<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Penn Treaty American Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/x/ Fee paid previously.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
PENN TREATY AMERICAN CORPORATION
3440 LEHIGH STREET
ALLENTOWN, PENNSYLVANIA 18103
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY
MAY 23, 1997
TO THE SHAREHOLDERS OF PENN TREATY AMERICAN CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of PENN
TREATY AMERICAN CORPORATION (the "Company") will be held at Comfort Suites of
Allentown, 3712 Hamilton Boulevard, Allentown, Pennsylvania on Friday, May 23,
1997, at 9:00 a.m. (the "Meeting") for the purpose of considering and voting
upon the following matters:
1. To elect three persons to the Company's Board of Directors as Class
I Directors to serve until the 2000 Annual Meeting of Shareholders and
until their successors are elected and have been qualified;
2. To approve an increase in the number of shares from 600,000 to
1,200,000 which may be issued under the Company's Employee Incentive
Stock Option Plan ("the Plan");
3. To ratify the selection of Coopers & Lybrand L.L.P. as independent
public accountants for the Company and its subsidiaries for the year
ending December 31, 1997; and
4. To transact whatever other business may properly come before the
Meeting, or any adjournments or postponements thereof.
Only those Shareholders of Common Stock of record at the close of business
on April 7, 1997 shall be entitled to notice of, and to vote at, the Meeting.
EACH SHAREHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE ANNUAL
MEETING, IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT
DELAY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. ANY PROXY GIVEN BY THE
SHAREHOLDER MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED BY FILING WITH THE
SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY BEARING A
LATER DATE. ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE HIS OR HER
PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Domenic P. Stangherlin
------------------------------------
Domenic P. Stangherlin, Secretary
Allentown, Pennsylvania
April 25, 1997
<PAGE>
PENN TREATY AMERICAN CORPORATION
3440 Lehigh Street
Allentown, Pennsylvania 18103
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 1997
INTRODUCTORY STATEMENT
This Proxy Statement ("Proxy Statement") is being furnished to the
shareholders of Penn Treaty American Corporation, a Pennsylvania corporation
(the "Company"), in connection with the solicitation by the Board of Directors
of the Company of Proxies to be voted at the Annual Meeting of Shareholders of
the Company to be held on May 23, 1997, at Comfort Suites of Allentown, 3712
Hamilton Boulevard, Allentown, Pennsylvania at 9:00 a.m., or at any adjournments
or postponements thereof (the "Meeting"). This Proxy Statement and the
accompanying Proxy Card are first being mailed to the shareholders on or about
April 25, 1997. A copy of the 1997 Annual Report, which includes financial
statements for the fiscal year ended December 31, 1996, is enclosed herewith.
Costs of solicitation will be borne by the Company.
MATTERS TO BE CONSIDERED
The matters to be considered and voted upon at the Meeting will be:
1. To elect three persons to the Company's Board of Directors as Class
I Directors to serve until the 2000 Annual Meeting of Shareholders and
until their successors are elected and have been qualified;
2. To approve an increase in the number of shares from 600,000 to 1,200,000
which may be issued under the Company's Employee Incentive Stock
Option Plan ("the Plan);
3. To ratify the selection of Coopers & Lybrand L.L.P. as independent
public accountants for the Company and its subsidiaries for the year
ending December 31, 1997; and
4. To transact whatever other business may properly come before the
Meeting, or any adjournments or postponements thereof.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The close of business on April 7, 1997 has been fixed as the record date for
the determination of shareholders entitled to
<PAGE>
notice of and to vote at the Meeting and any adjournments or postponements
thereof. As of such date, there were outstanding 7,519,199 shares of common
stock, par value $.10 per share ("Common Stock"), held by 447 shareholders of
record.
Each share of Common Stock is entitled to one vote on all matters properly
submitted at the Meeting. The presence, in person or by Proxy, of the holders of
a majority of the outstanding shares of Common Stock entitled to vote on the
matters set forth in the accompanying Notice of Meeting will constitute a quorum
for the transaction of business at the Meeting. The three nominees for Director
who receive the largest number of votes cast at the Meeting, either in person or
by Proxy (there being no cumulative voting), will be elected to serve on the
Board of Directors of the Company. The approval of an increase in the number of
shares which may be issued under the Company's Employee Incentive Stock Option
Plan will require the affirmative vote, either in person or by Proxy, of the
holders of shares representing at least a majority of the votes cast at the
Meeting. The ratification and approval of the selection of Coopers and Lybrand
L.L.P. as the independent public accountants for the Company and its
subsidiaries, Penn Treaty Life Insurance Company ("PTLIC"), Senior Financial
Consultants Company (the "Agency"), formerly named Cher-Britt Service Company,
Network America Life Insurance Company ("Network America") and American Network
Insurance Company, ("ANIC") formerly Health Insurance of Vermont, Inc., ("HIVT")
will require the affirmative vote, either in person or by Proxy, of the holders
of shares representing at least a majority of the votes cast at the Meeting.
Shares represented by valid Proxies will be voted in accordance with
instructions contained therein or, in the absence of such instructions, in
accordance with the recommendations of the Board of Directors. Shareholders who
execute Proxies may revoke them at any time before such Proxies are voted by (i)
delivering written notice to the Secretary of the Company at the Company's
principal executive offices or (ii) delivering to the Secretary of the Company
duly executed Proxies bearing a later date than the Proxy being revoked.
Shareholders who execute Proxies but nevertheless attend the Meeting may revoke
such Proxies at any time before such Proxies are voted by giving written notice
to the Secretary.
PROPOSAL I--ELECTION OF DIRECTORS
The Board of Directors currently has nine members and is divided into three
classes, each comprised of three Directors who serve for terms of three years
and until their successors have been elected and qualified.
3
<PAGE>
The Proxy Agents named in the enclosed Proxy Card intend to vote, unless
instructed otherwise, for election of the nominees named below. If for any
reason any of the nominees becomes unable or is unwilling to serve at the time
of the Meeting, the Proxy Agents will, unless instructed otherwise, vote for a
substitute nominee or nominees in their discretion. It is not anticipated that
any nominee will be unavailable for election.
The following information with respect to current and past five years'
business experience, directorships and memberships on committees of the Board of
Directors has been furnished to the Company by each person nominated as a
Director and each person whose term of office as a Director will continue after
the Meeting.
Class I Nominees for election at the Meeting to serve until the 2000 Annual
Meeting are listed below. All of the nominees are currently serving as
directors.
Irving Levit is the founder, Chairman of the Board of Directors, President
and Chief Executive Officer of the Company. Mr. Levit has also been Chairman of
the Board of Directors, President and Chief Executive Officer of PTLIC since it
was purchased by the Company in 1976, of the Agency since February 1988, of
Network America since July 1989 and ANIC since it was purchased in 1996. In
addition, Mr. Levit has been the sole owner of the Irv Levit Insurance
Management Corporation ("IMC"), an insurance agency, since 1961. Mr. Levit is 67
and has over 40 years experience in the insurance business.
A. J. Carden has served as Executive Vice President and Director of the
Company and PTLIC since July 1983, of the Agency since February 1988, of Network
America since July 1989 and ANIC since it was purchased in 1996. His duties
include overseeing the Company's underwriting and claims departments and
monitoring the Company's compliance with various state insurance department
requirements. From 1970 to July 1983, Mr. Carden served as Assistant to the
President and Vice President of Claims for Columbia Life Insurance Company and
Columbia Accident and Health Insurance Company located in Bloomsburg,
Pennsylvania. Mr. Carden is 63 and has 40 years experience in the insurance
business.
Domenic P. Stangherlin has served as Secretary and Director of the Company
and PTLIC since June 1971, of the Agency since February 1988, of Network America
since July 1989 and ANIC since it was purchased in 1996. Mr. Stangherlin is the
owner and manager of the Line Tool Company, a manufacturer of micro-positioners
located in Allentown, Pennsylvania. He is 70.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES FOR A FIXED TERM OF THREE YEARS.
4
<PAGE>
Class III Directors whose present terms continue until the 1999 Annual
Meeting:
Michael F. Grill has served as Treasurer and Comptroller of the Company and
PTLIC since 1981, of the Agency since February 1988, of Network America since
July 1989 and ANIC since it was purchased in 1996. Mr. Grill became a Director
of the Company in December 1986, of the Agency in February 1988, of Network
America in July 1989 and of ANIC in 1996. Prior to joining the Company,
Mr Grill served as Chief Accountant for World Life and Health Insurance Company
located in King of Prussia, Pennsylvania from 1973 to 1981. Mr. Grill is 47 and
has 25 years experience in the insurance business.
C. Mitchell Goldman, Esquire, has served as a Director of the Company since
May 1987. Mr. Goldman is a partner in the law firm of Goldman, Marshall &
Muszynski, P.C., which engages in the practice of health care law. Mr. Goldman
was also a partner and Senior Vice President of GLS Associates, a health care
consulting firm providing marketing and other planning services for hospitals,
nursing homes and other health care facilities from 1975 until October 1995. Mr.
Goldman currently serves as Corporate Secretary of the Corporate Alliance for
Drug Education. Mr. Goldman is a member of the National Health Lawyer
Association and the American Hospital Association Society for Planning and
Healthcare Marketing. In addition to his law degree, Mr. Goldman has an M.B.A.
in Health Care Administration from the Wharton School of the University of
Pennsylvania. He is 46.
John W. Mahoney became a director of the Company in 1996 and a Vice
President of ANIC when ANIC was purchased by the Company in September 1996. From
December 1988 to September 1996, Mr. Mahoney served as the President of HIVT.
Prior to becoming the President, Mr. Mahoney served as an Executive Vice
President for three years and as Vice President for 18 years. Mr. Mahoney is a
member of the National Association of Life Underwriters, the National
Association of Health Underwriters and is a Director of the Vermont Life and
Health Guaranty Association. Mr. Mahoney holds a B.A. degree from St. Michael's
College in Colchester, Vermont. He is 54 years old and has 30 years of insurance
experience.
Class II Directors whose present terms continue until the 1998 Annual
Meeting:
Jack D. Baum has served as Vice President of Marketing of the Company and
PTLIC since April 1985 and became a Director of each in March 1987. He became
Vice President of Sales and Director of the Agency in February 1988, of Network
America in July 1989 and ANIC when it was purchased in 1996. His duties include
supervising and motivating the Company's sales force and he is responsible for
advertising and promotional activities. Prior to joining the
5
<PAGE>
Company, Mr. Baum served as Vice President of Marketing for National Security
General Insurance Company in Lancaster, Pennsylvania from September 1983 to
April 1985 and as a Director of Group Sales and Marketing for Educators
Mutual Life Insurance in Lancaster, Pennsylvania, from March 1976 to
September 1983. Mr. Baum is 63 and has over 20 years experience in the
insurance business.
Emile G. Ilchuk has served as a Director of the Company and PTLIC since
January 1972, of the Agency since February 1988, of Network America since July
1989 and of ANIC since it was purchased in 1996. Mr. Ilchuk has worked as a
Safety Inspector for the Pennsylvania Department of Labor and Industry since
1975. He is 59.
Glen A. Levit has served as a Director of the Company since May 1995, as a
director of PTLIC and Network America since April 1995 and as a director of ANIC
since it was purchased in 1996. Mr. Levit has served as Vice President of Sales
of PTLIC and Network America since June, 1993 and as Vice President of ANIC
since it was purchased in 1996. His duties include hiring, training and
supervising agents and marketers and he is responsible for planning and
conducting seminars across the country. From October 1991 until June, 1993 Mr.
Levit served as the Regional Sales Director and as a regional marketer for PTLIC
and Network America. Prior to that time, Mr. Levit worked in several other
departments of PTLIC and Network America including underwriting, and has also
served as a director of IMC, an insurance agency, since 1988. He is 29 and has
10 years of experience in the insurance business. Mr. Levit is the son of Irving
Levit.
To assist in the discharge of its responsibilities, the Board of Directors
has an Audit Committee, a Compensation Committee and an Executive Committee. The
Audit Committee communicates with and receives information directly from the
Company's independent accountants. The Audit Committee comprises Messrs. Ilchuk
and Goldman. The Audit Committee met one time during the last fiscal year. The
Compensation Committee comprises Messrs. Goldman and Stangherlin. This committee
reviews and evaluates the performance and leadership of the Company's executive
officers and recommends compensation levels to the Board of Directors. The
Compensation Committee met one time during the last fiscal year. The Executive
Committee meets periodically to discuss and act upon certain significant matters
affecting the Company. The Executive Committee comprises Messrs. Levit, Carden
and Stangherlin. The Executive Committee met two times during the last fiscal
year. The Board of Directors does not have a nominating committee. The total
combined attendance for all Committee meetings was 100%.
6
<PAGE>
GENERAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
During 1996, the Board of Directors met 6 times. Each Director attended at
least 75% of the meetings of the Board.
Each Director receives a fee of $200 for each regular board meeting
attended. In addition, Mr. Goldman, currently a Director of the Company,
received a consulting fee of $7,000 during 1996.
Information with respect to the share ownership of the Directors and the
nominees is set forth below. See "Principal Shareholders."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
IMC, an insurance agency which is owned by Irving Levit, Chairman of the
Board, President and Chief Executive Officer of the Company, PTLIC, Network
America, ANIC and the Agency, produced approximately $65,000, $62,000 and
$55,000 of new and renewal premiums for PTLIC for the years ended December 31,
1994, 1995 and 1996, respectively, for which it received commissions of
approximately $15,000, 14,000 and $12,000, respectively. While IMC has only been
minimally involved in the sale of insurance products since 1979 and IMC'S
operations since that time have not been significant, IMC continues to receive
overriding commissions from the Company of 5%, on business written for PTLIC by
any IMC general agents who were appointed prior to 1979 and any of their
sub-agents hired prior and subsequent to January 1979 and one agent appointed in
1981. For the years ended December 31, 1994, 1995 and 1996 these overriding
commissions totalled approximately $520,000, $517,000 and $539,000,
respectively. The premium revenues on which such overrides are paid, are based
on commissions which are higher than those currently paid to independent agents.
The terms on which commissions have been paid to IMC are consistent with (i)
the terms on which commissions have been paid by the Company to comparable
unaffiliated agencies in the past and currently to one unaffiliated agency
performing similar services and (ii) the terms on which commissions are paid in
the industry in general, and were no less favorable than would have been
obtained from unrelated third parties. To the extent that the Company engages in
future transactions with any of its affiliates, all such transactions will
likewise be on terms no less favorable than could be obtained from unaffiliated
parties and will be approved by a majority of the Company's disinterested
directors.
C. Mitchell Goldman, a Director of the Company, performed certain legal
services for the Company during 1996 for which he was paid legal fees of
approximately $29,000.00.
7
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Goldman and Stangherlin, who are non-employee directors. Mr. Stangherlin also
serves as the Secretary of the Company, PTLIC, the Agency, Network America and
ANIC. Mr. Goldman performed certain legal services for the Company during 1996.
See Certain Relationships and Related Transactions.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Executive Compensation Program is administered by the
Compensation Committee (the "Committee"), a Committee of the Board of Directors
consisting of independent non-employee directors. The primary functions of the
Committee are to review and evaluate the performance and leadership of the Chief
Executive Officer and all other executive officers and to recommend compensation
amounts to the Board of Directors. In 1996, the Board of Directors accepted and
adopted all of the Committee's recommendations concerning executive compensation
amounts.
OBJECTIVES AND POLICIES
The Committee seeks to:
- provide compensation which is closely linked to Company and individual
performance;
- align the interests of the Company's executives with those of its
shareholders through award opportunities that can result in ownership of
common stock;
- ensure that compensation is sufficiently competitive to attract and retain
high quality executive talent.
Consistent with these objectives, the Committee employs a system of
quantitative measures and qualitative assessments in evaluating and measuring
executive officer performance. Quantitative measures include earnings
performance, return on assets and growth of revenues. Qualitative assessments
include the quality and measured progress of the operations of the Company and
the success of strategic actions taken.
In addition to Company-wide measures of performance, the Committee considers
performance factors particular to each executive officer, such as the
performance of the departments for which said officer had management
responsibility, individual
8
<PAGE>
managerial accomplishments and contribution to the achievement of corporate
goals.
CEO COMPENSATION
In accordance with the Committee's general practice and the Company's
compensation policies, Mr. Levit's compensation for the 1996 fiscal year was
based principally upon the Company's performance and Mr. Levit's ongoing
contribution to that performance. The increases in Mr. Levit's salary and the
amount of the bonus were determined in the Committee's sole discretion after its
consideration of competitive data, the Board's assessment of Mr. Levit's
performance and recognition of the Company's performance during 1996.
C. Mitchell Goldman
Domenic Stangherlin
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1994, 1995 and 1996 of those persons who
during 1996 (i) served as the Company's chief executive officer or (ii) were
executive officers (other than the chief executive officer) whose total
annual salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
------------------------------------------- COMPENSATION
NAME AND SALARY BONUS OTHER ANNUAL OPTIONS
PRINCIPAL POSITION YEAR ($) ($) COMPENSATION($)(1) (#)
- ------------------------------------------- --------- --------- --------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Irving Levit(3) 1994 217,723 25,000 800 0
Chairman of the 1995 232,909 35,000 1,400 48,000
Board President 1996 259,927 40,000 1,000 48,000
& Chief Executive
Officer
A. J. Carden 1994 112,070 13,000 800 0
Executive 1995 117,754 15,000 1,400 18,000
Vice-President 1996 123,062 17,000 1,000 18,000
<CAPTION>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)(2)
- ------------------------------------------- -------------
<S> <C>
Irving Levit(3) 4,500(3)
Chairman of the 4,500(3)
Board, President 8,998(3)
& Chief Executive
Officer
A. J. Carden 3,752
Executive 3,983
Vice-President 4,202
</TABLE>
- ------------------------
(1) Represents Directors' fees of $200 for each regular board meeting attended.
(2) Represents Company contributions to the Company's Pension Plan on behalf of
each of the named individuals.
(3) Excludes cash overriding commissions and direct commissions totalling
approximately $535,000, $531,000 and $551,000 paid to IMC by the Company in
1994, 1995 and 1996, respectively, in connection with policies written for
the Company. See "Certain Relationships and Related Transactions" above.
9
<PAGE>
Pension Plan and 401(K) Plan
Until August 1, 1996, the Company maintained a defined contribution pension
plan covering substantially all employees. The company contributed 3% of each
eligible employee's annual covered payroll to the plan. All contributions were
subject to limitations imposed by the Internal Revenue Code on retirement plans
and Section 401(k) plans. Upon the termination of the plan on August 1, 1996,
each participant became fully vested. A prorata portion of the 1996 scheduled
contribution was put into the plan upon termination.
On August 1, 1996, the Company adopted a 401(k) retirement plan, covering
substantially all employees with one year of service. Under the plan,
participating employees may contribute up to 15% of their annual salary on a
pre-tax basis. The Company, under the plan, equally matches employee
contributions up to the first three percent of the employee's salary. The
Company and employee portion of the plan is vested immediately. The Company
expense in 1996 was $36,000. The Company may elect to make a discretionary
contribution to the plan, which will be contributed proportionately to each
eligible employee. The Company did not make a discretionary contribution in
1996.
INCENTIVE STOCK OPTION PLAN
The shareholders of the Company adopted an Incentive Stock Option Plan
(the "Plan") in March 1987. The Plan, as amended by shareholder action on May
25, 1990 and May 28, 1993 provides for the granting of options to purchase up
to 600,000 shares of Common Stock. Stock options have been granted and are
outstanding to date with respect to 589,760 shares. Prices of these options
range from $5.00 to $22.55 per share. In 1995, 102,000 stock options were
granted under the Plan at an exercise price of $12.38 per share and 48,000
stock options were granted at an exercise price of $13.61 per share. In June
1996, 116,800 stock options were granted under the Plan at an exercise price
of $20.50 per share and 48,000 stock options were granted at an exercise
price of $22.55 per share. In addition, as of April 2, 1997, stock options
granted with respect to 19,618 shares have been canceled and 124,116 shares
have been exercised. Options granted under the Plan are intended to qualify
as "incentive stock options" within the meaning of Section 422 of the Code. A
committee of the Board of Directors has the authority to administer the Plan
and to grant options to key employees (including officers, whether or not
they are Directors) of the Company. The exercise price of all options granted
under the Plan may not be less than the fair market value of the shares on
the date of grant (110% of fair market value in the case of grant to any
person who holds more than 10% of the combined voting power of all classes of
outstanding stock.) The maximum allowable term of each option is ten years
(five years in the case of holders of more than 10% of the combined voting
power of all classes of outstanding
10
<PAGE>
stock), and the options become exercisable in four equal annual
installments commencing one year from the option grant date.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning grants of stock
options during the fiscal year ended December 31, 1996 to each of the Company's
executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
- ------------------------------------------------------------------------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
% OF TOTAL
OPTIONS
GRANTED
OPTIONS TO EMPLOYEES EXERCISE OR EXPIRATION 5% 10%
NAME GRANTED(#) IN FISCAL YEAR BASE PRICE($) DATE ($) ($)
- ------------------------------------------- ----------- --------------- --------------- ----------- --------- ----------
Irving Levit............................... 48,000 29.3% 22.55 6/18/2006 686,716 1,725,067
A. J. Carden............................... 18,000 11.0% 20.50 6/18/2006 232,062 588,091
</TABLE>
- ------------------------
(1) The dollar amounts set forth under these columns are the result of
calculations made at assumed 5% and 10% appreciation rates as required by
the Securities and Exchange Commission regulations and are not intended to
indicate future price appreciation, if any, of the Company's common stock.
AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gains realized on exercise in 1996 by the
Company's executive officers named in the Summary Compensation Table. The table
also sets forth the number of shares covered by exercisable and unexercisable
options held by such executives on December 31, 1996 and the aggregate gains
that would have been realized had these options been exercised on December 31,
1996, even though these options were not exercised, and the unexercisable
options could not have been exercised on December 31, 1996.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT AT DEC. 31,
VALUE DEC. 31, 1996(#) 1996($)(1)
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------------- ------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Irving Levit........................ 0 0 85,947/89,142 1,317,518/675,349
A.J. Carden......................... 29,16 498,208 17,484/31,500 253,921/282,938
</TABLE>
- ------------------------
(1) Market value of shares covered by in-the-money options on December 31,1994,
less option exercise price. Options are in-the-money if the market value of
the shares covered thereby is greater than the option exercise price. The
closing price of the Company's Common Stock at fiscal year end was $26.00.
11
<PAGE>
AGENT STOCK OPTION PLAN
In October 1994, the Board of Directors of the Company authorized a stock
option plan for its agents (the "Agent Plan"). The Agent Plan, adopted by the
Board of Directors in May 1995, provides for the grant of Common Stock options
covering up to 300,000 shares and is designed to reward the Company's agents by
providing for the grant of options to purchase Common Stock to agents upon
attaining certain sales objectives determined by the Board of Directors. The
exercise price of all options granted under the plan may not be less than the
fair market value of the shares on the date of grant. The maximum allowable term
of each option is ten years, and the options become exercisable in four equal
annual installments commencing one year from the option grant date. On August
18, 1995, 16,100 options were granted under the Agent Plan at an exercise price
of $12.63 per share. On June 25, 1996, 20,000 options were granted under the
Agent Plan at an exercise price of $20.50 per share.
12
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 17, 1997, information with
respect to the beneficial ownership of the Common Stock of the Company by (i)
each person known to the Company to own 5% or more of the outstanding shares of
Common Stock, (ii) each of the Company's Directors, and (iii) all Directors and
Executive Officers as a group:
<TABLE>
<CAPTION>
PERCENT
NAME (1) SHARES OWNED OF OWNERSHIP (2)
- -------------------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Irving Levit (3).................................................... 1,954,288 25.70%
Palisade Capital Management L.L.C.(4)............................... 671,770 8.69%
Dimensional Fund Advisors, Inc.(5).................................. 404,200 5.38%
Domenic P. Stangherlin.............................................. 41,887 *
Emile G. Ilchuk..................................................... 11,500 *
A. J. Carden (6).................................................... 17,484 *
Jack D. Baum (7).................................................... 33,658 *
Michael F. Grill (8)................................................ 27,834 *
C. Mitchell Goldman, Esquire (9).................................... 1,700 *
Glen A. Levit (10).................................................. 17,476 *
John W. Mahoney(11)................................................. 12,000 *
Cameron B. Waite(12)................................................ -- *
All Directors and Executive
Officers as a group................................................. 2,117,827 27.55%
(10 persons) (13)
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise noted, the address of each person named above is in care of
the Company.
(2) Based on 7,519,199 shares outstanding, except that shares underlying options
exercisable within 60 days are deemed to be outstanding for purposes of
calculating the percentage owned by the holder of such options.
(3) Mr. Levit is the President, Chief Executive Officer and Chairman of the
Board of the Company. Includes 49,450 shares held by a private foundation of
which Mr. Levit is an officer and director, 40,007 shares held by Mr. Levit
as trustee of a retirement account, 167,152 shares held by Mr. Levit as
co-trustee of an irrevocable trust for Mr. Levit's five children and
exercisable options to purchase 85,947 shares of Common Stock. Includes
30,000 shares held by mr. Levit's wife as to which he disclaims beneficial
ownership. Excludes 43,665 shares held by four of his adult children and
options to purchase 89,142 shares.
(4) According to the Schedule 13G filed with the Commission by Palisade Capital
Management, L.L.C. for the year ended December 31, 1996, the address for
Palisade Capital Management, L.L.C. is One Bridge Plaza, Suite 695, Fort
Lee,
13
<PAGE>
NJ 07024. Palisade Capital Management L.L.C. reported sole voting power
and sole investment power with respect to all shares and includes 210,970
shares which Palisade Capital Management L.L.C. has a right to acquire upon
conversion of convertible securities.
(5) According to the Schedule 13G filed with the Commission by Dimensional Fund
Advisors, Inc. for the year ended December 31, 1996, the address for
Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401. Dimensional Fund Advisors, Inc. reported sole voting power
with respect to 301,300 shares and sole dispositive power with respect to
404,200 shares of Common Stock.
(6) Consists of exercisable options, and excludes options to purchase 31,500
shares of Common Stock.
(7) Includes exercisable options to purchase 33,577 shares of Common Stock and
excludes options to purchase 17,500 shares of Common Stock.
(8) Consists of exercisable options, and excludes options to purchase 26,250
shares of Common Stock.
(9) Includes 375 shares held by Mr. Goldman's wife and 450 shares beneficially
owned by Mr. Goldman's minor children.
(10) Includes exercisable options to purchase 2,250 shares of Common Stock and
excludes options to purchase 18,750 shares of Common Stock.
(11) Consists of shares held jointly by Mr. Mahoney and his wife.
(12) Mr. Waite has served as Chief Financial Officer of the Company since May
1996. From September 1994 to April 1996, Mr. Waite was Chief Financial
Officer and Treasurer of Blue Fish Clothing, Inc., a manufacturer,
wholesaler and retailer of women's clothing. From April 1983 to September
1994, Mr. Waite held various positions with Independence Bancorp. Inc.,
which merged with CoreStates Financial Corporation, his last position being
Vice President of Asset Liability Management. He holds a B.A. in Economics
from Dickinson College and an M.B.A. from Lehigh University.
(13) Includes exercisable options held by members of the group to purchase
167,112 shares and excludes options held by members of the group to purchase
183,142 shares of Common Stock.
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return for the
Company's common stock with the comparable cumulative return of two indices. The
NASDAQ Stock Market Index provides some indication of the performance of the
overall stock market, and the NASDAQ Insurance Stock Index reflects the
performance of insurance company stock generally.
PENN TREATY AMERICAN CORPORATION Performance Graph (1)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PTAC STOCK............................................... $ 100.00 $ 75.00 $ 78.91 $ 98.44 $ 154.68 $ 243.74
NASDAQ STOCK MARKET...................................... $ 100.00 $ 116.38 $ 133.60 $ 130.59 $ 184.67 $ 227.16
NASDAQ INS STOCK......................................... $ 100.00 $ 135.34 $ 144.76 $ 136.26 $ 193.56 $ 220.57
</TABLE>
- ------------------------
(1) Assumes a $100 investment on December 31, 1991 in Penn Treaty American
Corporation common stock, and in each of the indices. The total return
assumes reinvestment of all dividends.
15
<PAGE>
PROPOSAL II--APPROVAL OF AN INCREASE IN THE NUMBER OF
SHARES FROM 600,000 TO 1,200,000 WHICH MAY BE ISSUED
UNDER THE COMPANY'S INCENTIVE STOCK OPTION PLAN
The shareholders of the Company adopted the Plan in March 1987. The
essential features of the Plan are outlined above under "Executive
Compensation--Incentive Stock Option Plan." The Plan is designed to provide
those key employees of the Company who are important to its success and growth
with a direct proprietary interest in the future success of the Company and to
encourage them to maximize their performance and remain with the Company.
Of the 600,000 shares for which options may be granted under the Plan,
options covering 589,760 shares have been issued. For the reasons described
below, on April 25, 1997, the Board of Directors approved an amendment to the
Plan which increases the number of shares subject to options thereunder by
600,000 shares, to a total of 1,200,000 shares, subject to shareholder approval
at the Meeting. If the shareholders do not approve the increase, the maximum
number of shares issuable under the Plan pursuant to incentive stock options
will remain at 600,000. Approval of this amendment to the Plan requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock represented and entitled to vote at the Meeting.
The Board of Directors has approved this amendment to the Plan because it
believes that the Company and its shareholders benefit substantially from having
certain officers and key employees of the Company receive options to purchase
the Company's Common Stock. The opportunity afforded these employees to acquire
Common Stock by exercising these options is, in the judgment of the Board of
Directors, an essential element of an effective employee incentive program. The
Board of Directors also believes that stock options, particularly incentive
options, are very valuable in attracting and retaining high quality personnel
and in providing additional motivation to the Company's personnel to use their
best efforts on behalf of the Company and its shareholders. Increasing the
number of shares reserved for issuance under the Plan at this time demonstrates
the Company's continued commitment to furthering these goals.
THE BOARD OF DIRECTORS HAS APPROVED AND RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE INCENTIVE STOCK OPTION PLAN
INCREASING THE NUMBER OF SHARES FROM 600,000 TO 1,200,000 WHICH MAY BE ISSUED
THEREUNDER.
16
<PAGE>
PROPOSAL III--APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company, upon recommendation of the Audit
Committee, has selected the firm of Coopers & Lybrand L.L.P. as the independent
public accountants of the Company and its subsidiaries for the year ending
December 31, 1997. Coopers & Lybrand L.L.P. has acted in this capacity since
1986. A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Meeting for the purpose of making a statement if he so desires and to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION AND APPROVAL OF
THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE COMPANY AND ITS SUBSIDIARIES FOR THE YEAR ENDING DECEMBER
31, 1997.
SHAREHOLDER PROPOSALS
For the 1998 Annual Meeting of Shareholders, shareholder proposals must be
received by the Secretary of the Company no later than January 5, 1998.
OTHER MATTERS
At the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the Meeting is
that which is presented above. If any other matter or matters are properly
brought before the Meeting, or any adjournments or postponements thereof, it is
the intention of the persons named in the accompanying Proxy Card to vote
Proxies on such matters in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Domenic P. Stangherlin
-----------------------------------
Domenic P. Stangherlin
Secretary
Allentown, Pennsylvania
April 25, 1997
17
<PAGE>
REVOCABLE PROXY
PENN TREATY AMERICAN CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
May 23, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Michael F. Grill, Glen A. Levit and Jack D. Baum, each with the power of
substitution and with all the powers and discretion the undersigned would have
if personally present, are hereby appointed the Proxy Agents to represent the
undersigned at the Annual Meeting of Shareholders of Penn Treaty American
Corporation (the "Company") to be held at 9:00 A.M., prevailing local time on
May 23, 1997 (the "Meeting"), including any adjournment(s) or postponement(s)
thereof, and to vote all shares of stock of the Company which the undersigned
is entitled to vote on all matters that properly come before the Meeting,
subject to any directions indicated in the boxes below.
1. ELECTION OF DIRECTORS: For Withhold For All
Except
Irving Levit [ ] [ ] [ ]
A.J. Carden
Domenic P. Stangherlin
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED.
2. PROPOSAL TO APPROVE AN INCREASE IN THE NUMBER OF SHARES from 600,000 to
1,200,000 which may be issued under the Company's Employee Incentive Stock
Option Plan.
For Against Abstain
[ ] [ ] [ ]
3. PROPOSAL TO APPROVE THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. as the
independent public accountants for the Company and its subsidiaries for the
year ending December 31, 1997.
For Against Abstain
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any postponement(s) or
adjournment(s) thereof.
(over)
<PAGE>
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED. IF NO
DIRECTIONS TO THE CONTRARY ARE INDICATED THE BOXES PROVIDED, THE PROXY AGENTS
INTEND TO VOTE (I) FOR THE ELECTION OF THE THREE NOMINEES LISTED ABOVE, (II)
FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S EMPLOYEE INCENTIVE STOCK
OPTION PLAN AS LISTED ABOVE (III) FOR THE RATIFICATION OF THE APPOINTMENT OF
THE INDEPENDENT PUBLIC ACCOUNTANTS, AND (IV) IN THE DISCRETION OF THE PROXY
AGENTS ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
POSTPONEMENTS OR ADJOURNMENTS THEREOF.
The Proxy Agents present and acting at the Meeting, in person or by their
substitutes (or if only one is present and acting, then that one), may
exercise all the powers conferred hereby. Discretionary authority is hereby
conferred as to certain matters described in the Proxy Statement. This Proxy,
if properly executed and delivered, will revoke all prior Proxies. Receipt
of the Notice of the Annual Meeting of Shareholders and the Proxy Statement
dated April 25, 1997 are hereby acknowledged. Please sign your name exactly
as it appears on your certificate(s) indicating any official position or
representative capacity. If shares are registered in more than one name, all
owners should sign.
Please be sure to sign and date
this Proxy in the box below.
Date
Stockholder sign above Co-holder
(if any) sign above
PLEASE ACT PROMPTLY SIGN, DATE & MAIL YOUR PROXY CARD TODAY.
