-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bf/EFdzQ6lNi0mDH6Wa1T9dcYdCpJF4cEnr42kW4Inlj2F2PAUibyuBmjOaMM+q/ EFOe83IeSbrU6vRUFaaWAg== 0000912057-02-034596.txt : 20020905 0000912057-02-034596.hdr.sgml : 20020905 20020905112135 ACCESSION NUMBER: 0000912057-02-034596 CONFORMED SUBMISSION TYPE: T-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN TREATY AMERICAN CORP CENTRAL INDEX KEY: 0000814181 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 231664166 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: T-3/A SEC ACT: 1939 Act SEC FILE NUMBER: 022-28625 FILM NUMBER: 02757133 BUSINESS ADDRESS: STREET 1: 3440 LEHIGH ST CITY: ALLENTOWN STATE: PA ZIP: 18103 BUSINESS PHONE: 6109652222 MAIL ADDRESS: STREET 1: 3440 LEHIGH ST CITY: ALLENTOWN STATE: PA ZIP: 18103 T-3/A 1 a2088441zt-3a.txt FORM T-3/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. Amendment No. 1 to FORM T-3 FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE TRUST INDENTURE ACT OF 1939 PENN TREATY AMERICAN CORPORATION (Name of applicant) 3440 Lehigh Street Allentown, PA 18103 (Address of principal executive offices) ------------------------------------------------------------------------------- SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED TITLE OF CLASS AMOUNT -------------- ------ 6 1/4% Convertible Subordinated Notes due 2008 $74,750,000 ----------------------------------------- Approximate date of proposed public offering: As soon as practicable after the date of effectiveness of this Application for Qualification. William W. Hunt President and Chief Operating Officer Penn Treaty American Corporation 3440 Lehigh Street Allentown, PA 18103 (name and address of agent for service) with a copy to: Justin P. Klein, Esquire Ballard Spahr Andrews and Ingersoll, LLP 1735 Market Street, 51st Floor Philadelphia, PA 19103 ----------------------------------------- The applicant hereby amends this application for qualification on such date or dates as may be necessary to delay its effectiveness until: (i) the 20th day after the filing of a further amendment which specifically states that it shall superseded this amendment; or (ii) such date as the Securities and Exchange Commission, acting pursuant to Section 307(c) of the Trust Indenture Act of 1939, may determine upon the written request of the applicant. GENERAL 1. General Information. (a) Form of organization: Corporation (b) State under the laws of which organized: Pennsylvania 2. Securities Act exemption applicable. Upon the terms set forth in an Offering Circular dated August 28, 2002 and the related Letter of Transmittal (which together constitute the "Exchange Offer"), Penn Treaty American Corporation (the "Company") is offering to exchange up to $74.75 million principal amount of the Company's 6 1/4% Convertible Subordinated Notes due 2008 (the "Exchange Notes") for up to all of the outstanding principal amount of the Company's 6 1/4% Convertible Subordinated Notes due 2003 (the "Subordinated Notes"). The Company will extend the Exchange Offer to each holder of its outstanding Subordinated Notes if the notes are validly tendered and not withdrawn in the Exchange Offer. The Company has engaged Philadelphia Brokerage Corporation for consulting services in connection with the Company's recapitalization but not to solicit the exchange of Subordinated Notes in the Exchange Offer. The Company is making the Exchange Offer in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), afforded by Section 3(a)(9) thereof. The Company has not paid or given, and will not pay or give, directly or indirectly, any commission or other remuneration to any broker, dealer, salesman or other person for soliciting tenders of Subordinated Notes. AFFILIATIONS 3. Affiliates. To the Company's knowledge, item 5 of this Application sets forth the name and address of the only shareholder of the Company holding 10% or more of the Company's voting securities as of August 26, 2002. The following list sets forth the relationship among the Company and all of its principal direct and indirect subsidiaries as of August 27, 2002. Each of the entities listed under A through E below is a wholly-owned subsidiary of the Company. Indirect subsidiaries are indented and listed under their direct parent corporations. American Network Insurance Company, a subsidiary of Penn Treaty Network American Insurance Company, currently beneficially owns approximately 2.5% of the outstanding Common Stock of the Company. A. Senior Financial Consultants Company B. Penn Treaty Network America Insurance Company American Network Insurance Company Network Insurance Senior Health Division C. American Independent Network Insurance Company of New York D. United Insurance Group Agency E. Penn Treaty (Bermuda) Ltd. MANAGEMENT AND CONTROL 4. Directors and Executive Officers. The following table sets forth the name and office of all directors and executive officers of the Company as of August 27, 2002. The address of each director and executive officer is c/o Penn Treaty American Corporation, 3440 Lehigh Street, Allentown, PA 18103. Irving Levit Founder, Chairman of the Board, Director, Chief Executive Officer William W. Hunt President, Chief Operating Officer Cameron B. Waite Executive Vice President, Chief Financial Officer A.J. Carden Executive Vice President, Director Michael F. Grill Treasurer, Comptroller, Director Jim Heyer Senior Vice President, Risk Management Jack Baum Vice President of Agency Management, Director Alexander M. Clark Director Francis R. Grebe Director 3 Gary E. Hindes Director Matthew W. Kaplan Director Domenic P. Stangherlin Director
5. PRINCIPAL OWNERS OF VOTING SECURITIES. The following table sets forth, as of August 26, 2002, the security ownership of each person who was known by the Company to beneficially own 10% or more of the voting securities of the Company.
TITLE PERCENTAGE OF NAME AND COMPLETE OF CLASS AMOUNT VOTING MAILING ADDRESS OWNED OWNED SECURITIES OWNED - ------------------------ ------------ ------------ ---------------- Irving Levit Common Stock 2,451,895(1) 12.3% c/o Penn Treaty American Corporation 3440 Lehigh Street Allentown, PA 18103
(1) 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 children and exercisable options to purchase 241,455 shares of Common Stock. Shares of Common Stock subject to options currently exercisable or exercisable within 60 days of August 27, 2002 are deemed outstanding for computing the percentage beneficially owned by Mr. Levit. Excludes 46,000 shares held by Mr. Levit's wife as to which he disclaims beneficial ownership and 59,233 shares held by other family members as to which he also disclaims beneficial ownership. UNDERWRITERS 6. Underwriters. (a) Persons acting as underwriters within the last three years: None. (b) Not applicable. CAPITAL SECURITIES 7. Capitalization. (a) The following table sets forth, as of August 26, 2002, certain information as to each authorized class of securities of the Company: 4
Col. A. Col. B Col. C TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING - --------------------------- ---------------------- ---------------------- Common Stock, par value 40,000,000 19,907,737 $0.10 per share (1)(2) Preferred Stock (1)(3) 5,000,000 0 6 1/4% Convertible $74,750,000 $74,750,000 (4) Subordinated Notes due 2003
(1) In February 2002, Penn Treaty received the approval of the Pennsylvania Insurance Department of a Corrective Action Plan for two of the Company's subsidiaries, Penn Treaty Network America Insurance Company and American Network Insurance Company. As a result, the Company has recommenced sales of its long-term care insurance products in Pennsylvania and 25 other states. The principal component of the Corrective Action Plan was a Reinsurance Agreement with Centre Solutions (Bermuda), Limited, a subsidiary of Zurich Financial Services Group, pursuant to which Centre Solutions agreed to reinsure 100% of the long-term care insurance policies of Penn Treaty Network America Insurance Company and American Network Insurance Company currently in-force, subject to an aggregate limit of liability. In connection with the Reinsurance Agreement, the Company granted Centre Solutions four tranches of warrants to purchase a total of 5,000,000 shares of convertible Preferred Stock, three tranches of which are immediately exercisable and one tranche that only becomes exercisable if the Company does not commute the reinsured business on December 31, 2007. The Convertible Preferred Stock issued upon exercise of the warrants would represent approximately 35% of the outstanding Common Stock after conversion. (2) The holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the shareholders. (3) The holders of the Preferred Stock have no right to vote in any election of directors of the Company or any other matters. (4) Convertible into Common Stock at $28.44 per share. INDENTURE SECURITIES 8. Analysis of Indenture Provisions. The Exchange Notes will be issued under the terms of an indenture to be entered into between the Company and Wells Fargo Bank Minnesota, N.A., as trustee (the "Indenture"). The 5 following is an analysis of the Indenture provisions required under Section 305(a)(2) of the Trust Indenture Act of 1939, as amended: (A) Events of Default; Withholding of Notice of Default. Pursuant to the Indenture, an "Event of Default" will occur if: (a) default in the payment of the principal of or premium, if any, on the Notes when due at maturity, upon redemption or otherwise, including failure by the Company to purchase the notes when required; or (b) default in the payment of any installment of interest on the Notes as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (c) a failure on the part of the Company to duly observe or perform any other covenants or agreements on the part of the Company in the Indenture (other than a default in the performance or breach of a covenant or agreement that is specifically dealt with elsewhere in this Section) that continues for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Trustee, or to the Company and a responsible officer of the Trustee, by the holders of at least 25% in aggregate principal amount of the notes at the time outstanding; or (d) an event of default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any of its subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such indebtedness or guarantee now exists or shall be created after the date hereof, which default (i) is caused by a failure to pay principal or interest on such indebtedness prior to the expiration of the grace period provided in such indebtedness (a "Payment Default") or (ii) results in the acceleration of such indebtedness prior to its expressed maturity and, in each case, the principal amount of such indebtedness, together with the principal amount of any other such indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10,000,000 or more; or (e) final judgments or decrees shall be entered by a court of competent jurisdiction against the Company or any of its subsidiaries involving liabilities of $25,000,000 or more (singly or in the aggregate) (after deducting the portion of such liabilities accepted by a reputable insurance company) and such final judgments or decrees shall not have been vacated, discharged, satisfied or stayed pending appeal within 60 days from the entry thereof; or 6 (f) the Company shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it or shall make a general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due; or (g) an involuntary case or other proceeding shall be commenced against the Company seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 consecutive days; then, and in each and every such case (other than an Event of Default specified in (f) or (g)), unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the notes then outstanding, by notice in writing to the Company (and to the Trustee if given by noteholders), may declare the principal of, premium, if any, on the notes and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in the Indenture or in the notes contained to the contrary notwithstanding. If an Event of Default specified in (f) or (g) occurs and is continuing, the principal of all the notes and the interest accrued thereon shall be immediately due and payable. The foregoing provision is subject to the conditions that if, at any time after the principal of the notes shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all notes and the principal of and premium, if any, on any and all notes that shall have become due otherwise than by acceleration (with interest on overdue installments of interest (to the extent that payment of such interest is enforceable under applicable law) and on such principal and premium, if any, at the rate borne by the notes, to the date of such payment or deposit) and amounts due to the Trustee, and if any and all defaults under this Indenture, other than the nonpayment of principal of, premium, if any, and accrued interest on notes that shall have become due by acceleration, shall have been cured or waived, then and in every such case the holders of a majority in aggregate principal amount of the notes then outstanding, by written notice to the Company and to the Trustee, may waive all defaults or 7 Events of Default and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or Event of Default, or shall impair any right consequent thereto. The Company shall notify a responsible officer of the Trustee, promptly upon becoming aware thereof, of any Event of Default. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such waiver or rescission and annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the holders of notes and the Trustee shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the holders of notes and the Trustee shall continue as though no such proceeding had been taken. The Trustee shall, within 90 days after the occurrence of a default, mail to all noteholders, as the names and addresses of such holders appear upon the note register, notice of all defaults of which a responsible officer has actual knowledge, unless such defaults shall have been cured or waived before the giving of such notice; provided that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Notes, the Trustee shall be protected in withholding such notice if and so long as a responsible officer of the Trustee in good faith determine that the withholding of such notice is in the interests of the noteholders. (B) Authentication and Delivery; Application of Proceeds. Pursuant to the Indenture, the Trustee may appoint an authenticating agent that shall be authorized to act on its behalf and subject to its direction in the authentication and delivery of notes in connection with the original issuance thereof and transfers and exchanges of notes as fully to all intents and purposes as though the authenticating agent had been expressly authorized by this Indenture and those sections to authenticate and deliver notes. For all purposes of the Indenture, the authentication and delivery of notes by the authenticating agent shall be deemed to be authentication and delivery of such Notes "by the Trustee" and a certificate of authentication executed on behalf of the Trustee by an authenticating agent shall be deemed to satisfy any requirement in the Indenture or in the notes for the Trustee's certificate of authentication. Such authenticating agent shall at all times be a person eligible to serve as Trustee. There will be no proceeds from the issuance of the Subordinated Notes. (C) Release or Release and Substitution of Property Subject to the Lien of the Indenture. The Subordinated Notes are not secured by any assets of the Company. 8 (D) Satisfaction and Discharge. Pursuant to the Indenture: (I) (a) The Company may, at its option by board resolution, at any time, with respect to the notes, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding notes upon compliance with the conditions set forth in paragraph (d). (b) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (b), the Company shall be deemed to have been released and discharged from its obligations with respect to the outstanding notes on the date the conditions set forth in paragraph (d) below are satisfied (hereinafter, "legal defeasance"). For this purpose, such legal defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding notes, which shall thereafter be deemed to be "outstanding" only for the purposes of the sections of and matters under this Indenture referred to in clauses (i) and (ii) below and to have satisfied all its other obligations under such notes and this Indenture insofar as such notes are concerned, except for the following, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of holders of outstanding notes to receive solely from the trust fund described in paragraph (d) below and as more fully set forth in such paragraph, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due and (ii) continuing obligations under the Indenture. (c) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (c), the Company shall be released and discharged from its obligations under any covenant contained in the Indenture with respect to the outstanding Notes on and after the date the conditions set forth in paragraph (d) are satisfied (hereinafter, "covenant defeasance"), and the notes shall thereafter be deemed to be not "outstanding" for the purpose of any direction, waiver, consent or declaration or act of holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the outstanding notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document, and such omission to comply shall not constitute a Default or an Event of Default under (A), but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. (d) The following shall be the conditions to application of either paragraph (b) or paragraph (c) above to the outstanding Notes: 9 (i) The Company shall have irrevocably deposited in trust with the Trustee, pursuant to an irrevocable trust and security agreement in form and substance satisfactory to the Trustee, cash or non-callable U.S. government obligations maturing as to principal and interest at such times, or a combination thereof, in such amounts as are sufficient, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges or assessments in respect thereof payable by the Trustee, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof (in form and substance reasonably satisfactory to the Trustee) delivered to the Trustee, to pay the principal of, premium, if any, and interest on the outstanding notes on the dates on which any such payments are due and payable in accordance with the terms of the Indenture and of the notes as well as all other sums payable hereunder by the Company; (ii) (a) No Event of Default shall have occurred or be continuing on the date of such deposit, and (b) no Default or Event of Default under (A)(f) or (A)(g) above shall occur on or before the 123rd day after the date of such deposit; (iii) Such deposit shall not result in a Default under the Indenture or a breach or violation of, or constitute a default under, any other instrument or agreement to which the Company is a party or by which it or its property is bound; (iv) In the case of a legal defeasance under paragraph (b) above, the Company shall have delivered to the Trustee an opinion of counsel in form and substance reasonably satisfactory to the Trustee stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling applicable to such a defeasance or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the holders of the notes shall not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and shall be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; and, in the case of a covenant defeasance under paragraph (c) above, the Company shall have delivered to the Trustee an officer's certificate and an opinion of counsel, in form and substance reasonably satisfactory to the Trustee, to the effect that holders of the notes shall not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and shall be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; (v) The holders shall have a perfected security interest under applicable law in the cash or U.S. government obligations deposited pursuant to subsection (d) above; 10 (vi) The Company shall have delivered to the Trustee an opinion of counsel, in form and substance reasonably satisfactory to the Trustee, to the effect that, after the passage of 123 days following the deposit, the trust funds shall not be subject to any applicable bankruptcy, insolvency, reorganization or similar law affecting creditors' rights generally; (vii) Such defeasance shall not cause the Trustee to have a conflicting interest with respect to any securities of the Company; and (viii) The Company shall have delivered to the Trustee an officers' certificate and an opinion of counsel in form and substance reasonably satisfactory to the Trustee, each stating that all conditions precedent specified herein relating to the defeasance contemplated by this Section have been complied with; provided, that no deposit under clause (i) shall be effective to terminate the obligations of the Company under the notes or this Indenture prior to the passage of 123 days following such deposit. (II) In addition to the Company's rights under the Section above, the Company may terminate all of its obligations under the Indenture when: (a) (i) all notes theretofore authenticated and delivered (other than Notes that have been destroyed, lost or stolen and that have been replaced, converted or paid as have been delivered to the Trustee for cancellation; and (ii) the Company has paid or caused to be paid all other sums payable hereunder and under the notes by the Company; or (b) (i) the notes not previously delivered to the Trustee for cancellation shall have become due and payable or are by their terms to become due and payable within one year or are to be called for redemption under arrangements satisfactory to the Trustee upon delivery of notice, (ii) the Company shall have irrevocably deposited with the Trustee, as trust funds, cash, in an amount sufficient to pay principal of premium, if any, and interest on the outstanding notes, to maturity or redemption, as the case may be, (iii) such deposit shall not result in a breach or violation of, or constitute a default under, any agreement or instrument pursuant to which the Company is a party or by which it or its property is bound and (iv) the Company has delivered to the Trustee an officers' certificate and an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee, each stating that all conditions related to such defeasance have been complied with. After (i) the conditions of Section (I) or (II) above have been satisfied, (ii) the Company has paid or caused to be paid all other sums payable hereunder by the Company and (iii) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent 11 referred to in clause (i) above relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee upon written request shall acknowledge in writing the discharge of the Company's obligations under the Indenture except for those surviving obligations. (E) Evidence to be Furnished to the Trustee as to Compliance with Conditions and Covenants. Pursuant to the Indenture, The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an officers' certificate stating whether or not to the best knowledge of the signers thereof the Company is in compliance (without regard to periods of grace or notice requirements) with all conditions and covenants under the Indenture, and if the Company shall not be in compliance, specifying such non-compliance and the nature and status thereof of which such signer may have knowledge. The Company shall file with the Trustee written notice of the occurrence of any default or Event of Default within ten days of its becoming aware of any such default or Event of Default. 9. Other obligors. None. ---------------------------------------------- Contents of application for qualification. This application for qualification comprises: (a) Pages numbered 1 to 12, consecutively; (b) The statement of eligibility and qualification of Wells Fargo Bank Minnesota, N.A., as trustee, on Form T-1 under the indenture to be qualified; and (c) The following attached exhibits in addition to those filed as a part of the statement of eligibility and qualification of the trustee. Exhibit T3A.1 Restated and Amended Certificate of Incorporation of Penn Treaty American Corporation. (1) Exhibit T3A.2 Amendment to Restated and Amended Certificate of Incorporation of Penn Treaty American Corporation.(2) Exhibit T3A.3 2nd Amendment to Restated and Amended Certificate of Incorporation of Penn Treaty American Corporation.* Exhibit T3A.4 Statement with Respect to Shares, amending Restated and Amended Certificate of Incorporation of Penn Treaty American Corporation, as amended.* Exhibit T3B Amended and Restated By-laws of Penn Treaty American Corporation, as amended. (3) 12 Exhibit T3C Indenture to be entered into between Penn Treaty American Corporation and Wells Fargo Bank Minnesota, N.A., as trustee. (4) Exhibit T3D Not applicable. Exhibit T3E.1 Offering Circular dated August 28, 2002. (4) Exhibit T3E.2 Letter of Transmittal dated August 28, 2002. (4) Exhibit T3E.3 Letter to Clients dated August 28, 2002. (4) Exhibit T3E.4 Letter to Broker-Dealers dated August 28, 2002. (4) Exhibit T3E.5 Notice of Guaranteed Delivery dated August 28, 2002. (4) Exhibit 3F A cross reference sheet showing the location in the Indenture of the provisions inserted therein pursuant to Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939, as amended.*
* Filed herewith (1) Incorporated by reference to Exhibit 3.1 of Penn Treaty American Corporation's Registration Statement on Form S-1 (File No. 033-92690). (2) Incorporated by reference to Exhibit 3.1(b) to Penn Treaty American Corporation's Registration Statement on Form S-3 (File No. 333-22125). (3) Incorporated by reference to Exhibit 3.2 to Penn Treaty American Corporation's Registration Statement on Form S-3 (File No. 333-22125). (4) Incorporated by reference to Penn Treaty American Corporation's Schedule TO filed on August 28, 2002. 13 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the applicant, PENN TREATY AMERICAN CORPORATION., a corporation organized and existing under the laws of Pennsylvania, has duly caused this amendment No. 1 to the application to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in Allentown, and the Commonwealth of Pennsylvania, on the 5th day of September, 2002. (SEAL) PENN TREATY AMERICAN CORPORATION. By /s/ William W. Hunt -------------------------------- William W. Hunt President and Chief Operating Officer Attest: By: /s/ Cameron B. Waite -------------------------------- Cameron B. Waite Executive Vice President and Chief Financial Officer ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ----------------------------- _____ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2) WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) A U.S. NATIONAL BANKING ASSOCIATION 41-1592157 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national Identification No.) bank) SIXTH STREET AND MARQUETTE AVENUE Minneapolis, Minnesota 55479 (Address of principal executive offices) (Zip code) Stanley S. Stroup, General Counsel WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (612) 667-1234 (Name, address and telephone number of agent for service) ----------------------------- PENN TREATY AMERICAN CORPORATION (Exact name of obligor as specified in its charter) PENNSYLVANIA 23-1664166 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3440 LEHIGH STREET ALLENTOWN, PA 18103 (Address of principal executive offices) (Zip code) ----------------------------- UNSECURED DEBT SECURITIES (Title of the indenture securities) ================================================================================ Item 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Treasury Department Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. The Board of Governors of the Federal Reserve System Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 15. FOREIGN TRUSTEE. Not applicable. Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this Statement of Eligibility. Wells Fargo Bank incorporates by reference into this Form T-1 the exhibits attached hereto. Exhibit 1. a. A copy of the Articles of Association of the trustee now in effect.** Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.* b. A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of The Northwestern National Bank of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the surviving entity being titled Northwestern National Bank and Trust Company of Minneapolis.* c. A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.* d. A copy of the letter dated May 12, 1983 from the Regional Counsel, Comptroller of the Currency, acknowledging receipt of notice of name change effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest Bank Minneapolis, National Association.* e. A copy of the letter dated January 4, 1988 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis, National Association with various other banks under the title of "Norwest Bank Minnesota, National Association."* f. A copy of the letter dated July 10, 2000 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation effective July 8, 2000 of Norwest Bank Minnesota, National Association with various other banks under the title of "Wells Fargo Bank Minnesota, National Association."*** Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust powers issued January 2, 1934, by the Federal Reserve Board.* Exhibit 4. Copy of By-laws of the trustee as now in effect.** Exhibit 5. Not applicable. Exhibit 6. The consent of the trustee required by Section 321(b) of the Act. Exhibit 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is filed in paper format pursuant to Form SE, filed with the Securities and Exchange Commission on or about August 26, 2002. Exhibit 8. Not applicable. Exhibit 9. Not applicable. * Incorporated by reference to exhibit number 25 filed with registration statement number 33-66026. ** Incorporated by reference to the exhibit of the same number to the trustee's Form T-1 filed as exhibit 99.T3G to the Form T-3 dated July 13, 2000 of GB Property Funding Corp. file number 022-22473. *** Incorporated by reference to exhibit number 2f to the trustee's Form T-1 filed as exhibit 25.1 to the Current Report Form 8-K dated September 8, 2000 of NRG Energy Inc. file number 001-15891. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 26th day of August 2002. WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Michael T. Lechner ------------------------------------ Michael T. Lechner Assistant Vice President EXHIBIT 6 August 26, 2002 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Michael T. Lechner ------------------------------------ Michael T. Lechner Assistant Vice President EX-3.A3 3 a2088183zex-3_a3.txt EXHIBIT T3A-3 EXHIBIT T3A.3 Microfilm Number: 200142-1366 Filed with the Department of State on June 1, 2001 Entity Number: 1145993 /S/ KIM PIZZINGRILLI ----------------------------- SECRETARY OF THE COMMONWEALTH ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION DSCB:15-1915 (Rev 90) In compliance with the requirements of 15 Pa.C.S. Section 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The NAME of the corporation is: PENN TREATY AMERICAN CORPORATION 2. The (a) ADDRESS of this corporation's current registered office in this Commonwealth or (b) NAME of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) 3440 LEHIGH STREET ALLENTOWN PA 18103 LEHIGH ------------------ --------- ----- ----- ------ Number and Street City State Zip County (b) C/O: ---------------------------------------------- ------ Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The STATUTE by or under which it was incorporated is: PHILADELPHIA BUSINESS CORPORATION LAW, ACT OF MAY 5, 1933, P.L. 364, AS AMENDED 4. The DATE of its incorporation is: MARCH 13, 1965 5. (CHECK, AND IF APPROPRIATE COMPLETE, ONE OF THE FOLLOWING): X The amendment shall be effective upon filing these Articles of Amendment in the Department of State. The amendment shall be effective on: at ------ --------- Date Hour 6. (CHECK ONE OF THE FOLLOWING): X The amendment was adopted by the shareholders (or members) pursuant to 15 Pa.C.S. Section 1914(a) and (b). The amendment was adopted by the board of directors pursuant to 15 Pa.C.S. Section 1914(c). 7. (CHECK, AND IF APPROPRIATE COMPLETE, ONE OF THE FOLLOWING): X The amendment adopted by the corporation, set forth in full, is as follows: The first paragraph of Article Fifth shall be amended and restated in its entirety as follows: "Fifth: The aggregate number of shares which the Corporation shall have authority to issue is 40,000,000 shares of common stock, par value $.10 per share ("Common Stock") ; and 5,000,000 shares of preferred stock, par value $1.00 per share ("Preferred Stock")". The amendment adopted by the corporation is set forth in full in Exhibit A attached hereto and made a part hereof. 8. (CHECK IF THE AMENDMENT RESTATES THE ARTICLES): The restated Articles of Incorporation supersede the original Articles and all amendments thereto. IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 30th day of May, 2001. Penn Treaty Corporation ------------------------------- (Name of Corporation) BY: /S/ A.J. CARDEN ----------------------------- A.J. Carden (Signature) Title: EXECUTIVE VICE PRESIDENT EX-3.A4 4 a2088183zex-3_a4.txt EXHIBIT T3A-4 EXHIBIT T3A.4 Microfilm Number:2002011-553 PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU Entity Number Statement with Respect to Shares 145993 Domestic Business Corporation (15 Pa.C.S. Section 1522) DOCUMENT WILL BE RETURNED TO THE Name NAME AND ADDRESS YOU ENTER TO ESQUIRE ASSIST THE LEFT. ---------------------------------------- Address COUNTER PICKUP ---------------------------------------- City State Zip Code ---------------------------------------- Fee: $52 Filed in the Department of State on February 14, 2002 ----------------- /s/ C. Michael Weaver -------------------------------------------------- Acting Secretary of the Commonwealth In compliance with the requirements of 15 Pa.C.S. Section 1522(b) (relating to statement with respect to shares), the undersigned corporation, desiring to state the designation and voting rights, preferences, limitations, and special rights, if any, of a class or series of its shares, hereby states that: 1. The name of the corporation is: Penn Treaty American Corporation 2. CHECK AND COMPLETE ONE OF THE FOLLOWING: The resolution amending the Articles under 15 Pa.C.S. Section 1522(b) (relating to divisions and determinations by the board), set forth in full, is as follows: X The resolution amending the Articles under 15 Pa.C.S. Section 1522(b) is set forth in full in Exhibit A attached hereto and made a part hereof. 3. The aggregate number of shares of such class or series established and designated by (a) such resolution, (b) all prior statements, if any, filed under 15 Pa.C.S. Section 1522 or corresponding provisions of prior law with respect thereto, and (c) any other provision of the Articles is 5,000,000 shares. 4. The resolution was adopted by the Board of Directors or an authorized committee thereon on: February 12, 2002 5. CHECK, AND IF APPROPRIATE COMPLETE, ONE OF THE FOLLOWING: X The resolution shall be effective upon the filing of this statement with respect to shares in the Department of State. The resolution shall be effective on: at . -------------- ---------------- Date Hour IN TESTIMONY WHEREOF, the undersigned corporation has caused this statement to be signed by a duly authorized officer thereof this 14th day of February, 2002. Penn Treaty American Corporation -------------------------------- Name of Corporation /s/ Jane M. Bagley ------------------ Signature Assistant Secretary and Corporate Counsel ----------------------------------------- Title EXHIBIT A RESOLUTION OF THE BOARD OF DIRECTORS OF PENN TREATY AMERICAN CORPORATION RESOLVED, that, pursuant to the authority expressly vested in the Board of Directors of the Company by Article Fifth of the Company's Articles, the Board of Directors hereby fixes and determines the designations, preferences, qualifications, limitations, restrictions and special or relative rights of 5,000,000 shares of its Preferred Stock, par value $1.00 per share, by establishing and designating the Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock, Series A-3 Convertible Preferred Stock and Series A-4 Convertible Preferred Stock as more fully set forth on Exhibit I attached hereto. EXHIBIT I SERIES A-1 CONVERTIBLE PREFERRED STOCK, SERIES A-2 CONVERTIBLE PREFERRED STOCK, SERIES A-3 CONVERTIBLE PREFERRED STOCK, AND SERIES A-4 CONVERTIBLE PREFERRED STOCK OF PENN TREATY AMERICAN CORPORATION. Of the 5,000,000 shares of Preferred Stock which Penn Treaty American Corporation, a Pennsylvania corporation (the "Corporation") has the authority to issue, 806,968 shares are designated "Series A-1 Convertible Preferred Stock," 459,238 shares are designated "Series A-2 Convertible Preferred Stock," 371,444 shares are designated "Series A-3 Convertible Preferred Stock" and 3,362,350 shares are designated "Series A-4 Convertible Preferred Stock." The following is a statement of the designations, preferences, limitations and relative rights in respect of the shares of Series A-1 Convertible Preferred Stock ("Series A-1 Preferred Stock"), Series A-2 Convertible Preferred Stock ("Series A-2 Preferred Stock"), Series A-3 Convertible Preferred Stock ("Series A-3 Preferred Stock") and Series A-4 Convertible Preferred Stock ("Series A-4 Preferred Stock" and, collectively with the Series A-1 Preferred Stock, Series A-2 Preferred Stock and Series A-3 Preferred Stock, the "Preferred Stock") of the Corporation: Except as provided in Sections 1, 4 and 6 hereof, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series A-3 Preferred Stock and the Series A-4 Preferred Stock are identical in all respects as a class of capital stock and possess the same designations, limitations and rights. 1. Definitions. As used herein, the following terms have the respective meanings set forth below: "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Corporation after the date hereof, other than Conversion Shares. "Affiliate" shall mean any entity controlling, controlled by or under common control with another entity. For purposes of this definition, "control" shall have the meaning presently specified for that word in Rule 405 promulgated by the SEC under the Securities Act. "Appraised Value" shall mean, in respect of any share of Common Stock on any date herein specified, the fair market value of such share of Common Stock (determined without giving effect to any discount for (i) a minority interest, or (ii) any lack of transferability or liquidity), as determined by an investment banking firm of nationally recognized standing selected by the Corporation and acceptable to the Majority Holders, on the basis of a sale between a willing seller and buyer, neither acting under any compulsion. If the investment banking firm selected by the Corporation is not acceptable to the Majority Holders and the Corporation and the Majority Holders cannot agree on a mutually acceptable investment banking firm, then the Majority Holders and the Corporation shall each choose one such investment banking firm and the respective chosen firms shall agree on another investment banking firm which shall make the determination. The Corporation shall retain, at its sole cost, such investment banking firm or firms as may be necessary for the determination of Appraised Value. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of New York. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock, par value $.10 per share, of the Corporation as constituted on the date hereof, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Corporation of any other class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is also not preferred as to dividends or assets over any other class of stock of the Corporation and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Common Stock of the Corporation in the circumstances contemplated by Section 6(d)(v). "Corporation" shall have the meaning set forth in the preamble. "Conversion Shares" shall mean the shares of Common Stock issued or issuable upon conversion of shares of Preferred Stock. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, Additional Shares of Common Stock, either immediately or upon the occurrence of a specified date or event, but shall not include the Preferred Stock or the Warrants. "Fair Market Value" shall mean, as of any date, the value of a share of Common Stock determined as follows: (i) if such stock is publicly traded and is then listed on a national securities market or exchange, its closing price on the date of determination on the principal national securities exchange on which the stock is listed or admitted to trading as reported in The Wall Street Journal; (ii) if such stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal; (iii) if such stock is publicly traded but is not listed or admitted to trading on a national securities exchange nor quoted on the Nasdaq National Market, the average of the closing bid and asked prices on the date of determination as reported by The Wall Street Journal (or, if not so reported, as otherwise reported by any newspaper or other source as the Board of Directors of the Corporation may determine in good faith); or (iv) if none of the foregoing is applicable, the Appraised Value. "Liquidation Preference" shall mean an amount equal to $12.00 per share with respect to the Series A-1 Preferred Stock, $24.00 per share with respect to the Series A-2 Preferred Stock, $36.00 per share with respect to the Series A-3 Preferred Stock and $6.00 per share with respect to the Series A-4 Preferred Stock (subject to equitable adjustment for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event affecting the Preferred Stock). "Majority Holders" shall mean the holders of Warrant Securities exercisable for, convertible into or representing, as the case may be, as of the date of any such determination, in excess of fifty percent (50%) of the aggregate number of shares of Common Stock theretofore obtained or thereafter obtainable through the exercise or conversion of Warrant Securities. "Other Property" shall have the meaning set forth in Section 6(d)(v). "Permitted Issuances" shall mean the (a) the issuance of stock options to employees of the Corporation or any Subsidiary of the Corporation pursuant to a stock option plan approved by the stockholders of the Corporation authorizing the issuance of not more than two million (2,000,000) shares of Common Stock, or (b) issuance of shares of Common Stock upon (i) conversion of the Preferred Stock, or (ii) exercise of the stock options referred to in clause (a) of this definition. "Person" shall mean any individual, corporation, sole proprietorship, partnership (general or limited), limited liability company, joint venture, trust, association, institution, or other legal entity or organization. "Series" shall mean the Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock or Series A-4 Preferred Stock, as applicable. "Significant Subsidiary" shall mean a subsidiary of the Corporation which would constitute a "significant subsidiary" within the meaning of Rule 1-02 of Regulation S-X promulgated by the United States Securities and Exchange Commission as in effect on the date of filing hereof. "Stated Value" shall mean an amount equal to $12.00 for each share of Series A-1 Preferred Stock, $24.00 for each share of Series A-2 Preferred Stock, $36.00 for each share of Series A-3 Preferred Stock and $6.00 for each share of Series A-4 Preferred Stock (subject to equitable adjustment for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event affecting the Preferred Stock. "Warrants" shall mean the Warrants to purchase shares of Preferred Stock issued on or about the date of filing of this statement and all warrants issued upon transfer, division or combination of, or in substitution for, such Warrants. "Warrant Securities" shall mean the Warrants, the Preferred Stock and the Conversion Shares, collectively. 2. Dividends. If the Board of Directors of the Corporation declares a dividend payable upon the then outstanding shares of Common Stock (other than a stock dividend on the Common Stock distributed solely in the form of additional shares of Common Stock), the holders of the Preferred Stock shall be entitled to the amount of dividends per share of Preferred Stock as would be declared payable on the largest number of whole and fractional shares of Common Stock into which each share of Preferred Stock held by each holder thereof could be converted pursuant to the provisions of Section 6 hereof, such number determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend and without regard to any restrictions on issuance of or payment of dividends on fractional shares. 3. Voting Rights. Except as otherwise provided herein or by law, the holders of Preferred Stock shall have no right to vote in any election of directors or on any other matter. 4. Rights of Liquidation. (a) General. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or in the event of its insolvency, before any distribution or payment is made to any holders of Common Stock or any other class or series of capital stock of the Corporation designated to be junior to the Preferred Stock in liquidation preference, and subject to the liquidation rights and preferences of any class or series of preferred stock designated in the future to be senior to, or on a parity with, the Preferred Stock with respect to liquidation preference, the holders of each share of Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Corporation's capital stock of all classes, whether such assets are capital, surplus or earnings, the greater of (i) the Liquidation Preference, or (ii) such amount per share of Preferred Stock as would have been payable had each share of Preferred Stock which is convertible into Common Stock been so converted immediately prior to such liquidation, dissolution or winding up. (b) Distributions Pro Rata. If the assets of the Corporation available for distribution to the holders of the Preferred Stock shall not be sufficient to make in full the payments required by Section 4(a) hereof, such assets shall be distributed ratably among the holders of the Preferred Stock based upon the aggregate Liquidation Preferences of the shares of Preferred Stock held by each such holder. (c) Treatment of Certain Transactions. A merger or consolidation of the Corporation with or into another corporation or other entity, any other corporate reorganization in which the shareholders of the Corporation immediately prior to such merger, consolidation or reorganization own less than fifty percent (50%) of the Corporation's voting power immediately after such merger, consolidation or reorganization, any transaction or series of transactions in which in excess of fifty percent (50%) of the Corporation's voting power is transferred, or any sale, transfer or other disposition of all or substantially all of the property, assets or business of the Corporation shall, at the option of holders representing a majority of the Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock and Series A-4 Preferred Stock be deemed a Liquidation with respect to such Series of Preferred Stock. The provisions of this Section 4(c) shall not apply to (i) any reorganization, merger or consolidation involving only a change in the state of incorporation of the Corporation, or (ii) a merger of the Corporation with or into a wholly-owned subsidiary of the Corporation that is incorporated in the United States of America. 5. Actions Requiring the Consent of the Holders of the Preferred Stock. The consent of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the shares of each of the Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock and Series A-4 Preferred Stock at the time outstanding, given in person or by proxy, either in writing without a meeting or by vote at a meeting called for such purpose, acting as a separate class, shall be necessary for effecting or validating any of the following transactions: (a) Any amendment, alteration or waiver of any provision of the Corporation's Articles or By-laws (including any filing of a statement with respect to shares) which adversely affects any of the rights, preferences or privileges of any of the holders of the applicable Series in a manner disproportionate to the rights, preferences or privileges of other holders of the Corporation's securities; (b) Any increase or decrease (other than by conversion) in the authorized number of shares of Common Stock or Preferred Stock; (c) Any authorization, designation or issuance, whether by reclassification or otherwise, of any new class or series of stock or any other securities convertible into equity securities of the Corporation ranking on a parity with or senior to the Preferred Stock in right of redemption, liquidation preference, voting or dividends or any increase in the authorized or designated number of any such new class or series; (d) Any redemption or repurchase of Common Stock (except for acquisitions of Common Stock by the Corporation pursuant to agreements which permit the Corporation to repurchase such shares upon termination of services to the Corporation or in exercise of the Corporation's right of first refusal upon a proposed transfer); (e) Any change in the authorized number of directors of the Corporation; (f) Any liquidation or dissolution of the Corporation; (g) Any merger or consolidation of the Corporation or a Significant Subsidiary with or into another corporation or other entity or any other corporate reorganization in which the shareholders of the Corporation immediately prior to such merger, consolidation or reorganization own less than fifty percent (50%) of the Corporation's voting power immediately after such merger, consolidation or reorganization, or any transaction or series of transactions in which in excess of fifty percent (50%) of the Corporation's voting power is transferred; (h) Any sale, transfer or other disposition of all or substantially all of the property, assets or business of the Corporation; and (i) Any sale, transfer or other disposition of all or substantially all of the stock or assets of any Significant Subsidiary of the Corporation. 6. Conversion. (a) Right To Convert. A holder of record of any share or shares of Preferred Stock, other than Centre Strategic Investment Holdings, a Bermuda corporation, or any Affiliate thereof, shall have the right at any time, at such holder's option, to convert, without the payment of any additional consideration, each share of Preferred Stock held by such holder into that number of fully paid and nonassessable shares of Common Stock as is determined by dividing (i) the Stated Value for such share of Preferred Stock by (ii) the applicable Conversion Value (as defined in Section 6(d) hereof) then in effect for the Preferred Stock. In the event that any Preferred Stock is held by Centre Strategic Investment Holdings, a Bermuda corporation, or any Affiliate thereof, such holder shall have no right to convert the shares of Preferred Stock so held. (b) Mechanics of Conversion. If the holder of shares of Preferred Stock desires to exercise such right of conversion, such holder must give written notice to the Corporation (the "Conversion Notice") of the election by such holder to convert a stated number of shares of Preferred Stock (the "Conversion Shares") into shares of Common Stock on the date specified in the Conversion Notice (which date shall not be earlier than three business days after the date on which the Corporation receives the Conversion Notice (the "Conversion Date")), and by surrender of the certificate or certificates representing such Conversion Shares. The Conversion Notice shall also contain a statement of the name or names (with addresses) in which the certificate or certificates for Common Stock shall be issued. Promptly after the Conversion Date, receipt of the Conversion Notice and the surrender of the Conversion Shares, the Corporation shall issue and deliver, or cause to be delivered, to the holder of the Conversion Shares or such holder's nominee or nominees, a certificate or certificates for the number of shares of Common Stock issuable upon the conversion of such Conversion Shares. Such conversion shall be deemed to have been effected as of the close of business on the Conversion Date, and the person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the holder or holders of record of such shares of Common Stock as of the close of business on such date. (c) Common Stock Reserved. The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock, solely for issuance upon the conversion of shares of Preferred Stock as herein provided, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all of the shares of Preferred Stock at the time outstanding, free from preemptive rights or any other rights of persons other than the respective holders of the Preferred Stock (taking into account the adjustments provided herein) and take all action that may be necessary or appropriate (including without limitation exercising its best efforts to obtain shareholder approval) to increase the authorized number of shares of Common Stock if necessary to permit such conversion. (d) Conversion Value; Adjustments. The initial Conversion Value shall be $4.00 for the Series A-1 Preferred Stock, $8.00 for the Series A-2 Preferred Stock, $12.00 for the Series A-3 Preferred Stock and $2.00 for the Series A-4 Preferred Stock. The Conversion Value is subject to adjustment in each case, in accordance with the provisions in this Section 6(d). Such respective Conversion Values in effect from time to time, as adjusted pursuant to this Section 6(d), are referred to herein as the "Conversion Value" for the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series A-3 Preferred Stock or the Series A-4 Preferred Stock, as applicable. All of the remaining provisions of this Section 6(d) shall apply separately to the respective Conversion Values for each of the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series A-3 Preferred Stock and the Series A-4 Preferred Stock in effect from time to time. (i) Stock Dividends, Subdivisions and Combinations. If at any time the Corporation shall: (1) take a record of the holders of Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Additional Shares of Common Stock, (2) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (3) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (A) the number of shares of Common Stock into which each share of Preferred Stock is convertible immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which such share of Preferred Stock is convertible immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (B) the Conversion Value for each such share of Preferred Stock shall be adjusted to equal (I) the then Conversion Value for such share of Preferred Stock multiplied by the number of Conversion Shares into which such share of Preferred Stock is convertible immediately prior to the adjustment, divided by (II) the number of Conversion Shares for which such share of Preferred Stock is convertible immediately after such adjustment. (ii) Certain Other Distributions. If at any time the Corporation shall take a record of the holders of Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (1) any evidences of its indebtedness, any shares of its stock or any other securities or property (other than cash dividends legally payable out of earnings or earned surplus or Additional Shares of Common Stock); or (2) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of its stock or any other securities or property of any nature whatsoever (other than cash dividends legally payable out of earnings or earned surplus or Additional Shares of Common Stock), then (A) the number of shares of Common Stock into which each share of Preferred Stock is convertible shall be adjusted to equal the product of the number of shares of Common Stock into which each such share of Preferred Stock is convertible immediately prior to such adjustment by a fraction (I) the numerator of which shall be the Fair Market Value per share of Common Stock at the date of taking such record, and (II) the denominator of which shall be (x) such Fair Market Value per share of Common Stock, minus (y) the amount allocable to one share of Common Stock of the fair value (as determined in good faith by the Board of Directors of the Corporation and supported by an opinion from an investment banking firm of recognized national standing acceptable to the Majority Holders) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (B) the Conversion Value of each share of Preferred Stock shall be adjusted to equal (I) the then Conversion Value multiplied by the number of shares of Common Stock into which such share of Preferred Stock is convertible immediately prior to the adjustment divided by (II) the number of shares of Common Stock into which such share of Preferred Stock is convertible immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Corporation to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 6(d)(ii) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 6(d)(i). (iii) Issuance of Additional Shares of Common Stock. (1) If at any time prior to the Commutation Date, as such term is defined in that certain Reinsurance Agreement among Centre Solutions (Bermuda) Limited and the operating subsidiaries of the Corporation, Penn Treaty Network America Insurance Company and American Network Insurance Company, with an effective date of December 31, 2001, the Corporation shall issue or sell any Additional Shares of Common Stock, other than Permitted Issuances, at a price per share less than the greater of (A) the Conversion Value then in effect and (B) the Fair Market Value of a share of Common Stock into which a share of Preferred Stock is then convertible, then the Conversion Value shall be reduced to a price equal to the lower of (x) a price determined by dividing (I) an amount equal to the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance or sale multiplied by the then Conversion Value, plus (2) the aggregate consideration received by the Corporation upon such issuance or sale, by (II) the total number of shares of Common Stock outstanding immediately after such issuance or sale, and (y) a price determined by multiplying the Conversion Value then in effect by a fraction, the numerator of which is (I) the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the Fair Market Value immediately prior to such issue or sale plus (2) the aggregate consideration, if any, received by the Company upon such issue or sale, divided by (II) the total number of shares of Common Stock outstanding immediately after such issue or sale, and the denominator of which shall be the Fair Market Value immediately prior to such issuance or sale. (2) The provisions of Section 6(d)(iii) (1) shall not apply to any issuance of Additional Shares of Common Stock for which an adjustment is provided under Section 6(d)(i) or (ii). No adjustment of the Warrant Price shall be made under Section 6(d)(iii) upon the issuance of any Additional Shares of Common Stock which are issued pursuant to the exercise of any warrants, options or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any Convertible Securities, if any such adjustment shall previously have been made upon the issuance of such warrants, options or other rights or upon the issuance of such Convertible Securities (or upon the issuance of any warrant or other rights therefor) pursuant to Section 6(d)(iv). (iv) Issuance of Convertible Securities, Warrants or Other Rights. If at any time the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which the Corporation is the surviving corporation) issue or sell, any Convertible Securities, warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities, other than Permitted Issuances, whether or not the rights to exchange or convert thereunder are immediately exercisable, if the consideration per share of Common Stock receivable upon exercise of such warrants or other rights or upon conversion or exchange of such Convertible Securities shall be less than the greater of the Conversion Value in effect immediately prior to the time of such issue or sale or the Fair Market Value immediately prior to such issue or sale, then the Conversion Value shall be adjusted as provided in Section 6(d)(iii) on the basis that (i) the maximum number of Additional Shares of Common Stock issuable pursuant to all such warrants or other rights or necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to have been issued and outstanding, (ii) the price per share of such Additional Shares of Common Stock shall be deemed to be the lowest possible price per share at which such Additional Shares of Common Stock are available to such holders, and (iii) the Corporation shall have received all of the consideration payable therefor as of the date of the actual issuance of such warrants or other rights or such Convertible Securities. No further adjustments of the Conversion Value shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such warrants or other rights or upon the actual issue of such Common Stock upon such conversion or exchange of such Convertible Securities, provided that, where no such adjustment has been made at the time of issuance, an adjustment shall be made at the time of the conversion of any such Convertible Securities or at the time of the exercise of any such warrants or other rights if such an adjustment is required by Section 6(d)(iii). (v) Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Corporation shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Corporation is not the surviving corporation), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another Person and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring Person ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Corporation, then each holder of Preferred Stock shall have the right thereafter to receive, upon conversion of the Preferred Stock, the number of shares of common stock of the successor or acquiring corporation and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock into which a share of Preferred Stock is convertible immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring Person shall expressly assume the due and punctual observance and performance of each and every covenant and condition of the terms of the Preferred Stock to be performed and observed by the Corporation and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board of Directors of the Corporation) in order to provide for adjustments of shares of the Common Stock into which the Preferred Stock is convertible which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 6(d). The foregoing provisions of this Section 6(d)(v) shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. (vi) Other Action Affecting Common Stock. In case at any time or from time to time the Corporation shall take any action in respect of its Common Stock, other than the payment of cash dividends legally payable out of earnings or earned surplus or any other action described in this Section 6(d), then the number of shares of Common Stock or other stock into which a share of Preferred Stock is convertible and/or the Conversion Value shall be adjusted in such manner as may be equitable in the circumstances. (vii) Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Convertible Securities or any warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities shall be issued for cash consideration, the consideration received by the Corporation therefor shall be the amount of the cash received by the Corporation therefor, or, if such Additional Shares of Common Stock or Convertible Securities are offered by the Corporation for subscription, the subscription price, or, if such Additional Shares of Common Stock or Convertible Securities are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends, but not subtracting any compensation, discounts or expenses paid or incurred by the Corporation for and in the underwriting of, or otherwise in connection with, the issuance thereof). To the extent that such issuance shall be for a consideration other than cash, or in case any Additional Shares of Common Stock or any Convertible Securities or any warrants or other rights to subscribe for or purchase such Additional Shares of Common Stock or Convertible Securities shall be issued in connection with any merger in which the Corporation issues any securities, then the amount of such consideration shall be deemed to be the fair value of such consideration at the time of such issuance as determined in good faith by the Board of Directors of the Corporation or, if so requested by the Majority Holders, by a nationally recognized independent financial expert selected by the Majority Holders. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration, if any, received by the Corporation for issuing such warrants or other rights plus the additional consideration payable to the Corporation upon exercise of such warrants or other rights. The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Convertible Securities shall be the consideration received by the Corporation for issuing warrants or other rights to subscribe for or purchase such Convertible Securities, plus the consideration paid or payable to the Corporation in respect of the subscription for or purchase of such Convertible Securities, plus the additional consideration, if any, payable to the Corporation upon the exercise of the right of conversion or exchange contained in such Convertible Securities. In case of the issuance at any time of any Additional Shares of Common Stock or Convertible Securities in payment or satisfaction of any dividends upon any class of stock other than Common Stock, the Corporation shall be deemed to have received for such Additional Shares of Common Stock or Convertible Securities a consideration equal to the amount of such dividend so paid or satisfied. (viii) Readjustment of Conversion Value. Upon the expiration of the right to convert, exchange or exercise any Convertible Securities or any warrant or other right, the issuance of which effected an adjustment in the Conversion Value, if any such Convertible Securities or any warrant or other right shall not have been converted, exercised or exchanged, the number of shares of Common Stock deemed to be issued and outstanding by reason of the fact that they were issuable upon such conversion, exchange or exercise shall no longer be computed as set forth above, and the Conversion Value shall forthwith be readjusted and thereafter be the price which it would have been (but reflecting any other adjustments in the Conversion Value made pursuant to the provisions of this Section 6(d) after the issuance of such Convertible Securities, warrants or other rights) had the adjustment of the Conversion Value been made in accordance with the issuance or sale of the number of Additional Shares of Common actually issued upon conversion, exchange or issuance of such Convertible Securities, warrants or other rights and thereupon only the number of Additional Shares of Common actually so issued shall be deemed to have been issued and only the consideration actually received by the Corporation shall be deemed to have been received by the Corporation. (ix) Other Provisions. For the purposes of this Section 6(d), the following provisions shall also be applicable: (1) All calculations under this Section 6(d) shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (2) No adjustment in the Conversion Value shall be made if such adjustment would result in a change in the Conversion Value of less than $.01, provided that any such adjustments not made shall be carried forward and taken into account at the time of any subsequent adjustment in the Conversion Value. (3) The number of shares of Common Stock at any time outstanding shall not include any shares thereof then directly or indirectly owned or held by or for the account of the Corporation or any Subsidiary. (4) Whenever the Board of Directors of the Corporation shall be required to make any determination under this Section 6(d), such determination may be challenged in good faith by a majority of the holders of the shares of any Series, and any dispute shall be resolved by an investment banking firm of recognized national standing selected by the Corporation and acceptable to such holders. (x) Construction with the Warrants. The provisions of this Section 6(d) shall be construed with due regard for the fact that the Preferred Stock is issuable upon the exercise of the Warrants, which contain adjustment provisions similar to this Section 6(d). Such provisions and the provisions of Section 6(d) shall be construed so that an event giving rise to an adjustment under the terms of the Warrants and the Preferred Stock shall result in an adjustment under either the terms of the Warrants or the terms of the Preferred Stock, but in no event shall an adjustment arising out of the same event be made with respect to a specific share of Preferred Stock and the share of Preferred Stock issuable upon the exercise of the Warrant related thereto. (e) Notices to Holders of Preferred Stock. (i) Notice of Adjustments. Whenever the Conversion Value or the number of shares of Common Stock into which a share of Preferred Stock is convertible shall be adjusted pursuant to Section 6(d), the Corporation shall forthwith prepare a certificate to be executed by the chief financial officer of the Corporation setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock into which a share of Preferred Stock is convertible and (if such adjustment was made pursuant to Section 6(d)(v) or (vi)) describing the number and kind of any other shares of stock or Other Property into which a share of Preferred Stock is convertible, and any change in the purchase price or prices thereof, after giving effect to such adjustment or change. The Corporation shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 9. The Corporation shall keep at its principal office copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any holder of Preferred Stock or any prospective purchaser of Preferred Stock designated by a holder thereof. (ii) Notice of Certain Corporate Action. In case the Corporation shall propose to (A) pay any dividend payable in stock of any class to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock, (B) offer to the holders of its Common Stock rights to subscribe for or to purchase any Convertible Securities or Additional Shares of Common Stock or shares of stock of any class or any other securities, rights or options, (C) effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision or combination of outstanding shares of Common Stock), (D) effect any capital reorganization or recapitalization, (E) effect any consolidation, merger or sale, transfer or other disposition of all or substantially all its property, assets or business, or (F) effect the liquidation, dissolution or winding up of the Corporation, then in each such case, the Corporation shall give to each holder of Preferred Stock, in accordance with Section 9, a notice of such proposed action, which shall specify the date on which a record is to be taken for the purposes of such stock dividend, distribution or rights, or the date on which such reclassification, reorganization, recapitalization, consolidation, merger, sale, transfer, disposition, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, as well as the record date for any vote on any such action and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Common Stock and the number and kind of any other shares of stock into which the Preferred Stock may become convertible, after giving effect to any adjustment which will be required as a result of such action. Such notice shall be so given in the case of any action covered by clause (A) or (B) above at least twenty (20) days prior to the record date for determining holders of the Common Stock for purposes of such action and, in the case of any other such action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be earlier. 7. No Impairment. The Corporation shall not by any action including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Preferred Stock, but will at all times in good faith carry out of all such terms and take all such actions as may be necessary or appropriate to protect the rights of holders of Preferred Stock against impairment. 8. Fractional Shares. The Corporation shall not be required to issue or cause to be issued fractional shares of Common Stock on the conversion of Preferred Stock. The number of full Conversion Shares which shall be issuable upon the conversion of any shares of Preferred Stock shall be computed on the basis of the aggregate number of Conversion Shares purchasable on conversion of the shares of Preferred Stock so presented. If any fraction of a Conversion Share would, except for the provisions of this Section 8, be issuable on the conversion of the Preferred Stock, the Corporation shall, at its option, (a) pay an amount in cash equal to the Conversion Value multiplied by such fraction or (b) round the number of Conversion Shares issuable up to the next whole number of such shares. 9. Notices. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section with respect to notices to the Corporation, or the facsimile number of a holder of Preferred Stock set forth in the records of the Corporation with respect to notices to such holder, prior to 4:30 p.m. (Eastern time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section with respect to notices to the Corporation, or the facsimile number of a holder of Preferred Stock set forth in the records of the Corporation with respect to notices to such holder, later than 4:30 p.m. (Eastern time), (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service to the delivery address specified in this Section with respect to notices to the Corporation, or the delivery address of a holder of Preferred Stock set forth in the records of the Corporation with respect to notices to such holder, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such communications to the Corporation shall be 3440 Lehigh Street, Allentown, Pennsylvania 18103-7001, Attn: Jane Bagley, facsimile number (610) 965-0668. EX-3.F 5 a2088183zex-3_f.txt EXHIBIT 3F EXHIBIT 3F CROSS-REFERENCE TABLE
Trust Indenture Act Section Indenture Section - --------------------------- ----------------- 310(a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 7.10 (b) 7.9 (c) N.A. 311(a) 7.14 (b) 7.14 (c) N.A. 312(a) 2.5(a); 5.1 (b) 16.5 (c) 16.5 313(a) 7.2 (b)(1) N.A. (b)(2) 7.2 (c) 7.2 (d) 7.2 314(a) 4.7(a); 5.2 (b) N.A. (c)(1) 16.7 (c)(2) 16.7 (c)(3) N.A. (d) N.A. (e) 16.7 (f) N.A. 315(a) 7.1(b) (b) 6.8 (c) 7.1(a) (d) 7.1(c) (e) 6.9 316(a) (last sentence) 8.4 (a)(1)(A) 6.7 (a)(1)(B) 6.7 (a)(2) N.A. (b) 6.4 (c) 9.2 317(a) 6.2 (b) 4.4 318(a) 16.10; 16.11 N.A. means Not applicable.
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