliminary Copy
American Travellers Corporation
3220 Tillman Drive
Bensalem, Pennsylvania 19020
215-244-1600
1996 ANNUAL MEETING OF SHAREHOLDERS
April 19, 1996
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of
Shareholders which will be held at The Holiday Inn Bucks County, Yardley
Room A, 4700 Street Road, Trevose, Pennsylvania 19053, at 10:00 A.M., local
time, on Thursday, May 23, 1996.
We hope you will be able to attend this year's Annual Meeting in person
and we encourage you to do so. The Company's management will report on
operations and will be available to respond to questions you have about the
Company's business.
Whether or not you plan to attend, it is important that your shares be
represented and voted at the meeting. Therefore, we urge you to complete,
sign, date and return your proxy card promptly in the enclosed envelope.
Sincerely,
John A. Powell
Chairman of the Board and President
AMERICAN TRAVELLERS CORPORATION
3220 Tillman Drive
Bensalem, Pennsylvania 19020
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF AMERICAN TRAVELLERS CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of
American Travellers Corporation (the "Company") will be held at The Holiday
Inn Bucks County, Yardley Room A, 4700 Street Road, Trevose, Pennsylvania
19053, on Thursday, May 23, 1996, at 10 A.M., local time, for the following
purposes:
1. To elect three Class I directors, each to serve for three years
and until their respective successors are elected and qualified;
2. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to increase the number of shares of
Common Stock, which the Company has authority to issue from
37,500,000 to 50,000,000;
3. To consider and act upon a proposal to approve the Company's 1996
Stock Option Plan; and
4. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
Only shareholders of record at the close of business on April 4, 1996
are entitled to notice of, and to vote at, the meeting and any adjournment(s)
thereof.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON BUT IF YOU DO NOT
EXPECT TO ATTEND IN PERSON, YOU ARE URGED TO SIGN AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
Dated: April 19, 1996
By Order of the Board of Directors,
Susan T. Mankowski
Secretary
AMERICAN TRAVELLERS CORPORATION
PROXY STATEMENT
Annual Meeting of Shareholders
May 23, 1996
This Proxy Statement is being furnished to shareholders of the Company
in connection with the solicitation of proxies on behalf of the Board of
Directors of the Company for use at the Annual Meeting of Shareholders of the
Company to be held at 10 A.M., local time, on May 23, 1996, at The Holiday Inn
Bucks County, Yardley Room A, 4700 Street Road, Trevose, Pennsylvania 19053,
and at any and all adjournments thereof, for the purpose of considering and
acting upon the matters referred to in the preceding Notice of Annual Meeting
of Shareholders and more fully discussed herein. The mailing address of the
Company's executive offices is 3220 Tillman Drive, Bensalem, Pennsylvania
19020.
This Proxy Statement and the accompanying form of proxy are first being
mailed on or about April 19, 1996 to shareholders of the Company entitled to
notice of, and to vote at, the meeting.
Quorum and Voting
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 will constitute a quorum for the purpose of considering such
matter. The election of each nominee to the Board of Directors requires the
affirmative vote of at least a majority of the votes represented at the
meeting. The affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon is required to approve Proposals 2 and
3.
Proxies in the accompanying form which are properly executed, duly
returned to the Company and not revoked will be voted in accordance with the
instructions therein. IF NO INSTRUCTION IS GIVEN, THE PROXY WILL BE VOTED FOR
PROPOSALS 2 AND 3 AND FOR EACH OF THE NOMINEES NAMED HEREIN. The presence at
the meeting of a shareholder will not revoke his proxy. However, a proxy may
be revoked at any time before it is voted by written notice to the Company,
addressed to Susan T. Mankowski, Secretary, at the executive offices of the
Company or by written notice to the Company delivered at the meeting to Susan
T. Mankowski or any other person duly appointed to act as secretary for the
meeting; however, a revocation shall not be effective until such notice has
been received and a revocation shall not affect a vote on any matter cast
prior to such receipt.
Record Date and Shares Outstanding
The close of business on April 4, 1996 has been fixed as the record date
with respect to this solicitation and for the determination of shareholders
entitled to receive notice of, and to vote at, the meeting. The stock
transfer books will not be closed. At the close of business on the record
date, there were issued and outstanding and entitled to be voted at the
meeting 16,242,196 shares of the Company's Common Stock, $.01 par value (the
"Common Stock"). Such amount reflects a three-for-two stock split of the
authorized and outstanding Common Stock effective April 10, 1996 for security
holders of record on March 20, 1996. Unless otherwise indicated, all
references to amounts of shares of Common Stock contained herein are
on a post-split basis. At the meeting, each shareholder will be entitled,
with respect to each matter to be voted on, to cast one vote in person or by
proxy for each share of Common Stock held by such shareholder. Abstentions,
and any shares as to which a broker or nominee indicates that it does not have
discretionary authority to vote on a particular matter, will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining whether the
approval of shareholders has been obtained with respect to any such matter and
thus will have the effect of a vote to "Withhold Authority" in the election of
directors or as a vote "Against" all other matters included in the proxy.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the record date (unless
otherwise indicated) regarding the stock ownership of (i) each person known to
the Company to beneficially own more than five percent of its Common Stock,
(ii) each of the Company's directors and nominees for director, (iii) the
executive officers named in the Executive Compensation section herein, and
(iv) the Company's directors and officers as a group. Unless otherwise
indicated, each person has sole voting and investment power over the shares
deemed to be beneficially owned by such person.
Approximate
Number of Shares Percentage
Name and Address of Beneficial Owners Beneficially Owned of Class
John A. Powell . . . . . . . . . . . . 1,211,592 (1)(2) 7.2%
Brinson Partners, Inc. . . . . . . . . . . . 1,307,994 (3) 8.1%
209 South La Salle St.
Chicago, Illinois 60604-1295
Trust under Deed of Trust of
Francis E. Powell, Jr. . . . . . . . . . 1,062,693 (4) 6.5%
c/o Ramon R. Obod, Esquire
2000 Market Street, 10th Floor
Philadelphia, Pennsylvania 19103
FMR Corp. 916,719 (5) 5.4%
82 Devonshire Street
Boston, Massachusetts 02109
Susan T. Mankowski . . . . . . . . . . 134,250 (2) (6)
Walter E. Conrad. . . . . . . . . . . . . 73,956 (2) (6)
Walter J. Diener. . . . . . . . . . . . . . . . 78,000 (2)(7) (6)
Thomas J. Parry . . . . . . . . . . . . . . . . 49,749 (2) (6)
Alice E. Powell . . . . . . . . . . . . . 43,500 (2)(4) (6)
Arnold H. Keehn . . . . . . . . . . . . . . . 40,650 (2) (6)
Ronald J. Holmer. . . . . . . . . . . . . . . 39,856 (2)(8) (6)
Ramon R. Obod . . . . . . . . . . . . . . . 33,355 (2)(4) (6)
Benedict J. Iacovetti. . . . . . . . . . . . . 19,749 (2) (6)
Ernest Iannucci. . . . . . . . . . . . . . . . 12,249 (2) (6)
Henry G. Hager . . . . . . . . . . . . 4,998 (2) (6)
Directors and officers as a group (15 persons) 1,855,607 (2) 10.7%
___________________
(1) Includes 50,052 shares for which James V. Fiumara, Sr. and his wife have
appointed Mr.Powell as their proxy for the purpose of voting their shares.
(2) John A. Powell, Susan T. Mankowski, Walter E. Conrad, Walter J. Diener,
Thomas J. Parry, Alice E.Powell, Arnold H. Keehn, Ronald J. Holmer, Ramon R.
Obod, Benedict J. Iacovetti, Ernest Iannucci, Henry G. Hager and the directors
and officers of the Company as a group may acquire 667,500, 111,750, 12,000,
19,500, 48,249, 42,000, 39,000, 32,499, 18,750, 19,749, 10,749, 3,498 and
1,129,699 shares, respectively, pursuant to stock options which are currently
exercisable or become exercisable within sixty (60) days, which numbers of
shares are included in the respective numbers of shares beneficially owned.
(3) Brinson Partners, Inc. ("BPI") has indicated in a Schedule 13-G dated
February 9, 1996 filed on behalf of itself, its wholly-owned subsidiary,
Brinson Trust Company ("BTC"), its parent company, Brinson Holdings, Inc.
("BHI"), BHI's parent company, SBC Holding (USA), Inc. ("SBCUSA"), and
SBCUSA's parent company, Swiss Bank Corporation ("SBC"), that BPI owns
directly 956,812 of the shares, BTC owns directly 351,182 of the shares and
that BHI, SBCUSA and SBC own the shares indirectly through BPI and BTC.
(4) Alice E. Powell, Debra F. Powell and Ramon R. Obod are trustees
("Trustees") of the Trust under Deed of Trust of Francis E. Powell, Jr.,
Settlor, dated August 24, 1988 (the "Trust"). Shares owned by the
Trust are not included in the number of shares beneficially owned by the
Trustees.
(5) FMR Corp. has indicated in a Schedule 13-G dated February 14, 1996 that it
has sole voting power only with respect to 156,954 of the shares. Share
amounts include 631,717 shares obtainable upon conversion of the Company's
convertible subordinated debentures owned by FMR Corp.
(6) Less than 1%.
(7) All shares held jointly by Mr. Diener and his wife.
(8) Includes 2,775 shares held by Mr. Holmer's wife and 1,582 shares
obtainable by Mr. Holmer's wife upon conversion of the Company's convertible
subordinated debentures owned by her.
ELECTION OF DIRECTORS
The Articles of Incorporation provide that the Company shall have a
Board of Directors that is divided into three classes, each class to consist,
as nearly as may be possible, of one-third of the total number of directors.
One class shall be elected each year to serve as directors for a term of three
years. Directors elected to fill vacancies and newly created directorships
will be elected to serve for the balance of the term of the class to which
they are elected. At the present time, Class I and II have three directors and
Class III has two directors. Class I is to be elected at the meeting, each
member to serve a three-year term expiring in 1999 and until their respective
successor is elected and qualified. The three nominees named below will be
placed before the shareholders for election to Class I.
Unless authority to vote for one or more nominees is withheld, the
proxies will be voted for management's Class I nominees, Alice E. Powell,
Walter E. Conrad and Arnold H. Keehn. Each of the nominees is presently
serving as a director of the Company.
If any of the nominees becomes unwilling or unable to serve, which is
not expected, the proxies will be voted for a substitute nominee(s) designated
by the Board of Directors.
The following table sets forth information concerning the Company's
directors and management's nominees:
First Became Principal Occupation
Name and (Age) a Director for the Past Five Years
Class I -- Nominees for election in 1996 to serve until the Annual Meeting in
1999:
Alice E. Powell (72). .1989 Retired. For over 35 years
prior to her retirement in
November 1991, Mrs. Powell
owned and was active in the
administration of The Powell
Insurance Agency, a general
insurance agency.
Walter E. Conrad (69) .1978 Owner for more than 30 years of
The Walter Conrad Agency, a
general insurance agency and a
general agent for an insurance
subsidiary of the Company since
1977.
Arnold H. Keehn (67). .1986 Engaged for more than the past
20 years in the private
practice of law in Montgomery
County, Pennsylvania as a sole
practitioner.
Class II -- Directors elected in 1995 to serve until the Annual Meeting in
1998:
John A. Powell (51) . .1971 Vice President in charge of
operations of the Company from
1971 until October 1985,
President of the Company from
October 1985 to September 1990
and from November 1991 to
present and Chairman of the
Board since April 1989.
Walter J. Diener (78) .1972 Retired. Prior to his
retirement in 1981, Mr. Diener
owned Walter J. Diener Real
Estate, a real estate agency in
Fort Washington, Pennsylvania.
Henry G. Hager (61). . .1995 President since 1985 of the
Insurance Federation of
Pennsylvania, Inc., an
insurance industry trade
association with over 200
members. Mr. Hager is also a
partner in the law firm of
Stradley, Ronon, Stevens &
Young and a director of
American Water Works, Inc.
Class III -- Directors elected in 1994 to serve until the Annual Meeting in
1997:
Susan T. Mankowski (48). ..1989 Assistant Secretary of the
Company from 1977 to May 1989
and Secretary and Assistant
Treasurer of the Company since
May 1989, Vice President --
Operations from November 1989
to March 1991, Vice President
-- Chief Information Officer
from April 1991 to November
1993, Vice President --
Internal Business Systems from
November 1993 to June 1995 and
Vice President --
Administration since June 1995.
Ramon R. Obod (61). . .1986 Partner for more than the past
20 years in the law firm of
Fox, Rothschild, O'Brien &
Frankel, Philadelphia,
Pennsylvania, General Counsel
to the Company.
During the year ended December 31, 1995, nine meetings of the Board of
Directors were held and the Board of Directors acted by unanimous consent on
two occasions.
The Board of Directors has established Executive, Compensation,
Nominating, Audit and Option Committees to assist in the discharge of its
responsibilities.
The Executive Committee presently consists of John A. Powell, Chairman,
and Ramon R. Obod. Such Committee has all the powers and exercises all of the
duties of the Board of Directors, except as otherwise provided by law. During
the year ended December 31, 1995, there was one meeting of the Executive
Committee and the Executive Committee acted by unanimous consent on one
occasion.
Arnold H. Keehn, Chairman, Walter J. Diener and Walter E. Conrad
constitute the Audit Committee. John A. Powell is an ex-officio member of the
Audit Committee. This Committee performs the following functions:
- recommends to the full Board of Directors the engagement of
independent public accountants for the ensuing year;
- reviews the plan and results of the audit engagement by the
Company's independent public accountants, including review of the
management letter;
- reviews the scope and results of the Company's internal audit
procedures.
Two meetings of the Audit Committee were held during the year ended December
31, 1995.
The Option Committee, administers the Company's various stock option
plans. From January 1995 through May 24, 1995 the Committee consisted of
Walter J. Diener and Walter E. Conrad. From May 25, 1995 through the present
such committee was comprised of Messrs. Diener and Keehn. The Option
Committee met three times in the year ended December 31, 1995.
The Compensation Committee is comprised of Arnold H. Keehn, Walter E.
Conrad and Alice E. Powell. John A. Powell is an ex-officio member of the
Compensation Committee. The Compensation Committee is generally responsible
for setting guidelines and making recommendations with respect to the
compensation levels of all executive officers of the Company. Mr. Powell does
not participate in matters dealing with his own compensation. The Compensation
Committee met twice during the year ended December 31, 1995.
The Nominating Committee is comprised of Arnold H. Keehn and Ramon R.
Obod. John A. Powell is an ex-officio member of the Nominating Committee. The
Nominating Committee makes recommendations with respect to nominees for the
Board of Directors. The Nominating Committee met once in 1995 and recommended
the nominees placed before the meeting. Under the Company's by-laws,
nominations for directors to be elected at the annual meeting of shareholders
must be submitted in writing to the Secretary of the Company not later than
the close of business on the tenth day immediately preceding the date of the
meeting and must be accompanied by the signed written consent of the nominee
to serve if elected.
In 1995, each director attended at least 75% of the total number of
meetings of the Board of Directors and the committee(s) on which he or she
served.
Ramon R. Obod, a director of the Company, is a member of the law firm of
Fox, Rothschild, O'Brien & Frankel, which was retained by the Company as
General Counsel during the fiscal year ended December 31, 1995, and which is
being retained by the Company in such capacity during the current fiscal year.
Henry G. Hager, a director of the Company, is a member of the law firm of
Stradley, Ronon, Stevens & Young, which was retained by the Company in
connection with a routine litigation matter. John A. Powell is the father of
Denise Powell who is a Vice President of the Company.
Compensation of Directors
Employees of the Company and persons affiliated with the Company's
General Counsel are not paid any fees for their services as directors of the
Company. Other directors are paid a fee of $500 for each meeting of the Board
of Directors or any Committee meeting which they attend (provided the fee for
attendance at committee meetings is $300 if held on the same day as a Board
meeting), plus a retainer of $15,000 annually. Each director who is not an
employee of the Company automatically receives an option to purchase 1,500
shares of Common Stock annually, exercisable at the fair market value of the
Common Stock at the time of the grant. In addition, each director is provided
with a fully-paid long-term care policy (having an annual premium value of
approximately $2,000-$7,500 depending on the age of the director) which policy
provides a $150 per diem lifetime benefit upon confinement to a nursing
facility.
Alice E. Powell acts as a consultant to the Company in connection with
the development of a newsletter for policyholders and agents for which she is
compensated $50,000 annually.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries to the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers (hereinafter collectively referred to as the
named executive officers) for the fiscal years ended December 31, 1995, 1994
and 1993.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Rest- Securities All
and Annual ricted Under- Other
Principal Compen- Stock lying LTIP Compen-
Position Year Salary Bonus sation Awards Options/ Payouts sation
($) ($) ($) ($) SARs(1) ($) ($)
John A. Powell
1995 551,388 500,000 0 0 300,000 0 20,226(2)
1994 523,348 388,200 0 0 67,500 0 30,579
1993 478,576 325,000 0 0 150,000 0 26,837
President, Chairman of the Board and Chief Executive Officer
Thomas J. Parry
1995 127,616 65,000 0 0 30,000 0 7,287(3)
1994 110,000 25,000 0 0 9,000 0 565
1993 98,435 25,000 0 0 15,000 0 4,323
Vice President - Product Development & Compliance
Ronald J. Holmer
1995 134,327 50,000 0 0 21,750 0 10,202(3)
1994 117,192 25,000 0 0 7,500 0 11,228
1993 108,000 25,000 0 0 15,000 0 856
Vice President - Operations
Ernest Iannucci
1995 126,942 30,000 0 0 21,750 0 1,543(3)
1994 113,173 20,000 0 0 4,500 0 0
1993 35,962 2,000 0 0 7,500 0 0
Vice President - Chief Information Officer
Benedict J. Iacovetti
1995 116,365 45,000 0 0 24,750 0 8,230(3)
1994 100,000 20,000 0 0 6,000 0 1,155
1993 94,423 10,000 0 0 3,000 0 0
Chief Financial Officer and Treasurer
_______________
(1) Options to purchase Common Stock.
(2) Represents $4,150 in the form of insurance premiums the Company paid on a
life insurance policy on the life of Mr. Powell, $13,010 in the form of
contributions by the Company pursuant to the Company's 401(k) plan and
profit sharing plan and $3,066 representing the actuarially determined
value of premiums paid on a split-dollar life insurance policy on the
life of Mr. Powell.
(3) Represents the Company's contribution on behalf of the named individual
pursuant to the Company's 401(k) plan and profit sharing plan.
Option/SAR Grants in Last Fiscal Year
The following table provides information related to options granted to
the named executive officers during the fiscal year ended December 31, 1995.
Option/SAR Grants in Last Fiscal Year
Potential Realized
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
(a) (b) (c) (d) (e) (f) (g)
% of Total
Number of Options/
Securities SARs
Underlying Granted to Exercise
Options/ Employees or Base Expir-
SAR In Fiscal Price ation
Name Granted (#) Year ($/sh) Date 5%($) 10%($)
John A. Powell
187,500(1) 33 12.00 5/24/2005 1,415,013 3,585,921
112,500(2) 20 15.75 11/8/2005 1,114,323 2,823,912
Thomas J. Parry
18,750(3) 3 12.00 5/24/2005 141,501 358,592
11,250(4) 2 15.75 11/8/2005 111,432 282,391
Ronald J. Holmer
18,750(3) 3 12.00 5/24/2005 141,501 358,592
3,000(5) 1 15.75 11/8/2005 29,715 75,304
Ernest Iannucci
18,750(3) 3 12.00 5/24/2005 141,501 358,592
3,000(5) 1 15.75 11/8/2005 29,715 75,304
Benedict J. Iacovetti
18,750(3) 3 12.00 5/24/2005 141,501 358,592
6,000(6) 1 15.75 11/8/2005 59,431 150,609
_______________
(1) Immediately exercisable options to purchase common stock.
(2) Exercisable on May 9, 1996.
(3) 6,250 exercisable on May 25, 1996, May 25, 1997 and May 25, 1998,
respectively.
(4) 3,750 exercisable on November 9, 1996, November 9, 1997 and November 9,
1998, respectively.
(5) 1,000 exercisable on November 9, 1996, November 9, 1997 and November 9,
1998, respectively.
(6) 2,000 exercisable on November 9, 1996, November 9, 1997 and November 9,
1998, respectively.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table provides information related to the number and value
of options held by the named executive officers as of December 31, 1995. No
named executive officer exercised options during the fiscal year ended
December 31, 1995.
Aggregated Option/SAR Exercises in Last Fiscal Year
And FY-End Option/SAR Values
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARS Options/SARS
At FY-End(#)(1) at FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
John A.Powell
0 0 892,500/112,500 10,222,813/337,500
Thomas J. Parry
0 0 42,000/30,000 507,875/160,691
Ronald J. Holmer
0 0 26,250/21,750 306,875/135,563
Ernest Iannucci
0 0 12,000/21,750 124,125/135,563
Benedict J. Iacovetti
0 0 13,500/24,750 158,125/144,563
(1) Options to purchase Common Stock.
Defined Benefit Pension Plan
Certain qualified employees of the Company are eligible to participate
in the Company's qualified Defined Benefit Pension Plan (the "Pension Plan").
The amount of contributions required under the Pension Plan are determined
each year by the Pension Plan's actuary. Under certain circumstances, a
participant may contribute to the Pension Plan. All assets of the Pension
Plan, consisting of participant and employer contribution accounts, are held
in trust and invested. The balance is adjusted annually to reflect the
investment results of the Pension Plan.
Generally, the payment of monthly benefits under the Pension Plan
commences at age 65 and is based on a percentage of a participant's average
annual cash compensation (salary and bonus) in excess of certain Social
Security benefits. A participant's accrued benefit will be 100% vested when
such participant attains age 65, suffers a total disability as defined in the
Pension Plan or dies. If a participant's employment is terminated for any
reason other than retirement at age 65, total disability or death, he is
entitled to receive the full balance in his voluntary account. The portion of
such participant's accrued benefit in his employer contribution account to
which he will be entitled is based on the number of years of service
completed.
Below is a table showing estimated annual benefits payable upon
termination in the form of a straight-life annuity to persons in specified
compensation and years-of-service classifications.
Pension Plan Table
Estimated Annual Retirement Benefits
Average Annual Years of Service
Compensation 15 20 25 30 35
$125,000 $18,328 $24,438 $30,547 $36,657 $42,776
150,000 22,416 29,888 37,359 44,832 52,304
175,000 22,416 29,888 37,359 44,832 52,304
200,000 22,416 29,888 37,359 44,832 52,304
225,000 22,416 29,888 37,359 44,832 52,304
250,000 22,416 29,888 37,359 44,832 52,304
300,000 22,416 29,888 37,359 44,832 52,304
400,000 22,416 29,888 37,359 44,832 52,304
450,000 22,416 29,888 37,359 44,832 52,304
500,000 22,416 29,888 37,359 44,832 52,304
The following table sets forth for the named executive officers the
estimated annual pension benefit (calculated by adding to the accrued benefit
as of December 31, 1995 an estimate of the benefits that will accrue from
January 1, 1996 to age 65) payable to such named executive officer and his
credited service under the Pension Plan.
Credited
Service
Estimated Annual as of
Name Pension Benefit December 31, 1995
John A. Powell $57,543 29 years
Thomas J. Parry 31,941 5 years
Ronald J. Holmer 14,421 4 years
Ernest Iannucci 17,463 2 years
Benedict J. Iacovetti 35,202 3 years
Employment Agreements with Named Executive Officers
Mr. Powell's employment agreement (the "Employment Agreement"),
originally entered into in June 1989, provides for a base salary, an annual
bonus, if applicable, based on a formula tied to the Company's performance and
a discretionary bonus. As amended in February 1996, the Employment Agreement
calls for a base salary of $800,000. The mandatory bonus is payable if and to
the extent the Company's actual net income before taxes ("Actual Income")
exceeds the net income before taxes targeted by the Company in its yearly
budget ("Target Income"). If the ratio of Actual Income to Target Income (the
"Ratio") is between 75% and 85%, the bonus is equal to 20% of Mr. Powell's
base salary; if the Ratio is between 85% and 100%, the bonus is 40% of such
base; if the Ratio is between 100% and 115%, the bonus is 55% of such base;
and if the Ratio is above 115%, the bonus is 65% of such base. Under the
terms of the Employment Agreement, (i) Mr. Powell's base salary is subject
to annual adjustment based upon the greater of the increase in the consumer
price index or the average percentage increase granted to the Company's
salaried employees, (ii) in the event of disability, Mr. Powell is entitled
to receive his full salary, bonus and other benefits during such disability
and for a period of twenty-four months after any termination on account
thereof (plus participation in any group insurance arrangement for life),
(iii) in the event that the Employment Agreement is terminated other than for
good cause (or by Mr. Powell under certain circumstances), Mr. Powell is
entitled to a severance payment equal to the greater of his base salary and
bonus which would have been payable through the end of the then current term
or two and one-half times Mr. Powell's then current salary and bonus (in
addition to benefits throughout the then current term and participation in any
group insurance arrangement for life), and (iv) in the event that the
Employment Agreement is not renewed at the end of a term, Mr. Powell is
entitled to a severance payment of up to two and one-half times his then
current salary and bonus (plus participation in any group insurance
arrangement for life). In addition, Mr. Powell is the owner of a $3 million
split-dollar life insurance policy that is subject to the Employment
Agreement. The Employment Agreement provides that the Company shall pay all
the premiums on such policy, subject to the Company's right to be reimbursed
for such premiums. The term of the Employment Agreement extends through March
16, 1999 and renews automatically for successive five-year periods unless
either party gives notice of termination prior to the end of the then current
term.
Mr. Parry, Mr. Holmer, Mr. Iannucci and Mr. Iacovetti have entered
into employment agreements with the Company pursuant to which their employment
will continue on an "at-will" basis. Such employment agreements further
provide that upon the happening of certain events (including the acquisition
of 10% or more of the Common Stock by a non-affiliate, a tender offer or the
death or incapacity of John A. Powell), the Company is required to escrow an
amount equal to two years' salary of the employee. Upon the occurrence of
certain subsequent events (including a significant change in the Board of
Directors of the Company, the replacement of John A. Powell as chief
executive officer or 20% or more of the Common Stock becoming owned by a
non-affiliate), each such officer is entitled to receive such escrowed amount,
payable in 12 monthly installments, in the event their employment is
terminated within three years of the first triggering event other than for a
good cause or as a result of certain unrelated circumstances (such as death or
disability).
COMPENSATION COMMITTEE AND OPTION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for executive compensation
other than compensation pursuant to the Company's stock option plans which is
administered by the Company's Option Committee. The Company's overall
approach is to compensate executive officers within a range that it believes
compares favorably with the Company's competitors while reflecting the
Company's financial success from year to year and offering appropriate
incentives for excellence in individual performance. The three primary
components of executive compensation are base salary, bonuses and stock
options.
The Company sets base salaries that it believes are in the mid-range of
the salaries paid by its competitors. The salary of John A. Powell, the
Company's Chief Executive Officer, is fixed by contract as described below.
In amending Mr. Powell's employment agreement in 1994, the Compensation
Committee compared such salary to the salaries of chief executives contained
in a report on executive compensation at eleven life/health and accident
companies prepared by Arthur Andersen LLP and found that Mr. Powell's base
salary was within the average range of the base salaries contained in such
report. Base salaries of the other executive officers were compared in 1993
to the base salaries paid by insurance companies of similar size located in
the northeastern United States, as published by LOMA, an industry service
association. While the job descriptions contained in such survey were not
identical to those of the Company, the base salaries of the Company's
executive officers were found to be within the range of those of the executive
officers contained in the survey. In consideration of the significant growth
in the Company's assets, revenues and net income in 1995, increases in base
salaries were granted to the Company's executive officers in 1995, generally
on or about the particular officer's employment anniversary date. The
individual amounts of such increases were determined based upon the
Compensation Committee's perception of each officer's contribution to the
Company's performance. While many of the companies contained in the foregoing
compensation surveys are contained in the NASDAQ Insurance Index, the Company
believes that its competitors for executive talent are not necessarily
identical to those companies that should be used to compare shareholder
return. Formalized external salary comparisons were again conducted in
January 1996 and will be utilized by the Company to set or adjust base
salaries beginning in 1996.
To reward individual performance and create incentives in the short term
for Company performance, in addition to adjusting the base salaries, the
Company maintains a bonus policy that authorizes certain funds to be set aside
for cash bonuses if and to the extent the Company's annual pre-tax income
exceeds the budget adopted by the Board of Directors for such year. In 1995,
the Company exceeded the budget set by the Board of Directors and the
Compensation Committee allocated all of the monies available for bonuses. The
actual amount of an executive officer's base salary (within the range
discussed above) as well as any individual bonus (except Mr. Powell's which is
discussed below) is based upon the Compensation Committee's subjective view of
each executive officer's contribution to the operations of the Company in
terms of the efficient execution of their respective job functions, personnel
management and initiative. Discretionary bonuses are also awarded if the
Board of Directors feels that the Company made strides in certain areas that
were not necessarily reflected in the current year's earnings.
Stock options are granted to executive officers at the discretion of the
Option Committee to both reward past performance and to create a long-term
incentive for the officers to work toward a goal of improving the Company's
performance as evidenced by the market value of its Common Stock. The actual
amount of any option grant is based upon the Option Committee's subjective
view of each executive officer's past performance and his or her potential
contribution to the Company's future operations and may include, among other
items, the executive officer's length of service and the amount of any
previously granted options held by such executive officer.
By utilizing this overall approach, the Board of Directors believes that
the executive officers are appropriately compensated based on industry
standards and are offered strong motivation to maintain and exceed the
financial goals of the Company.
In the fiscal year ended December 31, 1995, Mr. Powell was paid his base
salary and the bonus specified under his employment agreement, which was an
amount equal to 65% of his base salary based on the Company's earnings
exceeding 115% of the targeted earnings for the year. In addition, in
recognition of the substantial growth in the Company's assets, premium and
total revenues, and net income in 1995 and Mr. Powell's efforts in connection
therewith, Mr. Powell was granted a discretionary bonus of $135,000. Finally,
to ensure that Mr. Powell continues to have a strong incentive to improve
operations of the Company in the future, and having considered the number of
options Mr. Powell then held, the Company granted Mr. Powell options to
purchase 300,000 shares of Common Stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Section 162(m)") generally imposes a $1,000,000 limit on the amount of
compensation deductible by the Company that it pays to certain executive
officers except for qualified "performance-based compensation." Compensation
attributable to options granted under the various stock option plans currently
in effect, including the 1996 Stock Option Plan, if approved, are expected to
qualify for deductibility under Section 162(m). The Compensation Committee
monitors the effect of Section 162(m) on the deductibility of such
compensation paid by the Company and intends to optimize the deductibility of
such compensation to the extent deductibility is consistent with the
objectives of the executive compensation program. The Compensation Committee,
however, intends to weigh the benefits of full deductibility with the
objectives of the executive compensation program and, if the Compensation
Committee believes to do so is in the best interests of the Company and its
shareholders, will make compensation arrangements that may not be fully
deductible due to Section 162(m).
Compensation Committee Option Committee
Arnold H. Keehn Walter J. Diener
Walter E. Conrad Arnold H. Keehn
Alice E. Powell
John A. Powell, Ex-Officio
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1995 were Arnold H.
Keehn, Walter E. Conrad, Alice E. Powell and John A. Powell, ex-officio. The
members of the Option Committee from January to May 24, 1995 were Walter J.
Diener and Walter E. Conrad and from May 25, 1995 through the present were
Walter J. Diener and Arnold H. Keehn. Other than John A. Powell, the
Company's President, Chairman and Chief Executive Officer, who is an
ex-officio member of the Compensation Committee, during 1995, no officer,
former officer or employee of the Company or any subsidiary of the Company
served on the Company's Compensation Committee or on the Option Committee. As
an ex-officio member of the Compensation Committee, Mr. Powell does not
participate in any discussions or vote on any proposal regarding his own
salary, benefits or other compensation. Other than the foregoing, Mr. Powell
has no limitation on his activities on the Compensation Committee as a result
of his ex-officio status.
During 1995, Walter E. Conrad received $109,117 in gross compensation
attributable to his equity interest in two insurance agencies that were
compensated by the Company and/or a subsidiary of the Company based on
insurance policies of the Company written through such agencies.
AMERICAN TRAVELLERS CORPORATION
STOCK PERFORMANCE
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareholder return on the Company's Common Stock
against the cumulative return of the S & P Composite 500 Stock Index and the
NASDAQ Insurance Index for the five-year period ended December 31, 1995.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG AMERICAN TRAVELLERS CORPORATION,
THE S & P 500 INDEX AND THE NASDAQ INSURANCE INDEX
Cumulative Total Return
12/90 12/91 12/92 12/93 12/94 12/95
American Travellers 100 94 64 101 138 237
S & P Index 100 130 140 155 157 215
NASDAQ Insurance Index 100 141 191 204 192 273
* $100 INVESTED ON 12/31/90 IN STOCK OR INDEX INCLUDING REINVESTMENT
OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
PROPOSED AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION
General
The Company's Board of Directors has unanimously approved, and has voted
to recommend that the shareholders approve, an amendment to Article 5(a) of
the Company's Articles of Incorporation to increase the number of shares of
Common Stock that the Company is authorized to issue from 37,500,000 to
50,000,000 (the "Proposed Charter Amendment"). The affirmative vote of a
majority of the votes cast by all shareholders entitled to vote thereon is
required to approve the adoption of the Proposed Charter Amendment. If
adopted by the shareholders at the meeting, the Proposed Charter Amendment
will become effective upon its filing with the Department of State of the
Commonwealth of Pennsylvania.
Operation and Effect of the Proposed Charter Amendment
At present, Article 5(a) of the Company's Articles of Incorporation
authorizes the Company to issue 37,500,000 shares of Common Stock, $.01 par
value and 5,000,000 shares of Preferred Stock, $.01 par value per share. As
of the date hereof, 16,242,196 shares of Common Stock are outstanding and
_______ shares are reserved for issuance upon the exercise of stock options or
conversion of outstanding convertible subordinated debentures. Additionally,
the Company may issue Common Stock pursuant to a share rights plan that is in
place although no shares of Common Stock have been reserved therefor. No
shares of Preferred Stock have been issued. Holders of Common Stock have no
preemptive rights to subscribe for any securities of the Company. If the
Proposed Charter Amendment is adopted, the Board of Directors will have the
right to issue the additional shares of Common Stock for such consideration as
it deems appropriate and without further approval of the shareholders except
as mandated by Pennsylvania law. The issuance of additional shares of Common
Stock could result in dilution to shareholders since shareholders of the
Company have no preemptive rights.
Reasons for the Proposed Charter Amendment
As of the date hereof, the Company has approximately _________ additional
shares of Common Stock available for issuance. In the opinion of the Board of
Directors, it is desirable to increase the number of shares of Common Stock
which the Company has the authority to issue to aid the Company in future
financing, to provide funds to enable the Company to increase the capital and
surplus of its insurance subsidiaries, to afford the Company added flexibility
to take advantage of attractive business opportunities if they should become
available and for other proper purposes. The Company has no present contracts
or agreements with respect to the issuance of any of the shares of Common
Stock that would be authorized by the Proposed Charter Amendment, however, the
Company may consider issuing additional Common Stock in the near future
depending on market and other considerations.
The text of present Article 5(a) and Article 5(a) as it is proposed to be
amended are set forth below:
Present:
"5(a). The aggregate number of shares of stock which the
Corporation shall have the authority to issue is 37,500,000
shares of Common Stock, $.01 par value per share, and
5,000,000 shares of Preferred Stock, $.01 par value per
share."
As amended, if the Proposed Charter Amendment is adopted:
"5(a). The aggregate number of shares of stock which the
Corporation shall have the authority to issue is 50,000,000
shares of Common Stock, $.01 par value per share, and
5,000,000 shares of Preferred Stock, $.01 par value per
share."
Vote Required to Approve the Proposed Charter Amendment
The affirmative vote of a majority of the votes represented at the meeting
and entitled to vote thereon is required to approve the Proposed Charter
Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
APPROVAL OF THE 1996 STOCK OPTION PLAN
The 1996 Plan
On March 14, 1996, the Board of Directors adopted, subject to approval by
the shareholders, the 1996 Stock Option Plan (the "1996 Plan") which enables
the Company to grant incentive stock options (within the meaning of Section
422 of the Code) and nonqualified stock options (in any combination subject to
the terms of the 1996 Plan) to purchase up to an aggregate maximum of
2,000,000 shares of the Company's Common Stock to employees and persons with
managerial, professional or supervisory responsibilities, including but not
limited to, members of the Board of Directors, officers of, and consultants
to, the Company, responsible for the past and continued success of the
Company. As used herein with respect to the 1996 Plan, the "Company"
includes subsidiaries of the Company. The purpose of the 1996 Plan is to
enable the Company to attract and retain persons of ability as directors,
officers, employees and consultants and to motivate such persons to use their
best efforts on behalf of the Company by providing them with an equity
participation in the Company. Approximately 384 persons are eligible for
selection to receive stock options pursuant to the terms of the 1996 Plan. At
April 12, 1996, the market price of the Common Stock was $_____ per share.
The full text of the 1996 Plan is set forth in Exhibit "A" hereto, and the
following description is qualified in its entirety by reference to Exhibit
"A."
The 1996 Plan is administered by the Option Committee appointed by the
Board of Directors, which Committee currently consists of two members who are
members of the Board of Directors of the Company and who are "disinterested
persons" within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and are deemed to be
"outside directors" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder (the "Committee"). The current members of
the Committee are Walter J. Diener and Arnold H. Keehn. The Committee has the
authority to determine, subject to the provisions and conditions of the 1996
Plan, the number of shares to be subject to options granted pursuant to the
1996 Plan and the terms and conditions thereof, including the duration of
options and to select the persons to whom options other than Formula Awards
(hereinafter defined) are granted. The Committee is authorized to adopt,
amend and rescind rules relating to the administration of the 1996 Plan.
The 1996 Plan provides that if a stock option or portion thereof shall expire
or is terminated, cancelled or surrendered for any reason without being
exercised in full, the unpurchased shares of Common Stock that were subject to
such stock option or portion thereof shall be available for future grants of
stock options under the 1996 Plan.
Incentive stock options may be granted for a term of up to five years in
the case of optionees who own in excess of 10% of the combined voting power of
all classes of the Company's stock and up to 10 years, in the Committee's sole
discretion, in the case of all other optionees. Nonqualified stock options
may be granted for a term of up to 10 years.
Participants and Grants
Stock options other than Formula Awards may be granted by the Committee to
those persons who the Committee determines have the capacity to make a
substantial contribution to the success of the Company. The Committee may
grant stock options other than Formula Awards to purchase such number of
shares of Common Stock (subject to the limitations set forth in the 1996
Plan) as the Committee may, in its sole discretion, determine. In granting
stock options other than Formula Awards under the 1996 Plan, the Committee, on
an individual basis, may vary the number of incentive stock options or
non-qualified stock options as between Participants (hereinafter defined) and
may grant incentive stock options and/or non-qualified stock options to a
Participant in such amounts as the Committee may determine in its sole
discretion; provided, that, no Participant may be granted stock options
in any year (a consecutive 12-month period) to purchase in excess of 750,000
shares of Common Stock. A "Participant" is a person to whom a stock option
other than a Formula Award has been granted.
Incentive stock options may be granted to purchase Common Stock under the
1996 Plan only to employees of the Company at not less than the fair market
value of the shares as of the date of grant (or 110% of fair market value in
the case of any officer or employee holding in excess of 10% of the combined
voting power of all classes of the Company's stock as of the date of grant).
To the extent that an optionee is granted incentive stock options under the
1996 Plan to purchase Common Stock having a fair market value (determined as
of the date of grant) which exceeds $100,000 with respect to incentive stock
options which are exercisable for the first time by such optionee in any
calendar year under all stock option plans of the Company, such excess stock
options will be treated as nonqualified stock options.
The 1996 Plan can be amended, suspended, reinstated or terminated by the
Board of Directors; provided, however, that i) no amendment shall be made more
than once every six months that would change the amount, price or timing of
the Formula Awards, and ii) without approval of the Company's shareholders, no
amendment shall be made that (a) increases the maximum number of shares of
Common Stock that may be subject to stock options granted under the 1996 Plan,
except for specified adjustment provisions, (b) extends the term of the 1996
Plan, (c) increases the period during which a stock option may be exercised
beyond 10 years from the date of the grant, (d) materially increases the
benefits accruing to Participants or Eligible Directors (hereinafter defined)
under the 1996 Plan, (e) materially modifies the requirements as to
eligibility for participation in the 1996 Plan, (f) changes the maximum number
of shares of Common Stock for which options may be granted to any Participant
during any year (a consecutive 12-month period, except for specified
adjustment provisions), or (g) will cause stock options granted under the 1996
Plan to fail to meet the requirements of Rule 16b-3 under the Exchange Act.
Unless previously terminated by the Board of Directors, the 1996 Plan will
terminate on March 13, 2006, and no additional options may be granted after
that date.
Options are not assignable or transferable except by will or the laws of
intestate succession. Options other than Formula Awards may be exercised by
the optionee (or the optionee's legal representative) only while the optionee
is employed by the Company (except in the case of an optionee who is an
Eligible Director), or within six months after termination of employment due
to a permanent disability or three months after termination of employment due
to retirement. The executor or administrator of a deceased optionee's estate
or a decedent's distributee shall be entitled to exercise the option until six
months after the decedent's death. Options expire immediately in the event an
optionee is terminated with or without cause or resigns; provided, however, in
the event the Company terminates the employment of an optionee who at the time
of such termination was an officer of the Company and had been continuously
employed by the Company during the five-year period immediately preceding such
termination, for any reason except "good cause" (as defined in the 1996 Plan),
each stock option held by such optionee (which had not then previously lapsed
or terminated and which had been held by such optionee for more than six
months prior to such termination) shall become immediately exercisable as to
the total number of shares of Common Stock and shall remain so exercisable for
a period of three months after such termination unless such option expires
earlier by its terms. In the event of the termination of a Participant's
service as a director of the Company, who at the time of such termination was
an Eligible Director and had continuously served as a director of the Company
during the five-year period immediately preceding such termination, and
such termination is for any reason except for such Participant's death or
total disability or the removal of such Participant as director (by the
shareholders, the Board of Directors or otherwise) for "good cause" (as
defined in the 1996 Plan), each stock option held by such Participant (which
has not previously lapsed or terminated and which has been held by such
Participant for more than six months prior to such termination) shall
immediately become fully exercisable as to the total number of shares of
Common Stock subject thereto (whether or not exercisable to that extent at the
time of such termination) and shall remain so exercisable for a period of
three months after such termination unless such stock option expires
earlier by its terms. All aforementioned exercise periods set forth in this
paragraph are subject to the further limitation that the option shall not, in
any case, be exercisable beyond the stated expiration date of such option.
The purchase price and the number and kind of shares that may be purchased
upon exercise of an option are subject to adjustment in certain events,
including any stock splits, recapitalizations and reorganizations. If any
portion of an option terminates or lapses unexercised, the shares that were
subject to the unexercised portion will continue to be subject to the 1996
Plan, and new options may be granted in respect of such shares.
Formula Awards to Eligible Directors
The 1996 Plan reserves up to 50,000 shares of the presently authorized
shares for the issuance of Formula Awards to certain nonemployee directors of
the Company.
The 1996 Plan provides for the grant of options annually to "Eligible
Directors," defined as the members of the Company's Board of Directors who are
not otherwise employees of the Company. The shares issued pursuant to Formula
Awards may be shares currently authorized but unissued or currently held or
subsequently acquired by the Company as treasury shares.
The 1996 Plan provides that an option to purchase 1,500 shares of Common
Stock shall be granted automatically each year, immediately following the
annual meeting of the Company's shareholders to each director, who is an
Eligible Director at such time, immediately following such annual meeting
beginning with the 1996 Annual Meeting of shareholders (each, a "Formula
Award"). Notwithstanding the foregoing, Formula Awards will not be granted
under the 1996 Plan until formula awards under the Company's 1993 Stock Option
Plan and 1995 Stock Option Plan are exhausted.
The option exercise price per share for a Formula Award shall be the
average of the fair market value for the fifth through the ninth "business
days" (defined in the 1996 Plan as those days on which the Nasdaq National
Market is open for trading) following the date of grant. For purposes of the
preceding sentence, fair market value is defined as the mean of the high and
low per share trading prices for the Common Stock as reported in The Wall
Street Journal for Nasdaq National Market composite transactions.
Except as otherwise provided in the 1996 Plan, a Formula Award shall
immediately vest upon the grant of the Formula Award. A Formula Award shall
become exercisable immediately upon vesting for all directors who have served
as Directors of the Company for a total of five consecutive years as of the
date of the grant. If a director has not served as a director of the Company
for such period, the Formula Award shall become exercisable according to the
following schedule:
Period of Optionee's Continuous Service Portion of Formula
as a Director of the Company Award that is
Following the Date of the Grant Exercisable
Twelve months 33 1/3%
Eighteen months 66 2/3%
Twenty-Four months 100%
Except as otherwise provided in the 1996 Plan, any Formula Award, to the
extent the same is exercisable in accordance with the 1996 Plan, is
exercisable in whole or in part at any time or from time to time until the
expiration or termination in accordance with the 1996 Plan by written notice,
signed by the person exercising the Formula Award, to the Company stating the
number of shares with respect to which the Formula Award is being exercised,
accompanied by payment in full of the exercise price for the number of shares
to be purchased. The date both such notice and payment are received by the
office of the Secretary of the Company shall be the date of exercise of the
Formula Award as to such number of shares. Notwithstanding any provision to
the contrary, no Formula Award may at any time be exercised with respect to a
fractional share.
Each Formula Award not earlier terminated shall expire 10 years from its
date of grant. In the event of the termination of a Formula Award holder's
service as a director of the Company, by reason of his or her removal as
director (by the shareholders, the Board of Directors or otherwise) the
then-outstanding Formula Awards of such holder (whether or not then
exercisable) shall automatically expire on (and may not be exercised on) the
effective date of such termination. In the event of the termination of a
Formula Award holder's service as a director of the Company by reason of
retirement or total and permanent disability, the then-outstanding Formula
Awards of such holder shall become exercisable, to the full extent of the
number of shares remaining covered by such Formula Awards, regardless
of whether such Formula Awards were previously exercisable, and each such
Formula Award shall expire one year after the date of such termination or on
the stated grant expiration date, whichever is earlier. For purposes of the
1996 Plan, the term "by reason of retirement" means (i) mandatory retirement
pursuant to Board policy, or (ii) termination of service on or after such
holder's 65th birthday. In the event of the death of a Formula Award holder
while the holder is a director of the Company, the then-outstanding Formula
Awards of such holder shall become exercisable, to the full extent of the
number of shares remaining covered by such Formula Awards, regardless of
whether such Formula Awards were previously exercisable, and each such Formula
Award shall expire one year after the date of death of such holder or on the
stated grant expiration date, whichever is earlier. In the event of the
termination of a Formula Award holder's service as a director for any reason
other than as described above, including without limitation, expiration of the
director's term in office (without renomination or reelection) or by
resignation, the then outstanding Formula Awards of such holder shall become
exercisable, to the full extent of the number of shares of Common Stock
remaining covered by such Formula Awards were previously exercisable, and each
such Formula Award shall expire three months after the effective date of such
termination.
The right of any holder of a Formula Award to exercise a Formula Award
shall, during the lifetime of such holder, be exercisable only by such holder
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the rules
thereunder (a "QDRO") and shall not be assignable or transferable by such
holder other than by will or the laws of descent and distribution or a QDRO.
Neither the recipient of a Formula Award nor such recipient's successors
in interest shall have any rights as a shareholder of the Company with respect
to any shares of Common Stock subject to a Formula Award granted to such
recipient until the date of issuance of a stock certificate evidencing such
shares upon their purchase pursuant to such Formula Award. Neither the 1996
Plan, nor the granting of a Formula Award, nor any other action taken pursuant
to the 1996 Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that an Eligible Director has a right to
continue as a director of the Company for any period of time or at any
particular rate of compensation.
The aggregate number of shares with respect to which a Formula Award may
be granted to an Eligible Director under the 1996 Plan, the number and class
of shares subject to each outstanding Formula Award, and the exercise price
per share specified in each such Formula Award shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a split-up or consolidation of shares or any like capital
adjustment or the payment of any stock dividend, or other increase or decrease
in the number of such shares effected without receipt of consideration by the
Company. Notwithstanding any provision to the contrary, no Formula Award
shall be granted on a date when the number of shares of Common Stock
authorized for issuance pursuant to the 1996 Plan and then available for
issuance pursuant to new Formula Awards is less than the aggregate number of
such shares that would be issuable pursuant to Formula Awards otherwise
required to be granted on such date, assuming the full vesting and exercise of
such Formula Awards. In the event Formula Awards are not granted as a
result of the application of the aforementioned limitations, no Formula Awards
shall thereafter be granted pursuant to the 1996 Plan.
Certain Federal Tax Aspects of the Plan
Set forth below is a general summary of certain Federal income tax aspects
of the 1996 Plan. State and local income and other tax consequences are not
discussed and may vary from state to state.
Tax Deductibility Under Code Section 162(m). Section 162(m) of the Code
disallows a public company's deductions for employee remuneration exceeding
$1,000,000 per year for certain executives, but contains an exception for
qualified "performance-based compensation." In December 1995, the Internal
Revenue Service issued final regulations interpreting this provision. The
1996 Plan has been drafted and is intended to be administered to enable
compensation represented by stock options granted under the 1996 Plan to
qualify as "performance-based compensation," and the discussion below assumes
that such compensation will so qualify.
Nonqualified Stock Options and Formula Awards. For Federal income tax
purposes, the recipient of a nonqualified option (including Formula Awards)
granted under the 1996 Plan will not recognize any income for Federal income
tax purposes upon the grant of the option, nor will the Company then be
entitled to any deduction. Generally, upon exercise of a nonqualified option,
the optionee will recognize ordinary income, and the Company will be entitled
to a deduction, in an amount equal to the excess of the fair market value of
the stock at the date of exercise over the exercise price of the option. An
optionee's basis in the stock acquired pursuant to a nonqualified option, for
purposes of determining his gain or loss on his subsequent disposition of the
shares, will generally be equal to the fair market value of the stock on the
date of exercise of the nonqualified option.
Optionees who are subject to the short-swing profits restrictions of
Section 16(b) of the Exchange Act, unless they elect within 30 days of
exercising a nonqualified stock option to be taxed as of the time of such
exercise (on the basis of the fair market value of the stock at such time),
are permitted to defer the recognition of income realized from the exercise
until the earlier of (i) the expiration of the six-month period under Section
16(b), or (ii) the first day on which the sale of such stock at a profit will
not subject the optionee to suit.
Incentive Stock Options. An employee generally recognizes no income when
an incentive stock option is granted to him or when that option is exercised.
It should be noted, however, that for purposes of the alternative minimum tax
under Section 55 of the Code, an incentive stock option is treated as a
nonqualified stock option. Generally, upon a disposition of shares acquired
pursuant to an incentive stock option, the optionee will recognize long-term
capital gain and the Company will not be entitled to a deduction as long as
the optionee does not dispose of the shares, either (i) within two years after
the grant of the option, or (ii) within one year after the exercise of the
option. However, if the optionee does not satisfy these holding periods, the
optionee will recognize ordinary income upon such a disposition equal to the
lesser of (i) the excess of the fair market value of the shares at the time of
exercise over the exercise price paid for such shares, or (ii) the gain
realized upon such disposition. The Company will be entitled to a deduction
only to the extent the optionee must recognize ordinary income.
Taxation of Capital Gains and Ordinary Income. Presently, the maximum
Federal income tax rate for individuals applicable to long-term capital gains
is 28%, whereas the maximum effective Federal income tax rate for individuals
applicable to ordinary income is 39.6%. Capital losses generally are only
deductible against capital gains and, for individuals, a limited amount
($3,000 per year) of ordinary
income.
Vote Required for Approval of the 1996 Plan
The affirmative vote of a majority of the votes represented at the meeting
and entitled to vote thereon is required to adopt the 1996 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
1996 PLAN.
INDEPENDENT ACCOUNTANTS
The firm of Arthur Andersen LLP acted as independent accountants for the
Company for its fiscal year ended December 31, 1995. It is anticipated that a
representative or representatives of Arthur Andersen LLP will be present at
the meeting to make a statement if they desire to do so and to respond to
appropriate questions. Although it is expected that the Company's independent
accountants for its fiscal year ending December 31, 1996 will continue to be
Arthur Andersen LLP, the Company wishes to maintain its discretion during the
year as to selection of its independent accountants. Accordingly, no
selection has been made and the Board of Directors has reserved the right to
consider the appointment of another firm.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS TO
BE INCLUDED IN MANAGEMENT'S PROXY AND
PROXY STATEMENT FOR THE NEXT ANNUAL MEETING OF SHAREHOLDERS
In order for proposals of shareholders to be set forth in the Company's
proxy statement for the 1997 Annual Meeting of Shareholders, shareholders must
present their proposals to the Company no later than December 20, 1996.
OTHER MATTERS
The Board of Directors does not know of any other matters (other than
procedural matters) to be presented at the meeting. If any other matters
properly come before the meeting, the persons named in the accompanying proxy
will vote on such matters in accordance with their best judgment.
The expenses of soliciting proxies in the form included with this proxy
statement and the cost of preparing, assembling and mailing material in
connection with such solicitation of proxies will be borne by the Company. In
addition to the use of mail, the Company's directors, executive officers and
employees may solicit proxies personally or by telephone or telegraph. The
Company may reimburse brokerage firms and other custodians, nominees or
fiduciaries for their reasonable expenses in forwarding proxy materials to the
beneficial owners of shares.
A form of proxy is enclosed for your use. Please complete, date, sign and
return the proxy at your earliest convenience in the enclosed envelope, which
requires no postage if mailed in the United States. A prompt return of your
proxy will be appreciated.
By Order of the Board of Directors,
Susan T. Mankowski
Secretary
Bensalem, Pennsylvania
April 19, 1996
EXHIBIT "A"
AMERICAN TRAVELLERS CORPORATION
1996 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN
The purposes of this 1996 Stock Option Plan are to enable American
Travellers Corporation and its Subsidiaries to attract and retain the
services of key employees and persons with managerial, professional
or supervisory responsibilities, including, but not limited to,
members of the Board of Directors, officers of, and consultants to,
the Company, responsible for the past and continued success of the
Company, and to provide them with increased motivation and
incentive to exert their best efforts on behalf of the Company by
enlarging their personal stake in its success.
2. GENERAL PROVISIONS
2.1 Definitions
As used in the Plan:
(a) "Act" means the Securities Exchange Act of 1934, including
any and all amendments thereto.
(b) "Board of Directors" means the Board of Directors of the
Company.
c "Code" means the Internal Revenue Code of 1986, including
any and all amendments thereto.
(d) "Committee" means the committee appointed by the Board of
Directors from time to time to administer the Plan pursuant
to Section 2.2.
(e) "Common Stock" means the Company's Common Stock, $.01 par
value.
(f) "Company" means American Travellers Corporation, a
Pennsylvania corporation.
(g) "Eligible Director" means a member of the Company's Board
of Directors who is not otherwise an employee of the
Company or any Subsidiary.
(h) "Fair Market Value" means, with respect to a specific date,
the last reported sale price of the Common Stock in the
over-the-counter market, as reported by NASDAQ; however, if
the Common Stock is listed or traded on a national
securities exchange on the date Fair Market Value is being
determined, Fair Market Value shall mean the last reported
sale price of Common Stock on such exchange, as reported by
a responsible reporting service the Committee selects; or
if there are no transactions in the Common Stock on such
day, then Fair Market Value shall mean the last reported
sale price of the Common Stock in the over-the-counter
market or on such exchange, as the case may be, on
the last preceding day on which there was a transaction in
the Common Stock. In the event the Common Stock is
not so listed or traded on a date Fair Market Value
is being determined, Fair Market Value shall be
determined on the basis of an average of the fair
market values as of such date as determined by two or
more independent and well-qualified experts in
the appraisal of stock values, or on the basis of such
other method as the
Committee shall, in good faith, determine to be reasonable.
(I) "Formula Award" means an option grant made to an Eligible
Director pursuant to Section 4.2.
(j) "Incentive Stock Option" means an option granted under the
Plan which is intended to qualify as an incentive stock
option under Section 422 of the Code.
(k) "NASDAQ" means the National Association of Securities
Dealers, Inc. Automated Quotation System.
(l) "Non-Qualified Stock Option" means an option granted under
the Plan which is not an Incentive Stock Option.
(m) "Participant" means a person to whom a Stock Option other
than a Formula Award has been granted under the Plan.
(n) "Plan" means this 1996 Stock Option Plan.
(o) "Rule 16b-3" means Rule 16b-3 promulgated under the Act or
any successor Rule.
(p) "Stock Option" means an Incentive Stock Option or a
Non-Qualified Stock Option granted under the Plan.
(q) "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the
Company if, at the time of the granting of the Stock
Option, each of the corporations other than the last
corporation in the unbroken chain owns 50% or more of the
total voting power of all classes of stock in one of the
other corporations in such chain.
2.2 Administration of the Plan
(a) The Plan shall be administered by the Committee which shall
at all times consist of two (2) or more persons, each of
whom shall be members of the Board of Directors. Each
member of the Committee shall be a "disinterested person"
(as such term is defined in Rule 16b-3) and an "outside
director" within the meaning of Section 162(m) of the Code
and any regulations issued thereunder. The Board of
Directors may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board of
Directors. The Committee shall select one of its members
as Chairperson, and shall hold meetings at such times and
places as it may determine.
(b) The Committee shall have the full power, subject to and
within the limits of the Plan, to: (i) interpret and
administer the Plan, and Stock Options granted under it;
(ii) make and interpret rules and regulations for the
administration of the Plan and to make changes in and
revoke such rules and regulations (and in the exercise of
this power, shall generally determine all questions of
policy and expediency that may arise and may correct
any defect, omission, or inconsistency in the Plan or
any agreement evidencing the grant of any Stock
Option in a manner and to the extent it shall deem
necessary to make the Plan fully effective); (iii)
determine those persons to whom Stock Options other than
Formula Awards shall be granted and the number of
Stock Options other than Formula Awards to be granted to
any person; (iv) determine the terms of Stock Options
granted under the Plan, consistent with the provisions
of the Plan; and (v) generally, exercise such
powers and perform such acts in connection with the
Plan as are deemed necessary or expedient to promote
the best interests of the Company. The
interpretation and construction by the Committee of any
provision of the Plan or of any Stock Option shall be
final, binding and conclusive.
(c) The Committee may act only by a majority of its members
then in office; however, the Committee may authorize any
one (1) or more of its members or any officer of the
Company to execute and deliver documents on behalf of
the Committee.
(d) No member of the Committee shall be liable for any action
taken or omitted to be taken or for any determination made
by him or her in good faith with respect to the Plan, and
the Company shall indemnify and hold harmless each member
of the Committee against any cost or expense (including
counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee)
arising out of any act or omission in connection with
the administration or interpretation of the Plan, unless
arising out of such person's own fraud or bad faith.
2.3 Effective Date
The Plan is and shall be effective March 14, 1996, the date of
its adoption by the Board of Directors, and Stock Options may be
granted from time to time thereafter, subject, however, to
approval of the Plan by the affirmative vote of the holders of a
majority of the shares of the Common Stock present in person or
by proxy and entitled to vote at an annual meeting of the
shareholders of the Company or at a special meeting of the
shareholders of the Company expressly called for such purposes,
or any adjournments thereof, held on or before March 13, 1997.
If the Plan is not approved at such annual or special meeting
or at any adjournments thereof, the Plan and all Stock Options
previously granted thereunder shall become null and void.
2.4 Duration
If approved by the shareholders of the Company, as provided in
Section 2.3, unless sooner terminated by the Board of Directors,
the Plan shall remain in effect until March 13, 2006.
2.5 Shares Subject to the Plan
The maximum number of shares of Common Stock which may be
subject to Stock Options granted under the Plan shall be
2,000,000, of which the number of such shares which shall be
available for issuance pursuant to Formula Awards made to
Eligible Directors under the Plan shall be 50,000. The
Stock Options and Formula Awards shall be subject to
adjustment in accordance with Section 4.11 or 5.1, as
appropriate, and shares to be issued upon exercise of Stock
Options and Formula Awards may be either authorized and
unissued shares of Common Stock or authorized and issued
shares of Common Stock purchased or acquired by the
Company for any purpose. If a Stock Option or Formula Award
or portion thereof shall expire or is terminated, cancelled or
surrendered for any reason without being exercised in full,
the unpurchased shares of Common Stock that were subject
to such Stock Option or Formula Award or portion
thereof shall be available for future grants of Stock Options or
Formula Awards, as the case may be, under the Plan.
2.6 Amendments
The Plan may be suspended, terminated or reinstated, in whole or
in part, at any time by the Board of Directors. The Board of
Directors may from time to time make such amendments to the Plan
as it may deem advisable, including, with respect to Incentive
Stock Options, amendments deemed necessary or desirable to
comply with Section 422 of the Code and any regulations issued
thereunder; provided, however, that (i) no amendment shall be
made more than once every six (6) months that would change the
amount, price or timing of Formula Awards, and (ii) without the
approval of the Company's shareholders no amendment shall be
made that:
(a) Increases the maximum number of shares of Common Stock that
may be subject to Stock Options or Formula Awards granted
under the Plan (other than as provided in Section 4.11 or
5.1, as appropriate); or
(b) Extends the term of the Plan; or
(c) Increases the period during which a Stock Option may be
exercised beyond ten (10) years from the date of grant; or
(d) Otherwise materially increases the benefits accruing to
Participants or Eligible Directors under the Plan; or
(e) Materially modifies the requirements as to eligibility for
participation in the Plan; or
(f) Changes the maximum number of shares of Common Stock for
which options may be granted to any Participant during any
year (a consecutive twelve (12) month period) (other than
as provided in Section 5.1); or
(g) Will cause Stock Options granted under the Plan to fail to
meet the requirements of Rule 16b-3.
Except as otherwise provided herein, termination or amendment of
the Plan shall not, without the consent of a Participant or
Eligible Director, affect such Participant's or Eligible
Director's rights under any Stock Option or Formula Award
previously granted to such Participant or Eligible Director, as
the case may be.
2.7 Participants and Grants
Stock Options may be granted by the Committee to those persons
who the Committee determines have the capacity to make a
substantial contribution to the success of the Company. The
Committee may grant Stock Options to purchase such number of
shares of Common Stock (subject to the limitations of
Section 2.5) as the Committee may, in its sole discretion,
determine. Notwithstanding the foregoing, no Participant
shall be granted Stock Options in any year (a consecutive
twelve (12) month period) to purchase in excess of
750,000 shares of Common Stock. In granting Stock Options, the
Committee, on an individual basis, may vary the number of
Incentive Stock Options or Non-Qualified Stock Options
as between Participants and may grant Incentive Stock
Options and/or Non-Qualified Stock Options to a Participant in
such amounts as the Committee may determine in its sole
discretion.
3. STOCK OPTIONS
3.1 General
All Stock Options granted under the Plan shall be evidenced by
written agreements executed by the Company and the Participant
to whom granted and dated as of the applicable date of grant,
which agreement shall state the number of shares of Common
Stock which may be purchased upon the exercise thereof and
shall contain such investment representation and other
terms and conditions as the Committee may from time to
time determine, or, in the case of Incentive Stock Options, as
may be required by Section 422 of the Code, or any other
applicable law. Each such grant shall be signed on behalf of
the Company by a member of the Committee or by an officer
delegated such authority by the Committee.
3.2 Price
Subject to the provisions of Sections 3.6(d), 4.11 and 5.1, the
purchase price per share of Common Stock subject to a Stock
Option shall, in no case, be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on
the date the Stock Option is granted.
3.3 Period
The duration or term of each Stock Option granted under the Plan
shall be for such period as the Committee shall determine but in
no event more than ten (10) years from the date of grant
thereof.
3.4 Exercise
Subject to Sections 2.3 and 5.4, Stock Options may be
exercisable immediately upon the grant of the Stock Option or at
such other time or times as the Committee shall specify when
granting the Stock Option. Once exercisable, a Stock Option
shall be exercisable, in whole or in part, by delivery of a
written notice of exercise to the Secretary of the Company
at the principal office of the Company specifying the number
of whole shares of Common Stock as to which the Stock
Option is then being exercised together with payment of the
full purchase price for the shares being purchased upon such
exercise. Until the shares of Common Stock as to which a
Stock Option is exercised are issued, the Participant
shall have none of the rights of a shareholder of the
Company with respect to such shares.
3.5 Payment
The purchase price for shares of Common Stock as to which a
Stock Option has been exercised and any amount required to be
withheld, as contemplated by Section 5.3, may be paid:
(a) In United States dollars in cash, or by check, bank draft
or money order payable in United States dollars to the
order of the Company; or
(b) By the delivery by the Participant to the Company of whole
shares of Common Stock having an aggregate Fair Market
Value on the date of payment equal to the aggregate of the
purchase price of Common Stock as to which the Stock Option
is then being exercised or by the withholding of whole
shares of Common Stock having such Fair Market Value upon
the exercise of such Stock Option; or
(c) By a combination of both (a) and (b) above.
The Committee may, in its discretion, impose limitations,
conditions and prohibitions on the use by a Participant of
shares of Common Stock to pay the purchase price payable by such
Participant upon the exercise of a Stock Option.
3.6 Special Rules for Incentive Stock Options
Notwithstanding any other provision of the Plan, the following
provisions shall apply to Incentive Stock Options granted under
the Plan:
(a) Incentive Stock Options shall only be granted to
Participants who are employees of the Company or a
Subsidiary.
(b) To the extent that the aggregate Fair Market Value of
stock, with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any
calendar year under the Plan and any other Stock Option
Plan of the Company or a Subsidiary, exceeds $100,000, such
Stock Options shall be treated as Non-Qualified Stock
Options.
(c) Any Participant who disposes of shares of Common Stock
acquired upon the exercise of an Incentive Stock Option by
sale or exchange either within two (2) years after the date
of the grant of the Incentive Stock Option under which the
shares were acquired or within one (1) year of the
acquisition of such shares, shall promptly notify the
Secretary of the Company at the principal office of the
Company of such disposition, the amount realized, the
purchase price per share paid upon exercise and the date of
disposition.
(d) No Incentive Stock Option shall be granted to a Participant
who, at the time of the grant, owns stock representing more
than ten percent (10%) of the total combined voting power
of all classes of stock either of the Company or any parent
or Subsidiary of the Company, unless the purchase price of
the shares of Common Stock purchasable upon exercise of
such Incentive Stock Option is at least one hundred ten
percent (110%) of the Fair Market Value (at the time
the Incentive Stock Option is granted) of the Common
Stock and the Incentive Stock Option is not exercisable
more than five (5) years from the date it is granted.
3.7 Termination of Employment or Relationship
(a) In the event a Participant's employment by, or relationship
with, the Company or its Subsidiaries shall terminate for
any reason other than those reasons specified in Sections
3.7(b), (c), (d), (e) or (f) while such Participant holds
Stock Options granted under the Plan, then all rights of
any kind under any outstanding Stock Option held by such
Participant which shall not have previously lapsed or
terminated shall expire immediately.
(b) If a Participant's employment by, or relationship with, the
Company or its Subsidiaries shall terminate as a result of
such Participant's total disability, each Stock Option held
by such Participant (which has not previously lapsed or
terminated) shall immediately become fully exercisable as
to the total number of shares of Common Stock subject
thereto (whether or not exercisable to that extent at the
time of such termination) and shall remain so
exercisable by such Participant for a period of six (6)
months after
termination unless such Stock Option expires earlier by its
terms. For purposes of the Plan, "total disability" shall
mean permanent mental or physical disability as
determined by the Committee.
(c) In the event of the death of a Participant, each Stock
Option held by such Participant (which has not previously
lapsed or terminated) shall immediately become fully
exercisable as to the total number of shares of Common
Stock subject thereto (whether or not exercisable to that
extent at the time of death) by the executor or
administrator of the Participant's estate or by the
person or persons to whom the deceased Participant's
rights thereunder shall have passed by will or by
the laws of descent or distribution, and shall remain
so exercisable for a period of six (6) months after
such Participant's death unless such Stock Option
expires earlier by its terms.
(d) If a Participant's employment by the Company or a
Subsidiary shall terminate by reason of such Participant's
retirement in accordance with Company policies, each
Stock Option held by such Participant at the date of
termination (which has not previously lapsed or
terminated) shall immediately become fully
exercisable as to the total number of shares of Common
Stock subject hereto (whether or not exercisable to
that extent at the time of such termination) and shall
remain so exercisable by such Participant for a period
of three (3) months after termination, unless such Stock
Option expires earlier by its terms.
(e) In the event the Company terminates the employment of a
Participant who at the time of such termination was an
officer of the Company and had been continuously employed
by the Company during the five (5) year period
immediately
preceding such termination, for any reason except "good
cause" (hereafter defined) and except upon such
Participant's death, total disability or retirement in
accordance with Company policies, each Stock Option held by
such Participant (which has not previously lapsed or
terminated and which has been held by such Participant for
more than six (6) months prior to such termination) shall
immediately become fully exercisable as to the total number
of shares of Common Stock subject thereto (whether or not
exercisable to that extent at the time of such termination)
and shall remain so exercisable for a period of three (3)
months after such termination unless such Stock Option
expires earlier by its terms. A termination for "good
cause" shall have occurred only if the Participant in
question is terminated, by written notice (i) because of
his or her conviction of a felony for a crime involving
an act of fraud or dishonesty, (ii) intentional acts or
omissions on such Participant's part causing
material injury to the property or business of the
Company, or (iii) because such Participant shall have
breached any material term of any employment agreement
in place between such Participant and the Company and
shall have failed to correct such breach within any
grace period provided for in such agreement. "Good cause"
for termination shall not include bad judgment or any
act or omission reasonably believed by such
Participant, in good faith, to have been in, or not
opposed to, the best interests of the Company.
(f) In the event of the termination of a Participant's service
as a Director of the Company, who at the time of such
termination was an Eligible Director and had continuously
served as a Director of the Company during the five (5)
year period immediately preceding such termination, and
such termination is for any reason except for such
Participant's death or total disability or the removal
of such Participant as Director (by the shareholders,
the Board of Directors or otherwise) for "good cause"
(as defined in Section 3.7(e)(i) and (ii)), each
Stock Option held by such Participant (which has not
previously lapsed or terminated and which has been held
by such Participant for more than six (6) months prior
to such termination) shall immediately become fully
exercisable as to the total number of shares of Common
Stock subject thereto (whether or not exercisable to
that extent at the time of such termination) and
shall remain so exercisable for a period of three (3)
months after such termination unless such Stock
Option expires earlier by its terms.
3.8 Effect of Leaves of Absence
It shall not be considered a termination of employment when a
Participant is on military or sick leave or such other type of
leave of absence which is considered continuing intact the
employment relationship of the Participant with the Company or
any of its Subsidiaries. In case of such leave of absence, the
employment relationship shall be deemed to have continued until
the later of (i) the date when such leave shall have lasted
ninety (90) days in duration, or (ii) the date as of which the
Participant's right to re-employment shall have no longer been
guaranteed either by statute or contract.
4. FORMULA AWARDS TO ELIGIBLE DIRECTORS
4.1 General
Each Formula Award granted under the Plan shall be evidenced by
a written agreement executed by the Company and by the Eligible
Director to whom such Formula Award is granted and dated as of
the applicable date of grant. Each Agreement shall be signed on
behalf of the Company by a member of the Committee or by an
officer delegated such authority by the Committee. Each such
agreement shall comply with and be subject to the terms and
conditions of the Plan. Any such agreement may contain such
other terms, provisions and conditions not inconsistent with the
Plan or this Section 4 as may be determined by the Committee.
All Formula Awards granted under the Plan shall, except where
this Section 4 or the context clearly indicates to the
contrary, be subject to the provisions of the Plan applicable
to Non-Qualified Stock Options.
4.2 Formula Awards
Subject to the limitations in Sections 4.13 and 4.14, an option
to purchase 1,500 shares of Common Stock (as adjusted pursuant
to Section 4.11) shall be granted automatically each year,
immediately following the annual meeting of the Company's
shareholders, to each member of the Company's Board of Directors
(each, a "Director") who is an Eligible Director at such time
immediately following such annual meeting beginning with the
annual meeting of the shareholders at which the shareholders
approve the Plan.
4.3 Formula Award Exercise Price
The exercise price per share for a Formula Award shall be the
average of the Fair Market Values for the fifth (5th) through
the ninth (9th) business days (which, for purposes of this
Section 4.3 shall mean those days on which the NASDAQ National
Market is open for trading) following the date of grant.
4.4 Vesting and Exercisability
Except as otherwise provided in Section 4.7, a Formula Award
shall immediately vest and become non-forfeitable upon the grant
of the Formula Award. Except as otherwise provided in Section
4.7, a Formula Award shall become exercisable immediately
upon vesting for all Directors who have served as Directors
of the Company for a total of five (5) consecutive years as
of the date of the grant. If a Director has not served as a
Director for such period, a Formula Award shall become
exercisable according to the following schedule:
Period of Optionee's Continuous Portion of
Service as a Director of the Formula Award
Company following the Grant That is Exercisable
Twelve months 33-1/3%
Eighteen months 66-2/3%
Twenty-four months 100%
4.5 Time and Manner of Exercise
Except as otherwise provided in this Section 4.5, any vested
Formula Award, to the extent the same is exercisable in
accordance with Section 4.4, is exercisable in whole or in
part at any time from time to time until the expiration or
termination of its term in accordance with Section 4.7 by
giving written notice, signed by the person exercising
the Formula Award, to the Company (to the attention of
the Company's Corporate Secretary) stating the number
of whole shares of Common Stock with respect to which the
Formula Award is being exercised, accompanied by payment in
full of the option exercise price for the number of shares of
Common Stock to be purchased. The date both such notice and
payment are received by the office of the Corporate
Secretary of the Company shall be the date of exercise of
the Formula Award as to such number of shares.
4.6 Payment of Exercise Price
Payment of the exercise price for a Formula Award may be in
cash or by check, bank draft or money order payable in United
States dollars to the order of the Company or payment may be
in whole or in part by
(a) transfer to the Company of shares of Common Stock having
a Fair Market Value (as determined in Section 4.3) on
the date of exercise equal to the exercise price; or
(b) delivery of instructions to the Company to withhold from
the shares of Common Stock that would otherwise be issued
on exercise of that number of such shares having a Fair
Market Value (as determined in Section 4.3) equal to
the exercise price.
If the Fair Market Value (as determined in Section 4.3) of
the number of whole shares of Common Stock transferred or
the number of whole shares of Common Stock withheld is
less than the total exercise price, the shortfall must be
paid in cash, check, bank draft or money order, as
aforesaid.
4.7 Term of Formula Awards
Each Formula Award shall expire ten (10) years from its date
of grant, but shall be subject to earlier termination as
follows:
(a) In the event of the termination of a Formula Award
holder's service as a Director, by reason of his or her
removal as Director (by the shareholders, the Board of
Directors or otherwise), the then outstanding Formula
Awards of such holder (whether or not then
exercisable) shall automatically expire on (and may
not be exercised on) the effective date of such
termination.
(b) In the event of the termination of a Formula Award
holder's service as a Director by reason of retirement
or total disability, the then outstanding Formula Awards
of such holder shall become exercisable, to the full
extent of the number of shares of Common Stock
remaining covered by such Formula Awards, regardless of
whether such Formula Awards were previously
exercisable, and each such Formula Award shall expire
one (1) year after the date of such termination or on
the stated grant expiration date, whichever is earlier.
For purposes of this Section 4.7, the phrase "by
reason of retirement" means (a) mandatory retirement
pursuant to Board policy or (b) termination of service on
or after the holder's 65th birthday.
(c) In the event of the death of a Formula Award holder while
such holder is a Director, the then outstanding Formula
Awards of such holder shall become exercisable, to the
full extent of the number of shares of Common Stock
remaining covered by such Formula Awards,
regardless of whether such Formula Awards were
previously exercisable, and each such Formula Award
shall expire one (1) year
after the date of death of such holder or on the stated
grant expiration date, whichever is earlier. Exercise
of a deceased holder's Formula Awards that are still
exercisable shall be by the estate of such holder
or by the person or persons to whom the holder's
rights have passed by will or the laws of descent and
distribution.
(d) In the event of the termination of a Formula Award
holder's service as a Director by reason of the
expiration of the Director's term in office (without
renomination or reelection) or by reason of
resignation, or for any other reason except those
described in
Sections 4.7(a), (b) or (c), the then outstanding Formula
Awards of such holder shall become exercisable, to the
full extent of the number of shares of Common Stock
remaining covered by such Formula Awards, regardless of
whether such Formula Awards were previously exercisable,
and each such Formula Award shall expire three (3)
months after the effective date of such termination.
4.8 Transferability
The right to exercise a Formula Award shall, during the
lifetime of the Eligible Director to whom such Formula Award
was granted, be exercisable only by such recipient or
pursuant to a qualified domestic relations order as
defined by the Code or Title l of the Employee Retirement
Income Security Act, or the rules thereunder (a "QDRO")
and shall not be assignable or transferable by such
recipient other than by will or the laws of descent and
distribution
or a QDRO. Any purported transfer contrary to this provision
will be null and void and without effect.
4.9 Limitation of Rights
Neither the recipient of a Formula Award under the Plan nor
the recipient's successor or successors in interest shall
have any rights as a shareholder of the Company with
respect to any shares of Common Stock subject to a Formula
Award granted to such person until the date of issuance
of a stock certificate for such shares of Common Stock.
4.10 Limitation as to Directorship
Neither the Plan, nor the grant of a Formula Award, nor any
other action taken pursuant to the Plan shall constitute or
be evidence of any agreement or understanding, express or
implied, that an Eligible Director has a right to
continue as a Director for any period of time or at any
particular rate of compensation.
4.11 Capital Adjustments
The number and class of shares with respect to which a
Formula Award may be granted to an Eligible Director under
the Plan, the number and class of shares subject to each
outstanding Formula Award, and the exercise price per
share specified in each such Formula Award shall be
proportionately adjusted in accordance with the provisions
Section 5.1 For purposes of the preceding sentence, the
Company shall be deemed to have received consideration
for any shares issued
pursuant to this or any other employee benefit plan meeting
the requirements of Rule 16b-3.
4.12 Limit on Grants to Eligible Directors
Notwithstanding any provision to the contrary, the Committee
may, but shall not be obligated to, grant an Eligible
Director Stock Options under the Plan and such grant, if
any, shall not affect the Eligible Director's entitlement to
be granted Formula Awards pursuant to Section 4.2.
4.13 Commencement of Grants of Formula Awards
Notwithstanding any provision to the contrary, no Formula
Award shall be granted pursuant to the Plan unless and until
no additional Formula Awards may be granted pursuant to the
Company's 1993 Stock Option Plan and 1995 Stock Option
Plan.
4.14 Termination of Formula Awards
Notwithstanding any provision to the contrary, no Formula
Award shall be granted pursuant to the Plan on a date when
the number of shares of Common Stock authorized for
issuance pursuant to the Plan and then available for
issuance pursuant to new Formula Awards is less than the
aggregate number of such shares that would be issuable
pursuant to Formula Awards otherwise required to be granted
on such date, assuming the full vesting and exercise of
such Formula Awards. In the event Formula Awards are
not granted as a result of the
application of this Section 4.14, no Formula Awards shall
thereafter be granted pursuant to the Plan.
4.15 Conflicting Provisions
In the event of any conflict between a provision of this
Section 4 and a provision in any other paragraph of the Plan
with respect to Formula Awards, such provision of this
Section 4 shall be deemed to control.
5. MISCELLANEOUS PROVISIONS
5.1 Adjustments Upon Changes in Capitalization
In the event of changes to the outstanding shares of Common
Stock of the Company through reorganization, merger,
consolidation, recapitalization, reclassification, stock
split-up, (except for the 3-for-2 stock split approved
by the Board of Directors on March 4, 1996, payable April
10, 1996), stock dividend, stock consolidation or otherwise,
or in the event of a sale of all or substantially all of
the assets of the Company, an appropriate and proportionate
adjustment shall be made in the number and class of
shares as to which Stock Options and Formula Awards may be
granted. A corresponding adjustment changing the
number or class of shares and/or the exercise price per
share of unexercised
Stock Options and Formula Awards or portions thereof which
shall have been granted prior to any such change shall
likewise be made. Notwithstanding the foregoing, in the
case of a reorganization, merger or consolidation, or sale
of all or substantially all of the assets of the Company,
in lieu of adjustments as aforesaid, the Committee may in
its discretion accelerate the date after which a Stock
Option or Formula Award may or may not be exercised or
the stated expiration date thereof. Adjustments or
changes under this Section 5.1 shall be made by the
Committee, whose determination as
to what adjustments or changes shall be made, and the extent
thereof, shall be final, binding and conclusive.
5.2 Non-Transferability
No Stock Option shall be transferable except by will or the
laws of descent and distribution, nor shall any Stock Option
be exercisable during the Participant's lifetime by any
person other than the Participant or his guardian or
legal representative.
5.3 Withholding
The Company's obligations under the Plan shall be subject to
applicable federal, state and local tax withholding
requirements. Federal, state and local withholding tax due
at the time of a grant or upon the exercise of any Stock
Option may, in the discretion of the Committee, be paid
in shares of Common Stock already owned by the
Participant or through the withholding of shares
otherwise issuable to such Participant, upon such terms and
conditions as the
Committee shall determine. If the Participant shall fail to
pay, or make arrangements satisfactory to the Committee for
the payment to the Company of all such federal, state and
local taxes required to be withheld by the Company, then
the Company shall, to the extent permitted by law, have the
right to deduct from any payment of any kind otherwise due
to such Participant an amount equal to any federal, state
or local taxes of any kind required to be withheld by the
Company.
5.4 Compliance with Law and Approval of Regulatory Bodies
No Stock Option or Formula Award shall be exercisable and no
shares will be delivered under the Plan except in compliance
with all applicable federal and state laws and regulations
including, without limitation, compliance with all
federal and state securities laws and withholding tax
requirements and with the rules of NASDAQ and of all
domestic stock exchanges on which the Common Stock
may be listed. Any share certificate issued to evidence
shares for which a Stock Option or Formula Award is
exercised may bear legends and
statements the Committee shall deem advisable to assure
compliance with federal and state laws and regulations. No
Stock Option or Formula Award shall be exercisable and no
shares will be delivered under the Plan, until the
Company has obtained the consent or approval from
regulatory bodies, federal or state, having jurisdiction
over such matters as the Committee may deem advisable.
In the case of the exercise of a Stock Option or
Formula Award by a
person or estate acquiring the right to exercise the Stock
Option or Formula Award as a result of the death of the
Participant, the Committee may require reasonable evidence
as to the ownership of the Stock Option or Formula Award and
may require consents and releases of taxing authorities that
it may deem advisable.
5.5 No Right to Employment
Neither the adoption of the Plan nor its operation, nor any
document describing or referring to the Plan, or any part
thereof, nor the granting of any Stock Options hereunder,
shall confer upon any Participant under the Plan any
right to continue in the employ of the Company or any
Subsidiary, or shall in any way affect the right and power
of the Company or any Subsidiary to terminate the employment
of any Participant at any time with or without assigning a
reason therefor, to the same extent as might have been
done if the Plan had not been adopted.
5.6 Exclusion from Pension Computations
By acceptance of a grant of a Stock Option under the Plan,
the recipient shall be deemed to agree that any income
realized upon the receipt or exercise thereof or upon the
disposition of the shares received upon exercise will not
be taken into account as "base remuneration", "wages",
"salary" or "compensation" in determining the amount of any
contribution to or payment or any other benefit
under any pension, retirement, incentive, profit-sharing
or deferred
compensation plan of the Company or any Subsidiary.
5.7 Abandonment of Options
A Participant or Eligible Director may at any time abandon a
Stock Option or Formula Award prior to its expiration date.
The abandonment shall be evidenced in writing, in such form
as the Committee may from time to time prescribe. A
Participant or Eligible Director shall have no further
rights with respect to any Stock Option or Formula Award so
abandoned.
5.8 Severability
If any of the terms or provisions of the Plan conflict with
the requirements of Rule 16b-3, then such terms or provisions
shall be deemed inoperative to the extent they so conflict
with the requirements of Rule 16b-3.
5.9 Interpretation of the Plan
Headings are given to the sections of the Plan solely as a
convenience to facilitate reference, such headings, numbering
and paragraphing shall not in any case be deemed in any way
material or relevant to the construction of the Plan or any
provision hereof. The use of the masculine gender shall
also include within its meaning the feminine. The use of the
singular shall also include within Its meaning the
plural and vice versa.
5.10 Use of Proceeds
Funds received by the Company upon the exercise of Stock
Options and Formula Awards shall be used for the general
corporate purposes of the Company.
5.11 Construction of Plan
The place of administration of the Plan shall be in the
Commonwealth of Pennsylvania, and the validity, construction,
interpretation, administration and effect of the Plan and of
its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws of
the Commonwealth of Pennsylvania.
Preliminary Copy - Proxy Card
This proxy when properly executed will be voted as specified. If no
specification is made, this proxy will be voted FOR each nominee for director
named below (PROPOSAL 1) and in the discretion of the proxies on all other
matters.
PROPOSAL 1: Election of three Class I director nominees listed below, each to
serve for three years and until their respective successors are elected and
qualified.
FOR WITHHELD INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR
three nominees AUTHORITY AN INDIVIDUAL NOMINEE, STRIKE OUT THAT
listed except to vote for NOMINEE'S NAME
as marked three nominees
to the listed
contrary
Alice E. Powell Walter E. Conrad
Arnold H. Keehn
PROPOSAL 2: To amend the Company's Articles of Incorporation to increase the
number of shares of Common Stock, which the Company has authority to issue
from 37,500,000 to 50,000,000.
PROPOSAL 3: Proposal to approve the Company's 1996 Stock Option Plan.
PROPOSAL 4: To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The undersigned hereby also acknowledges receipt of
The Notice of Annual Meeting of Shareholders and
Proxy Statement with respect to said Meeting and the
Company's Annual Report for the year ended December
31, 1995.
Dated , 1996
Please date this proxy and sign your name exactly as
It appears hereon. Where there is more than one
Owner, each should sign.
Please complete, date, sign and return this Proxy promptly, using the enclosed
envelope, whether or not you expect to attend the meeting. You may
nevertheless vote in person if you attend.
Only shareholders of record at the close of business on April 4, 1996 are
entitled to notice of, and to vote at, the meeting and any adjournment(s)
thereof.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON BUT IF YOU DO NOT EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
Dated: April 19, 1996
By Order of the Board of Directors,
Susan T. Mankowski
Secretary
AMERICAN TRAVELLERS CORPORATION
3220 Tillman Drive
Bensalem, Pennsylvania 19020
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John A. Powell and Ramon R. Obod, and
each of them, as the true and lawful attorneys and proxies of the undersigned,
to vote and otherwise act on behalf of the undersigned at the Annual Meeting
of Shareholders of American Travellers Corporation, to be held in Trevose,
Pennsylvania on May 23, 1996, at 10:00A.M., local time, or at any adjournment
or adjournments thereof, and with all powers the undersigned would possess if
present, to vote on the matters set forth on the reverse side hereof.
(Continued on reverse side)
