8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 13, 2007

Penn Treaty American Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania	001-14681	23-1664166
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3440 Lehigh Street, Allentown, Pennsylvania 18103

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (610) 965-2222

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e)On December 19, 2007, Penn Treaty Network America Insurance Company (“PTNAIC”), for itself and for the benefit of its affiliates and parent corporation, Penn Treaty American Corporation (the “Company”), and William W. Hunt, Jr. President and Chief Executive Officer of PTNAIC and the Company entered into an updated Employment Agreement (the “Agreement”), replacing and superseding a prior employment agreement dated June 1, 2001. The general terms of the Agreement are consistent with the terms of the prior employment agreement dated June 1, 2001.

Under the Agreement, Mr. Hunt is entitled to a base salary in the amount of $353,000 per year, an annual performance bonus and an annual stock option grant, use of a mutually selected company vehicle and standard health and other benefits. The Board of Directors of the Company has discretion to adjust Mr. Hunt’s base salary at the end of each year and to determine the amount of the annual performance bonus and annual stock option grant. The Agreement also provides for indemnification of Mr. Hunt for acts and omissions during his employment and the advance of expenses in connection with indemnified claims.

Mr. Hunt’s employment under the Agreement is for an unspecified term and on an “at-will” basis and may be terminated at any time. Under the Agreement, if Mr. Hunt’s employment is terminated due to his death or his disability, he or his estate will be entitled to receive his salary, bonus, fringe benefits, expenses and vacation accrued through the date of termination. If Mr. Hunt’s employment is terminated (i) by the Company without cause or (ii) by him for good reason, he will be entitled to severance compensation in an amount equal to twelve months’ base salary at the then current rate in one lump sum cash payment payable within thirty days after his termination and all stock options previously granted to him will continue to vest for twelve months following his termination.  In addition, if Mr. Hunt’s employment is terminated by the Company without cause, PTNAIC will pay for the reasonable and customary charges for the services of an outplacement career organization for Mr. Hunt’s benefit for a period of six months following the date of his termination. Mr. Hunt is not entitled to any severance if his employment is terminated at any time by the Company with cause or by Mr. Hunt without good reason.

A copy of the Agreement is attached hereto as Exhibit 10.1.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

(a) On December 13, 2007, an amendment to the Amended and Restated Bylaws of Penn Treaty American Corporation (the “Company”) was approved by the Company’s Board of Directors, effective as of such date. Pursuant to the amendment, Article VIII - Share Certificates, Dividends, Etc. is amended and restated specifically to permit the issuance by the Company of uncertificated shares, making the Company eligible to participate in a direct registration system as required by the rules of The New York Stock Exchange, Inc. A copy of the Amended and Restated Bylaws of Penn Treaty American Corporation (As Amended December 13, 2007),

 

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including the amended and restated version of Article VIII - Share Certificates, Dividends, Etc., is attached hereto as Exhibit 3.1.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits. The following exhibit is being filed herewith:

Exhibit Description

3.1 Amended and Restated Bylaws of Penn Treaty American Corporation (As Amended December 13, 2007).

10.1 Employment Agreement effective as of December 19, 2007, by and between Penn Treaty Network America Insurance Company and William W. Hunt, Jr.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PENN TREATY AMERICAN CORPORATION

December 19, 2007 By: /s/ Mark Cloutier

Name: Mark Cloutier

Title: Executive Vice President, Chief Financial Officer and Treasurer

 

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EXHIBIT INDEX

Exhibit Description

3.1 Amended and Restated Bylaws of Penn Treaty American Corporation (As Amended December 13, 2007)

10.1 Employment Agreement effective as of December 19, 2007, by and between Penn Treaty Network America Insurance Company and William W. Hunt, Jr.

 

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EX-10

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made effective as of December 19, 2007 (the “Effective Date”), by and between PENN TREATY NETWORK AMERICA INSURANCE COMPANY, a Pennsylvania corporation, for itself and for the benefit of its affiliates and parent corporation (collectively, the “Company”), and William W. Hunt, Jr., residing at 1110 Alexander Lane, West Chester, PA 19382 (“Executive”), and replaces and supersedes the Employment Agreement between the parties dated June 1, 2001.

WHEREAS, the Company has employed Executive in an officer position with the Company since May 2001; and

WHEREAS, the Company currently employs Executive as its President and Chief Executive Officer, and

WHEREAS, Executive desires to continue such employment with the Company, and

WHEREAS, the Company and Executive desire to set forth the terms on which Executive shall be employed by the Company.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and intending to be legally bound, the parties agree as follows:

1. EMPLOYMENT. The Company agrees to employ Executive as President and Chief Executive Officer, and Executive hereby accepts such employment, on the terms and subject to the conditions set forth in this Agreement.

a. Scope and Duties. Executive shall perform such executive duties and responsibilities and exercise such authority as are normally associated with and appropriate for the position of a President and Chief Executive Officer, and as otherwise agreed by the parties hereto. Executive shall be a member of the Company’s senior management team and shall report directly to the Board of Directors of the Company’s parent, Penn Treaty American Corporation (“PTAC”) (the “PTAC Board”). The duties of Executive shall be performed primarily in Pennsylvania and as otherwise agreed by the parties hereto. Executive’s principal place of business shall be at the offices of the Company in Allentown, Pennsylvania or at such other location(s) as the parties may agree from time to time.

Executive shall devote his entire productive time, ability and attention to the business of the Company and shall perform all duties in a professional, ethical and businesslike manner. Executive will not, during the term of this Agreement, directly or indirectly engage in any other business, either as an employee, employer, consultant, principal, officer, director, advisor, or in any other capacity, either with or without compensation, without the prior written consent of the PTAC Board.

2. TERM OF EMPLOYMENT. Executive’s employment under this Agreement shall be for an unspecified term on an “at will” basis and may be terminated by either party as set forth in Section 5. By executing this Agreement, Executive confirms that no promises or agreements that are contrary to the at-will relationship have been committed to him during any of Executive’s discussions with the Company. This “at-will” relationship may not be altered except as specifically agreed to in writing by Executive and the PTAC Board.

3. BEST EFFORTS OF EXECUTIVE. Executive shall use his best efforts to perform, to the best of his ability, faithfully and efficiently the responsibilities that may be required by the express and implicit terms of this Agreement, to the reasonable satisfaction and sole discretion of the Company. Such duties shall be provided at such place(s) as the needs, business, or opportunities of the Company may require from time to time.

Executive shall devote all of his business time to his obligations to the Company pursuant to this Agreement, and shall not, without the prior written approval of the PTAC Board, render services of a

business nature to any other person or entity, if such activities would materially interfere with the performance of Executive’s duties under this Agreement.

4. COMPENSATION AND RELATED MATTERS

a. Base Salary. As compensation for the services provided by Executive under this

Agreement, the Company will pay Executive an annual base salary of $353,000 (three hundred and fifty-three thousand dollars) which shall be payable at the usual times for the payment of the Company’s other salaried employees, subject to adjustment as provided herein. Upon termination of this Agreement, payments under this paragraph shall cease as set forth in paragraph 5 below. This section of the Agreement is included only for accounting and payroll purposes and should not be construed as establishing a minimum or definite term of employment. The base salary may be adjusted at the end of each year of employment at the discretion of the PTAC Board.

b. Bonus. In addition to the base salary payments described in the preceding paragraph, Executive shall be eligible to earn an annual performance bonus in such amount as shall be determined by the PTAC Board which shall be granted in accordance with the Company’s established criteria of awarding bonuses.

c. Stock Options. Executive shall be eligible to receive stock option grants in accordance with the Company’s established criteria for granting stock options as shall be determined in the sole discretion of the PTAC Board.

d. Automobile. The Company shall lease or purchase, for Executive’s use, a mutually agreeable vehicle and the Company shall assume responsibility for all lease or purchase payments, regularly scheduled maintenance, automobile insurance premiums and necessary repairs for such vehicle. Title to any such vehicle shall be held in Company’s name. Upon termination of Executive’s employment by either party or for any reason, Executive shall immediately return such vehicle to the Company in good condition, ordinary wear and tear excepted.

e. Expenses. During the term of employment hereunder, Executive shall be entitled to receive prompt reimbursement for all reasonable and necessary expenses incurred by him in performing services hereunder, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. Executive will maintain records and written receipts as required by Company policy and as reasonably requested by the PTAC Board to substantiate such expenses. Additionally, Executive shall receive a Company credit card to be used in accordance with Company policies for reasonable and necessary expenses such as travel, entertainment and other related company business expenses.

f. Other Benefits. During the term of Executive’s employment under this Agreement, Executive shall be entitled to participate in all incentive, retirement, profit-sharing, life, medical, disability and other benefit plans and programs (collectively, “Benefit Plans”) as are from time to time generally available to other senior executives of the Company, subject to the provisions of such Benefit Plans as they may change from time to time. The portion of such benefits paid by Executive shall be consistent with the portion of such benefits paid by similarly situated employees of the Company. Executive shall, at his option, be eligible to participate in any incentive compensation, stock option, stock purchase or similar plans or programs as the Company may maintain for compensating similarly situated employees at such level of participation as the PTAC Board may determine in its reasonable discretion based upon Executive’s responsibilities and performance. Executive shall also be entitled to holidays, sick leave and vacation in accordance with the Company’s policies or practices as they may change from time to time.

5. TERMINATION. Executive’s employment under this Agreement may be terminated under the following circumstances:

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a. Death. Executive’s employment shall terminate automatically upon the Executive’s death.

b. Disability. If the Company determines in good faith that the disability of the Executive has occurred during Executive’s employment hereunder (pursuant to the definition of “Disability” set forth below), it may give to the Executive written notice in accordance with Section 7(a) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30^th day after the date of such notice (the “Disability Effective Date”), provided that, within such 30 days, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for ninety (90) consecutive business days as a result of illness, accident or incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative (such agreement as to acceptability not to be withheld unreasonably).

c. By Company For Cause. In the event that Executive is in breach of any material obligation owed to the Company under this Agreement or engages in any conduct described below), this shall constitute “Cause” as set forth in this Agreement. Subject to the terms and conditions set forth in this subsection (c), the Company may terminate Executive’s employment for Cause without notice for any of the following reasons:

i. gross negligence by Executive of his duties hereunder;

ii. the willful and continued failure by the Executive to substantially perform his duties hereunder after demand for substantial performance is delivered to him by the Company that specifically identifies the manner in which the Company believes the Executive has not substantially performed his duties,

iii. Executive’s conviction of, or plea of nolo contendere to, a crime (whether or not involving the Company) constituting any felony, or any lesser crime or offense involving the property of Company;

iv. the willful engaging by the Executive in gross misconduct relating to the Executive’s employment that is materially injurious to the Company, monetarily or otherwise (including, but not limited to, conduct that constitutes competitive activity) or which subjects, or if generally known would subject, the Corporation to public ridicule.

With respect to material breach and subsections (c)(i) and (c)(ii) above, Executive’s employment shall not be deemed to have been terminated for Cause without (x) reasonable written notice to the Executive setting forth the reasons for the Company’s intention to terminate for Cause, (y) the opportunity to cure (if curable) within five (5) business days of such written notice of the event(s) giving rise to such notice and (z) an opportunity for the Executive, together with his counsel, to be heard by the PTAC Board.

d. By Executive For Good Reason. Executive may terminate his employment at any time for Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence of any of the following, without the express written consent of the Executive, after the Effective Date:

i. the assignment to Executive of any duties inconsistent with Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive;

ii. the Company’s requiring Executive to relocate to any office or location other than that described in Section 1(a) (excluding travel reasonably required in the performance of Employee’s responsibilities)

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e. By Company Without Cause. Executive’s employment may be terminated by the Company at its discretion at any time.

f. By Executive Without Good Reason. Executive may terminate this Agreement at Executive’s discretion at any time. In the event of termination by Executive pursuant to this subsection, the Company may immediately relieve Executive of all duties and immediately terminate this Agreement.

6. COMPENSATION UPON TERMINATION. In the event of termination, the following terms and conditions regarding compensation shall apply:

a. Death. In the event of termination due to Executive’s death, the Company shall be obligated to pay Executive only the specified salary, bonuses, fringe benefits, expenses and vacation accrued through the date of termination and any rights Executive may have under any Company stock option plan shall be determined under the terms thereof.

b. Disability. In the event of termination due to Executive’s disability, the Company shall be obligated to pay Executive only the specified salary, bonuses, fringe benefits, expenses and vacation accrued through the date of termination and any rights Executive may have under any Company stock option plan shall be determined under the terms thereof.

c. By Company For Cause. In the event of termination by Company for Cause, Executive shall only be entitled to be paid for days worked that occurred prior to the date of termination and for which Executive has not yet been paid. The compensation provided for under this Section 6(c) shall be Executive’s exclusive remedy and Executive shall not be paid any bonus payments or other compensation, prorated or otherwise.

d. By Executive For Good Reason. In the event of termination by Executive for Good Reason, Executive shall be entitled to receive compensation for twelve (12) months beyond the termination date of such termination (the “Severance Period”), unless the Company terminates Executive’s employment for Cause. The Company shall pay such amounts to Executive in a lump sum in cash within thirty (30) days after the date of termination. In the event of termination by Executive for Good Reason, Executive shall not be entitled to receive any bonus payments or other compensation, prorated or otherwise; however, Executive shall be entitled to continue to receive all stock options previously granted to Executive that vest during the Severance Period.

e. By Company Without Cause. In the event of termination by the Company without cause, Executive shall be entitled to receive compensation for twelve (12) months beyond the termination date of such termination (the “Severance Period”), unless the Company terminates Executive’s employment for Cause. The Company shall pay such amounts to Executive in a lump sum in cash within thirty (30) days after the date of termination. In the event of such a discretionary termination by the Company, Executive shall not be entitled to receive any bonus payments or other compensation, prorated or otherwise; however, Executive shall be entitled to continue to receive all stock options previously granted to Executive that vest during the Severance Period. The Company shall also pay for the reasonable and customary charges for the services of an outplacement career organization for Executive’s benefit for a period of six months following the date of termination.

f. By Executive Without Good Reason. In the event of termination by Executive Without Good Reason, the Company shall pay Executive at the then applicable base salary rate to the termination date included in Executive’s original termination notice. The compensation provided for under this Section 6(f) shall be Executive’s exclusive remedy and Executive shall not be paid any bonus payments or other compensation, prorated or otherwise.

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g. The provisions of this Section 6 shall exclusively govern the Executive’s rights upon termination of employment with the Company and its parent and affiliates.

h. Discharge of the Company’s Obligations. The amounts payable to the Executive pursuant to this Section 6 following termination of his employment shall be in full and complete satisfaction of the Executive’s rights under this Agreement and any other claims he may have in respect of his employment by the Company, its parent, or any of its Affiliates. Such amounts shall constitute liquidated damages with respect to any and all such rights and claims and, upon the Executive’s receipt of such amounts, the Company shall be released and discharged from any and all liability to the Executive in connection with this Agreement or otherwise in connection with the Executive’s employment with the Company and its Affiliates.

i. As a condition precedent to receipt of the payments provided for in Section 6, Executive shall be required to execute a general release in favor of the Company, excluding only the payments remaining to be made pursuant to such Section 6.

7. TERMINATION PROCEDURE.

a. Notice of Termination. Any termination requiring notice thereof shall be communicated by Notice of Termination to the other party given in accordance with Section 20(e) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

b. Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

8. RETURN OF MATERIALS UPON TERMINATION. Upon termination of Executive’s employment by either party or for any reason, Executive shall immediately return to the Company all lists, books, records, financial data, and any other materials or data of any kind furnished to you by the Company, or owned by the Company, and shall not keep any copies without the Company’s express consent. Executive further agrees that he shall not at any time utilize or divulge any of the Company’s trade secrets, proprietary or confidential information to any third party without the Company’s prior written consent.

9. OTHER OBLIGATIONS UPON TERMINATION. Upon termination of the Executive’s employment for any reason, the Executive agrees to resign, as of the date of such termination of employment, from the Board of Directors and any committees of the Company, or boards of directors or committees of its affiliates or parent on which he serves.

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10. INDEMNIFICATION. The Company shall indemnify Executive and provide for the advance of expenses in connection therewith, subject to and in accordance with Article XII of the Company’s By-Laws. The Company shall maintain customary director and officer liability insurance covering Executive for acts and omissions during the time of Executive’s employment with the Company to the same extent it does so for similarly situated executives.

a. Notice of Claim. Executive shall give to the Company notice of any claim made against him for which indemnification will or could be sought under this Agreement. In addition, the Executive shall give the Company such information and cooperation as it may reasonably require and as shall be within the Executive’s power and at such times and places as are convenient for the Executive.

b. Defense of Claim. With respect to any proceeding as to which the Executive notifies the Company of the commencement thereof:

i. The Company will be entitled to participate therein at its own expense;

ii. Except as otherwise provided below, to the extent that it may wish, the Company will be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Executive, which in the Company’s sole discretion may be regular counsel to the Company and may be counsel to other officers and directors of the Company or any subsidiary. The Executive also shall have the right to employ his own counsel (at his own expense) in such action, suit or proceeding if he reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Executive.

iii. The Company shall not be liable to indemnify the Executive under this Agreement for any amounts paid in settlement of any action or claim affected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty that would not be paid directly or indirectly by the Company or limitation on the Executive without the Executive’s written consent. Neither the Company nor the Executive will unreasonably withhold or delay their consent to any proposed settlement.

11. DISPUTE RESOLUTION. The parties agree that they will use their best efforts to amicably resolve any dispute arising out of or relating to this Agreement. Any controversy, claim or dispute that cannot be so resolved shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Any such arbitration shall be conducted in Lehigh County, Pennsylvania, or such other place as may be mutually agreed upon by the parties. Within fifteen (15) days after the commencement of the arbitration, each party shall select one person to act arbitrator, and the two arbitrators so selected shall select a third arbitrator within ten (10) days of their appointment. Each party shall bear its own costs and expenses and an equal share of the arbitrator’s expenses and administrative fees of arbitration.

12. WITHHOLDING. Anything to the contrary herein notwithstanding, the Company shall, and is hereby authorized to, withhold or deduct from any amounts payable by the Company to you, your beneficiary or your legal representative under this letter agreement, any federal, state or municipal taxes, social security contributions or other amounts required to be withheld by law, and to remit such amounts to the proper authorities. The Company is also hereby authorized to withhold or deduct appropriate amounts with respect to any benefit plans or programs or other elections made by you.

13. I-9. All of Company’s obligations under this Agreement are expressly conditioned upon Executive’s completion to Company’s reasonable satisfaction of an I-9 Form (Employee Eligibility Verification Form) and upon Executive’s submission to Company of original documents reasonably satisfactory to Company to demonstrate Executive’s employment eligibility.

14. RIGHT TO INSURE. The Company shall have the right to secure in its own name, or otherwise, and at its own expense, life, health, accident or other insurance covering Executive and Executive shall

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have no right, title or interest in and to such insurance. Executive shall assist the Company in procuring such insurance by submitting to examinations and by signing such applications and other instruments as may be required by the insurance carriers to which application is made for any such insurance.

15. CHANGE IN CONTROL AGREEMENT. Executive is currently party to a Change of Control Employment Agreement with PTAC, dated as of June 18, 2001 (the “2001 Change of Control Employment Agreement”). This Agreement shall have no effect or impact upon the 2001 Change of Control Employment Agreement.

16. FURTHER ASSURANCES. Each party agrees at any time, and from time-to-time, to execute, acknowledge, deliver and perform, and/or cause to be executed, acknowledged, delivered and performed, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and/or assurances as may be necessary, and/or proper to carry out the provisions and/or intent of this Agreement.

17. CONSENTS. Any consent, approval or authorization required on the part of the Company hereunder shall mean the written consent, approval or authorization of the PTAC Board.

18. ACKNOWLEDGEMENT. By executing this Agreement, Executive acknowledges that he understands and voluntarily accepts the terms and conditions set forth herein. Executive acknowledges and agrees that he has had the opportunity to review this Agreement with an attorney, that he fully understands this Agreement, and that he signed it knowingly and voluntarily. Executive also acknowledges that he has not received any promise or inducement to execute this Agreement except as expressly set forth herein.

19. REPRESENTATIONS & WARRANTIES BY EXECUTIVE. In order to induce the Company to enter into this Agreement, the Executive makes the following representations and warranties to the Company and acknowledges that the Company is relying upon said representations and warranties:

a. Executive warrants and represents to the Company that during his period of employment, he is committed to carrying out his responsibilities in a diligent and professional manner and in accordance with the Company’s Code of Conduct;

b. No agreements or obligations exist to which the Executive is a party or otherwise bound, in writing or otherwise, which in any way interfere with, impede or preclude him from fulfilling all of the terms and conditions of this Agreement.

20. GENERAL PROVISIONS

a. Entire Agreement. Any prior employment agreement between the parties is hereby terminated and canceled. With the exception of the 2001 Change of Control Employment Agreement, this Agreement is the entire understanding and agreement of the Parties with respect to the subject matter hereof, and supersedes any and all prior representations, agreements and understandings, oral or written, express or implied, made between them, all of which are hereby merged into this Agreement.

b. Governing Law & Venue. This Agreement will be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to the choice of law or conflict of law principles thereof. The parties agree that any dispute arising from, or related to, this Agreement shall be brought and resolved only in federal or state court with jurisdiction over Lehigh County, Allentown, Pennsylvania and the Parties agree to submit to such jurisdiction.

c. Assignment. This Agreement is personal to Executive and Executive shall not have the right to assign Executive’s interest in this Agreement, any rights under this Agreement or any duties imposed under this Agreement, nor shall Executive have the right to pledge, hypothecate, transfer, assign or otherwise encumber Executive’s right to receive any form of compensation

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hereunder without the express prior written consent of the Company Any action in violation of the foregoing shall be null and void

d. Waiver. A waiver of any breach or provision of, or right under, this Agreement will be valid only if in writing and executed by the Party against whom the waiver is sought to be enforced. Any such waiver shall not be construed to be a waiver of any subsequent breach or any other provision or right. The failure of a Party to enforce any right under, or provision of this Agreement will not impair nor be construed as a waiver by the Party of such right or provision, or any other right or provision hereunder.

e. Notice. Any notice or other communication between the Parties provided or required in this Agreement will be given in writing and signed by the Party, and will be considered duly given (i) when delivered personally or by confirmed facsimile transmission to the address or facsimile number listed below, in which case notice shall be effective on the day of dispatch if delivered or transmitted within regular business hours, (ii) if sent via certified or registered mail, postage prepaid, return receipt requested, to the address listed below, in which case notice shall be effective on the third day after posting, or (iii) if sent via an established national overnight delivery service capable of being tracked (such as Federal Express), charges prepaid, to the address listed below, in which case notice shall be effective on the next day after posting:

If to Company: Penn Treaty American Corporation

ATTN: Chairman of the Board of Directors

3440 Lehigh Street

Allentown, PA 18103

Telephone: 610-965-2222

Fax: 610-967-1098

With copy to: Penn Treaty American Corporation

ATTN: Corporate Counsel

3440 Lehigh Street

Allentown, PA 18103

Telephone: 610-965-2222

Fax: 610-967-1098

If to Executive : William W. Hunt, Jr.

1110 Alexander Lane

West Chester, PA 19382

Telephone: 610-793-0489

f. Modification. This Agreement may not be modified or amended except by an instrument in writing, executed by the PTAC Board and the Executive.

g. Successors; Binding Agreement.

i. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns.

ii. This Agreement is personal to the Executive and, except as permitted under Section 20(c), shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees to the extent any such person succeeds to the Executive’s interests under this Agreement. If the Executive should die while any amounts are payable to him hereunder all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

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h. Severability. The parties acknowledge that the terms of this Agreement are fair and reasonable at the date signed by them. However, in light of the possibility of a change of conditions or differing interpretations by a court of what is fair and reasonable, the parties stipulate as follows: If any provision of this Agreement is found by a court of competent jurisdiction to be invalid, illegal or unenforceable, in whole or in part, in any respect under applicable law, that provision will be enforced to the maximum extent permissible or, if applicable, the Parties shall negotiate in good faith to substitute a valid, legal, and enforceable provision that reflects the intent of such invalid, illegal or unenforceable provision, and the other provisions of this Agreement will remain in full force and effect.

i. Section Headings. Headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision thereof.

j. Survival. Any respective obligations of Executive or the Company which by their nature would continue beyond the termination, cancellation, or expiration of this Agreement will survive such termination, cancellation, or expiration.

k. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which, when taken together, shall constitute one and the same instrument.

l. Facsimile Signatures. This Agreement may be transmitted by facsimile, and it is the intent of the parties for the facsimile transmitted signature of any autograph reproduced by a receiving facsimile machine or computer to be an original signature, and for the facsimile signature and any complete photocopy of this Agreement to be deemed an original counterpart. .

IN WITNESS WHEREOF, the parties, intending to be legally bound, hereto have executed this Agreement as of the date first above written.

By: PENN TREATY AMERICAN CORPORATION By: William W. Hunt, Jr.

for PENN TREATY NETWORK AMERICA

INSURANCE COMPANY

/s/ Eugene Woznicki /s/ William W. Hunt, Jr.

Eugene Woznicki, Executive

Chairman of the Board of Directors

Penn Treaty American Corporation

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EX-3.(II)

Exhibit 3.1

AMENDED AND RESTATED BY-LAWS

OF

PENN TREATY AMERICAN CORPORATION

A Pennsylvania Corporation

(As Amended December 13, 2007)

TABLE OF CONTENTS

Page

ARTICLE I – OFFICES 1

1. Registered Office 1

2. Additional Offices 1

ARTICLE II – SEAL 1

1. Corporate Seal 1

ARTICLE III – SHAREHOLDERS MEETING 1

1. Location of Shareholders Meeting 1

2. Annual Shareholders Meetings 1

3. Failure to Hold Annual Meeting 1

4. Quorum. 2

5. Shareholder Action 3

6. Proxies 3

7. Voting. 4

8. Notice of Annual Meeting of Shareholders 5

9. Judges of Election 6

10. Special Meetings of Shareholders 6

11. Business Transacted at Special Meetings of Shareholders 6

12. Notice of Special Meetings of Shareholders 6

13. Shareholder List 7

14. Action by Unanimous Consent of Shareholders in Lieu of a Meeting 7

15. Action by Majority Consent of Shareholders in Lieu of a Meeting 7

ARTICLE IV – DIRECTORS 7

1. Number and Class of Directors 7

2. Removal of Directors; Vacancies 8

3. Powers of Directors 8

4. Location of Meetings of the Board of Directors 9

5. Meetings of the Board of Directors 9

6. Annual Meetings of the Board of Directors 9

7. Special Meetings of the Board of Directors 9

8. Quorum 9

9. Compensation 10

10. Standard of Care 10

11. Liability of Directors 11

12. Tender Offers – Directors Duty 11

13. Nomination of Board of Directors 12

ARTICLE V – OFFICERS 13

1. Officers 13

2. Compensation 13

3. Term of Office 14

4. The Chief Executive Officer 14

5. The President 14

6. The Secretary 14

7. The Treasurer 15

 

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ARTICLE VI – VACANCIES 15

1. Vacancies of the Board of Directors 15

ARTICLE VII – CORPORATE RECORDS 16

1. Minute Books and Share Register 16

2. Inspection of Corporate Documents 16

ARTICLE VIII - SHARE CERTIFICATES, DIVIDENDS, ETC. 16

1. Share Certificates. 16

2. Uncertificated Shares. 17

3. Record Date. 18

4. Dividends 19

5. Payment of Dividends 19

ARTICLE IX – MISCELLANEOUS PROVISIONS 20

1. Checks or Demands for Money 20

2. Fiscal Year 20

3. Written Notice 20

4. Waiver of Notice 20

5. Participation in Meetings by Telephone Conference Call 21

6. Opt-Out Provisions 21

ARTICLE X – ANNUAL STATEMENT 21

1. Annual Statement 22

ARTICLE XI – AMENDMENTS 22

1. Procedure 22

ARTICLE XII – INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES AND AGENTS; INSURANCE22

1. General Rule 22

2. Derivative Actions 23

3. Success on Merits 24

4. Determination 24

5. Advancing Expenses 24

6. Not Exclusive of Other Rights 25

7. Power to Purchase Insurance 25

8. Creation of a fund to Secure Indemnification 25

9. Willful Misconduct or Recklessness 25

10. Authority 26

 

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PENN TREATY AMERICAN CORPORATION

AMENDED AND RESTATED

BYLAWS

ARTICLE I – OFFICES

1.            Registered Office. The registered office of this Corporation shall be at 3440 Lehigh Street, Allentown, Pennsylvania, 18103.

2.            Additional Offices. This Corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of this Corporation may require.

ARTICLE II – SEAL

1.            Corporate Seal. The corporate seal shall have inscribed thereon the name of this Corporation, the year of its organization and the words “Corporate Seal, PENNSYLVANIA”.

ARTICLE III – SHAREHOLDERS MEETING

1.            Location of Shareholders Meeting. Meetings of shareholders may be held at the registered office of the Corporation or at such other place within or without the Commonwealth of Pennsylvania as may from time to time be selected by the Board of Directors.

2.            Annual Shareholders Meetings. The annual meeting of the shareholders of the Company for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held in each calendar year. The Board of Directors shall by resolution set the date, time and place of the annual meeting.

3.            Failure to Hold Annual Meeting. Failure to hold the annual meeting at the designated time shall not work a dissolution of the Corporation or affect otherwise valid corporate acts.

4. Quorum.

(a)          A meeting of a business corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders, in person or by proxy, entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purposes of consideration and action on the matter. The shareholders present, in person or by proxy, at a duly organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. If a meeting cannot be organized because a quorum has not attended, those shareholders present and entitled to vote may, except as otherwise provided in this paragraph, adjourn the meeting to such time and place as they may determine.

(b)          Those shareholders entitled to vote, in person or by proxy, who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least fifteen days because of an absence of a quorum, although less than a quorum as fixed in this paragraph or in these Bylaws, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. When a meeting of shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken unless the Board of Directors fixes a new record date for the adjourned meeting.

 

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5.            Shareholder Action. Unless otherwise provided in this paragraph or these Bylaws, whenever any corporate action is to be taken by a vote of the shareholders of the Corporation, it shall be authorized by a majority of the votes cast at a duly organized meeting of the shareholders by the holders of shares entitled to vote thereon.

6.            Proxies. Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person to act for him by proxy. The presence of, or vote or other action at a meeting of shareholders, or the expression of consent or dissent to corporate action in writing, by proxy of a shareholders shall constitute the presence of, or vote or action by, or written consent or dissent of the shareholder for the purposes of this paragraph. Where two or more proxies of a shareholder are present, the Corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. Every proxy shall be executed in writing by the shareholder or by his duly authorized attorney-in-fact and filed with the Secretary of the Corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the Secretary of the Corporation. An unrevoked proxy shall not be valid after three years from the date of the execution unless a longer time is expressly provided therein. A proxy shall not be revoked by death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the Secretary of the Corporation.

 

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7. Voting.

(a)          Shares of the Corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this paragraph shall affect the validity of a proxy given to a pledgee or nominee. Where shares of the Corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (i) if only one or more such persons is present in person or by proxy, all of the shares standing in the names of such person shall be deemed to be represented for the purpose of determining a quorum and the Corporation shall accept as the vote of all the shares the vote cast by him or a majority of them; and (ii) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the right of the joint owners or the beneficial owners thereof among themselves. If there has been filed with the Secretary of the Corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of any order of court directing the voting of the shares, the persons specified as having such voting power in the latest document so filed and only those persons shall be entitled to vote the shares but only in accordance therewith.

 

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(b)          Any other domestic or foreign corporation for profit or not-for-profit that is a shareholder of the Corporation may vote by any of its officers or agents, or by proxy appointed by an officer or an agent, unless some other person, by resolution of the Board of Directors of the other corporation or a provision of its articles or Bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the Secretary of the Corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. Shares of a domestic or foreign corporation for profit or not-for-profit other than a business corporation, standing in the name of a shareholder that is a business corporation, may be voted by the persons and in the manner provided for in the case of business corporations by the foregoing sentence unless the laws of the jurisdiction in which the issuer of the shares is incorporated require the shares or memberships to be voted by some other person or persons or in some other manner in which case, to the extent that those laws are inconsistent herewith, this paragraph shall not apply. Shares of the Corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the Board of Directors of the Corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time.

8.            Notice of Annual Meeting of Shareholders. Written notice of the annual meeting shall be mailed to each shareholder entitled to vote thereat, at such address as appears on the books of the Corporation, at least five days prior to the meeting unless a greater period is required by statute in a particular case. For a meeting called to consider a fundamental change under Chapter 19 of the Business Corporation Law of 1988, written notice shall be given at least ten days prior to the meeting.

 

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9.            Judges of Election. In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may, and on the request of any shareholder or his proxy, shall, make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one of three judges are to be appointed. On request of the chairman of the meeting, or of any shareholder or his proxy, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. No person who is a candidate for office shall act as a judge.

10.          Special Meetings of Shareholders. Special meetings of the shareholders may be called at any time by the Board of Directors or the President. At any time, upon written request of any person who has called a special meeting, it shall be the duty of the Secretary to fix the time of the meeting which, if the meeting is called pursuant to a statutory right, shall be held not more than sixty days after receipt of the request. If the Secretary neglects or refuses to fix the time of the meeting, the person or persons calling the meeting may do so.

11.          Business Transacted at Special Meetings of Shareholders. Business transacted at all special meetings shall be confined to the objects stated in the notice and matters germane thereto.

12.          Notice of Special Meetings of Shareholders. Written notice of a special meeting of shareholders stating the time and place and object thereof, shall be mailed, postage pre-paid, to each shareholder entitled to vote thereat at such address as appears on the books of the Corporation, at least five days before such meeting, unless a greater period of notice is required

 

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by statute in a particular case. For a meeting called to consider a fundamental change under Chapter 19 of the Business Corporation Law of 1988, written notice shall be given at least ten days prior to the meeting.

13.          Shareholder List. The office or agent having charge of the transfer books shall make a complete list of the shareholders entitled to vote at any meeting of shareholders (arranged in alphabetical order), with the address of and the number of shares held by each. Such list shall be subject to inspection by any shareholder during the whole time of the meeting.

14.          Action by Unanimous Consent of Shareholders in Lieu of a Meeting. Any action required or permitted to be taken at a meeting of the shareholders or a class of shareholders of the Corporation may be taken if, prior or subsequent to the action a consent or consents thereto by all the shareholders who would be entitled to vote at a meeting are filed with the Secretary.

15.          Action by Majority Consent of Shareholders in Lieu of a Meeting. If the Articles so permit, any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. Such consents shall be filed with the secretary of the Corporation. The action shall not become effective until at least ten days’ written notice of the action has been given to each shareholder entitled to vote thereon who has not consented thereto.

ARTICLE IV – DIRECTORS

1.            Number and Class of Directors. Except as otherwise fixed pursuant to the provisions of Article Fifth of the Articles of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation to election of additional directors under specified circumstances, the number of

 

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directors shall be fixed at nine (9). The directors shall be natural persons of full age, who need not be residents of this Commonwealth or shareholders in the Corporation. At the annual election of directors to be held at the annual meeting of shareholders in 1987, the directors shall be divided into three (3) classes, as nearly equal as possible, known as Class I, Class II, and Class III. The initial directors of Class I shall serve until the 1988 annual meeting of shareholders, at which time the directors of Class I shall be elected for a term of three (3) years and shall thereafter be elected every three (3) years for three (3) year terms. The initial directors of Class II shall serve until the 1989 annual meeting of shareholders, at which time the directors of Class II shall be elected for a term of three (3) years and shall thereafter be elected every three (3) years for three (3) year terms. The initial directors of Class III shall serve until the 1990 annual meeting of shareholders, at which time the directors of Class III shall be elected for a term of three (3) years and shall thereafter be elected every three (3) years for three (3) year terms. Each director elected shall hold office until his or her successor is elected and qualified.

The term “entire Board” as used in these Bylaws means the total number of directors which the Corporation would have if there were no vacancies.

2.            Removal of Directors; Vacancies. Any member of the Board of Directors may be removed for cause only the affirmative vote of the holders of 67% of the combined voting power of all shareholders who are entitled to vote for the election of directors, voting together as a single class. Proper “cause” shall be determined by the vote of not less than 67% of the entire Board of Directors. A director elected to fill a vacant position, however created, shall serve for the remainder of the term of the director he or she is replacing.

3.            Powers of Directors. In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board may exercise all such powers of the Corporation and

 

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do all such lawful acts and things as are not by statute or by the Articles or by these Bylaws directed or required to be exercised or done by the shareholders.

4.            Location of Meetings of the Board of Directors. The meetings of the Board of Directors may be held at such place within this Commonwealth, or elsewhere, as a majority of the directors may from time to time appoint, or as may be designated in the notice calling the meeting.

5.            Meetings of the Board of Directors. Each newly elected Board may meet at such place and time as shall be fixed by the shareholders at the meeting at which such directors are elected and no notice shall be necessary to the newly elected directors in order to legally constitute the meeting, or they may meet at such place and time as may be fixed by the consent in writing of all the directors.

6.            Annual Meetings of the Board of Directors. Annual meetings of the Board shall be held without notice immediately following the annual shareholders meeting at the registered office of the Company, or at such other time and place as shall be determined by the Board.

7.            Special Meetings of the Board of Directors. Special meetings of the Board may be called by the President on one day’s notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors.

8.            Quorum. A majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. If all the directors shall severally or collectively consent in writing to any action to be taken by the

 

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Corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors.

9.            Compensation. Directors as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board, provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

10.          Standard of Care. A director of the corporation shall stand in a fiduciary relation to the Corporation and shall perform his duties as a director, including his duties as a member of any committee of the Board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the Corporation, and with such are, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. In performing his duties, a director shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following:

(a)          One or more officers or employees of the Corporation whom the director reasonably believes to be reliable and competent in the matters presented;

(b)          Counsel, public accounts or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person; and/or

(c)          A committee of the Board upon which he does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

 

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A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause his reliance to be unwarranted.

11.          Liability of Directors. A director of the Corporation shall not be personally liable for monetary damages as such for any action taken, or any failure to take any action, unless:

(a)          the director has breached his duty of good faith or duty of loyalty or failed to perform the duties of his office; and/or

(b)          the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.

12.          Tender Offers – Directors Duty. (a) The Board of Directors may, if it deems advisable, oppose a tender offer, or other offer for the Corporation’s securities, whether the offer is in cash or in the securities of a corporation or otherwise. When considering whether to oppose an offer, the Board of Directors may, but is not legally obligated to, consider any pertinent issue. By way of illustration, but not of limitation, the Board of Directors may, but shall not be legally obligated to, consider any or all of the following:

(i)           whether the offer is acceptable based on historical and present operating results or the financial condition of the Corporation and its subsidiaries, and their future prospects;

(ii)          whether a more favorable offer could be obtained for the Corporation’s, or its subsidiaries’, securities or assets in the future;

(iii)        the social, economic or any other material impact which an acquisition of the Corporation, or substantially all of its assets, would have upon the employees, insureds and customers of the Corporation and its subsidiaries and the communities in which they serve;

 

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(iv)         the reputation and business practices of the offeror and its management and affiliates as they would affect the employees, insureds and customers of the Corporation and its subsidiaries and the future value of the Corporation’s stock;

(v)          the value of the securities (if any) which the offeror is offering in exchange for the Corporation’s, or its subsidiaries’, securities or assets based on an analysis of the worth of the Corporation, or if its subsidiaries, as compared to the offeror corporation or other entity whose securities are being offered; and/or

(vi)         any antitrust or other legal or regulatory issues that are raised by the offer.

(b)          If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purposes including, but not limited to, any or all of the following: advising shareholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring the Corporation’s securities; selling or otherwise issuing authorized shares of preferred stock with such designations, preferences, qualifications, limitations, restrictions and/or special rights as the Board of Directors deems appropriate; selling or otherwise issuing authorized but unissued securities or treasury stock or granting options with respect thereto; acquiring a company to create an antitrust or other regulatory problem for the offeror; and obtaining a more favorable offer from another individual or entity.

13.          Nomination of Board of Directors. Nominations for election of the Board of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or, subject to the rights of the holders of preferred stock, by any shareholder of any

 

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outstanding class of common stock of the Corporation entitled to vote for election of directors. Nominations, other than those made by or on behalf of the Board of Directors of the Corporation, shall be made in writing and shall be delivered or mailed to the President of the Corporation not less than fifty (50) days nor more than seventy-five (75) days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than fifty (50) days’ notice of the meeting is given to shareholders, such nominations shall be mailed or delivered to the president of the Corporation not later than the close of business on the seventh day following the day on which the notice of the meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder(s): a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of common stock of the Corporation that will be voted for each proposed nominee by the notifying shareholder(s); (d) the name and residence address of the notifying shareholder(s). Nominations not made in accordance herewith shall be disregarded by the chairman of the meeting and votes cast for such nominee shall not be counted.

ARTICLE V – OFFICERS

1.            Officers. The executive officers of the Corporation shall be chosen by the directors and shall be a Chief Executive Officer, President, Secretary and Treasurer. The Board of Directors may also choose one or more Vice-Presidents and such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be prescribed by the Board. Any two or more offices may be held by the same person. It shall not be necessary for the officers to be directors.

2.            Compensation. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors.

 

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3.            Term of Office. The officers of the Corporation shall hold office for one year and until their successors are chosen and shall have qualified. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in their judgment the best interests of the Corporation will be served thereby.

4.            The Chief Executive Officer. The Chief Executive Officer shall preside at all meetings of the shareholders and directors. He shall oversee the general and active management of the Corporation and shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation. He shall be Ex-Officio a member of all committees, and shall have the general powers and duties of supervision and management usually vested in the office of Chief Executive Officer of a corporation and shall perform such other duties as from time to time may be assigned by the Board of Directors.

5.            The President. The President shall have general and active management of the business of the Corporation, shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Corporation. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation. He shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation and shall perform such other duties as from time to time may be assigned by the Board of Directors.

6.            The Secretary. The Secretary shall attend all sessions of the Board and all meetings of the shareholders and act as clerk thereof, and record all the votes of the Corporation and the minutes of all its transactions in a book to be kept for that purpose; and shall perform like duties for all committees of the Board of Directors when required. He shall give, or cause to be

 

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given, notice of all meetings of the shareholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, Chief Executive Officer or President, and under whose supervision he shall be. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it.

7.            The Treasurer. The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall keep the moneys of the Corporation in a separate account to the credit of the Corporation. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer, President and Directors, at the annual meeting of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation.

ARTICLE VI – VACANCIES

1.            Vacancies of the Board of Directors. If the office of any one or more officer or agent becomes vacant for any reason, the Board of Directors may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred.

 

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ARTICLE VII – CORPORATE RECORDS

1.            Minute Books and Share Register. There shall be kept at the registered office or principal place of business of this Corporation an original or duplicate record of the proceedings of the shareholders and of the directors, and the original or a copy of its Bylaws, including all amendments or alterations thereto to date, certified by the Secretary of this Corporation. At the registered office, principal place of business or at the office of this Corporation’s transfer agent, an original or duplicate share register shall also be kept giving the names of the shareholders in alphabetical order, and showing their respective addresses, the number and classes of shares held by each, the number and date of certificates issued for the shares, and the number and date of cancellation of every certificate surrendered for cancellation.

2.            Inspection of Corporate Documents. Every shareholder upon written verified demand stating the purpose thereof, shall have a right to examine, in person or by agent or attorney, at any reasonable time or times, for any reasonable purpose, the share register, books or records of account, and records of the proceedings of the shareholders and directors, and to make extracts therefrom.

ARTICLE VIII - SHARE CERTIFICATES, DIVIDENDS, ETC.

1. Share Certificates.

(a)          The share certificates of the Corporation shall be numbered and registered in the share ledger and transfer books of the Corporation, as they are issued. Every share certificate may be executed by facsimile or otherwise on behalf of the Corporation in any manner approved by the Board of Directors. In case any officer who has signed, or whose facsimile signature has been placed upon any share certificate shall have ceased to be such officer because of death, resignation or otherwise before the certificate is issued, it

 

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may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the date of its issue.

(b)          Transfers of certificated shares shall be made on the books of the Corporation upon surrender of the certificates therefor, endorsed by the person named in the certificate or by attorney, lawfully constituted in writing. No transfer shall be made inconsistent with Article 8 of the Uniform Commercial Code, and its amendments and supplements.

(c)          Any person claiming a share certificate to be lost or destroyed shall make an affidavit or affirmation of that fact and advertise the same in such manner as the Board of Directors may required, and shall give the Corporation a bond of indemnity with sufficient surety to protect the Corporation from any liability or expense which it or they may incur by reason of the original certificate remaining outstanding, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed, but always subject to the approval of the Board of Directors.

2. Uncertificated Shares.

(a)          Notwithstanding anything herein to the contrary, any or all classes and series of shares, or any part thereof, may be represented by uncertificated shares, except that shares represented by a certificate that are issued and outstanding shall continue to be represented thereby until the certificate is surrendered to the Corporation. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall, or shall instruct its transfer agent to, send to the registered owner (holder) thereof a written notice containing the information required to be set forth or stated on certificates.

 

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The rights and obligations of the holders of uncertificated shares and those of certificated shares, of the same class or series, shall be identical.

(b)          The Board of Directors may prescribe procedures for the issuance and registration of transfer of uncertificated shares, and with respect to such other matters relating to uncertificated shares as the Board of Directors may deem appropriate.

(c)          Each registered holder of capital stock represented by uncertificated shares shall be entitled, upon request to the custodian of the stock transfer books of the Corporation, or other person designated as the custodian of the records of uncertificated shares, to have physical certificates representing such shares registered in such holder’s name.

3. Record Date.

(a)          The Board of Directors may fix a time, not more than ninety days, prior to the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, or to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion, or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date fixed, as aforesaid. When a determination of

 

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shareholders of record has been made as provided in this paragraph for purposes of a meeting the determination shall apply to any adjournment thereof unless the Board of Directors fixes a new record date for the adjourned meeting.

(b) If a record date is not fixed:

(i)           The record date for determining shareholders entitled to notice of, and to vote at, a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held.

(ii)          The record date for determining shareholders entitled to express consent or dissent to corporate action in writing without a meeting when prior action by the Board of Directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the Secretary.

(iii)        The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

4.            Dividends. Subject to the provisions of Section 1551, the Board of Directors may, in its discretion, declare and pay dividends and make other distributions upon the outstanding shares of the Corporation from time to time and to such extent as they deem advisable, in cash, property or in shares of the Corporation.

5.            Payment of Dividends. Before payment of any dividend there may be set aside out of the net profits of the Corporation such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing

 

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dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation, and the directors may abolish any such reserve in the manner in which it was created.

ARTICLE IX– MISCELLANEOUS PROVISIONS

1.            Checks or Demands for Money. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate.

2. Fiscal Year. The fiscal year shall end on the 31^st day of December of each year.

3.            Written Notice. Whenever written notice is required to be given to any person by statute, or by the Articles of Incorporation or these Bylaws, it may be given to such person, either personally or by sending a copy thereof by first class or express mail, postage pre-paid or by telegram (with messenger service specified), telex or TWX (with answer back received) or courier service, charges prepaid, or by telecopier, to his address (or to his telex, TWX, telecopier or telephone number) appearing on the books of the Corporation, or in the case of directors, supplied by him to the Corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched. A notice of meeting shall specify the place, day and hour of the meeting and, in the case of a special meeting, the general nature of the business to be transacted.

4.            Waiver of Notice. Whenever any written notice is required to be given by statute, or by the Articles or the Bylaws of the Corporation, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as otherwise provided by statute and in

 

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these Bylaws, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted. Attendance of a person, either in person or by proxy, at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.

5.            Participation in Meetings by Telephone Conference Call. One or more persons may participate in a meeting of the Board of Directors, of a committee of the incorporators, the Board or of the shareholders, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this paragraph shall constitute presence in person at such meeting.

6.            Opt-Out Provisions. The Corporation hereby explicitly opts out of the provisions of Subchapter H (entitled “Disgorgement by Certain Controlling Shareholders Following Attempts to Acquire Control”) of Act No. 1990-36, 15 Pa.C.S. 2571-2575 and these provisions shall accordingly not be applicable to the Corporation. (This amendment to the By-laws was approved by the Board of Directors on July 19, 1990.) The Corporation hereby explicitly opts out of the provisions of Subchapter G (entitled “Control Share Acquisitions”) of Act No. 1990-36, 15 Pa.C.S. 2561-2567 and these provisions shall accordingly not be applicable to the Corporation. (This amendment to the By-laws was approved by the Board of Directors on July 19, 1990.)

ARTICLE X – ANNUAL STATEMENT

 

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1.            Annual Statement. The President and Board of Directors shall present at each annual meeting a full and complete statement of the business and affairs of the Corporation for the preceding year. Such statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a certified public accountant.

ARTICLE XI – AMENDMENTS

1.            Procedure. These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by the Board of Directors, subject always to the power of the shareholders to change such action, at any regular meeting of the Board of Directors or at any special meeting of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting; provided that notwithstanding the foregoing, the provisions of Article IV, Sections 1, 2, 10, 11, 12 and 13, Article XII or this Article XI of these Bylaws may be altered, amended, or repealed only upon the affirmative vote of 67% of the combined voting power of all shareholders who are entitled to vote thereon, voting as a single class.

ARTICLE XII – INDEMNIFICATION OF DIRECTORS, OFFICERS AND

EMPLOYEES AND AGENTS; INSURANCE

1.            General Rule. Any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by the Corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid

 

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in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceedings, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceedings by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

2.            Derivative Actions. Any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by the Corporation against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation; except, however, that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Common Pleas of the county in which the registered office of the Corporation is located or the court in which such

 

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action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Common Pleas or such other court shall deem proper.

3.            Success on Merits. To the extent that a director, officer, employee or agent as above described has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraph 1 or 2 of this Article or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

4.            Determination. Any indemnification under paragraph 1 or 2 of this Article (unless ordered by a court) shall be made only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in such subparagraph. Such determination shall be made:

(a)          By the vote of the Board of Directors consisting of directors who were not parties to such action, suit or proceedings; or

(b)          If such action is not obtainable, or even if obtainable the vote of the disinterested directors so directs, by independent legal counsel in a written opinion; or

(c) By the shareholders.

5.            Advancing Expenses. Expenses incurred by an officer, director, employee or agent in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it

 

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shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article.

6.            Not Exclusive of Other Rights. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, vote of shareholders or directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

7.            Power to Purchase Insurance. The Corporation may, by action of the Board of Directors, purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article.

8.            Creation of a fund to Secure Indemnification. The Corporation may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure in any matter its indemnification obligations, whether arising under or pursuant to this Article or otherwise.

9.            Willful Misconduct or Recklessness. Indemnification pursuant to this Article shall not be made in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness.

 

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10.          Authority. Indemnification pursuant to this Article, under any Bylaw, agreement, vote of shareholders, members or directors or otherwise, may be granted for any action taken or any failure to take any action and may be made whether or not the Corporation would have the power to indemnify the person under any provision of law except as provided in this Article and whether or not the indemnified liability arises or arose from any threatened, pending or completed action by or in the right of the Corporation.

 

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