SEPARATION AGREEMENT AND GENERAL RELEASE

 
This Separation Agreement and General Release (hereinafter "Agreement") is
entered into by and among Penn Treaty Network America Insurance Company
(hereinafter "PTNA"), Penn Treaty American Corporation (hereinafter "PTAC") and
William Hunt, Jr. (hereinafter "Hunt").
 
WHEREAS, Hunt and PTNA were parties to an "Employment Agreement," dated December
19, 2007; and
 
WHEREAS, Hunt and PTAC were parties to a Change of Control Agreement dated June
18, 2001;
 
WHEREAS, PTNA is in receivership and Hunt's employment as President and Chief
Executive Officer of PTNA was terminated effective March 27, 2009; and
 
WHEREAS, a good-faith dispute has arisen between PTNA, PTAC, and Hunt regarding
what monetary and other benefits, if any, are or will be due and owing to Hunt
as a result of the termination of his employment from PTNA, and the parties
mutually desire to resolve amicably and permanently all matters relating to
Hunt's Employment Agreement and employment relationship with PTNA and the
termination thereof, as well as all issues relating to the Change of Control
Agreement between Hunt and PTAC;

 
NOW, THEREFORE, in consideration of the promises contained herein, the receipt
and adequacy of which are hereby acknowledged, the parties agree as follows:

 
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1. Termination Date. Hunt's employment with PTNA was terminated effective March
27, 2009 (the "termination date").
 
2. Severance Pay, Outplacement Assistance, and Benefits.
 
a.           Severance Pay Benefit. In consideration for Hunt's execution of
this Agreement and his fulfillment of the promises made in this Agreement, PTNA
and PTAC agree to provide Hunt with compensation for twelve (12) months beyond
his March 27, 2009 termination date from PTNA, at his final regular rate of pay.
This payment will be made as follows: within thirty (30) days of the execution
of this Agreement by Hunt: (1) PTNA will pay Hunt the gross sum of Three Hundred
Thirty-Five Thousand Nine Hundred Fourteen dollars and Thirty-Five cents
($335,914.35), less standard payroll taxes and authorized deductions, which
represents eleven (11) months' gross pay; and (2) PTAC will pay the gross sum of
Thirty Thousand, Five Hundred Thirty-Seven dollars and Sixty-Five cents
($30,537.65), less standard payroll taxes and authorized deductions, which
represents one (1) month's gross pay. These payments are subject to Hunt's
obligation to comply with his obligations as set forth in this Agreement. Should
Hunt materially violate his obligations, the General Release in section 5 below
shall remain in full force and effect. Should either PTNA or PTAC materially
violate their obligations under this Agreement, the General Release in section 5
below shall be void.
 
b.           Outplacement Assistance. In further consideration for Hunt's
execution of this Agreement and his fulfillment of the promises made in this
Agreement, PTNA will make outplacement services available to Hunt through Right
Management, at
 

 
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PTNA's cost. Hunt shall be entitled to make use of these outplacement services
for a period of six (6) months following the execution of this Agreement.
 
3. Unemployment Compensation. In further consideration for Hunt's execution of
this Agreement and his fulfillment of the promises made in this Agreement,
neither PTNA nor PTAC will contest Hunt's eligibility for unemployment
compensation benefits.
 
4. References. If PTNA receives a request for a reference concerning Hunt from
prospective, future employers, PTNA will provide only the following information:
verification of Hunt's employment dates, title, and duties, and that it is
PTNA's policy not to release any further information regarding former employees.
This obligation is conditioned on all such requests for references being made to
the PTNA Vice President of Human Resources.
 
5. General Release of Claims.
 
a.       In consideration of the benefits described in Sections 2 and 3 above,
Hunt, on his own behalf and that of his heirs, executors, administrators,
agents, representatives, and assigns, hereby forever releases PTNA, PTAC, and
their parents, subsidiaries, or related companies (collectively referred to as
the "Penn Treaty Companies"), including all of their shareholders, officers,
directors, owners, employees, staff members, agents, representatives,
predecessors, insurers, successors, and assigns (collectively referred to as
"the Released Parties"), from any and all claims, demands, suits, or causes of
action of any nature whatsoever, whether known or unknown,

 
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including, without limitation, those relating in any way to Hunt's Employment
Agreement with PTNA, his employment with PTNA and the termination thereof, and
the Change of Control Agreement with PTAC, claims under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act ("ADEA"), the Older
Workers Benefit Protection Act, the Americans with Disabilities Act, the Family
and Medical Leave Act, the Pennsylvania Human Relations Act, the Pennsylvania
Wage Payment and Collection Law, and all other federal, state or local laws, all
tort claims, all claims for breach of contract, claims for wrongful discharge,
claims for emotional distress, defamation, fraud, misrepresentation or other
personal injury, claims for unpaid compensation, claims relating to benefits,
claims for attorneys' fees and costs, and claims under any federal, state, or
local law through the date this Agreement is signed by Hunt.

 
b.           Hunt hereby waives and relinquishes each and every right or benefit
that Hunt might now have under his Employment Agreement with PTNA, the Change of
Control Agreement with PTAC, and any other prior or existing contract or
agreement with any of the Penn Treaty Companies, as well as under the common law
or any statutory or regulatory provision to the fullest extent that Hunt may
lawfully waive such right or benefit. In furtherance of such waiver and
relinquishment, Hunt expressly warrants and represents that Hunt intends that
the release given herein shall be and remain in effect as a full and complete
release, notwithstanding the discovery or existence of any additional claims or
facts predating the date of the execution of this Agreement.
 
c.           Notwithstanding any other provision of this Agreement, Hunt shall
retain the right to seek indemnification pursuant to, and in accordance with,
the provisions

 
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of PTNA's and PTAC's By-Laws and Article 10 of his Employment Agreement with
PTNA, for any claims asserted against Hunt for acts or omissions during the time
of Hunt's employment or service with PTNA or PTAC.
 
d.           In addition, for so long as PTAC continues to purchase Directors'
and Officers Liability Insurance for the directors and officers of itself and
its subsidiaries, Hunt will continue to receive the same coverage any such
policy or policies provide to the other directors and officers of PTAC and its
covered subsidiaries.
 
e.           Hunt agrees to resign, effective upon the date of his execution of
this Agreement, from the following positions: (1) Chairman of the Board of PTNA;
(2) President, CEO and Chairman of the Board of American Network Insurance
Company; (3) President, CEO and Chairman of the Board of American Network
Insurance Company of New York; and (4) Chairman of the Board of Network
Insurance Senior Health Division, Inc.
 
f.           Hunt further forever waives and relinquishes any right that Hunt
may have to reinstatement or reemployment with PTNA, agrees not to seek
employment with PTNA now or in the future, and recognizes that PTNA has no
obligation to reinstate or reemploy him.
 
g.           This release and waiver shall not be applicable to any claims which
cannot be waived by law, including, but not limited to claims relating to the
validity of enforcement of this Agreement, claims for unemployment compensation,
or Hunt's right to file a charge of discrimination with or to testify, assist or
participate in a discrimination

 
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investigation conducted by the Equal Employment Opportunity Commission ("EEOC")
or similar governmental agencies, commissions, or bodies. In this regard,
however, Hunt is waiving his right to any monetary recovery should he or any
such entity (such as the EEOC) pursue any claim on Hunt's behalf.
 
6. No Existing Claims. Hunt hereby confirms that no claim, charge, or complaint
filed by Hunt against the Released Parties presently exists before any federal,
state, or local court or administrative agency.
 
7. Return of PTNA Property. Within three (3) days of the effective date of this
Agreement, Hunt shall return to PTNA all property of any Penn Treaty Company,
including without limitation, all lists, reports, files, memoranda, records,
computer hardware, software, credit cards, door and file keys, computer access
codes or disks, instructional manuals, financial records, cell phones and any
other physical or personal property which Hunt received or prepared or helped
prepare in connection with Hunt's employment with PTNA. Hunt further agrees that
Hunt will not retain any copies, duplicates, reproductions or excerpts thereof.
 
8. Confidentiality. Hunt shall hold in strict confidence and not divulge to any
person or firm without the prior written consent of PTNA any non-public
information concerning the business operations, financial condition,
correspondence, documents, and records relating to the Penn Treaty Companies,
except to the extent Hunt is subject to legal process or otherwise legally
required to do so. Hunt will only disclose such information after providing PTNA
with 10 days prior notice and giving PTNA the
 
 

 
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opportunity to object to such disclosure unless any governmental or law
enforcement agency requests that he not provide such notice or the giving of
such notice is prohibited by law. Hunt will not issue any press releases or
other written communications for public dissemination or participate in any
interviews with members of the journalistic or broadcast media regarding Hunt's
past employment and/or relationship with the Penn Treaty Companies. Hunt agrees
to refer to the period, terms, conditions and all other aspects of Hunt's
employment in a friendly manner. Except to the extent that PTNA or PTAC are
subject to legal process or otherwise legally required to do so, or it is
necessary to do so in good faith in managing PTNA and PTAC's businesses, no
officer or board member of PTNA or PTAC shall comment, publish or communicate
disparaging or derogatory statements or opinions, directly or indirectly, to any
third party, including to the public or members of the journalistic or broadcast
media or to any prospective future employer of Hunt regarding Hunt of any
nature, including regarding Hunt's job performance at or service for PTNA or
PTAC.
 
9.        Cooperation. Hunt shall cooperate with any of the Penn Treaty
Companies with respect to prior or pending business matters with which Hunt is
or was involved. This cooperation includes but is not limited to making
available to any of the Penn Treaty Companies such correspondence, documents and
records as have applicability to the past, present and future business
operations of such companies and making full and adequate disclosure to any of
the Penn Treaty Companies of all matters involving any of them of which Hunt has
knowledge. In addition, Hunt shall cooperate with and be available upon request
to any of the Penn Treaty Companies in connection

 
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with any investigation, litigation, arbitration or other proceeding initiated or
brought by or against any of the Penn Treaty Companies, whether or not Hunt is a
party in such matter or in connection with any threatened or potential
investigation, litigation, arbitration or other proceeding by or against any of
the Penn Treaty Companies, including being available to answer questions by any
of the Penn Treaty Companies and appearing as necessary to give testimony,
either at trial, hearing, or in a deposition. Furthermore, Hunt shall cooperate
in executing documents required to effectuate the purpose and intent of this
paragraph and this Agreement. The Penn Treaty Companies shall attempt to
schedule such cooperation at mutually convenient times and places taking into
account any employment constraints that Hunt may have. The Penn Treaty Companies
shall reimburse Hunt for reasonable expenses incurred by Hunt in such
cooperation, such as telephone, travel, lodging, and meal expenses, consistent
with generally applicable policies for reimbursement of employee expenses. In
addition, the Penn Treaty Companies shall pay Hunt's reasonable legal fees
incurred in connection with such cooperation and the parties further agree that,
in the event of a conflict requiring Hunt to secure separate counsel while
providing such cooperation, Hunt may select his own counsel. Notwithstanding the
above, Hunt's selection of counsel and an appropriate fee structure for such
legal services are subject to approval by the Penn Treaty Companies (with such
approval not to be unreasonably withheld). Such services shall be reimbursed by
the Penn Treaty Companies at a rate no greater than $350 per hour. Nothing in
this Agreement shall require Hunt to fail or refuse to cooperate with any legal
process or with any request for information of any governmental or law
enforcement agency. Hunt will only respond to such legal process or governmental
or law enforcement request for

 
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information after providing the Penn Treaty Companies with 10 days prior notice
and giving the Penn Treaty Companies the opportunity to object to such
disclosure, unless any governmental or law enforcement agency requests that he
not provide such notice or the giving of such notice is prohibited by law.
 
10. Non-interference. For one (1) year from Hunt's execution of this Agreement,
Hunt shall not, without the prior written consent of PTNA, (1) interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between any of the Penn Treaty Companies and any insurance broker, insurance
agent, program manager, managing general underwriter, managing general agent,
insured, reinsurer, supplier, vendor or employee of any of the Penn Treaty
Companies or any other person or entity with which any of the Penn Treaty
Companies maintains a business relationship, or (2) hire or attempt to hire
directly or indirectly any employee of any of the Penn Treaty Companies.
 
11. Confidentiality of Agreement. Hunt, PTNA and PTAC shall keep secret and
strictly confidential the existence of this Agreement and further shall not
disclose, make known, discuss, or relay any information concerning this
Agreement, or any of the discussions leading up to this Agreement, to anyone
other than officers and directors of PTNA and PTAC who have a legitimate
business reason to know, tax advisors and accountants, members of Hunt's
immediate family, and/or his tax advisor or attorney, provided that those to
whom any party makes such disclosure agree to keep said information confidential
and not disclose it to others. The foregoing shall not prohibit disclosure (i)
as may be ordered by any regulatory agency or court or as required by other

 
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lawful process, (ii) as may be necessary for the prosecution of claims relating
to the performance or enforcement of this Agreement; or (iii) as may be
requested by any governmental or law enforcement agency.
 
12. Non-Disparagement. Except to the extent Hunt is subject to legal process or
otherwise legally required to do so or required by this Agreement to do so, Hunt
shall not make, or cause to be made, any statement or communicate any
information (whether oral or written) that disparages or reflects negatively on
any of the Penn Treaty Companies or any of their directors, officers or
shareholders.

 
13. Iniunctive and Other Relief. Hunt, PTNA and PTAC shall be entitled to have
the provisions of Sections 7, 8, 9,10,11 and 12 specifically enforced through
injunctive relief, without having to prove the adequacy of the available
remedies at law, and without being required to post bond or security, it being
acknowledged and agreed that such breach will cause irreparable injury to Hunt,
PTNA and/or PTAC and that money damages will not provide an adequate remedy to
them. Moreover, Hunt, PTNA and PTAC understand and agree that if they breach any
provision of this Agreement, in addition to any other legal or equitable remedy
the non-breaching party shall be entitled to recover all their reasonable
attorneys' fees and costs incurred by them arising out of any such breach.
 
14. No Admission of Wrongdoing. Hunt hereby acknowledges and agrees that neither
this Agreement nor the furnishing of the consideration for the general release
set forth in this Agreement shall be deemed or construed at any time for any
purpose as
 

 
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an admission by any of the Penn Treaty Companies or the Released Parties of any
liability or unlawful conduct of any kind.
 
15. Consultation of Counsel. PTNA recommends to Hunt that Hunt consult with
legal counsel prior to executing this Agreement and Hunt acknowledges that he
has done so.

 
16. Consideration Period. Hunt acknowledges that he has been given at least
forty-five (45) days from his receipt of this Agreement to consider whether or
not to sign this Agreement. Hunt agrees that if he signs this Agreement before
the expiration of this forty-five (45) day period, he has done so voluntarily.
 
17. Revocation Period. Hunt is aware that he may change his mind and revoke this
Agreement at any time during the seven (7) day period immediately after the date
upon which this Agreement is signed, in which case none of the provisions of
this Agreement will have effect. In the event that Hunt elects to revoke this
Agreement, Hunt must do so in writing. Such revocation must be delivered by hand
or sent by certified mail, post-marked before the end of the seven-day
revocation period, to Kate Crimmins, Vice President, Human Resources, Penn
Treaty Network America Ins. Co., 3440 Lehigh Street, Allentown, Pennsylvania. In
the event that Hunt exercises his right of revocation, Hunt agrees to
immediately repay to PTNA and/or PTAC any amounts previously paid to Hunt or on
Hunt's behalf pursuant to this Agreement.
 
18. Governing Law. This Agreement shall be construed exclusively in accordance
with the laws of the Commonwealth of Pennsylvania, without regard to the
 

 
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principles of conflicts of laws therein. In the event that a dispute arises
under this Agreement and legal action is instituted, the parties agree that such
action may be maintained in any court of competent jurisdiction.
 
19. Declaration of Invalidity. The parties hereby acknowledge and agree that if
any provision or term of this Agreement be declared void or to no effect by a
competent tribunal, it is the intent of the parties that said declaration shall
not operate to void any other provision or term of this Agreement and that those
provisions and terms not declared void or to no effect shall continue in full
force and effect and be binding on the parties.

 
20. Entire Agreement. The parties hereby acknowledge and agree that this
Agreement constitutes and contains the exclusive and entire agreement and
understanding between them concerning Hunt's Employment Agreement with PTNA, his
employment with PTNA, the termination thereof, the circumstances attendant
thereto, the Change of Control Agreement with PTAC, and the other subject
matters addressed herein between the parties, and supersedes and replaces all
prior negotiations and all agreements proposed or otherwise, whether written or
oral, concerning the subject matters hereof.
 
21. Modifications. This Agreement may not be waived, changed, modified,
abandoned, or terminated, in whole or in part, except by an instrument signed by
authorized representatives of PTNA, PTAC, and Hunt.

 
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22.     Receipt and Effective Date. Hunt hereby acknowledges that this Agreement
was presented to him on September 30, 2009. Additionally, Hunt further
acknowledges that PTNA and PTAC have provided to Hunt, in conjunction with and
attached to this Agreement as Exhibit A, a list of the job titles and ages of
all individuals selected by PTNA at this time for the separation program and a
list of the job titles and ages of all individuals in the same job
classifications not selected by PTNA at this time for the separation program.
This Agreement shall not become effective or enforceable until the expiration of
the seven-day revocation period set forth in Section 17 above.
 
Hunt has had an opportunity to carefully review and consider this Agreement.
After such careful consideration, Hunt knowingly and voluntarily enters into
this Agreement with full understanding of its meaning.
 
IN WITNESS WHEREOF and intending to be legally bound, the parties have duly
executed this Agreement as of the date(s) set forth below.
 

 
 
/s/ William Hunt, Jr.
 
Date: October 9, 2009
WILLIAM HUNT, JR.
 
PENN TREATY NETWORK AMERICA INSURANCE COMPANY
 
By: /s/ Kate Crimmins
 
Title:  Vice President, Human Resources Date:
October 9, 2009
 
 
PENN TREATY AMERICAN CORPORATION
 
By:  /s/ Eugene Woznicki
 
Title: Chairman and CEO
 
Date: October 9, 2009
 

 

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