Loading...
HomeMy WebLinkAbout01-6980MAYNARD R. STUFFT, RICHARD J. ' AGOSTINI, and GARY J. SCHULTZ, ' Plaintiffs IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA C CIVIL ACTION NO. OI-- PHICO GROUP, INC., Defendant · NOTICE You have been sued in court. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this Complaint and Notice are served, by entering a written appearance personally or by attorney and filing in writing with the Court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so, the case may proceed without you and a judgment may be entered against you by the Court without further notice for any money claimed in the Complaint or for any other claim or relief requested by the Plaintiffs. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 Telephone No. (800) 990-9108 AVISO USTED HA SIDO DEMANDADO EN CORTE. Si usted desea defenderse de las demandas que se presentan mas adelante en las siguientes paginas, debe tomar accion dentro de los proximos veinte (20) dias despues de la notificacion de esta Demanda y Aviso radicando personalmente or por medio de un abogado una comparecencia escrita y radicando en la Corte por escrito sus defensas de, y objecciones a, las demandas presentadas aqui en contra suya. Se le advierte de que si usted falla de tomar accion como se describe anteriormente, el caso puede proceder sin usted y un fallo por cualquier suma de dinero reclamada en la demanda o cualquier otra reclamacion o remedio solicitado por el demandante puede ser dictadO en contra suya por la Corte sin mas aviso adicional. Usted puede perder dinero o propiedad u otros derechos importantes para usted. MAYNARD R. STUFFT, RICHARD J. ' AGOSTINI, and GARY J. SCHULTZ, · PHICO GROUP, INC., Plaintiffs ' Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION NO. OI-/.,~,~r') L/"),~_ (,"'-7-'~ COMPLAINT Plaintiffs, Maynard R. Stuff, Richard J. Agostini, and Gary J. Schultz, by and through their counsel, McNees Wallace & Nurick LLP, for their Complaint against PHICO Group, Inc., state as follows: The Parties 1. Defendant PHICO Group, Inc. ("PHICO Group") is a Pennsylvania Corporation with its principal place of business at One Phico Drive, Mechanicsburg, Pennsylvania, 17055. 2. Plaintiff Maynard R. Stuff ("Stuff") is an adult individual, residing at 1208 East Powderhorn Road, Mechanicsburg, Pennsylvania, 17050. 3. Plaintiff Richard J. Agostini ("Agostini") is an adult individual, residing at 241 Pudding Hill Lane, Marshfield, Massachusetts, 02050-1042. 4. Plaintiff Gary J. Schultz ("Schultz") is an adult individual, residing at 1108 West Powderhorn Road, Mechanicsburg, Pennsylvania, 17050. including: Factual E, ack~round PHICO Group is the parent and holding company of several subsidiaries, a) PHICO Insurance Company, Inc. ("PHICO Insurance Company"); b) PHICO Services Company, Inc.; c) PHICO Realty Corp.; d) PHICO Re Ltd; e) PHICO Capital Markets, Inc.; and f) Independence Indemnity Insurance Company. 6. Until December, 1996, Stufft was employed by PHICO Group as President and Chief Executive Officer. 7. On or about June 28, 1996, PHICO Group entered into a voluntary early retirement agreement with Stufft (the "Stufft Agreement") whereby PHICO Group agreed to provide certain prospective financial and health insurance benefits to Stufft. A true and correct copy of the agreement is attached hereto as Exhibit A and incorporated herein by reference. 8. Until December, 1997, Agostini was employed by PHICO Group as Senior Vice President, New Business Development. 9. On or about December 22, 1997, PHICO Group entered into a separation agreement with Agostini (the "Agostini Agreement") whereby PHICO Group agreed to provide certain prospective financial and health insurance benefits to Agostini. A true and correct copy of the agreement is attached hereto as Exhibit B and incorporated herein by reference. 10. Until June, 2001, Schultz was employed by PHICO Group as Senior Vice President and Chief Financial Officer. 11. On or about June 15, 2001, PHICO Group entered into a separation agreement with Schultz (the "Schultz Agreement") whereby PHICO Group agreed to provide certain prospective financial and health insurance benefits to Schultz. A true and correct copy of the agreement is attached hereto as Exhibit C and incorporated herein by reference. 12. On August 16, 2001, PHICO Insurance Company was placed into rehabilitation by Order of the Commonwealth Court of Pennsylvania ("Rehabilitation Order''). A true and correct copy of the Rehabilitation Order is attached hereto as Exhibit D. 13. In or about late September, 2001, Schultz received a letter from William S. Taylor, Deputy Insurance Commissioner ("Taylor Letter"), notifying Schultz that PHICO Insurance Company had been placed into rehabilitation on August 16, 2001 by order of the Commonwealth Court of Pennsylvania. A true and correct copy of the letter, dated September 27, 2001, is attached hereto as Exhibit E. 14. The Taylor Letter states, in pertinent part: Unfortunately, the financial condition of PHICO [Insurance Company] is such that all of its obligations cannot be satisfied. By law, the Rehabilitator must put the payment of administrative expenses and policyholder claims above all other obligations. In order to conserve the limited resources of PHICO [Insurance Company] to satisfy these priority obligations, I am sorry to inform you that effective October 16, 2001, PHICO [Insurance Company] will no longer fund severance payments and benefits under the separation a,qreement you entered into with PHICO Group, Inc. This means that payments or benefits under your separation agreement may cease as of October 16, 2001. See Exhibit E (emphasis added). 15. In October, 2001, Stufft and Agostini each received a letter from William S. Taylor, Deputy Insurance Commissioner, dated October 3, 2001. True and correct copies of these letters are attached hereto as Exhibits F and G. 16. The letters from Taylor to Stufft and Agostini are identical to the letter from Taylor to Schultz, except that October 31, 2001 is noted as the date on which payments or benefits under the separation agreements may cease. See Exhibits F and G. 17. Stufft, Agostini, and Schultz made their separation agreements with PHICO Group, not with PHICO Insurance Company. 18. PHICO Insurance Company is not a party to either the Stufft Agreement, the Agostini Agreement, or the Schultz Agreement. PHICO Group is not named in or affected by the Rehabilitation Order. PHICO Insurance Company is only one of several subsidiaries of PHICO 19. 20. Group. 21. Other than PHICO Insurance Company, none of PHICO Group's subsidiaries are named in or affected by the Rehabilitation Order. 22. After receipt of the Taylor Letter, Schultz sent a letter on October 2, 2001 to PHICO Group advising that the obligations under the Schultz Agreement were the obligations of PHICO Group and not PHICO Insurance Company. Stufft sent a similar letter to PHICO Group on October 9, 2001. The Schultz and Stufft letters referenced in this paragraph are attached hereto as Exhibit H. 23. No payments have been received from PHICO Group in response to the demands contained in the Schultz and Stufft letters attached as Exhibit H. Copies of 4 the letters received from PHICO Insurance Company in response to the Schultz and Stufft letters are attached hereto as Exhibit I. 24. Although only PHICO Insurance Company and not PHICO Group is subject to the Rehabilitation Order, PHICO Group has ceased making payments under the Stufft, Agostini, and Schultz Agreements. 25. By letters dated October 17, 2001, October 23, 2001, and November 15, 2001, counsel for Plaintiffs demanded payments from PHICO Group of amounts due and owing. Copies of these letters are attached hereto as Exhibit J. 26. The only response received to the letters referenced in the preceding paragraph was an October 24, 2001, letter from counsel for PHICO Group, acknowledging receipt of the October 23, 2001, letter. A copy of the October 24, 2001, letter is attached hereto as Exhibit K. No substantive response was provided. Count I--Stufft v. PHICO Group Breach of Contract 27. Paragraphs 1-26, above, are incorporated herein by reference. 28. PHICO Group entered into a valid and binding contract with Stufft, which is reflected in the Stufft Agreement. 29. Pursuant to the Stufft Agreement, PHICO Group agreed to provide Stufft with separation benefits including: a) payment of the employer portion of Stufft's group health premium through August 1, 2004; b) payment of Stufft's group dental plan premium through August 1,2004; c) payment of the premium on a $600,000 life, accidental death and dismemberment policy through August 1, 2004; Exhibit A. d) payment of monthly installments of $9,000.00, beginning on January 1, 1997 and continuing through December 1,2011, in lieu of benefits Stufft would have otherwise received under a Supplemental Retirement Income Plan ("SRIP") and; e) payment of a lump sum benefit after August 1, 2001 under the Supplemental Executive Retirement Plan ("SERP"). 30. As to the SERP benefit, the Stufft Agreement provided for a monthly payment of the sum of $9,333.33 to Stufft through August, 2001, and thereafter Stufft would receive that same sum from the combination of payments from the HAP pension plan and payments from SERP. The HAP pension plan would have produced a monthly benefit of $5480.94 per month, and thus Stufft entitled to $ 3852.39 per month under SERP. 31. 32. Stufft fully performed all of his contractual obligations. PHICO Group breached the contract by failing to pay the $9,000.00 per month payments in lieu of SRIP, beginning in September, 2001, and continuing to the present. 33. As a result of PHICO Group's failure to make the $9000 per month payments in lieu of SRIP, Stufft's own contribution for group health coverage, which had been made by deduction of the sum of $112 from the $9000 payment, has not been paid. 34. PHICO Group further breached the contract by failing to pay Stufft's dental and life insurance policy premiums and the employer's portion of Stufft's health insurance coverage, resulting in Stufft's receiving unsolicited policy conversion inquiries and COBRA notices. 35. As a consequence of the foregoing, Stuff has suffered and will continue to suffer damages. WHEREFORE, Plaintiff Stuff requests judgment against Defendant PHICO Group, Inc. in an amount in excess of the mandatory arbitration limit of $25,000.00, together with interest and such other relief as this Court deems just and reasonable. Count II--Stufft v. PHICO Group Declaratory Judgment 36. Paragraphs 1-26 above, are incorporated herein by reference. 37. There is a pending controversy between Stuff and PHICO Group regarding the obligation of Defendant PHICO Group to pay separation benefits, including during the Rehabilitation of PHICO Insurance Company and during the remaining term of the Stuff Agreement. 38. A judicial declaration regarding the rights and obligations of the parties vis- d-vis the Stuff Agreement will resolve this controversy. 39. This Court has the authority to declare the rights and obligations of the parties pursuant to the Declaratory Judgments Act, 42 Pa. C.S.A. § 7532. WHEREFORE, Plaintiff Stuff respectfully requests a declaration of the rights and obligations of the parties pursuant to the Declaratory Judgments Act, and that the Court declare that Stuff is entitled to the payments provided for in the Stuff Agreement despite the pendency of the PHICO Insurance Company Rehabilitation. 40. 41. following: a) Count IIl--Stufft v. PHICO Group Violation of Wage Payment and Collection Law Paragraphs 1-26, above, are incorporated herein by reference. Pursuant to the Stuff Agreement, PHICO Group agreed to pay Stuff the the employer portion of Stuff's group health premium through August 1, 2OO4; b) the premium on Stufft's group dental plan through August 1, 2004; c) the premium on a $600,000 life, accidental death and dismemberment policy .through August 1,2004; and d) payment of monthly installments of $9,000.00, beginning on January 1, 1997 and continuing through December 1,2011, in lieu of benefits Stuff would have otherwise received under a Supplemental Retirement Income Plan ("SRIP") and; e) payment of a lump sum benefit after August 1,2001 under the Supplemental Executive Retirement Plan ("SERP"). Exhibit A. 42. All of the payments enumerated in paragraph 41, above, constitute wages as defined by the Wage Payment and Collection Law ("WPCL"), 43 P.S. § 260.2a. 43. PHICO Group made its last payment in lieu of SRIP benefit payment to Stuff on August 15, 2001, and has not made the other payments required under the Stuff Agreement when due. 44. Under the terms of the Stufft Agreement, PHICO Group was obligated to make payments of $9,000.00 in lieu of SRIP on September 15, 2001 and monthly thereafter on the 15th of the month. 45. PHICO Group failed to make the payments required under the Stufft Agreement, in violation of the WPCL, 43 P.S. § 260.9a. 46. The payments in lieu of SRIP which were due on September 15, 2001 and October 15, 2001 are already more than thirty days overdue. 47. The employee contribution for the health premium, which was to be deducted from the monthly payments in lieu of SRIP, were also to be made on the 15th of each month. 48. No good faith contest or dispute of Stufft's right to these wages exists to account for PHICO Group's non-payment. 49. In addition to these wages, Stufft is entitled to statutory liquidated damages equal to twenty-five percent of the total amount of wages due, pursuant to the WPCL, 43 P.S. § 260.10. 50. Stufft is also entitled to reasonable attorneys' fees, pursuant to the WPCL, 43 P.S. § 260.9a(f). WHEREFORE, Plaintiff Stufft requests judgment against Defendant PHICO Group, Inc. for wages past due, together with statutory liquidated damages, interest, costs, reasonable attorneys' fees, and such other relief as this Court deems just and reasonable. Count IV--Agostini v. PHICO Group Breach of Contract 51. Paragraphs 1-26, above, are incorporated herein by reference. 52. PHICO Group entered into a valid and binding contract with Agostini, which is reflected in the Agostini Agreement. 53. Pursuant to the Agostini Agreement, PHICO Group agreed to provide separation benefits including: a) group health and dental insurance for Agostini and his wife, Eileen F. Agostini ("Mrs. Agostini"), until the earlier of (1) the date on which they become eligible for Medicare, or (2) the date on which they turn 65 years old; and b) payments in lieu of Supplemental Retirement Income Plan ("SRIP") benefits in fifteen equal annual installments of $26,200.00, beginning on August 1, 1999 and continuing through August 1,2013. Exhibit B, ¶ 3(c) and (f). 54. Agostini will turn 65 on July 28, 2004. 55. Mrs. Agostini will turn 65 on June 8, 2004. 56. Agostini fully performed all of his contractual obligations. 57. PHICO Group breached the contract by failing to pay monthly health and dental insurance policy premiums for Agostini and his wife, beginning in September, 2001, and continuing to the present. 58. Agostini believes, and therefore avers, that PHICO Group has determined not to pay to Agostini the payments in lieu of SRIP when due under the Agostini Agreement. 59. As a consequence of the foregoing, Agostini has suffered and will continue to suffer damages. l0 60. The Agostini Agreement provides that PHICO Group will pay Agostini's legal costs arising from PHICO Group's breach of the agreement, stating: If the Company breaches any provision of this Agreement, Company is responsible for Employee's reasonable legal costs arising from the breach. Exhibit B, ¶ 11. WHEREFORE, Plaintiff Agostini requests judgment against Defendant PHICO Group, Inc. in an amount in excess of the mandatory arbitration limits of this Court, together with interest, costs, reasonable attorneys' fees, and such other relief as this Court deems just and reasonable. Count V--Agostini v. PHICO Group Declaratory Judgment 61. Paragraphs 1-26, above, are incorporated herein by reference. 62. There is a pending controversy between Agostini and PHICO Group regarding the obligation of Defendant PHICO Group to pay separation benefits, including during the Rehabilitation of PHICO Insurance Company and during the remaining term of the Agostini Agreement. 63. A judicial declaration regarding the rights and obligations of the parties vis- ~-vis the Agostini Agreement will resolve this controversy. 64. This Court has the authority to declare the rights and obligations of the parties pursuant to the Declaratory Judgments Act, 42 Pa. C.S.A. § 7532. WHEREFORE, Plaintiff Agostini respectfully requests a declaration of the rights and obligations of the parties pursuant to the Declaratory Judgments Act, and that the Court declare that Agostini is entitled to the payments provided for in the Agostini Agreement despite the pendency of the PHICO Insurance Company Rehabilitation. Count VI--Agostini v. PHICO Group Violation of Waqe Payment and Collection Law 65. Paragraphs 1-26, above, are incorporated herein by reference. 66. Pursuant to the Agostini Agreement, PHICO Group agreed to provide separation benefits, including group health and dental insurance for Agostini and Mrs. Agostini and payments in lieu of SRIP. Exhibit B. 67. These benefits constitute wages as defined by the Wage Payment and Collection Law ("WPCL"), 43 P.S. § 260.2a. 68. Under the terms of the Agostini Agreement, PHICO Group was obligated to make the insurance premium payments on behalf of Agostini, and did so on a monthly basis. 69. PHICO Group stopped making these premium payments on or before October 31,2001, in violation of the WPCL, 43 P.S. § 260.9a. 70. The premium payments are more than thirty days overdue. 71. No good faith contest or dispute of Agostini's right to these wages exists to account for PHICO Group's non-payment. 72. In addition to these wages, Agostini is entitled to statutory liquidated damages equal to twenty-five percent of the total amount of wages due, pursuant to the WPCL, 43 P.S. § 260.10. 73. Agostini is also entitled to reasonable attorneys' fees, pursuant to the WPCL, 43 P.S. § 260.9a(f). WHEREFORE, Plaintiff Agostini requests judgment against Defendant PHICO Group, Inc. for wages past due, together with statutory liquidated damages, interest, costs, reasonable attorneys' fees, and such other relief as this Court deems just and reasonable. Count Vll--Schultz v. PHICO Group Breach of Contract 74. Paragraphs 1-26, above, are incorporated herein by refer(.;nce. 75. PHICO Group entered into a valid and binding contract with Schultz, which is reflected in the Schultz Agreement. 76. Pursuant to the Schultz Agreement, PHICO Group agreed to provide separation benefits including: a) salary continuation in regular semi-monthly installments of $8,166.67 for twelve months, less taxes and other usual deductions, beginning on July 21,2001. b) reimbursement for COBRA coverage for group health and dental insurance until the earlier of (1) July 31,2002, or (2) the date on which health insurance coverage is provided by another employer; c) outplacement services provided by Career Management Consultants, Inc. at no cost to Schultz, for a period of twelve months beginning July 13, 2001; d) access to the Employee Assistance Program through the end of August, 2002; e) benefits under the Supplemental Retirement Income Plan ("SRIP"), Supplemental Executive Retirement Plan ("SERP"), PHICO Salary Deferral Plan, and the Health Alliance of Pennsylvania ("HAP") Pension Plan; and f) unused vacation days payments in the amount of $35,430, due at the end of the severance period. Exhibit C, ¶ 3(a)-(e). 77. Schultz is not currently employed, and is not receiving health or dental insurance through an employer other than PHICO Group. 78. Schultz fully performed all of his contractual obligations. 79. PHICO Group breached the contract by failing to pay Schultz's semi- monthly continuing salary installments $8,166.67 beginning in October, 2001, and continuing to the present. 80. PHICO Group further breached the contract by failing to pay Schultz's COBRA health and dental insurance policy premiums beginning in October, 2001, and continuing to the present. 81. PHICO Group further breached the contract by failing to pay the lump sum payout under Schultz°s SERP account, which had a lump sum benefit of $72,331.00 as of July 31,2001, which Schultz requested and was entitled to receive under the Schultz Agreement. 82. Schultz is also entitled to additional benefits under the SRIP if there is a "change in control" as defined in the SRIP, which Schultz believes may occur. 83. As a consequence of the foregoing, Schultz has suffered and will continue to suffer damages. 84. The Schultz Agreement also provides that PHICO Group will pay Schultz's legal costs arising from PHICO Group's breach of the agreement, stating: ]4 If the Company breaches any provision of this Agreement, Company is responsible for Employee's reasonable legal costs arising from the breach. Exhibit C, ¶ 12. WHEREFORE, Schultz requests judgment against Defendant PHICO Group, Inc. in an amount in excess of the mandatory arbitration limit of $25,000.00, together with interest, costs, reasonable attorneys' fees, and such other relief as this Court deems just and reasonable. Count Vlll--Schultz v. PHICO Group Declaratory Judgment 85. Paragraphs 1-26, above, are incorporated herein by reference. 86. There is a pending controversy between Schultz and PHICO Group regarding the obligation of Defendant PHICO Group to pay separation benefits, including during the Rehabilitation of PHICO Insurance Company, and during the remaining term of the Schultz Agreement. 87. A judicial declaration regarding the rights and obligations of the parties vis- ~-vis the Schultz Agreement will resolve this controversy. 88. This Court has the authority to declare the rights and obligations of the parties pursuant to the Declaratory Judgments Act, 42 Pa. C.S.A. § 7532. WHEREFORE, Plaintiff Schultz respectfully requests a declaration of the rights and obligations of the parties pursuant to the Declaratory Judgments Act. Count IX--Schultz v. PHICO Group Violation of Wage Payment and Collection Law 89. Paragraphs 1-26, above, are incorporated herein by reference. 90. the following: a) Pursuant to the Schultz Agreement, PHICO Group agreed to pay Schultz salary continuation in regular semi-monthly installments of $8,166.67 for twelve months, less taxes and other usual deductions, beginning on July 21,2001; b) reimbursement for COBRA coverage for group health and dental insurance until the earlier of (1) July 31, 2002, or (2) the date on which health insurance coverage is provided by another employer; c) the cost of outplacement services provided by Career Management Consultants, Inc., for a period of twelve months beginning July 13, 2001; d) benefits under the Supplemental Retirement Income Plan ("SRIP"), Supplemental Executive Retirement Plan ("SERP"), PHICO Salary Deferral Plan, and the Health Alliance of Pennsylvania ("HAP") Pension Plan. Exhibit C, I] 3. 91. All of the payments enumerated in paragraph 90, above, constitute wages as defined by the Wage Payment and Collection Law ('~VPCL"), 43 P.S. § 260.2a. 92. PHICO Group made its last salary continuation benefit payment to Schultz on October 15, 2001. 93. Under the terms of the Schultz Agreement, PHICO Group was obligated to make salary continuation payments of $8,166.67.00 each on October 31, 2001 and November 15, 2001. 94. PHICO Group failed to make these payments, in violation of the WPCL, 43 P.S. § 260.9a. 95. The salary continuation payments which were due on October 31, 2001 are already more than thirty days overdue. 96. PHICO Group has also failed to reimburse Schultz for the October 2001 and November 2001 COBRA payments. 97. No good faith contest or dispute of Schultz's right to these wages exists to account for PHICO Group's non-payment. 98. In addition to these wages, Schultz is entitled to statutory liquidated damages equal to twenty-five percent of the total amount of wages due, pursuant to the WPCL, 43 P.S. § 260.10. 99. Schultz is also entitled to reasonable attorneys' fees, pursuant to the WPCL, 43 P.S. § 260.9a(f). WHEREFORE, Plaintiff Schultz requests judgment against Defendant PHICO Group, Inc. for wages past due, together with statutory liquidated damages, interest, costs, reasonable attorneys' fees, and such other relief as this Court deems just and reasonable. McNEES WALLACE & NURICK LLC By Helen L. Gemmill (I.D. No. 60661) Susan V. Metcalfe (I.D. No. 85703) 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108 Phone # (717) 232-8000 Dated: December 11,2001 l? ,Hov ~3 01 04~34p ~.1 Dated: November ,2001 Subject to the penalties of 18 Pa. C.S. ~4904, relating to unswom falsification to authorities, I hereby certify that I have reviewed the foregoing and that the facts set forth therein are true and correct to the best of my knowledge, information and belief. VERIFICATION Subject to the penalties of 18 Pa. C.S. ~4904, relating to unsworn falsification to authorities, I hereby certify that I have reviewed the foregoing and that the facts set forth therein are true and correct to the best of my knowledge, information and belief. Dated: -/ ! VERIFICATION Subject to the penalties of 18 Pa. C.S. §4904, relating to unsworn falsification to authorities, I hereby certify that I have reviewed the foregoing and that the facts set forth therein are true and correct to the best of my knowledge, information and belief. Dated: Exhibit A PERSONAL AND CONFIDENTIAL June 28, 1996 Maynard R. Stuffi 1208 East Powderhorn Rd. Mechanicsburg, PA 17055 Subject: VOLUNTARY EARLY RETIREMENT Dear Maynard: You have voluntarily agreed to accept early retirement from active service with PHICO Group, Inc. to take place at the close of business on December 31, 1996. In consideration of a signed release and further mutual promises set forth in this letter agreement, we have mutually agreed that the Company will provide the following retirement package to you effective January 1, 1997. PHICO Group, Inc. will pay a benefit which approximates your vested benefit under the HAP Pension Plan as ifyml were age 65 on the first of each month beginning January 1, 1997 through August 1, 2001. This benefit is based on service and projected earnings through August 1, 2001. Each monthly payment will be $9,333.33. In the event you should die prior to August 1,'2001, this monthly payment will be paid to your designated beneficiary through August 1, 2001. NOTE: The HAP Pension Plan itself will begin to pay your pension benefit on September 1, 2001. PHICO will initiate the required paperwork at the proper time. In the event you should die subsequent to August 31, 2001, the information contained on your Pension Plan Beneficiary Designation from will prevail. In other words, the monthly payment to you would cease as of the first of the month following the month in which your death occurred. Your designated beneficiary would receive a death benefit equal to 50% of the lump sum Actuarial Equivalent. The form of the death benefit shall be determined by the beneficiary from among the options available to the beneficiary. These conditions are in keeping with the temas of the HAP Pension plan. Assuming no death prior to August 31, 2001, you will be issued a new Payment Options from for completion on or about July 1, 2001. In addition to the monthly payment described above, upon your request, or, in the event of your death, the request of your personal representative, prior to December 31, 1996, PHICO Group, Inc. will pay you the sum of $700,000.00, less applicable taxes. PHICO Group, Inc. will provide a benefit in the amount of $1,250.00 per month, which One PHICO Drive - RO. Box 85 · Mechanicsburg, PA 17055-Q085 · (717) 766-1122 · (800) 382-1378 · Fax (717) 766-2837 Regional Offices: indianapolis, Indiana · Eagan, Minnesota approximates your primary Social Security benefit based upon current calculations, and which shall be paid on the first of each month beginning January 1, 1997 through August 1, 2001. Because this benefit replicates your Social Security benefit, it will cease on August 1, 2001 and it will be your responsibility to make any elections and otherwise to activate your Social Security benefits at that time. With regard to the Management Incentive Compensation Plan 0VIICP), you will receive a bonus of $114,840, payable in the April, 1997 time frame. This payment will recognize perfmmance for calendar year 1996. PHICO Group, Inc. will pay the employer l~ortion o£ your present group health premium during the period January 1, 1997 througll!,~.August 1, 2004. NOTE: The amount payable by PHICO, your contribution, deductibles, and co-payments are subject to changes as our group health plan may change from time to time (or be abolished). Access to any legg!l~( required continuation coverage such as COBRA wil! be provided at thea. ppropriate time. At PHICO's option, ~ may ~rop you from this coverage and pay to you the cash equivalent of the described amount payable. PHICO will continue to pay your present group dental plan premium during the period January 1, 1997 through August 1, 2004. The same NOTE to the paragraph directly above also applies. PHICO will continue to pay the premium on a $600,000 life, accidental death and dismemberment policy on your life from January 1, 1997 through August 1, 2004. You are responsible for designating the beneficiary of that policy on an ongoing basis. PHICO Group, Inc. will pay supplementgl .retirement as presently credited under its Supplemental Retirement Income Plavr (SRIP} and according to all the conditions and stipulations contained in that plan, including the payment of any installments remaining unpaid at your death to your beneficiary under the Plan. This benefit is in lieu of all your rights and benefits in the SRIP plan, which will be cancelled. Payment will be made on the first of each month, beginning January 1, 1997 through December 1,2011 for a total of 180 payments at $9,000.00 per month. Enclosed is a new beneficiary form covering the benefit. Your existing SRIP plan must be returned for cancellation on or before December 31, 1996 in order for this benefit to be paid. Prior to your. retirement at the close of business on December 31, 1996, you will continue to receive your current salary and benefits and will continue to serve with such title, authority and responsibility as shall be determined by the Board of Directors. In addition, your current term as a member of PHICO's board of directors terminates in April, 1998. You may seek re-election at that time. We'also anticipate that as of January 1, 1997, you will be elected Vice-Chairman of the Board of Directors of PHICO to serve in that position until April, 1998, subject to the discretion of the PHICO's Board. During the time you serve as director, you will receive an annual consultancy fee of $50,000, payable quarterly, and office space at a location and with administrative support deemed reasonable by the board of directors of PHICO. PHICO will also provide you with a 1995 Oldsmobile Aurora automobile and IBM Type 9545 Thinkpad computer during your tenure as director. In order to continue to receive this benefit, you must be reasonably available to the Chairman of the Board of Directors and CEO of PHICO Group, Inc. to discuss corporate matters. If you do not seek or are not re-elected to a seat on the board, this $50,000 fee and related office space and support will be terminated. In addition, at the conclusion of your teim as director, PHICO Group, Inc. will transfer to you the 1995 Oldsmobile Aurora automobile and IBM Type 9545 Thinkpad computer. During the period January 1, 1997 through August 31, 2004, it will be your responsibility, or that of your beneficiary if applicable, to keep the Company informed of any change to your mailing address. All other benefits not addressed by this letter will cease at the close of business on December 31, 1996. By accepting this retirement package and signing below, you agree that you will not reveal any of PHICO Group, Inc.'s business secrets or confidential information or that of any of its subsidiaries to anyone at any time, and that you will not practice or make use of them yourself nor will you enter into, directly or indirectly engage in, or be connected with any business competitive with PHICO Group, Inc. or any of its subsidiaries, anywhere in the United States as long as you are receiving benefits pursuant to this agreement. "Directly or indirectly engage in any business" shall include engaging in business as an owner, parmer, agent, advisor, or as an employee or consultant of any person, firm, or corporation engaged in such business, or being directly or indirectly interested in any such business conducted by any person, firm, or corporation. "Business competitive with PHICO Group, Inc. or any of its subsidiaries" shall mean any insurance provider business activities similar to those engaged in by PHICO Group, Inc. or any of its subsidiaries while you are receiving benefits pursuant to this agreement. "Business competitive with PHICO Group, Inc. or any of its subsidiaries" shall not include consulting with purchasers of insurance products. In any event, you agree that none of your other business activities during the period you will be receiving benefits hereunder will be detrimental to the business of PHICO Group, Inc. You further agree that as long as you are receiving benefits pursuant to this agreement you will not submit or reveal any information, written or omi, concerning the accounts, operating plans or services or PHICO Group, Inc. or any of its subsidiaries to a competitor or any other party or use the same information for the benefit of yourself or others in the same or similar employment. In the event PHICO Group, Inc. deteanines that you have breached these provisions, PHICO Group, Inc. will provide you with ten days written notice, during which time you may attempt to cure any breach and cease such breaching activities. PHICO Group, Inc. and you agree that, in the event of your continued breach of any of the covenants contained in the preceding paragraph after expiration of the ten day written notice period, the remedy at law would be inadequate and PHICO Group or any of its subsidiaries may obtain immediate injunctive or any other equitable relief to prevent the continued breach. In addition, PHICO Group, Inc. and you agree and contract that it is not the intention of either party to violate any public policy, statutory or common law, and that if any sentence, paragraph, clause or combination of the preceding paragraph is in violation of the law of any state where applicable, such sentence, paragraph, clause, or comb'marion of the same shall be void in the jurisdictions where it is unlawful, and the remainder of such paragraph and this agreement shall remain binding on the parties hereto. It is the intention of both parties to make the covenants of the preceding paragraph binding only to the extent that it may be lawfully done under existing applicable laws. In the event that any part of any covenant of the preceding paragraph is detemtined by a court of law to be overly broad thereby making the covenant unenforceable, the parties hereto agree, and it is their desire, that such court shall substitute a reasonable, judicially enforceable limitation in place of the offensive part of the covenant and as so modified the covenant shall be as fully enforceable as set forth herein by the parties themselves in the modified form. Maynard, the Company is pleased to be able to provide this package to you. On behalf of the entire organization, I wish you good health and the opportunity to fully enjoy all that retirement has to offer. Sincerely, · Russell Chairman of the Board Acceptance and Release In consideration of and pursuant to the terms and conditions of the letter dated June 28, 1996, I, Maynard Stuffi, on behalf of myself and my descendants, dependents, heirs, executors, administrators, assigns and successors, hereby agree to the terms of the letter and release and forever discharge PHICO Group, Inc. its parent, owner, subsidiaries, affiliates, successors and assigns and their boards of trustees, directors, officers, employees, consultants, representatives and agents (collectively "PHICO") from any and all actions, claims, wages, demands, fights, liens, agreements, charges or the like arising on or before the date of this letter that I now have or may in the future have concerning all matters relating to my employment and the termination of my employment with PHICO specifically including, but not limited to, all actions, claims, charges or the like under the Age Discrimination in Employment Act of 1967, as amended, as well as all other Federal, state or local statutes or common law causes of action. I understand that I am responsible for any federal, state or local taxes which I may owe by virtue of my receipt of the benefits and payments under the June 28, 1996 letter from John A. Russell, Chairman of the Board of PHICO Group, Inc. I further acknowledge that I have read the June 28, 1996 letter as well as this Acceptance and Release, that I am familiar with their contents, that I understand and acknowledge the significance and consequences of the letter and the Acceptance and Release, and that I have executed this Acceptance and Release of my own free act. I acknowledge that I have been given twenty-one (21) days from the day I received a copy of the June 28, 1996 letter and Acceptance and Release to execute these documents and that I have been advised to consult with an attorney. I understand that I have the right to revoke my consent to the letter and this Acceptance and Release for a period of at least seven (7) days following my acceptance of the letter and execution of this Acceptance and Release and that the letter and this Acceptance and Release shall not become effective or enforceable until the expiration of this seven (7) day period. I further agree that I will not discuss the terms and conditions of this letter with any employee of PHICO or anyone who does not have a need to know such information. The consideration for this Acceptance and Release is PHICO's agreement to provide me with the payments described in the June 28, 1996 letter. This Acceptance and Release and the June 28, 1996 letter constitute the entire agreement concerning my employment and termination of employment with PHICO and all other subjects addressed in the letter or this Acceptance and Release. The letter and this Acceptance and Release supersede and replace all prior negotiations and all agreements proposed or otherwise, whether written or omi, concerning all subject matters covered herein. The letter and this Acceptance and Release are integrated documents. Executed this 28th day of June, 1996. Maynard g'tuffi Beneficiary_ Designation For PHICO Insurance Company Deferred Compensation Arrangement I, Maynard Stufft, intending to revoke any and all prior beneficiary designations that I may have made, hereby designate the following beneficiaries for the deferred compensation arrangement described below. The designation shall take effect 12:01 a.m. on January 1, 1997. If the Primary Beneficiary (or Beneficiaries) should predecease me, the Contingent Beneficiary (or Beneficiaries) shall receive any mounts due and unpaid from PHICO. If, as to such agreement, there is no properly designated beneficiary on file with PHICO, my beneficiary under the agreement shall be my estate, should my death occur before PHICO's fulfilling its payment obligation under such agreement. I reserve the right to change this beneficiary designation at any time by delivery of a new designation on this form (or on PHICO's replacement form it this form is replaced) to the Corporate Secretary of PHICO Insurance Company. If more than one primary or contingent beneficia~ is designated, the benefit shall be equally divided between or among the beneficiaries surviving me, unless some other provision is specified on this form. If the designated primary and contingent beneficiaries shall not survive me, the benefit shall be paid as if no properly designated beneficiary so survives. The arrangement for deferred compensation is in lieu of my fights under PHICO's Supplemental Retirement Income Plan, and is stipulated in a letter dated ',~wx'~--e ~ ~' , 1996, from John A. Russell, Chairman of the Board of PHICO Group, Inc., dealing with early retirement. BENEFICIARY: A. Primary: F~ffr~/;''~i T'- %q~c~£_q2~-- Proportion: l oo B. Contingent: ~ fi ~ c , ~ ~ ~ [~{ ~ / ~ Attest: U PHICO Group, Inc. Corporate~ecretary jme~sreyhico.r¢4 Exhibit B is entered into this ~ day of~, 1997, by and ~ between PHICO Group, Inc. ("Company") ~d Richard J. Agostini ( ~ployee" ) : WHEREAS, Employee was formerly employed by the Company as Senior Vice President, New Business Development and WHEREAS, both parties desire to reach an amicable cessation of the employment relationship, which relationship shall cease effective on the date of this agreement; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and Employee agree as follows: 1. Purpose: It is expressly understood that this Agreement is entered into for the purpose of avoiding litigation between Employee and the Company of any claims arising out of the aforesaid employment relationship. To that end, Employee acknowledges that this Agreement resolves any and all claims by Employee that the Company has ever acted improperly or unlawfully towards him with respect to his employment with the Company. Employee further acknowledges that the Company's actions towards him were in accordance with all applicable state and federal laws and regulations. 2. Consideration: The undersigned, Richard J. Agostini, expressly acknowledges and confirms that the only considerations for his signing this Separation Agreement and General Release are the terms and provisions stated herein and that no other promise or agreement of any kind has been made to him by any person or entity whatsoever to cause him to sign this document and that he fully understands its meaning and intent. The undersigned, Richard J. Agostini, further expressly acknowledges that in consideration for any of the separation benefits set forth below, he agrees to return all company property, e.g., laptop computer, automobiles, other miscellaneous equipment, policy manuals, etc. 3. Separation Benefits: For consideration of the promises set forth in this Separation Agreement and General Release, the Company agrees to provide: (a) Salary continuation in regular semi-monthly installments of $5,541.66 until August 1, 1999 less taxes and other usual deductions, beginning on the eighth (8th) day following execution of the Agreement. Any advances, temporary or permanent, which have been made to the Employee and remain unpaid will be deducted from the payments set forth in this paragraph; (b) Ail unused and accrued vacation earned through 12/31/97 will be paid in a lump sum on 02/01/98: © Group health and dental insurance for employee and spouse, Eileen F. Agostini, subject to the Company's and or Plan's customary terms and conditions, until the earlier of (1) the date on which they become eligible for coverage under Medicare, or (2) the date on which they attain the age of 65 years old; (d) Life insurance through the PHICO Group Plan will be continued for you until August 1, 1999, as per the terms and conditions of the Plan. The death benefit of the life insurance provided to you under this Agreement is in the amount of $266,000. (e) Two payments totaling $73,000. The first payment will be paid in the amount of $38,000 on February 1, 1998; and the second payment in the amount of $35,000 will be paid on August 1, 1999; (f) Payment of SRIP benefits in the amount of fifteen (15) equal annual installments of $26,200, commencing on August 1, 1999 and each following installment shall be paid annually thereafter on the 1st day of August, with the last annual installment being paid to Employee on August 1, 2013. No further or additional payments shall be made to Employee pursuant to the SRIP (attached hereto). The payments made to Employee under this Section 3(f) shall satisfy Company's obligations under the SRIP. The remaining provisions of the SRIP which are not inconsistent with the provisions set forth in this Section 3(f) shall remain in full force and effect. 3.1. The payments to which Employee is entitled under Sections 3(a) and 3(e) shall inure to the benefit of Employee's heir(s) in the event that Employee dies prior to August 1, 1999. 4. Mutual Aqreement As To Representations: The Company and Employee agree that, in all respects and at all times, neither party will take any action or make any statement about the other which is in any manner negative or derogatory. At all times, each party will be sensitive to the image, reputation and dignity of the other. The Company will use its best efforts to assure that its employees comply with this provision of the Agreement. 5. Release: In consideration of the Separation Benefits described above, which Separation Benefits Employee was not otherwise entitled to receive, Employee, for Employee, Employee's heirs, personal representatives and assigns, does hereby release and forever discharge the Company and/or its related companies, successors and assigns, officers, directors, agents and employees, and its owner, from any and all claims, demands, causes of actions, losses and expenses of every nature whatsoever, whether known or unknown, arising out of or in connection with Employee's employment by the Company or the termination thereof, including, but not limited to, breach of contract (expressed or implied), intentional infliction of emotional harm, wrongful discharge or other tort actions, claims of discrimination, whether as to race, sex, national origin, age or otherwise, including, without limitation, any claim under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Older Workers Benefits Protection Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Pennsylvania Human Relations Act, or any other federal, state, municipal statute or ordinance relating to discrimination in employment or the payment of wages, except for any right or claims which may arise after the date of this Agreement. Employee further agrees that the Agreement may be pled ~y the Company as a complete defense to any claim or entitlement which may be asserted by Employee, or by any other person or agency on Employee's behalf, in any suit or claim against the Company, including but not limited to any claim under the Pennsylvania Unemployment Compensation Law, for or on account of any matter or thing whatsoever arising out of Employee's employment by the Company. 6. Covenant Not To Sue and Waiver of Recovery: Employee agrees and covenants that he will not file, charge, claim, sue or cause or permit to be filed any civil or administrative action, suit or legal proceeding seeking equitable or monetary relief for Employee in connection with any matter occurring at any time in the past concerning or arising from Employee's employment relationship with the Company, up to an including the date of this Agreement or involving any continuing effects of any acts or practices which may have arisen or occurred on or prior to the date of this Agreement. Employee further agrees and covenants that should any person, organization, or other entity file, charge, claim, sue, or cause or permit to be filed any such action, suit, or legal proceeding, Employee will not seek or accept any personal relief in such civil or administrative action, suit or legal proceeding. Employee further covenants that he will not bring any civil or administrative action, suit or legal proceeding contesting the validity of this Agreement or attempting to negate, modify or reform the Agreement. The covenants and waiver set forth in this paragraph cover and apply to, without limitation, all such charges, claims, suits, proceedings, or causes of action as enumerated in Paragraph 5 above. 7. Trade Secrets/Confidential Information: Employee agrees that in his employment at PHICO he has obtained information which is of a confidential nature or a trade secret. Employee further agrees that he will not disclose such confidential information or trade secrets to anyone other than those directors, officers or employees of PHICO who have a need to know. 8. Confidentiality: Employee agrees that the terms of this Agreement shall be confidential. Employee agrees further not to disclose any information concerning this Agreement to any person except to Employee's immediate family, attorney, and/or financial advisor and except where such disclosure may be required by law. 4 9. Modification to This Aqreement: Employee agrees that this Agreement may not be modified except by a written document that is signed by the Company and the Employee. 10. Governinq Law: Employee agrees that this Agreement shall be governed by, and construed pursuant to, the laws of the Commonwealth of Pennsylvania. 11. Remedies For Breach: Employee agrees that if Employee breaches any provision of this Agreement, Employee will immediately return to the Company all sums remitted to Employee or on Employee's behalf under the Separation Benefits portion of this document and that this Agreement shall have the effect of a judgment in favor of the Company's entitlement to the sums remitted under the Separation Benefits cited above. Employee agrees to pay to the Company all costs and reasonable attorney's fees incurred by the Company in enforcing this paragraph. If the Company breaches any provision of this Agreement, Company is responsible for Employee's reasonable legal costs arising from the breach. 12.. Liability: Nothing contained herein shall be construed as an admission by the Company of any liability of any kind to Employee, all such liability being expressly denied. 13. Other Benefits: Any other benefits accumulated by or provided to Employee as an employee of the Company which have not already ceased will cease as of the date of this Agreement. 14. Company's Right of Cancellation: Should any provision of this Agreement be declared or be determined by any court to be illegal, defective or invalid, the Company shall have the right to cancel this Agreement and to obtain back all sums of consideration provided to the Employee under the terms of this Agreement. Employee agrees that if the Company exercises its rights under this paragraph, then upon written notification from the Company of its cancellation of this Agreement in accordance with this paragraph, he shall immediately return to the Company all sums remitted to Employee or on Employee's behalf under the Separation Benefits portion of this document, and that, further, Employee shall not accept any other consideration provided for in this Agreement. Upon cancellation of this Agreement pursuant to this paragraph, this Agreement shall have the effect of a judgment in favor of the Company's entitlement to the sums remitted under the Separation Benefits cited above. 15. Severability: Should any provision of this Agreement be declared or be determined by any court to be illegal, defective or invalid, the validity of the remaining parts, terms, or provisions shall not be affected thereby and said illegal or invalid parts, terms or provisions shall be deemed not to be part of this Agreement. 16. In further consideration of the separation benefits described above, employee shall not accept any employment in the health care property and casualty insurance industry, including but not limited to, medical malpractice and health care professional liability insurance, at any time from the date of this agreement through August 1, 1999. This restriction operates in conjunction with, not in replacement of, the restrictions set forth in the SRIP agreement referenced in Section 3 above. 17. Acknowledgment: Employee acknowledges and represents that: (a) Employee has been advised to consult with an attorney, if Employee desires, prior to executing this Agreement; (b) Employee has been provided a period of at least twenty-one (21) days to consider this Agreement; © Employee fully understands this Agreement and Employee's alternatives with respect to the advisability of making and entering into this Agreement; (d) Employee has a period of seven (7) days following the date on which this Agreement was executed to revoke this Agreement, and this Agreement will not become effective or enforceable until this revocation period has expired; and (e) Employee has entered into this Agreement by Employee's free will and choice without any compulsion, duress or undue influence from anyone. EMPLOYEE UNDERSTANDS THAT, BY SIGNING THIS AGREEMENT AND ACCEPTING THE SEVERANCE PACKAGE DESCRIBED HEREIN, HE IS FOREVER GIVING UP THE RIGHT TO SUE THE COMPANY FOR, AND ANY RIGHT TO RECOVER FROM, ANY CLAIMS OF ANY TYPE WHICH HE MIGHT HAVE AGAINST THE COMPANY BASED ON ANY EVENTS THAT HAVE OCCURRED UP TO AND INCLUDING THE MOMENT HE SIGNS. IN WITNESS WHEREOF, Employee has hereunto set Employee's hand and the Company has caused this Agreement to be executed by its duly authorized officer on the date written below. WITNESS EMPLOYEE PHICO GROUP, INC. KEVIN G. BURKE Vice President Human Resources Date Exhibit C SEPARATION AGR~RMENT AND GENERAL RELEASE THIS SEPARATION AGREEMENT AND GENERAL RELEASE ("Agreement") is entered into by and between PHICO Group, Inc. ("Company") ~nd Gary J. Schultz (UEmployee"): WHEREAS, Employee was formerly employed by the Company as Senior Vice President and Chief Financial Officer, until June 15, 2001; and WHEREAS, both parties desire to reach an amicable cessation of the employment relationship; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and Employee agree as follows: 1. Purpose: It is expressly understood that this Agreement is entered into for the purpose of avoiding litigation between Employee and the Company of any claims arising out of the aforesaid employment relationship. To that end, Employee acknowledges that this Agreement resolves any and all claims by Employee that the Company has ever acted improperly or unlawfully towards him with respect to his employment with the Company. Employee further acknowledges that the Company's actions towards him were in accordance with all applicable state and federal laws and regulations. 2. Consideration: The undersigned, Gary J. Schultz, expressly acknowledges and confirms that the only considerations for his signing this Separation Agreement and General Release are the terms and provisions stated herein and that no other promise or agreement of any kind has been made to him by any person or entity whatsoever to cause him to sign this document and that he fully understands its meaning and intent. The undersigned, Gary J. Schultz, further expressly acknowledges that in consideration for any of the separation benefits set forth below, he agrees to return all company property, e.g., laptop computer, automobiles, other miscellaneous equipment, policy manuals, etc. 3. SeDaratiDn Benefits: For consideration of the promises set forth in this Separation Agreement and General Release, the Company agrees to provide to Employee the following separation benefits: (a) Salary continuation in regular semi-monthly installments of $8,166.67 for twelve (12) months (a total of twenty-four (24) payments) less taxes and other usual deductions, beginning on the eighth (8th) day following execution of the Agreement. All earned, unused vacation days will be paid at the end of the salary continuation period. Any advances, temporary or permanent, which have been made to the Employee and remain unpaid will be deducted from the payments set forth in this paragraph; (b) Reimbursement for COBRA coverage for group health and dental insurance until (1) the last day of the month during which the Company makes the final salary continuation payment in accordance with paragraph 3(a) of this Agreement, or (2) the date on which said coverage is provided by another employer, whichever comes first, subject to the Company's and/or Plan's customary terms and conditions; (c) Outplacement services provided by Career Management Consultants, Inc. at no cost to the Employee, for a period of twelve (12) months beginning on the effective date of this Agreement; (d) Access to the Employee Assistance Program through the end of the month during which the Company makes the final salary continuation payment in accordance with paragraph 3(a) of this Agreement; and (e) Benefits under the Supplemental Retirement Income Plan (SRIP), Supplemental Executive Retirement Plan (SERP), PHICO Salary Deferral Plan, and the HAP Pension Plan will be paid in accordance with the applicable terms and conditions of those plans. If there is a change in control as defined under the SRIP and/or the SERP (collectively the ,,Plans" or individually the "Plan"), during the twelve month salary continuation period of this Agreement, and if the Employee would have then received a benefit under the Plan(s) in addition to that received by him as a result of his termination~of employment or service as defined in the Plans (Employee having received or is about to receive a lump sum payout of the present value of his current entitlements thereunder) then as additional consideration payable to Employee under this Agreement, the Company shall pay to the Employee in a lump sum the additional benefit in the event of a change in control as defined under the Plans within 30 days after the effective date of the change in control notwithstanding that he is not then a full time employee and further that he had theretofore received his pre change of control benefits under the Plan(s). 4. Full Cooperation: As a material condition for the payment of the Separation Benefits set forth in paragraphs 3(a) through (e), the Employee agrees to cooperate fully with the Company by responding fully and truthfully to inquiries from the Company, as well as providing information and documentation that is requested, as well as testifying truthfully in any court and/or administrative proceedings. Employee will be reimbursed for reasOnable expenses incurred in complying with the 2 requirements of this paragraph. In the event the Employee breaches this requirement, any separation benefits that have not been made, shall cease and the Company shall have no further obligations to the Employee. 5. Mutual Aqreement As To ReQresentations: The Company and Employee agree that, in all respects and at all times, neither party will take any action nor make any statement about the other which is in any manner negative or derogatory. At all times, each party will be sensitive to the image, reputation and dignity of the other. The Company will use its best efforts to assure that its employees comply with this provision of the Agreement. 6. Release: In consideration of the Separation Benefits described above, which Separation Benefits Employee was not otherwise entitled to receive, Employee, for Employee, Employee's heirs, personal representatives and assigns, does hereby release and forever discharge the Company and/or its related companies, successors and assigns, officers, directors, agents and employees, and its owner, from any and all claims, demands, causes of actions, losses and expenses of every nature whatsoever, whether known or unknown, arising out of or in connection with Employee's employment by the Company or the termination thereof, including, but not limited to, breach of contract (expressed or implied), intentional infliction of emotional harm, wrongful discharge or other tort actions, claims of discrimination, whether as to race, sex, national origin, age or otherwise, including, without limitation, any claim under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Older Workers Benefits 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 or any other federal, state, or local statute, regulation, or ordinance relating to discrimination in employment or the payment of wages, except for any right or claims which may arise after the effective date of this Agreement. This Agreement may be pled by the Company as a defense to any claim or entitlement which may be asserted by Employee, or by any other person or agency on Employee's behalf, in any suit or claim against the Company for or on account of any matter or thing whatsoever arising out of Employee's employment by the Company. Notwithstanding the foregoing, nothing herein shall be construed as a waiver or release of any right of the Employee to seek or receive compensation or any other rights or benefits under the Pennsylvania Unemployment Compensation Law, codified at 43 P.S. §751, et seq., to the extent that Employee is entitled to such rights and benefits by law. 7. Covenant Not To Sue and Waiver of Recovery: Employee agrees and covenants that he will not file, charge, claim, sue or 3 cause or permit to be filed any civil or administrative action, suit or legal proceeding (other than a claim under the Pennsylvania Unemployment Compensation Law) seeking equitable or monetary relief for Employee in connection with any matter occurring at any time in the past concerning or arising from Employee's employment relationship with the Company, up to and including the effective date of this Agreement or involving any continuing effects of any acts or practices which may have arisen or occurred on or prior to the effective date of this Agreement. Employee further agrees and covenants that should any person, organization, or other entity file, charge, claim, sue, or cause or permit to be filed any such action, suit, or legal proceeding, Employee will not seek or accept any personal relief in such civil or administrative action, suit or legal proceeding. Employee further covenants that he will not bring any civil or administrative action, suit or legal proceeding contesting the validity of this Agreement or attempting to negate, modify or reform the Agreement. The covenants and waiver set forth in this paragraph cover and apply to, without limitation, all such charges, claims, suits, proceedings, or causes of action as enumerated in Paragraph 5 above. 8. Trade Secrets/Confidential Information: Employee agrees that in his employment at PHICO he has obtained information which is of a confidential nature or a trade secret. Employee further agrees that he will not disclose such confidential information or trade secrets to anyone other than those directors, officers or employees of PHICO who have a need to know. 9. Confidentiality: Employee agrees that the terms of this Agreement shall be confidential. Employee agrees further not to disclose any information concerning this Agreement to any person (i) except to Employee's immediate family, attorney, and/or financial advisor, but only if such person is informed of and agrees to honor this confidentiality requirement; and (2) except where such disclosure may be required by law. 10. Modification to This Aqreement: Employee agrees that this Agreement may not be modified except by a written document that is signed by the Company and the Employee. 11. Governinq Law: Employee agrees that this Agreement shall be governed by, and construed pursuant to, the laws of the Commonwealth of Pennsylvania, and venue shall be in the courts located in Cumberland County, Pennsylvania. 12. Remedies For Breach: Employee agrees that if Employee breaches any provision of this Agreement, Employee will immediately return to the Company all sums remitted to Employee or on Employee's behalf under the Separation Benefits section of this document and that this Agreement shall have the effect of a judgment in favor of the Company's entitlement to the sums 4 remitted under the Separation Benefits section set forth above. Employee agrees to pay to the Company all costs and reasonable attorney's fees incurred by the Company in enforcing this paragraph. If the Company breaches any provision of this Agreement, Company is responsible for Employee's reasonable legal costs arising from the breach. 13. Liability: Nothing contained herein shall be construed as an admission by the Company of any liability of any kind to Employee, all such liability being expressly denied. 14. Other Benefits: Any other benefits accumulated by or provided to Employee as an employee of the Company which have not already ceased will cease upon the execution of this Agreement. 15. company's Riqht of Cancellation: Should Employee, or any person or agency acting on his behalf, seek to have any provisionof this Agreement be declared or be determined by any court'to be illegal, defective or invalid, the Company shall have the right to cancel this Agreement and to obtain back all sums of consideration provided to the Employee under the terms of this Agreement. Employee agrees that if the Company exercises its rights under this paragraph, then upon written notification from the Company of its cancellation of this Agreement in accordance with this paragraph, he shall immediately return to the Company all sums remitted to Employee or on Employee's behalf under the Separation Benefits section of this document, and that, further, Employee shall not accept any other consideration provided for in this Agreement. Upon cancellation of this Agreement pursuant to this paragraph, this Agreement shall have the effect of a judgment in favor of the Company's entitlement to the sums remitted under the Separation Benefits section set forth above. 16. Severability: Should any provision of this Agreement be declared or be determined by any court to be illegal, defective or invalid, the validity of the remaining parts, terms, or provisions shall not be affected thereby and said illegal or invalid parts, terms or provisions shall be deemed not to be part of this Agreement. · 17. Acknowledqment: Employee acknowledges and represents that: (a) Employee has been advised to consult with an attorney, if Employee desires, prior to executing this Agreement; (b) Employee has been provided a period of at least twenty-one (21) days to consider this Agreement; (c) Employee has read and fully understands this Agreement and understands Employee's alternatives with respect to the advisability of making and entering into this Agreement; (d) Employee has a period of seven (7) days following the date on which this Agreement was executed to revoke this Agreement and this Agreement will not become effective or enforceable until this seven-day revocation period has expired; and (e) Employee has entered into this Agreement by Employee's free will and choice without any compulsion, duress or undue influence from anyone. EMPLOYEE UNDERSTANDS THAT, BY SIGNING THIS AGREEMENT AND ACCEPTING THE SEVERANCE BENEFITS DESCRIBED HEREIN, HE IS FOREVER GIVING UP THE RIGHT TO SUE THE COMPANY FOR, AND ANY RIGHT TO RECOVER FROM, ANY CLAIMS OF ANY TYPE, WHETHER KNOWN OR UNKNOWN, WHICH HE MIGHT HAVE A~AINST THE COMPANY BASED ON ANY EVENTS THAT HAVE OCCURRED UP TO AND INCLUDING THE EFFECTIVE DATE OF THIS AGREE~NT. IN WITNESS WHEREOF, Employee has hereunto set Employee's hand and the Company has caused this Agreement to be executed by its duly authorized officer on the date written below. day of , 2001. WI?RESS EMPLOYEE Date~ PHICO GROOm, / Vice President Human/e s our c e s Exhibit D IN THE COMMONWEALTH COURT OF PENNSYLVANIA M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvm'fia, Plaintiff go PHICO Insurance Company One PHICO Drive P~O. Box 85 Mech~miesburg, PA 17055-0085, Defendant : Docket No. ~7 p~6~Ool ORDER AND NOW, this 16th day of August, 2001, upon consideration of the Petition for Rehabilitation ("Petition") filed by the Insurance Commissioner of the Commonwealth of Pennsylvania ("Commissioner"), the Court hereby fmds that it is in the best interest of PHICO Insurance Company ("PHICO"), its policyholders, creditors, and the public, that PHICO be placed into Rehabifitafion in accordance with provisions of Article V of the Insurance Depaxtment Act of 1921, Act of May 17, 1921, P.L. 789, as amended, 40 P.S. §.§221.1-221.63, and that sufficient grounds exist for the entry of an Order of Rehabilitation ("Order"), based on PHICO's consent to rehabilitation under 40 P.S. §221.i4(12). NOW, therefore, it is hereby ORDERED, ADJUDGED AND DECREED that: 1. The Petition for Rehabilitation filed by the Commissioner is granted. 2. PHICO is hereby placed in rehabilitation pursuant to the provisions of Article V of the Insurance Department Act, supra. 3. M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, is, and her successors in office are, hereby appointed Rehabilitator of PHICO, directed to take immediate possession of its property, business and affairs as Rehabilitator pursuant to the provisions of Article V of the Insurance Department Act, supra, and to take such action as the nature of this case and the interests of the policyholders, creditors, or the public may require. 4. The Rehabilitator shall have full powers and authority given the Rehabilitator under Article V of the Insurance Department Act, supra, and under provisions of all other applicable laws, as are reasonable and necessary to fulfill the duties and responsibilities of the Rehabilitator under Article V of the Insurance Depathnent Act, supra, and under this Order. ASSETS OF THE ESTATE 5. As provided in Section 515(c) of Article V of the Insurance Department Act, supra, as Rehabilitator, the Commissioner is hereby directed to take possession of the assets, contracts and rights of action of PHICO, of whatever nature and wherever located, whether held directly or indirectly. According to Section 515(c), supra, "the filing or recording of this Order with the clerk of the Commonwealth Court or recorder of deeds of the county in which the principal business of PHICO is conducted, or the county in which its principal office or place of business is located, shall impart the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with that recorder of deeds would have imparted." 6. All banks, investment bankers, or other companies, entities, or persons having in their possession assets which are, or may be, the property of PHICO are hereby ordered to advise the Rehabilitator, and any agents and attorneys for the Rehabilitator (collectively, the "Rehabilitator") immediately of such assets and to identify such assets for the Rehabilitator, and are fimher ordered not to disburse, convey, transfer, pledge, assign, hypothecate, encumber or in any manner dispose of such assets without the prior written consent of, or unless directed in writing by, the Rehabilitator. Any checks or other payments which have, as of the date of this Order, been actually mailed or actually delivered to the payee will, provided same are otherwise proper and in compliance with relevant law, be honored without prejudice to the fights of the Rehabilitator regarding recoupment from the recipient. Such persons and entities, and all other persons and entities, are enjoined from disposing of or destroying any records pertaining to any business transactions between PHICO and banks, brokerage houses or other persons or companies having done business with PHICO or having in their possession assets, which are, or were, the property of PHICO. 7. All insurance agents, brokers or other persons having sold policies of insurance and/or collected premiums on behalf of PHICO shall account for all earned premiums and commissions and shall account for and pay all premiums and commissions unearned due to policies canceled in the normal course of business, directly to the Rehabilitator at the offices of PHICO within 30 days of the date of this Order, or the date of receipt, whichever is later, or appear before this Court to show good cause as to why they should not be required to account to the Rehabilitator. No insurance agent, broker, or other person shall use premium monies owed to PHICO for any purpose other than payment to the Rehabilitator. Such insurance agents, brokers or other persons may be held in contempt of Court for violation of the provisions of this Order. 8. At the request of the Rehabilitator, all attorneys employed or retained by PHICO as of the date of this Order shall, within 30 days of such request, report to the Rehabilitator the name, company claim number, if applicable, and stares of each case or matter they are handling on behalf of PHICO. 9. At the request of the Rehabilitator, any company providing telephone service to PHICO shall provide new telephone numbers and refer calls from the numbers presently assigned to PHICO to any such new numbers and perform any other changes necessary to the conduct of the Rehabilitation of PHICO. 10. Any premium finance company which has entered into a contract to finance a policy which has been issued by PHICO shall pay the premium owed to PHICO directly to the Rehabilitator at the Offices of PHICO. 11. The United States Postal Service is requested to provide any information requested regarding PHICO and to handle future deliveries of PHICO mail, as directed by the Rehabilitator. 12. Any entity furnishing water, electric, sewage, garbage or trash removal services to PHICO shall maintain such services and transfer any such accounts to the Rehabilitator as of the date of this Order, unless instructed to the contrary by the Rehabilitator. 13. Any entity furnishing claims processing or data processing services to PHICO shall maintain such services and transfer any such accounts to the Rehabilitator as of the date of this Order, unless instructed to the contrary by the Rehabilitator. 14. Any entity which has custody or control of any data processing information and records including, but not limited to, source documents, all types of electronically stored information, master tapes or any other recorded information relating to PHICO, shall transfer, at the request of the Rehabilitator, custody and control of such records to the Rehabilitator. Any such entity may be held in contempt of Court for violation of the provisions of this Order. 15. At the request of the Rehabilitator, PHICO, its officers, directors, trustees, employees, agents and attorneys are hereby ordered to deliver to the Rehabilitator keys or access codes to the premises where PHICO conducts its business and to any safe deposit boxes, and to advise the Rehabilitator of the combinations or access codes of any safes or safe keeping devices of PHICO. 16. PHICO, its officers, directors, trustees, employees, agents and attorneys are hereby ordered to identify for the Rehabilitator ail of the assets, books, records, files, credit cards, or other property of PHICO, to tender or make readily available to the Rehabilitator, at the Rehabilitator's request, ail of the foregoing, and to advise and cooperate with the Rehabilitator in identifying and locating any of PHICO's assets. 17. Except for policies or contracts of insurance, the Rehabilitator, in her discretion, may affirm or disavow any executory contracts to which PHICO is a party. The entry of this Order of Rehabilitation shall not constitute an anticipatory breach of any such contracts. EXPENSES, POLICYHOLDER AND CERTIFICATE CLAIMS, OTHER PAYMENTS AND LAWSUITS 18. The Rehabilitator may, in her discretion, pay expenses incurred in the ordinary course of PHICO's business in rehabilitation and may, in her discretion, pay the actual, reasonable, and necessary costs of preserving or recovering the assets of PHICO and the costs of goods and services provided to PHICO's estate. Such costs shall include but not be limited to: (a) reasonable professional fees for accountants, actuaries, attorneys and consultants with other expertise retained by the Commonwealth of Pennsylvania Insurance Depaslsnent ("Department"), the Commissioner or the Rehabilitator to perform services relating to the Rehabilitation of PHICO or the preparation, implementation, or operation of a rehabilitation plan; (b) compensation and other costs related to representatives and employees of PHICO; and (c) a reasonable allocation of costs and expenses associated with time spent by Department personnel in connection with the rehabilitation of PHICO. 19. In the event that this Court issues an order appointing the Insurance Commissioner of the Commonwealth of Pennsylvania as liquidator of PHICO, actual, reasonable and necessary costs of preserving or recovering assets of PHICO and the costs of goods or services provided to and approved by PHICO Insurance Company (In Rehabilitation), under paragraph 18 of this Order, during the period of Rehabilitation will be treated as "costs and expenses of administration," pursuant to 40 P.S. §221.44. 20. The Rehabilitator may, in her discretion, pay claims for losses, in whole or in part, under policies and contracts of insurance and loss adjustment expenses as identified in Section 544(b) of the Insurance Department Act, supra, 40 P.S. §221.44Co). Such discretion of the Rehabilitator shall include the discretion not to pay bad faith claims or claims for extra-contractual charges or damages. 21. No payments of any type shall be made to any claimants of PHICO as identified in Section 544(c) through (i) of the Insurance Department Act of 1921, supra, 40 P.S. §221.44(c) through (i), except in the discretion of the Rehabilitator. 22. All persons, in the Commonwealth or elsewhere, are enjoined and restrained from: (a) instituting or further prosecuting any action in law or equity against PHICO or the Rehabilitator; (b) obtaining preferences, judgments, attachments, garnishments or liens, including obtaining collateral in any litigation, mediation, or arbitration involving PHICO, the Rehabilitator, or PHICO's assets and property; (c) levying any execution process against PHICO, the Rehabilitator or PHICO's assets and property in the Commonwealth of Pennsylvania or elsewhere; and (d) making any assessments or indirectly collecting such assessments by setting them off against amounts otherwise payable to PHICO. 23. Pursuant to Section 221.15(c) of the Insurance Department Act of 1921, supra, the Rehabilitator is specifically authorized, in her sole discretion, to enter into agreements to and otherwise take possession of the statutory deposits held by any state or territory and to do all things necessary to manage and apply the deposits in accordance with any such agreements. PHICO shall not post additional statutory security deposits in any state or territory. 24. All actions currently pending against PHICO in the Courts of the Commonwealth or elsewhere are hereby stayed. The Rehabilitator, in her sole discretion, may petition this Court to enter a stay of any pending or future actions against PHICO's policyholders, in the Courts of the Commonwealth of Pennsylvania or elsewhere, where the interests of PHICO's estate in rehabilitation so require. 25. No judgment or order against PHICO or an insured of PHICO entered after the date of filing of the Petition for Rehabilitation and no judgment or order against PHICO or an insured of PHICO entered at any time by default or by collusion need be considered as evidence of liability or quantum of damages by the Rehabilitator. REINSURANCE 26. The amounts recoverable by the Rehabilitator from any reinsurer of PHICO shall not be reduced as a result of this rehabilitation proceeding or by reason of any partial payment or distribution on a reinsured policy, contract or claim, and each such reinsurer of PHICO is without first obtaining leave of Court, hereby enjoined and restrained from terminating, canceling, failing to extend or renew, or reducing or changing coverage under any reinsurance policy or contract with PHICO. The Rehabilitator may terminate or rescind any contract with a reinsurer or reinsurers that is contrary to the best interests of the estate in rehabilitation. NEW OR RENEWAL BUSINESS 27. The Rehabilitator is authorized to accept or reject new, existing, or renewal business. In implementing this paragraph, the Rehabilitator shall have the discretion to, inter alia, accept or reject new, existing or renewal business, write renewal business for time periods less than one year, write contractually required tail coverage for time periods less than one year, and cancel existing business or contractually required tail coverage upon reasonable notice. INJUNCTION AGAINST INTERFERING WITH REHABILITATION 28. Until further order of this Court, all persons, corporations, parmerships, associations, counsel, custodians, and all other entities, wherever located, are hereby enjoined and restrained l~om interfering in any manner with the Rehabilitator's possession and fights to the assets and property of PHICO and from interfering in any manner with the conduct of the rehabilitation of PHICO. Those persons, corporations, partnerships, associations, counsel, custodians, and all other entities are hereby enjoined and restrained from wasting, transfen-ing, selling, concealing, terminating, canceling, destroying, disbursing, disposing of, or assigning any assets, contracts, causes of action, funds, records, investigative materials, or other property of any nature of PHICO. 10 30, T'niS Order shall not bc ~ed a findina~ o~ ~aration of insolvency such I1 Exhibit E (IN REHABILITATION} September 27, 2001 PI IICO BY CERTIFIED MAIL RETURN RECEIPT REQUESTED Mr. Gary J. Schultz 1108 W. Powderhom Road Mechanicsburg, PA 17050 Dear Mr. Schultz: PHICO Insurance Company ("PHICO") was placed into rehabilitation on August 16, 2001 by Order of the Commonwealth Court of Pennsylvania. The Rehabilitation Order appointed M. Diane Koken, the Pennsylvania Insurance Commissioner, as Rehabilitator of PHICO. The Order of Rehabilitation imposes certain duties upon the Rehabilitator and triggers certain statutory provisions, such as those governing the priority of obligations. Because of the financial condition of PHICO, it has been and continues to be necessary to rewew PHICO operations and finances. If rehabilitation can be accomplished, a draft plan for rehabilitation of PHICO will be submitted to the Commonwealth Court of Pennsylvania for its approval. Unfortunately, the financial condition of PH1CO is such that all of its obligations cannot be satisfied. By law, the Rehabilitator must put the payment of administrative expenses and policyholder claims above all other obligations. In order to conserve the limited resources of PHICO to satisfy these priority obligations, I am sorry to inform you that effective October 16, 2001, PHICO will no longer fund severance payments and benefits under the separation agreemem you entered into with PH1CO Group, Inc. This means that payments or benefits under your separation agreement may cease as of October 16, 2001. This letter will also serve to disavow any obligations PHICO may have in connection with said separation agreement. This action is not intended to affect any pension or retirement benefits that you may currently receive or may be eligible to receive under the HAP Pension Plan. We regret the necessity of this action, which is being done pursuant to the statutory ordering of priorities designed to maximize the ultimate payout of policyholder claim from PHICO's limited resources. By: Very truly yours, M. DIANE KOKEN, INSURANCE COIvlMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA, IN HER CAPACITY AS REHABILITATOR OF PItICO INSURANCE COMPANY William S. Taylor Deputy Insurance Commissioner Exhibit F PHI;CO Insurance Company Or~e PHICO Drive 0705o-2797) P.O. P~ox 85 Mechan icsburg, PA ~ 7 o 5 5-oo85 Tel 8oo.$82.U78 717.766.112~ Fax 7t7.766.2857 (IN REHABILITATION) October 3, 2001 PHICO BY CERTIFIED MAIL RETURN RECEIPT REQUESTED Maynard R. Stuffi 1208 E. Powderhom Road Mechanicsburg, PA 17055 Dear Mr. Smffi: PHICO Insurance Company ("PHICO") was placed into rehabilitation on August 16, 2001 by Order of the Commonwealth Court of Pennsylvanim The Rehabilitation Order appointed M. Diane Koken, the Pennsylvania Insurance Commissioner, as Rehabilitator of PHICO. The Order of Rehabilitation imposes certain dmies upon the Rehabilitator and triggers certain statutory provisions, such as those governing .the priority of obligations. Because of the financial condition of PHICO, it has been and continues to be necessary to review PHICO's operations and finances. If rehabilitation can be accomplished, a draft plan for rehabilitation of PHICO will be submitted to the Commonwealth Court of Pennsylvania for its approval. Unfortunately, the financial condition of PHICO is such that all of its obligations cannot be satisfied. By law, the Rehabilitator must put the payment of administrative expenses and policyholder claims above all other obligations. In order to conserve the limited resources of PHICO to satisfy these priority obligations, I am sorry to inform you that effective October 31, 2001, PHICO will no longer fund benefits under the separation agreement you entered into with PHICO Group, Inc. This means that benefits under your.~para[ion agreement may cease as of Oct0ber 31, 2001. This letter will also serve to disavow any obligations PHICO may have in connection with said separation agreement. This action is not intended to affect any pension or retirement benefits that you may currently receive or may be eligible to receive under the HAP Pension Plan. We regret the necessity of this action, which is being done pursuant to the statutory ordering of priorities designed to maximize the ultimate payout of policyholder claims fxom PHICO's limited resources. Very truly yours, By: M. DIANE KOKEN, INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA, IN HER CAPACITY AS REHABILITATOR OF PHICO INSURANCE COMPANY William S. Taylor Deputy Insurance Commissioner Exhibit G PHICO lnsueame Company One PHICO Drive U7oSO-Z797) Pi~. Box 85 Mect~nicsbu%~PA t7o55-oo~5 '1~1 800.38~.1378 717.766. t Fax 717-7~.~7 (IN REHABILITATION) October 3, 2001 PHICO BY CERTIFIED MAIL RETURN RECEIPT REQUESTED Mr. Richard J. Agostini 241 Pudding Hill Lane Marshfield, MA 02050-I042 Dear Mr. Agostini: 'PglICO-Insurance Company ("PI-II-COY') was placed into rehabifitation on August 16, 2001 by Order of the Commonwealth Court of Pennsylvania. The Rehabilitation Order appointed M. Diane Koken, thc Pennsylvania Insurance Commissioner, as Rehabilitator of PHICO. The Order of Rehabilitation imposes certain duties upon the Rehabilitator and triggers certain statutory provisions, such as those governing the priority of obligations. Because of the financial condition of PHICO, it has been and continues to be necess~ to review PHICO's operations and finances. If rehabilitation can be accomplished, a dra~ plan for rehabilitation of PHICO will be submitted to the Commonwealth Court of Pennsylvania for its approval. Unfortunately, the financial condition of PHICO is such that all of its obligations cannot be satisfied. By law, the Rehabilitator must put the payment of administrative expenses and policyholder claims above all other obligations. In order to conserve the limited resources of PHICO to satisfy these priority obligations, I am sorry to inform you that effective October 31, 2001, PHICO will no longer fund benefits under the separation agreement you entered into with PHICO Group, Inc. This means that benefits under your separation agreement may cease as of Octoher 31, 2001. This letter will also serve to disavow any obligations PHICO may have in connection with said separation agreement. This action is not intended to affect any pension or retirement benefits .that you may currently receive or may be eligible to receive under the HAP Pension Pla~ We regret the necessity of this action, which is being done purs,,unt to the statutory ordering of priorities designed to maximize the ultimate payout of policyholder claims ,from PHICO's limited resources. By: Very truly yours, M. DIANE KOKEN, INSURANCE COMMISSIONER OF ~ COMMONWEALTH OF PENNSYLVANIA, IN HER CAPACITY AS REHABILITATOR OF PHICO INSURANCE COMPANY William S. Taylor I Deputy Insurance Commissioner Exhibit H ~ 3. $chultz, CPA 1108 W. Powdechorn Rd. Mechanicsbu~g, PA 17050 717-691~80Z October 2, 200l BY CERTIFIED MAIL RETURN RECEIPT REQUESTED Sheryl M. Simmons Sr. VP & Treasurer PHICO Group, Inc. One pHICO Drive P.O. Box 115 Meehanicsburg, PA 17055-0085 Re: Separation Agreement and General Release dated July 13, 2001 between Gary J. Schultz and pHICO Group, Inc. Dear Sheryl: CompanY (In This weekend I received the attached from PHICO Insurance longer be funding the Rehabilitation) (pHICO) informing me that PHICO would no above referenced Separation Agreement. While I understand the intent of the letter, does not change my contractual relationship with pHICO Group, Inc. and the corranitments in that ~aweement to contmne I fully expect the salary continuation your response within 1 but would like your confirmation of that. I would appreciate business days. Sincerely, Gary J. Schultz Cc: Richard Stevenson McNees Wallace & Nurick LLC Gerald Anastasio, VP Human Resources PHICO Group Inc. Phico Group, Inc. One Phico Drive P.O. Box 85 Attention': ~nery~ ........ October 9, 2001 BY CERTIFIED MAIL RETURN RECIPT REQUESTED immons ........ ~**..,~ r~ctober 3, 2001 from William s. Taylor,' Dear Ms. S . certified ~e~, u~,o,., ~: om an cannot satisfy the I Have rece~ t_~..l~__= .... odvisina that Phtco Insura.?e~c~ ~_,~,~n( Inc effective Deouty Insurance L;.om_.m_~_~. -~, ~,, ~etirer~ent Agreement with ~-,~, ~,-"-~', ' --: ' m v01ull,J~ y c-o,,~, , ' It_o, ations of y ob_ October 31, 2001. received the check due S .eptember 15, 20~..1._ for -~-~.. i~ fn infnrm VOU that I have not ....... -~ ,,,,,,,me Plan in accordance w~m ~, .o ,~ ,.-. ......... ental Het~rem~ ~ ,, the amount credited u~er the Supplem my Voluntary Early Retirement agreement dated June 28, 1996. In accordance with that agreement, I am to receive monthly payments of $9,000.00 per month through December 1,2011. el a the overdue payment for September, ico Group, Inc. immediat Y P Y eh' ' con~-~l in the I request Ph s well as the other -. ~ due ,~n~ ~-~ r~instate all future payments,, a~_._., ,.,,,,, 28 1~96 ~P~ .m. ents,ar.e~-( .-w ......... a reemen[ oat~u ,~u~ ,,~ , : · he actions o[ luntary Earn Re_.?eme,?~. -q as such, are not su.b~.~ to ti ,-,~,,,~n.~nv VO ..... om Ph-ico-G~uup ~nc. a.nd,. Phico insurance ~, .... ,-.-,' · .and pay_a?ler~°rrtment of Pennsylvan~.a ~n r.e~,a[ds__to~ ,, ,,,~e ~vments by return ma,I. insurance ~. r-'_'_'; · ' ation ot st oue ~u,u,~,, ~._~_. I trust to receive confirm pa Very Truly, Maynard R. Stufft Past President & CEO PhiCO Group, Inc. Exhibit I October 15, 2001 PHICO (In Rehabilitation} Mr. Gary J. Schultz 1108 W. Powderhorn Road Mechanicsburg, PA 17050 Dear Gary: This is in response to your letter dated October 2, 2001 regardiag the discontinuance by PFIICO Insurance Company Of the funding.of severance payments and benefits under the separation agreement you entered into with PHICO Group, Inc. Please be advised that I no longer have the authority to approve payments from PHICO Group, Inc. and have therefore forwarded your letter and a copy of the separation agreement to Carolyn Seanlan, Chairman of the Board of PHICO Group, Inc. requesting her direction in this matter. I will keep you informed of any decisions made in this regard, but strongly advise you to direct any further inquiries regarding this matter to her attention. Sincerely, cc: Carolyn F. Scanlan PHICO Group, Inc. PHICO Insurance Company One PHICO Drive 07o5o-2797) P.O. ,Box 8 5 , Mechanicsburg, PA 17o55-°°85 Tel 8oo.382'1378 7~7'766'1122 Fax 717.766'z837 pHICO ~n Rehabilitationl October 15, 2001 Mr. MaynardR. Stufft 1208 E. Powderhorn Road Mechanicsburg, PA 17050 Dear Maynard: This is in response to your letter dated October 9, 2001 regarding the discontinuance by PHICO Insurance Company Of the funding of obligations under the Early Retirement Agreement you entered into ~vith PHICO Group, Inc. Please be advised that I no longer have the authority to approve payments from PHICO Group, Inc. and have ~herefore forwarded your letter and a copy of the Early Retirement Agreement to Carolyn Scanlan, Chairman of the Board of PHICO Group, Inc. requesting her direction in this matter. I will keep you informed of any decisions made in this regard, but strongly advise you to direct any further inquiries regarding this matter to her attention. SherJl 1~. Simmons , ~ ........ --"' ~resident and Treasurer cc: Carolyn F. Scanlan PHICO Group, Inc. Exhibit J McNees Wallace & Nurick attorneyS at taw RICHARD W. STEVENSON DIRECT DIAL: (717) 237-5208 E-MAiL ADDRESS: RSTEVENS~-'MWN'COM October 17, 2001 Mr. Gerald P. Anastasio Vice President, Human Resources pHICO Group, Inc. One pHICO Drive p. O. Box 85 Mechanicsburg, PA 17055-0055 RE: GARY SCHULTZ Misc. Matters Our File: 20615-0001 VIA FACSIMILE: 717-766-2837 AND FIRST CLASS MAIL Dear Mr. Anastasio: We represent Gary Schultz with regard to his severance from PHICO Group, Inc. Mr. Schultz has heretofore made application for the lump sum payout under his sERP account, which had a lump sum benefit of $72,331.00 as of July 30, 2001. He is entitled, under section 3.1(,a)(ii) of the SERP, to the lump sum because he elected on August 9, 2001, and thereafter received, a lump sum payout of his qualified retirement benefit. ' We hereby demand that the lump sum (together with interest from August 9, 2001) be paid without delay directly to Gary Schultz. Thank yOU. Very truly yo/~, By Ri'chard W. Stevenson RWS/hjl cc: Gary Schu~tz PO Box 1166 · 100 piNE STREET ° H^RR~SBURG, PA 17108-1166 ' TEL: 717.232.8000 ' FAX: 717.237.5300 ' wWW.MWN.COM COLUMBUS, OH ° HAZLETON, PA ' WAsHtNGTON, DC RtCHARD ~N. STEVENSON D~AL' (717) 237-5208 O RECT · E-MAIL ADDRESS R~ October 23, 2001 Ms. Carolyn F. Scanlan Chairman PHICO Group, Inc. One pHICO Drive p. O. Box 85 Mechanicsburg, PA 17055-0085 FAX: 766-2837 & MAIL RE: MAYNARD R. STUFFT pHICO Group, inc. Claim Dear Ms. Scanlan: We represent Maynard R. Stuff, former President and CEO of pHICO GroUp, Inc. ("Group"), who retired effective January 1, 1997, with benefits as described in that letter agreement dated June 28, 1996, signed by John A. Russell, Chairman- Following is a summary of the continuing payments due Mr. Stuff: · remitted to provide this benefit through alth Insurance- Group ~_s co ' ed an unsohc~ted .conve. r.s_i.°n 1. Hea_ltn_m. ~u~ ~.'~".",',.,,v recently rece~v -. ,A,-~-~,ut nreiudlce to a,,nust 1. 2004· Mr. :5[um ~-'o_~,~',~,r~.centl¥ a COBRA not~ce, vv,,,,,, ,- r--- ~-- , _-- Ol.,~ ~'~rnSS eno iIiU/~;~ inquiry from :)~uo ,-,,-, , Mr. Stuff intends to complete and request his position as described herein, information· please advise in detail and promptly as to what changes are being made or proposed in your group health plan· Mr. Stuff has been paying $112.00 r the coverage by deduction of this amount from his $9,000 per month in per month fo - ,-,-~crib d below). Since the September and October iieu of SRIP payment tu~ .... e payments have not been paid to Mr. Stuff, the health plan contribution has likewise not been paid. Finally, describe what level of contribution is anticipated from Mr. Stufft, and whether this is applied universally to all Group employees. · · to be provided by Group without ntal Plan. Th~s ~s. ..- ~,fft eceived a COBRA notice 2. ~n4 Yesterday, iw~ ....... r contribution througl~ AugUs~ ~, ~"" ' of this coverage. from Delta Dental. Advise promptly as to the status · ired to provide without cost to Mr. Stuff _ Health· Group is re.q.u 3. ~ ..... ~ Aunust 'l, ~uu'~ .... . .....*-- *he status o~ · 000 of life coverag.e tn~uu~_,_,:__ ~',~,m Advise promp[lY a~ ,-- - . $600· --~*ecl conversluH "~ ..... Once again, Prudentia an this coverage, and why he is receiving conversion information. Mr. Stuff intends to respond to this conversion inquiry, and does so without prejudice to his position as to Group's responsibility under the early retirement agreement. Ms. Carolyn F. scanlan October 23, 2001 Page 2 4. ~. Mr. stufft is entitled to a $9,000 per month payment through December 1,2011. He has not received the September and October payments and consequently has not made his health insurance contribution payment as described above. We demand that these past monthly obligations be paid promptly and future ones paid timely. , made to Mr. Stuff from ~,~, ,~,~-~ .~3 monthly pay.rnent. J ~.., ~ s terms to yield his SERP. The. ;~='"-,"'~'~001, was deslgnate(~ u), ,t his SERP 5. 199~r°ugh August ,, '- The calculation included january 1, benefit, payout under the proiected retirement plan monthly sum Stuff is benefit- Recently, he was notified and received a lump Mr. pension account, which will yield approximately $5,000.00 per month. likewise entitled to receive a lump sum under the SERP, the present value of which will supplement his monthly benefit to realize the $9,333.33. We hereby demand that this amount be calculated and promptly paid. Group has been noncommunicative and nonresponsive with Mr. Stuff and others Ith and other insurance ..... t ~,ayments and hea ,_ ~ontractual obligations, similarly situated regarding ear,Y. coverages- 't'his course of con(3uct but evidences bad faith as well. We hereby demand that these payments be brought current and the insurance coverage confirmed, and that full communication of information and intention be communicated to Mr. Stuff and the undersigned immediately. Very truly yours, McNEES WALLACE & NuRICK LLC By Richard W. Stevenson RWSIkdrlhjl c: Mr. Maynard R. Stuff RICHARD W. STEVENSON D RECT DIAL: (717) 237-5208 E-MAIL ADDRESS: RsTEVENS{~MWN COM November 15, 2001 Ms. Carolyn F. Scanlan Chairman PHICO Group, Inc. One PHICO Drive P. O. Box 85 Mechanicsburg, PA 17055-0085 F___~: 561-5334 & MAIL RE: RICHARD J. AGOSTINI PHICO Group, Inc. Claim Dear Ms. Scanian: We represent Richard J. Agostini, former Senior Vice President PHICO Group, Inc. ("Group"), who terminated with benefits as described in that Separation Agreement and General Release dated December 22, 1997 (,,Agreement"). Following is a summary of the continuing payments due Mr. Agostini: 1. Health Insurance. Group is committed to provide this benefit to Mr. Agostini an-~-~s wife, Ellen, through their age 65, which is in excess of 30 an unsolicited will complete ana reque~ .i~, ' .' osition as described herein, Mr. A. gostini months from now ("Lapse Date")· Mr. Agostini has recently received o ice Without prejudice, to h~,s..p .... hv ,~,~n~ d that Group conbnue to COBRA n t ' - --, ,~rmafion we ne~w, ,, .... an provide health insurance as heretofore provided. Without prejudice to our demand, please advise in detail and promptly as to what changes are being made or proposed in your group health plan. Describe what level of contribution will be requested, if any, from Mr. Agostini, and whether this is applied universally to all Group'employees- · his is to be provided by Group to the Agostinis 2. G__Grou_p~Denta. I .Plan_ T _ A,~ M Aaostini has received a COBRA without contribution through the Lapse D~,o..._r. ~ as heretofore notice. We demand that Group continue to provide dental insurance provided. Without prejudice to our demand, advise promptly as to the status of this coverage. Ms. Carolyn F. Scanlan November 15, 2001 Page 2 'tute Mr. Agostini is entitled to $314,400 under Section 3. SRIP .Subs~t_u~.e.. ,~.A ~. .... of Grou under the Agreement as 3(f) of the Agreement, aha g~ven u~u v,~o,.h P above, we demand payment in full. The A reement provides that with Group's breach, it is 4 Le_~.qal Costs., , ,g .... =~in" from the breach, which he w~ll responsible for Mr. Agostin s ~ega~ costs a,,o ~ ' submit. Group has been noncommunicative and nonresponsive with Mr. Agostini and others similarly situated regarding early retirement payments and health and other insurance coverages. This course of conduct is not only violative of Group's contractual obligations, but evidences bad faith as well. We hereby demand that these payments be brought current and the insurance coverage confirmed, and that full communication of information and intention be communicated to Mr. Agostini and the undersigned immediately. Very truly yours, McNEES WALLACE & NURICK LLC By Richard W. Stevenson RWS/kdr c: Mr. Richard J. Agostini loc: Helen L. Gemmill Exhibit K w#li~m EL Sclzorl~d~ FACSIMILE: (215) October 24, 2001 Richard W. Stevenson, Bsquire McNecs Wall~wc & Nufick, LLC PO Box 1166 100 Pine Sttoot Harrisburg, PA 17108-1166 Re: PHICO Gronp, Inc. Dear Mr. Stevenson:. This letter is in response to your letter of October 23, 2001 addressed to Carolyn F. Scanlau. Until recently, all payments were made by PHICO Insunmee Company. We represent PHICO Group, Inc. Your letter has been referred to us for response. We ~re in the process of revieWing the letter and the applicable facts and agreeiiients and will respond promptly. If you have any questions, please feel free to call me. WHS/amp cc: Vga Faesb~le Carolyn F. Seanlan William H. Schorling KLETT ROONEY LIEBER& SCHORLING A Professional Corporation ILLRSPHll t 50854.1 DI~LAWAI~ NEW ~I~/ MCNIE£S, WALLACE & NURICK IO0 PINE STR£1ET P O BOX HARRISBURG, PA 17108 SHERIFF'S RETURN - NOT SERVED CASE NO: 2001-06980 p COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND STUFFT MAYNARD R ET AL VS PHICO GROUP INC R. Thomas Kline according to law, says, the within named DEFENDANT PHICO GROUP INC Sheriff that he made a diligent who being duly sworn search and inquiry for , to wit: unable to locate Them in his bailiwick. COMPLAINT & NOTICE but was He therefore returns the the within named DEFENDANT NOT SERVED , as to PHICO GROUP INC SERVICE STOPPED DUE TO BANKRUPTCY. Sheriff's Costs: Docketing 18.00 Service .00 Affidavit .00 Surcharge 10.00 .00 28.00 SO answers-~~ ~/' R. ~fHOMAS KLINE SHERIFF OF CUMBERLAND COUNTY MCNEES WALLACE NURICK 12/18/2001 Sworn and subscribed to before me this ~ day o~ ,7 Prothonot ~ry IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA MAYNARD R. STUFFT, RICHARD J. AGOSTINI, and GARY J. SCHULTZ CIVIL ACTION NO. 01-6980 Plaintiffs, V. PHICO GROUP, INC., Defendants. SUGGESTION OF BANKRUPTCY AND NOW, COMES Defendant PHICO Group, Inc. ("PHICO Group"), by and through its undersigned counsel, and makes the following suggestion of bankruptcy: 1. On December 14, 2001 (the "Petition Date"), PHICO Group filed a voluntary bankruptcy petition pursuant to chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code") in the United States Bankruptcy Court for the Middle District of Pennsylvania, Harrisburg Division (the "Court") at Bankruptcy Case No. 01-06636. 2. As of the Petition Date, an automatic stay went into effect with respect to PHICO Group pursuant to § 362 of the Bankruptcy Code and all entities are stayed and prohibited from, among other things: a. The commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against PHIC0 Group that was or could have been commenced before the commencement of PHICO Group's chapter 11 case, or to recover a claim against PHICO Group that arose before the commencement of the case; The enfomement, against PHICO Group or against property of the PHICO Group's bankruptcy estate, of a judgment obtained before the commencement of PHICO Group's chapter 11 case; KRLSPGH:360346.1 Any act to obtain possession of property of PHICO Group's bankruptcy estate or of property from the estate or to exercise control over property of the estate; Any act to create, perfect, or enforce any lien against property of PHICO Group's Bankruptcy estate; Any act to create, perfect, or enfome against property of PHICO Group any lien to the extent that such lien secures a claim that arose before the commencement of PHICO Group's chapter 11 case; Any act to collect, assess, or recover a claim against PHICO Group that arose before the commencement of PHICO Group's chapter 11 case; and The setoff of any debt owing to PHICO Group that arose before the commencement of PHICO Group's chapter 11 case against anyclaim against PHICO Group. 3. Actual damages, including costs and attorneys' fees and, in appropriate cimumstances, punitive damages may be recovered against violators of the automatic stay. Dated: January,.."~, 2002 KLETT ROONEY LIEBER & SCHORLING A Professional Corporation James D. Newell (PA ID 51337) 40th Floor, One Oxford Centre Pittsburgh, PA 15219 (412) 392-2000 -and- Thomas P. Brogan (PA ID 32968) 240 N. Third Street, Suite 600 Harrisburg, PA 17101 (717) 231-7700 -and- William H. Schorling (PA ID 21466) Two Logan Square, 12th Floor Philadelphia, PA 19103 (215) 567-7500 Counsel to PHICO Group, Inc. KRLSPGH:360346.1 2 IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA MAYNARD R. STUFFT, RICHARD J. AGOSTINI, and GARY J. SCHULTZ Plaintiffs, V. PHICO GROUP, INC., Defendants. CWIL ACTION NO. 01-6980 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Suggestion of Bankruptcy was sent via U.S. Mail, postage pre-paid, and by facsimile transmission on this 3ra day of January 2002, to the following: Helen Gemmill Susan V. Metcalfe McNEES WALLACE & NURICK LLC 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108 Counsel for the Plaintiffs Dated: January 3,200 Victoria ZA. Dye, Paralegal KLETT ROONEY LIEBER & SCHORLING One Oxford Centre, 40th Floor Pittsburgh, PA 15219-6498 KRJ~PGH:360718.1