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 under Rule 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):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 26, 2000
TO THE SHAREHOLDERS OF PENN TREATY AMERICAN CORPORATION
The Annual Meeting of Shareholders of PENN TREATY AMERICAN CORPORATION will be
held at Lehigh Country Club, 2319 South Cedar Crest Boulevard, Allentown,
Pennsylvania on Friday, May 26, 2000, at 9:00 a.m. to consider and vote upon the
following proposals:
1. to elect three persons to Penn Treaty's Board of Directors as
Class I Directors to serve until the 2003 Annual Meeting of
Shareholders and until their successors are elected and have
been qualified;
2. to ratify the selection of PricewaterhouseCoopers LLP as
independent public accountants for Penn Treaty and its
subsidiaries for the year ending December 31, 2000; and
3. to transact other business that properly comes before the
Annual Meeting, or any adjournments or postponements.
Only those holders of our common stock of record at the close of business on
April 10, 2000 shall be entitled to notice of, and to vote at, the Annual
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 A
SHAREHOLDER MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED BY FILING WITH THE
SECRETARY OF PENN TREATY 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/ Sandra A. Kotsch
--------------------------------
Sandra A. Kotsch, Secretary
Allentown, Pennsylvania
April 17, 2000
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 2000
INTRODUCTORY STATEMENT
----------------------
Penn Treaty American Corporation is a Pennsylvania corporation with its
principal executive offices located at 3440 Lehigh Street, Allentown,
Pennsylvania 18103, telephone number (610) 965-2222. This Proxy Statement is
being furnished to our shareholders in connection with the solicitation by our
Board of Directors of proxies to be voted at the Annual Meeting of Shareholders
of Penn Treaty to be held on May 26, 2000, at Lehigh Country Club, 2319 South
Cedar Crest Boulevard, Allentown, Pennsylvania at 9:00 a.m., or at any
adjournment or postponement.
This Proxy Statement and the accompanying proxy card are first being
mailed to our shareholders on or about April 17, 2000. A copy of the 2000 Annual
Report, which includes financial statements for the fiscal year ended December
31, 1999, is enclosed with this Proxy Statement.
ABOUT THE ANNUAL MEETING
------------------------
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Annual Meeting, shareholders will act upon the following
matters: the election of three directors of Penn Treaty, each to serve for a
three-year term expiring at the annual meeting of shareholders in 2003; the
ratification of our selection of PricewaterhouseCoopers LLP as the independent
public accountants for Penn Treaty and its subsidiaries for the year ending
December 31, 2000; and any other business that may properly be brought before
the Annual Meeting.
For your information, our subsidiaries are Senior Financial Consultants
Company (the "Agency"), Penn Treaty Network America Insurance Company
("PTNA")(formerly Network America Life Insurance Company), American Network
Insurance Company ("ANIC"), American Independent Network Insurance Company of
New York ("AINIC"), United Insurance Group Agency, Inc. ("UIG") and Network
Insurance Senior Health Division ("NISHD").
WHO IS ENTITLED TO VOTE?
Only shareholders of record on the record date, which was the close of
business on Monday, April 10, 2000, will be entitled to receive notice of, and
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to vote at, the Annual Meeting and any adjournments or postponements. Each share
of common stock is entitled to one vote.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to us, it will be voted as you direct. If you are a registered
shareholder and attend the Annual Meeting, you may deliver your completed proxy
card in person or vote in person at the Annual Meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of common stock outstanding on the record
date will constitute a quorum, permitting business to be conducted at the Annual
Meeting. As of the record date, 7,808,589 shares of our common stock were
outstanding, held by 379 shareholders of record.
HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?
If you sign and return your proxy card, but do not make any selections,
you give discretionary authority to the persons named as proxy holders on the
proxy card, Jack D. Baum, Michael F. Grill and Glen A. Levit, to vote on the
proposals and any other matters that may arise at the Annual Meeting.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the proxy
holders will vote in accordance with the recommendations of the Board of
Directors. The Board recommends a vote:
o FOR election of the three nominees for director of Penn
Treaty, A.J. Carden, Irving Levit and Domenic Stangherlin; and
o FOR the ratification of our selection of
PricewaterhouseCoopers LLP as the independent public
accountants for Penn Treaty and its subsidiaries for the year
ending December 31, 2000.
With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board or, if no
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recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO ELECT THE DIRECTORS?
The three nominees for Director receiving the highest number of votes
cast by shareholders entitled to vote for Directors (there being no cumulative
voting) will be elected to serve on the Board. Votes withheld with respect to
the election of one or more directors will not be voted with respect to the
nominee or nominees indicated, although they will be counted for purposes of
determining whether there is a quorum. Accordingly, votes withheld will have no
effect on the result of the vote.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is exercised by filing with the Secretary of Penn
Treaty either a notice of revocation or a duly executed proxy bearing a date
later than the date on the proxy you submitted. The powers of the proxy holders
to vote your proxy will be suspended if you attend the Annual Meeting in person
and request to change your vote or vote in person, although attendance at the
Annual Meeting will not by itself revoke a previously granted proxy.
WHO BEARS THE COST OF SOLICITATION OF PROXIES?
We bear the cost of preparing, printing, assembling and mailing this
proxy statement and other material furnished to shareholders in connection with
the solicitation of proxies for the Annual Meeting.
WHEN ARE SHAREHOLDER PROPOSALS DUE FOR THE YEAR 2001 ANNUAL MEETING?
To be included in next year's proxy statement, shareholder proposals
must be submitted in writing by December 18, 2000 to: Secretary, Penn Treaty
American Corporation, 3440 Lehigh Street, Allentown, PA 18103. If any
shareholder wishes to present a proposal to the 2001 annual meeting that is not
included in Penn Treaty's proxy statement for that meeting and does not submit
such proposal to the Secretary of Penn Treaty until after March 2, 2001, then
the persons named in the proxy card for the 2001 annual meeting will be allowed
to use their discretionary voting authority when the proposal is raised at the
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2001 annual meeting, without any discussion of the matter in the proxy statement
for that meeting.
PROPOSAL I - ELECTION OF DIRECTORS
----------------------------------
Our 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. At the Annual
Meeting, the Board will nominate A.J. Carden, Irving Levit and Domenic
Stangherlin to be elected as Class I Directors of Penn Treaty, to hold office
until the 2003 annual meeting and until their successors have been elected and
qualified. The nominees have each consented to serve if elected to the Board. If
for any reason any of the nominees becomes unable or is unwilling to serve at
the time of the Annual Meeting, the proxy holders, unless you instruct them
otherwise, will vote for a substitute nominee or nominees in their discretion.
We do not anticipate that any nominee will be unavailable for election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
------------------------------------------------------------------
ABOVE NOMINEES FOR A FIXED TERM OF THREE YEARS.
-----------------------------------------------
The following table and paragraphs set forth information about the
current nominees and the other persons who will continue to serve as Directors
of Penn Treaty. The information has been furnished to Penn Treaty by each person
nominated as a Director and each person whose term of office as a Director will
continue after the Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH PENN TREATY SINCE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CLASS I: NOMINEES TO BE ELECTED FOR TERMS EXPIRING IN 2003:
A.J. Carden 66 Executive Vice President and Director 1983
Irving Levit 70 Founder, Chairman of the Board of 1971
Directors, President and Chief
Executive Officer
Domenic P. Stangherlin 73 Director 1971
CLASS II: DIRECTORS CONTINUING FOR TERMS EXPIRING IN 2001:
Jack D. Baum 66 Vice President of Agency Management 1987
and Director
Alexander M. Clark 69 Director 1999
Glen A. Levit 32 Senior Vice President and Director 1995
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CLASS III: DIRECTORS CONTINUING FOR TERMS EXPIRING IN 2002:
Francis R. Grebe 68 Director 1999
Michael F. Grill 50 Treasurer, Comptroller and 1986
Director
David B. Trindle 50 Director 1997
</TABLE>
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A. J. CARDEN has also served as Executive Vice President and Director
of the Agency since 1988, of PTNA since 1989, of ANIC since 1996 and of AINIC
since its inception in 1997. From 1970 to 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 has over 42 years experience in the
insurance business.
IRVING LEVIT has also served as the Chairman of the Board of Directors
and Chief Executive Officer of PTNA since 1989, ANIC since 1996 and of AINIC
since its inception in 1997 and as the Chairman of the Board of Directors,
President and Chief Executive Officer of the Agency since 1988. In addition, Mr.
Levit has been the sole owner of the Irv Levit Insurance Management Corporation
("IMC"), an insurance agency, since 1961. Mr. Levit has over 42 years experience
in the insurance business.
DOMENIC P. STANGHERLIN has also served as Secretary and Director of
the Agency since 1988, of PTNA since 1989, of ANIC since 1996 and of AINIC since
its inception in 1997. Mr. Stangherlin is the owner and manager of the Line Tool
Company, a manufacturer of micropositioners, located in Allentown, Pennsylvania.
JACK D. BAUM has served as a Vice President of Penn Treaty since 1985,
of the Agency since 1988, of PTNA since 1989, of ANIC since 1996 and of AINIC
since its inception in 1997. His duties include supervising and motivating Penn
Treaty's sales force. Prior to joining Penn Treaty, Mr. Baum served as Vice
President of Marketing for National Security General Insurance Company in
Lancaster, Pennsylvania from 1983 to 1985 and as a Director of Group Sales and
Marketing for Educators Mutual Life Insurance in Lancaster, Pennsylvania from
1976 to 1983. Mr. Baum has over 22 years experience in the insurance business.
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ALEXANDER M. CLARK has also served as a Director of AINIC since its
inception in 1997. Mr. Clark is a Managing Director of Advest, Inc., a position
he has held since 1993. He was formerly a Senior Vice President at Gramercy
Partners and previously with McKinley Allsopp, both of New York. Mr. Clark is a
graduate of Dartmouth College and pursued graduate studies at Harvard where he
earned an M.B.A. in Business Administration and further studies at Brown
University in savings banking. He is a member of the Association of Insurance
and Financial Analysts(CFA-1968).
GLEN A. LEVIT has also served as a Director of PTNA since 1995, of ANIC
since 1996 and of AINIC since its inception in 1997, and as President of PTNA
and ANIC since April 1997 and of AINIC since January 1999. Prior to being
appointed President, Mr. Levit served as the Vice President of Sales of PTNA and
as Vice President of ANIC and AINIC. From 1991 until 1993, Mr. Levit served as
the Regional Sales Director and as a regional marketer for PTNA. Mr. Levit has
also served as a Director of IMC, an insurance agency, since 1988. Mr. Levit is
the son of Mr. Irving Levit. Mr. Levit has over 12 years experience in the
insurance business.
FRANCIS R. GREBE is a partner at the investment counseling firm of
James M. Davidson and Company. He has held this position since 1988. Mr. Grebe
also serves as a Director and Executive President of The Main Line Trust
Company, a private fiduciary. Mr. Grebe has over 40 years experience with
leading financial institutions in the trust and investment area, including
Girard Trust Bank, Philadelphia National Bank and U.S. Trust Company of
Florida. Mr. Grebe currently serves as a Director of the Athenaeum of
Philadelphia and as a Trustee of The Guthrie Healthcare System. He is also a
Director and former President of Family Services o f Montgomery County,
Pennsylvania and currently serves as Trustee of the Meshewa Farm Foundation
and The Sylvan Foundation. Mr. Grebe is a Phi Beta Kappa graduate of the
University of Rochester and the University o f Michigan and is admitted to
practice law in Michigan, Illinois and New York.
MICHAEL F. GRILL has also served as Treasurer and Comptroller of Penn
Treaty since 1981, of the Agency since 1988, of PTNA since 1989, of ANIC since
1996 and of AINIC since its inception in 1997. Mr. Grill became a Director of
the Agency in 1988, of PTNA in 1989, of ANIC in 1996 and AINIC in 1997. Prior to
joining Penn Treaty, 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 has 27 years experience in the insurance business.
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<PAGE>
DAVID B. TRINDLE, FSA, MAAA is an independent consulting actuary with
27 years experience in the areas of health insurance and managed care. From 1993
until 1996, Mr. Trindle served as Partner and National Director of the Health
Actuarial practice of KPMG Peat Marwick. Prior to 1993, Mr. Trindle served as
President of QED Consulting Group, an actuarial firm specializing in health
insurance and long-term care which was co-founded by Mr. Trindle in 1988. From
1973 to 1988, Mr. Trindle served in various senior management and executive
roles at UNUM Corporation, Transport Life Insurance Company and Union Fidelity
Life Insurance Company where he also served on the Board of Directors. Mr.
Trindle is a Member of the American Academy of Actuaries and a Fellow of the
Society of Actuaries, for whom he served as Chairman of the Health Section. Mr.
Trindle holds a Masters Degree in Mathematics from Pennsylvania State
University.
GENERAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------------------------------------
HOW OFTEN DID THE BOARD MEET DURING 1999?
During 1999, the Board of Directors held seven meetings. Each Director
attended at least 75% of the meetings of the Board and its Committees. The
average attendance of directors at Board and Committee meetings held during 1999
was 94%.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
To assist in the discharge of its responsibilities, the Board of
Directors has three committees - the Audit Committee, the Compensation Committee
and the Executive Committee. The Board of Directors does not have a nominating
committee. The total combined attendance for all Committee meetings was 100%.
AUDIT COMMITTEE. The principal functions of the Audit Committee are to
assist the Board of Directors in the oversight of executive management's
responsibilities related to Penn Treaty's internal control process. In
connection with this function, the Audit Committee reviews various policies and
practices of management related to Penn Treaty's responsibilities to its
investors, customers, employees and the general public. With respect to the
audited financial statements of Penn Treaty and its subsidiaries for the year
ended December 31, 1999, the Audit Committee:
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o reviewed and discussed the audited financial statements with
management of Penn Treaty;
o discussed with Penn Treaty's independent auditors the matters
required to be discussed by SAS 61; and
o received the written disclosures and the letter from the
independent accountants required by Independence Standards
Board Standard No. 1 and has discussed independence issue with
Penn Treaty's independent accountants.
Based on its review and discussions described above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in Penn Treaty's Annual Report on Form 10-K for the year ended December
31, 1999.
The Audit Committee has a written charter, adopted in September 1999.
The charter is attached to this Proxy Statement as Appendix A. The members of
the Audit Committee during 1999 were Mr. Clark, Mr. Grebe, and Mr. Stangherlin.
Penn Treaty believes that each member of the Audit Committee meets the
independence test established as part of The New York Stock Exchange listing
standards. The Audit Committee met three times in 1999.
COMPENSATION COMMITTEE. The principal functions of the Compensation
Committee are to review and evaluate, at least annually, the performance of the
chief executive officer and other senior officers of Penn Treaty and its
subsidiaries, and to set their remuneration, including incentive rewards. The
members of the Compensation Committee during 1999 were Mr. Clark, Mr. Grebe and
Mr. Stangherlin. The Compensation Committee met once in 1999.
EXECUTIVE COMMITTEE. During the periods between Board meetings, the
Executive Committee exercises all of the powers of the Board of Directors,
except that the Executive Committee may not elect directors, change the
membership of or fill vacancies in the Executive Committee, fix the compensation
of the Directors, change the Bylaws, or take any action restricted by the
Pennsylvania Business Corporation Law or the Bylaws (including actions committed
to another Board Committee). The members of the Executive Committee during 1999
were Mr. Levit, Mr. Carden and Mr. Stangherlin. The Executive Committee met once
in 1999.
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HOW ARE DIRECTORS COMPENSATED?
Each Director receives a fee of $400 for each regular Board meeting
attended. In addition, Mr. Clark, Mr. Grebe and Mr. Stangherlin receive a
monthly fee of $200 for their service as members of Penn Treaty's Audit
Committee.
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, produced
approximately $50,000, $41,000 and $34,000 of new and renewal premiums for PTNA
for the years ended December 31, 1997, 1998 and 1999, respectively, for which it
received commissions of approximately $13,000, $10,000 and $8,000 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 Penn Treaty of 5% on business
written for PTNA 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, 1997, 1998 and 1999 these
overriding commissions totaled approximately $534,000, $559,000 and $543,000,
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 Penn Treaty 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 Penn Treaty 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 Penn Treaty's disinterested
directors.
Director Francis R. Grebe is a partner of James M. Davidson and
Company, an investment counseling firm that manages a significant portion of
Penn Treaty's investment assets. During 1999, the James M. Davidson firm
received a fee of $242,038 from Penn Treaty for its services. Mr. Grebe is not
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directly involved with any of Penn Treaty's investment matters. Mr. Grebe
serves as a financial advisor to Irving Levit on some of Mr. Levit's personal
matters.
OTHER EXECUTIVE OFFICERS OF PENN TREATY
CAMERON B. WAITE has served as Chief Financial Officer of Penn Treaty
since May 1996. From 1994 to 1996, Mr. Waite was Chief Financial Officer and
Treasurer of Blue Fish Clothing, Inc., a manufacturer, wholesaler and retailer
of women's clothing. From 1983 to 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. Mr. Waite
holds a B.A. in Economics from Dickinson College and an M.B.A. from Lehigh
University. Mr. Waite is 40.
JIM HEYER was appointed the Chief Operating Officer of PTNA in
January 1999. Prior to that time, Mr. Heyer served as the Vice President
of Administration of PTNA from 1993 to 1998. Mr. Heyer has also served as Vice
President of Administration of Penn Treaty since 1997 and as a Vice President
and Director of ANIC and AINIC since 1996 and 1997, respectively. Mr. Heyer
oversees our claims, underwriting, compliance and product development areas.
Prior to joining Penn Treaty in 1988, Mr. Heyer was employed by The Guardian
Life Insurance Company of North America. Mr. Heyer received his B.S. in Business
Administration and Marketing from Penn State University. Mr. Heyer is 36 and has
14 years experience in the insurance business.
COMPLIANCE WITH SECTION 16(A) REPORTING
The rules of the Securities and Exchange Commission require that Penn
Treaty disclose delinquent filings for reports of stock ownership (and changes
in stock ownership) by its directors and executive officers. To the best of Penn
Treaty's knowledge, all Form 3, Form 4 and Form 5 reports were timely filed,
except for the Form 3 report for Mr. Grebe.
PROPOSAL II - RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------------------------
The Board of Directors, upon recommendation of the Audit Committee, has
selected the firm of PricewaterhouseCoopers LLP as the independent public
accountants of Penn Treaty and its subsidiaries for the year ending December 31,
2000. PricewaterhouseCoopers LLP has acted in this capacity since 1986. A
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representative of PricewaterhouseCoopers LLP 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 OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS FOR PENN TREATY AND ITS SUBSIDIARIES FOR THE
YEAR ENDING DECEMBER 31, 2000.
EXECUTIVE COMPENSATION AND OTHER MATTERS
----------------------------------------
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to Penn Treaty for the
fiscal years ended December 31, 1997, 1998 and 1999 of those persons who, during
1999 (i) served as Penn Treaty's chief executive officer or (ii) were executive
officers (other than the chief executive officer) whose total annual salary and
bonus exceeded $100,000:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ------------------ ALL OTHER
NAME AND SALARY BONUS OTHER OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($) (2)
- ------------------------------- ---- --- --- ------ --- -------
<S> <C> <C> <C> <C> <C> <C>
IRVING LEVIT 1999 475,000 80,000 1,600 0 7,500(3)
- -------------
Chairman, President and 1998 277,875 50,000 800 0 7,627(3)
Chief Executive Officer 1997 264,591 50,000 800 29,000 2,562(3)
GLEN A. LEVIT 1999 125,224 12,000 1,600 0 4,117
- ---------------
Senior Vice President and
President of Insurance Company
Subsidiaries
CAMERON B. WAITE 1999 111,199 8,000 1,600 0 3,576
- ----------------
Chief Financial Officer
A. J. CARDEN 1999 100,297 14,000 1,600 0 3,429
- ------------
Executive Vice President 1998 135,935 14,000 800 0 4,498
1997 131,707 17,000 800 10,000 1,990
JIM HEYER 1999 96,783 8,000 1,600 0 3,143
- ---------
Chief Operating Officer
</TABLE>
- -----------------------
(1) Represents Directors' fees of $400 for each regular board meeting
attended.
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(2) Represents company contributions to Penn Treaty's 401(k) Plan on behalf
of each of the named individuals.
(3) Excludes cash overriding commissions and direct commissions totaling
approximately $547,000, $569,000 and $551,000 paid to IMC by Penn
Treaty in 1997, 1998 and 1999, respectively, in connection with
policies written for Penn Treaty. See "Certain Relationships and
Related Transactions."
OPTION GRANTS IN LAST FISCAL YEAR
There were no grants of stock options during the fiscal year ended
December 31, 1999.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth the number of shares acquired on
exercise of stock options and the aggregate gains realized on exercise in 1999
by Penn Treaty's executive officers named in the Summary Compensation Table. The
table also sets forth the number of shares covered by exercisable and
unexercisable options held by such executives on December 31, 1999 and the
aggregate gains that would have been realized had these options been exercised
on December 31, 1999, even though these options were not exercised, and the
unexercisable options could not have been exercised on December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON REALIZED OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END ($)(2)
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------ ------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Irving Levit 0 0 132,742 68,713 427,654 38,879
Glen A. Levit 0 0 21,000 6,000 28,125 0
Cameron B. Waite 0 0 1,000 1,000 0 0
A.J. Carden 0 0 36,500 9,500 56,257 0
Jim Heyer 0 0 19,500 6,000 23,438 0
</TABLE>
- -----------------
(1) The value realized represents the difference between the fair market
value per share of our common stock on the date of exercise and the per
share exercise price, multiplied by the applicable number of options.
(2) These values represent the difference between the closing price per share
on The New York Stock Exchange on December 31, 1999 ($15.75) and the per
share exercise price of the option.
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PENSION PLAN AND 401(K) PLAN
On August 1, 1996, Penn Treaty 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, and Penn Treaty equally matches employee contributions up to the
first 3% of the employee's salary. The Penn Treaty and employee portions of the
plan vest immediately. Penn Treaty's expense in 1999 under the plan was
$129,000. Penn Treaty may elect to make a discretionary contribution to the
plan, which will be contributed proportionately to each eligible employee. Penn
Treaty did not make a discretionary contribution in 1999.
INCENTIVE STOCK OPTION PLANS
The shareholders of Penn Treaty adopted an Incentive Stock Option Plan
(the "Plan") in March 1987. As of November 1997, no further options were granted
under the Plan. The Plan, as amended by shareholder action on May 25, 1990, May
28, 1993, and May 23, 1997, provided for the granting of options to purchase up
to 1,200,000 shares of our common stock. Stock options have been granted and are
outstanding to date with respect to 493,886 shares of our common stock. The
exercise prices of such options range from $8.71 to $35.475 per share. In
October 1997, options to purchase 72,250 shares of common stock were granted
under the Plan at an exercise price of $32.25 per share and options to purchase
29,000 shares of common stock were granted under the Plan at $35.475 per share.
No stock options were granted under the Plan during 1998 or 1999.
As of April 10, 1999, stock options granted with respect to 28,358
shares have been canceled and 188,383 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 Internal Revenue Code of 1986, as
amended. A committee of the Board of Directors had the authority to administer
the Plan and to grant options to key employees (including officers, whether or
not they were Directors) of Penn Treaty and its subsidiaries. The exercise price
of all options granted under the Plan could 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 a 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 was
ten years (five years in the case of holders of more than 10% of the combined
voting power of all classes of outstanding stock), and the options become
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exercisable in four equal, annual installments commencing one year from the
option grant date.
The shareholders of Penn Treaty adopted a new Employee Non-Qualified
Incentive Stock Option Plan in May 1998 (the "1998 Plan"). The 1998 Plan
authorizes Penn Treaty to grant "incentive stock options" under Section 422 of
the Internal Revenue Code, and non-qualified stock options, covering up to an
aggregate of 600,000 shares of our common stock. The purpose of the 1998 Plan is
to enable Penn Treaty to offer officers, directors and employees of Penn Treaty
and its subsidiaries options to acquire equity interests in Penn Treaty, thereby
attracting, retaining and rewarding such persons, and strengthening the
mutuality of interests between such persons and our shareholders. The maximum
allowable term of each option granted under the 1998 Plan is ten years (five
years in the case of holders of more than 10% of the combined voting power of
all classes of outstanding stock), and the options become exercisable in four
equal, annual installments commencing one year from the option grant date. No
stock options have been granted under the 1998 Plan.
AGENT STOCK OPTION PLAN
In October 1994, the Board of Directors of Penn Treaty 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 options to
purchase up to 300,000 shares of common stock options and is designed to reward
Penn Treaty's agents by providing for the grant of options to purchase common
stock to agents who attain certain sales objectives determined by the Board of
Directors. The exercise price of all options granted under the Agent 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. Under the Agent Plan, stock options have been granted and are
outstanding to date with respect to 58,450 shares. Prices of these options range
from $12.63 to $32.25 per share. In October 1997, 23,600 stock options were
granted under the Agent Plan at an exercise price of $32.25 per share. No
options were granted under the Agent Plan during 1998 and 1999.
CHANGE IN CONTROL AGREEMENTS
Penn Treaty has entered into Change in Control Agreements with each of
the executive officers named in the Summary Compensation Table. Under these
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agreements, if Penn Treaty merges into or ownership of the voting control of
Penn Treaty otherwise changes, and as a result of such change in control, any of
the named executive officers are terminated or their positions or work locations
are materially changed at any time during the three year period (five years in
the case of the Company's President and Chief Executive Officer) after the
change in control, they will be entitled to receive a lump sum payment of their
base salary through the end of the three year period (or five year period in the
case of the Company's President and Chief Executive Officer) and they shall be
entitled to continue to receive certain other insurance and retirement benefits
for the remainder of the three year period (or five year period in the case of
the Company's President and Chief Executive Officer).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION:
The members of the Compensation Committee of the Board of Directors
during 1999 were Mr. Clark, Mr. Grebe and Mr. Stangherlin, who are
non-employee directors. Mr. Stangherlin also serves as the Secretary of the
Agency, PTNA, ANIC and AINIC.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION:
Penn Treaty'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 1999, the Committee compared all executive
compensation with industry and regional executive compensation levels and
believes that Penn Treaty's compensation levels compare conservatively to other
comparable executive positions. The Board of Directors accepted and adopted all
of the Committee's recommendations concerning executive compensation amounts
during 1999.
The Committee seeks to:
o provide compensation that is closely linked to Company and
individual performance;
o align the interests of Penn Treaty's executives with those of
its shareholders through award opportunities that can result
in ownership of common stock;
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o ensure that compensation is sufficiently competitiv 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 Penn Treaty 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 managerial accomplishments and contribution to the
achievement of corporate goals.
CEO COMPENSATION:
In accordance with the Committee's general practice and Penn Treaty's
compensation policies, Mr. Levit's compensation for the 1999 fiscal year was
based principally upon Penn Treaty'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 Penn Treaty's performance during 1999.
Alexander M. Clark
Francis R. Grebe
Domenic P. Stangherlin
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PRINCIPAL SHAREHOLDERS
----------------------
The following table sets forth, as of April 3, 2000, information with
respect to the beneficial ownership of our common stock by (i) each person known
to Penn Treaty to own 5% or more of the outstanding shares of common stock, (ii)
each of Penn Treaty's Directors, and (iii) all Directors and Executive Officers
as a group:
Percent of
Name(1) Shares Owned Ownership (2)
- ------- ------------ -------------
Irving Levit (3) 1,980,865 25.37%
Goldman Sachs Asset Management(4) 736,750 9.44%
Dimensional Fund Advisors, Inc.(5) 568,705 7.28%
Palisade Capital Management, L.L.C.(6) 505,000 6.47%
Wellington Management Co., LLP(7) 501,396 6.42%
Jack D. Baum (8) 41,408 *
A. J. Carden (9) 36,500 *
Alexander M. Clark 2,000 *
Francis R. Grebe - *
Michael F. Grill (10) 30,000 *
Jim Heyer (11) 19,600 *
Glen A. Levit (12) 37,673 *
Domenic P. Stangherlin 27,925 *
David B. Trindle 3,000 *
Cameron B. Waite(13) 2,000 *
All Directors and Executive
Officers as a group 2,180,971 27.93%
(11 persons) (14)
* Less than 1%
- ---------------------
(1) Unless otherwise noted, the address of each person named above is in
care of Penn Treaty.
(2) Based on 7,808,589 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) Includes 46,350 shares held by a private foundation of which Mr. Levit
is an officer and director, 45,007 shares held by Mr. Levit as trustee
of a retirement account, 147,167 shares held by Mr. Levit as co-trustee
of an irrevocable trust for Mr. Levit's five children and exercisable
options to purchase 114,885 shares of Common Stock. Excludes 46,000
shares held by Mr. Levit's wife as to which he disclaims beneficial
ownership and 51,153 shares held by other family members as to which he
also disclaims beneficial ownership.
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(4) According to the Schedule 13G filed with the SEC by Goldman Sachs Asset
Management for the year ended December 31, 1999, the address for
Goldman Sachs Asset Management is 1 New York Plaza, New York, NY,
10004. Goldman Sachs Asset Management reported sole voting power with
respect to 555,800 shares and sole dispositive power with respect to
all shares.
(5) According to the Schedule 13G filed with the SEC by Dimensional Fund
Advisors, Inc. for the year ended December 31, 1999, 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 and sole dispositive power with respect to all shares.
(6) According to the Schedule 13G filed with the SEC by Palisade Capital
Management, L.L.C. for the year ended December 31, 1999, the address
for Palisade Capital Management, L.L.C. is One Bridge Plaza, Suite 695,
Fort Lee, NJ 07024. Palisade Capital Management L.L.C. reported sole
voting power with respect to 435,000 shares and sole dispositive power
with respect to all shares.
(7) According to the Schedule 13G filed with the SEC by Wellington
Management Company, LLP for the year ended December 31, 1999, their
principal business address is 75 State Street, Boston, MA 02109.
Wellington Management Company, LLP reported shared voting power with
respect to 293,267 shares and shared dispositive power with respect to
all shares.
(8) Includes exercisable options to purchase 41,327 shares of common stock.
(9) Consists of exercisable options to purchase shares of common stock.
(10) Consists of exercisable options to purchase shares of common stock.
(11) Includes exercisable options to purchase 19,500 shares of common stock.
(12) Includes exercisable options to purchase 21,000 shares of common stock.
Excludes 1,550 shares held by Mr. Levit's wife as to which he disclaims
beneficial ownership and 2,780 shares held in trust for Mr.
Levit's children as to which he disclaims beneficial ownership.
(13) Includes exercisable options to purchase 1,000 shares of common stock.
(14) Includes exercisable options held by members of the group to purchase
282,069 shares of common stock.
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PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return for
Penn Treaty's common stock with the comparable cumulative return of two indices.
The NYSE Composite provides some indication of the performance of the overall
stock market, and the S & P Insurance Composite reflects the performance of
insurance company stock generally.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PTA STOCK 100.00 157.14 247.61 302.38 268.10 147.62
NYSE COMPOSITE 100.00 131.31 156.33 203.71 237.43 262.31
S & P INSURANCE COMPOSITE 100.00 142.64 177.26 260.88 271.82 283.84
</TABLE>
(1) Assumes a $100 investment on December 31, 1994 in the Company's common stock
and in each of the indices shown. The total return assumes reinvestment of all
dividends.
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OTHER MATTERS
-------------
At the date of this Proxy Statement, the only business that the Board
of Directors intends to present or knows that others will present at the Annual
Meeting is that which is presented above. If any other matter or matters are
properly brought before the Annual Meeting, or any adjournment or postponement,
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/ Sandra A. Kotsch
-------------------------------
Sandra A. Kotsch, Secretary
Allentown, Pennsylvania
April 17, 2000
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Appendix A
----------
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. Purpose
The primary function of the Audit Committee of the Board of Directors
of Penn Treaty American Corporation (the "Audit Committee") is to
assist the Board of Directors (the "Board") in fulfilling its oversight
responsibilities by reviewing: the financial reports and other
financial information provided by Penn Treaty American Corporation (the
"Company" or "PTA") to any governmental body or the public; the
Company's systems of internal controls regarding finance, accounting,
legal compliance and ethics that management and the Board have
established; and the Company's auditing, accounting and financial
reporting processes generally. Consistent with this function, the Audit
Committee should encourage continuous improvement of, and should foster
adherence to, the Company's policies, procedures and practices at all
levels. The Audit Committee's primary duties and responsibilities are
to:
o Serve as an independent and objective party to monitor the
Company's financial reporting process and internal control
system.
o Review and appraise the audit efforts of the Company's
independent accountants and internal auditing department.
o Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal
auditing department and the Board.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section III of this Charter.
II. Composition
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors,
and free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgement as a
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member of the Audit Committee. All members of the Audit Committee shall
have a working familiarity with basic finance and accounting practices,
and at least one member of the Audit Committee shall have accounting or
related financial management expertise. Audit Committee members may
enhance their familiarity with finance and accounting by participating
in educational programs conducted by the Company or an outside
consultant.
The members of the Audit Committee shall be elected by the Board at the
annual organizational meeting of the Board or until their successors
shall be duly elected and qualified. Unless a Chair is elected by the
full Board, the members of the Audit Committee may designate a Chair by
majority vote of the full Audit Committee membership.
III. Responsibilities and Duties
The charter and powers of the Audit Committee shall be:
o Overseeing that management has maintained the reliability and
integrity of the accounting policies and financial reporting and
disclosure practices of the Company;
o Overseeing that management has established and maintained
processes to assure that an adequate system of internal control
is functioning within the Company;
o Overseeing that management has established and maintained
processes to assure compliance by the Company with all applicable
laws, regulations and Company policy;
The Audit Committee shall have the following specific powers and
duties:
1. Holding such regular meetings as may be necessary and such
special meetings as may be called by the Chairman of the Audit
Committee or at the request of the independent accountants;
2. Creating an agenda for the ensuing year;
3. Reviewing the performance of the independent accountants and
making recommendations to the Board regarding the appointment or
termination of the independent accountants;
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4. Conferring with the independent accountants and the internal
auditors concerning the scope of their examinations of the books
and records of the Company and its subsidiaries; reviewing and
approving the independent accountants' annual engagement letter;
reviewing and approving the Company's internal audit engagement
letter, annual audit plans and budgets; directing the special
attention of the auditors to specific matters or areas deemed by
the Committee or the auditors to be of special significance; and
authorizing the auditors to perform such supplemental reviews or
audits as the Committee may deem desirable;
5. Reviewing with management, the independent accountants and
internal auditors significant risks and exposures, audit
activities and significant audit findings;
6. Reviewing the range and cost of audit and non-audit services
performed by the independent accountants;
7. Reviewing the Company's audited annual financial statements and
the independent accountants' opinion rendered with respect to
such financial statements, including reviewing the nature and
extent of any significant changes in accounting principles or the
application therein;
8. Reviewing the adequacy of the Company's systems of internal
control;
9. Obtaining from the independent accountants and internal auditors
their recommendations regarding internal controls and other
matters relating to the accounting procedures and the books and
records of the Company and its subsidiaries and reviewing the
correction of controls deemed to be deficient;
10. Providing an independent, direct communication between the Board
of Directors, internal auditors and independent accountants;
11. Reviewing with appropriate Company personnel the actions taken to
ensure compliance with the Company's code of conduct and the
results of confirmations and violations of such code;
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<PAGE>
12. Reviewing the programs and policies of the Company designed to
ensure compliance with applicable laws and regulations and
monitoring the results of these compliance efforts;
13. Reporting through its Chairman to the Board following the
meetings of the Audit Committee;
14. Maintaining minutes or other records of meetings and activities
of the Audit Committee;
15. Reviewing the powers of the Committee annually and reporting and
making recommendations to the Board of Directors of PTA on these
responsibilities;
16. Conducting or authorizing investigations into any matters within
the Audit Committee's scope of responsibilities. The Audit
Committee shall be empowered to retain independent counsel,
accountants or others to assist it in the conduct of any
investigation;
17. Considering such other matters in relation to the financial
affairs of the Company and its accounts, and in relation to the
internal and external audit of the Company as the Audit Committee
may, in its discretion, determine to be advisable.
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<PAGE>
REVOCABLE PROXY
PENN TREATY AMERICAN CORPORATION ANNUAL MEETING OF SHAREHOLDERS
MAY 26, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Jack D. Baum, Michael F. Grill and Glen A. Levit, 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 26, 2000 (the "Meeting"), including any adjournments 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. Indicate your vote by placing an (X) in the
appropriate box.
1. ELECTION OF DIRECTORS For All For All Except* Withhold For All
A.J. Carden [ ] [ ] [ ]
Irving Levit
Domenic P. Stangherlin
(*) To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list above and mark an (X) in the "For All
Except" box.
2. PROPOSAL TO APPROVE THE APPOINTMENT For Against Abstain
OF PRICEWATERHOUSECOOPERS, LLP as [ ] [ ] [ ]
the independent public accountants for
the Company and its subsidiaries for the
year ending December 31, 2000.
3. In their discretion, the Proxies are
authorized to vote upon such other business For Against Abstain
as may properly come before the Meeting or [ ] [ ] [ ]
any adjournment(s) or postponement(s) thereof.
(over)
<PAGE>
SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AT THE ANNUAL
MEETING IN THE MANNER SPECIFIED. IF PROPERLY EXECUTED AND RETURNED, AND NO
SPECIFICATION IS MADE, VOTES WILL BE CAST "FOR" ALL ITEMS ON THE PROXY. Receipt
of the Notice of the Annual Meeting of Shareholders and the Proxy Statement
dated April 17, 2000 are hereby acknowledged.
IMPORTANT: When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title
as such. In the case of JOINT HOLDERS,
all should sign.
Date
---------------------- ----------
Date
---------------------- ----------
PLEASE ACT PROMPTLY. SIGN, DATE & MAIL
YOUR PROXY CARD TODAY.
