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PLAINTIFF'S
EXHIBIT
LOAN AGREEMENT
.., f -:^-.
- .,. day of February, 1991, by
THIS AGREEMENT is wade this _
and among CONSUMERS REIIISURANCE COMPANY ("Consumers Re"), of 1200
Camp Hill By-Pass, Camp Hill, ?ennsylvania, ?AYROLL PRODUCTS & SYS-
TEMS, INC. ("PP&S"), of 11 Harket Square, Suite 8, llewburyport,
l1assachusetts, CONSUI1ERS LIFE INSURANCE COMPANY ("Consumers"), of
1200 Camp Hill By-Pass, Camp Hill, Pennsylvania, and AMERICO LIMITED
("Americo"), of Road Town, Tortola, British Virgin Islands.
WHEREAS, ?P&S and Consumers have entered into a National
Marketing Partnership Agreement (the "Partnership Agreement") dated
May I, 1990; and
WHEREAS, in furtherance of the objectives of the Partnership
Agreement, Consumers Re. an affiliate of Consumers, has agreed to
advance certain sums to PP&S upon the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Loan
Consumers Re hereby agrees to lend up to the Ninety Thousand
Dollars ($90,000) to PP&S. Such sum shall be made available to PP&S
in monthly installments of Fifteen Thousand Dollars ($15,000). The
loan shall be evidenced by PP&S's promissory note in a form as set
forth in Exhibit A attached hereto and made a part hereof (the
"Note"). The Note shall not bear interest and shall due and payable
on or before July 31, 1993.
2. ReDavment of Loan
PP&S hereby agrees that any amounts due to PP&S under the Part-
nership Agreement shall first be applied to the any outstanding
principal balance of the Note. PP&S and Consumers shall execute and
deliver an Addendum to the Partnership Agreement in a form as set
forth in Exhibit B attaChed hereto and made a part hereof.
3. Security for Note
Americo hereby agrees to guaranty PP&S' obligations under the
Note and to execute and deliver a guaranty in the form as set forth
in Exhibit C attached hereto and made a part hereof (the "Guaran-
llROMISSORY NOTE
$90,000.00
Camp Hill, PA
February 28, 1991
FOR VALUE RECEIVED, PAYROLL PRODUCTS & SYSTEMS, INC. (the
"Borrower") , of II Market Square, Sui te ~ 8, Newburyport,
Massachusetts 01950, promises to pay to the order of CONSUMERs
REINSURANCE COMPANY (the "Holder"), at P. O. Box 26, Camp Hill
Pennsylvania 17011 (or at such other place as the Holder may from
time to time designate), in lawful money of the United States of
America, the unpaid principal balance due and owing under this Note
up to a maximum principal balance of Ninety Thousand Dollars
1$90,000.00), without any interest on the unpaid balance.
This Note is a master note eVidencing advances up to a maximum
amount of $90,000 to be made by the Holder to the Borrower form
t.ime to time through July 31, 1991 pursuant to an Agreement dated
as of February 28, 1991 by and among the Borrower, the Holder and
Consumers Life Insurance company Ithe "Agreement"). The Borrower
shall be obligated to repay only the actual amount advanced as
hereinafter specified, without any interest thereon as provided in
this Note. The Holder shall record all advances and repayments
under the Note on the schedule attached to this Note.
The unpaid principal balance due under t~is Note shall be due
and payable in full on JUly 31, 1993.
1
If the Borrower defaults in the payment of any amounts payable
under this Note and such default continues for a period of ten days
after written notice thereof, or if the Borrower fails to comply
with any provisions of the Agreement and such failure to comply
shall continue for a period of thirty days after written notice
thereof, or if the Borrower shall become insolvent, make an
assignment for the benefit of creditors or become subject to any
proceeding, whether voluntary or involuntary, under any federal or
state bankruptcy or insolvency law, the Holder may, by written
notice to the Borrower, declare the unpaid balance of this Note to
be immediately due and payable.
No delay or failure of the Holder in exercising any right,
power or privilege hereunder shall affect any such right, power or
privilege, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such right, power
or pri vi1eqe preclude any further exercise thereof. or of any other
right, power or privilege.
This Note may be prepaid at any time, in whole or in part
without penalty or premium.
If any provision of this Note shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof. but this Note shall be
construed as if such invalid or unenforceable provision had never
been contained herein.
2.
ADDENDUM
THIS AGREEMENT is made this ;J.<J iL day of February, 1991
between CONSUMERS LIFE INStmANCE COMPANY ("Consumers"), of 1200
Camp Hill By-Pass, Camp Hill, Pennsylvania 17011 and PAYROLL
PRODUCTS & SYSTEMS, INC. ("PP&S"), of 11 Market Square, Suite 8,
Newburyport, Massachusetts 01950. This Agreement amends and
supplements a certain agreement entitled "National Marketing
Partnership Agreement" Ithe Partnership Agreement) dated May 1,
1990 among the same parties. The parties agree as follows:
1. All profit sharing payments due to PP&S under and by
virtue of Section Nine of the Par-::nership Agreement shall
ce paid to Consumers Reinsurance Company (Consumers Re)
for the purpose of reducing a ce=-::ain Promisso~I Note of
P?&S to Consumers Re dated t~:.s day. Profit-sharing
payments to PP&S under the Par-::~ership Agreement shall
resume when the Promissory Note is paid in full and all
ot~er debts owed by PP&S to ConS~T.ers Re shall have cesn
paid in full.
2. T~e Assignment of profit-shar:.~g pa~~ents to Cons~~ers
Re shall ce secondary to the r:.;ht of set-off retained
bv Consumers at Section ~~el~e of the Partnership
Agreement, which means that prc::.t-sharinq payments, if
due and payable, shall first ce a;plied to any debt owed
cy PP&S to Consumers if the righ-:: of se-::-off is asserted
cy ConSUo'llcrs and secondly, paid to Consumers Re as
GUARANTY
ON EVEN DATE herewith PAYROLL PRODUCTS & SYSTEMS, INC., of 11
:'!arkec Square, Suite ,S, NewDuryport, Massachusetts 01950,
hereinafter referred to as "Debtor", has executed and delivered to
CONSUMERS REINSURANCE COMPANY, of 1200 Camp Hill By-Pass, Camp
Hill, PeMsylvania 17011, hereinafter referred to as "Creditor",
a Prcrnissory Note, and certain other agre~~ents. The Creditor has
under~aken to enter into such agreements in reliance upon, among
cther things, the security of this Guaranty to secure the
indebtedness of Debtor to Creditor.
THEREFORE, intending to be legally bound, to induce the
Creditor to make advances to Debtor, the undersigned Guarantor does
hereby agree as follows:
1. The Guarantor unconditionally guarantees to Creditor the
prompt and punctual payment of all amounts due from
Debtor from and after the date hereof, by acceleration
on account of default or otherwise, and the performance
of all other obligations, including the obligations
undertaken by the Debtor to the Creditor in the
Promisso~l Note. The liability of the Guarantor under
this Guaranty shall be unlimited.
2. The liability of the Guarantor hereunder is absolute and
unconditional and shall not be affected in any way by
reason of any failure to pursue, repay or preserve any
rights against any personlsl, or the lack of any prior
en!orc:e:llent of suc:t ric;ht5. The Guarantor hereby waives
1
any =~ght ~= re~u~=e any s~c~ ~ric= enfcrc~~en~, ~nci t~e
Guarantor agrees ~hat any delay i~ enforci~g or failure
to entorce any such rights shall i~ no way affec: the
liability of the Guarantor hereunder, even if such rights
are thereby lost.
3. The Guarantor hereby waives all notices whatsoever with
respect to this Guaranty, present and future, including
but not lL~ited to notice of Creditor's acceptance hereof
and intention to act in reliance herein, of the terms and
conditions of t~e agreements between Creditor and Debtor.
the Guarantor hereby consents to the taking of, or
failure to take. frcm time to time without notice to the
Guarantor, any action of any nature whatsoever with
respect to the agre~~ents cetween Debtor and Creditor,
including but not limited to any renewals, extensions,
modifications, postponements, compromises, indulgences,
waivers, surre."lders, exchanges and releases, and the
Guarantor shall remain fully liable herein,
notwithstanding any of the foregoing. the Guarantor
hereby waives the benefit of all laws now or hereafter
in effect in any way lL~iting or restricting the
liability of the Guarantor hereunder, including without
limitation la) all defenses whatsoever to the Guarantor's
liability here~nder except the defenses of (i) payment:
(11) the per~cr:nance of the other obligations by the
Creditor under the agreements, and (ili) lack cf notice
2
as ;~quir~~ :~ t~~ ~=~e= ~~:ee~e~~s ~;hic~ ~~l$ G~arancJ
sec...::es, and (::) a.ll =:..;h~s :0 s~ay of e~ec-"::ion and
exer.1pticn of ;:roper'::jO .:.~ any act::.on ::0 enforce the
liability of t~e Guaran'::~r ~ereundero
~. No :elay in making demand en the ~uarant:~r for
I=er:or:nance or payment of t;,.e Guarantor I s obligation
hereunder shall prejudice the right to enforce said
I=erforrnance or payment.
S. The Guarant~r herein furt:her does hereby empower any
attorney of any court of record wit:hin the United States
or elsewhere to apl=ear ~or '::hem or anyone of them. in
the event of default by Creditor, and after one or more
declarations filed. confess jud~ent against ther.1 or
either of th~~ as of any te~ for all sums due hereunder,
with cost:s of suit and attorney's commission of five
percent 15\) for collec'::icn and release of errors, and
without stay of execution and inquisition and ext:ension
upon any levy on real est:ate is hereby waioled. and
condemnation agreed to and the eX~~pticn of Fersonal
property frcm le'r/ and sale on any execution herein, is
also hereby expressly waived, and no benefit of exemption
be Claimed under and by virt:ue of any eX~~pticn law now
in force in Which may be hereafter passed.
6. This Guaranty is given in c~nnection with and evidences
the cbligation of the under signed to make payment in
connecticn with a c~mercial transacticn.
)
co: . r,ATERAL PLEDr !.
'"
Februarv 2B. 1991
10....
CONSUMERS LIMITED
Office
Grand Turk
Turks and Caicos Islands
Gcntlerr..:!:
In consicer:ltion of mait or otll.r y~lu~ill. ccnsid.,..tions new or h.rI!~fter utended by you to tile uncenigned or any
of tl1e::-s. or uoon Use endorsome:!!, gtlU1ntee or sur.ty of tile undenigneci or any of tIl.m, tIl. una...~igned and uch of
th.m hm:v i1Ssiln. tnIlsfer :iIla pledge to you. and gnnt to you ~ security interl!st and !im in, ~II property of tile u."-
demgr-e: or my 0; tIlem new or herl!:;ter in your possession or ccnUtlI in ony =~citV wh~tsoever. indudinl but not
limiteD :0 ~~e b.lmte of :illY de;losit, UUst or ~cency ~cccunund the following:
12,000 shares of Common Stock of Consumers Financial Corporation
Certificate No. (sl
$40,000 share interest in the fleI1Iu3a Intemational
tialC1 tl.JBJ, .a..w.
~II 0; '..r.ie." propm.... tog.ther witll futuresddilions Uld swsitutions, is herl!in elled tI'.e COII~I.nI. said ColI.1teroJ to
be he!: :v YOU 15 c;lll~ler.ll seC'~nty for t.':e pn-ment of ~I indebtedness ond IWlilities C-~= or to beceme due, direct or
in c:irec:. ;:lsoIUle or continte:!t, joint or se..r.II, new exisOnC or he:e:fur uisint, of the ::''ldenigne: or:ny 0; tIlem.
E;c:1 of cr.: undmitned ~ve:s to deliver to you upon rl!quest ~dditlon~ security to your utisf::ll;-.ion should the Col.
r.mr~ h:~e:n pl.c;~ t:ecome uns.tisf~ctory to you for any rI!;ZScn. Ex:, 0; lbe undenign.a here!ly ~utllcrizes you to
re:tec;~ :~e Ccllm~~ or any p~rt tIlereof 11 any time. At or 11 any time me.. m:turity of any liability or obliption of
:he uncr~ltneo or UlV of tIl.", to you, or on def~ult by any PutY on any ins:rument to wnich the und.rsign.d or any
'll rr.e::-s !nall be m~x.r, .ndon.r. SUrl!ty, ~.rontor or other putY, you are h....by ~uthOrilC:2. at your option and with.
out r"::-~n. spnlt my otll.r p.non or prcp.rty, to "II U public: or pnure s~e or braUt's bcud.Jl or any p:an of
tile s&la C;i1u.r.l ""tIlout d.m.1llc!. ~~scment or notice of any kind ellC!tlt such as m.-y be rel;UiM by I.w. and to
us;tn u:: :e!iyc~:::e Ccll.te,..l. mci at snv such saie you orYOllr ~tmt m~y p"~re.'use any or all ofuic! CoII.1u.-.J. From
lhe ::rcc~:s of UlV lUch ut. or lales of tIlls.id ColI.tenJ. you UllUthoriud to d~.;t; :nd rl!ain ~I casts and ell'
pens.! '^:::.~t lh.:e!o. inclUding re:sonabl. attorney's fees. md to Ulply thl ~sidue of such prccnlis apinst then.
ibiiitin 01 thl unce:1icnld or any of tIllm. In the ....nt of any such sale or s.1ltS you shall bllWlle to tile undenigned
onlV for otIy sUl'lliuI Irter the rull utisf.,ticn of allliallilitlcs to you. The undmignld shail ~m.ain li.1ble ror I/lY de.
fiat.
With rt!:t:: to UlV insuummt l.a:~d in whole or in p;rt by thl Colllten/. exll of l1:e undersicned hereby waiYes
de",snc. ;:mentml~t, protl't and nOllce of dishonor and consena. without notice, to any amnions or renewals thu
mlY CI cr.Jlted by you.
Adcl'TU
Columbus Centre Bldg.
Roadtown. Tortola
British Virgin Islands
Columbus Centre Bldg.
Roadtown, Tortola
British Virgin Islanus
.7vC'~ L"'nD
1. r . G. DIRECl'ORS (T&C) LIMITED
,Ill!, oft' ,
'f!,,?/! ~-([n',,, ,.
U.: I
Ad~rr\\
. "
llRCMISSORY NOTE
$90,000.00
Camp Hill, PA
February 28, 1991
FOR VALUE RECEIVED, PAYROLL PRODUCTS & SYSTEMS, INC. Ithe
"Borrower") , of 11 Market Square, Sui te ~ 8, Newburyport,
Massachusetts 01950, promises to pay to the order of CONSUMERs
REINSURANCE COMPANY (the "Holder"), at P.O. Box 26, Camp Hill
Pennsylvania 17011 lor at such other place as the Holder may from
time to time designate), in lawful money of the United States of
America, the unpaid principal balance due and owing under this Note
up to a maximum principal balance of Ninety Thousand Dollars
1$90,000.00), without any interest on the unpaid balance.
This Note is a master note evidencing advances up to a maximum
amount of $90,000 to be made by the Holder to the Borrower form
t.ime to time through July 31, 1991 pursuant to an Agreement dated
as of February 28, 1991 by and among the Borrower, the Holder and
Consumers Life Insurance company I the "Agree.'IIent"). The Borrower
shall be obligated to repay only the actual amount advanced as
hereinafter specified, without any interest thereon as provided in
this Note. The Holder shall record all advances and repayments
under the Note on the schedule attached to this Note.
The unpaid principal balance due under this Note shall be due
and payable in full on July 31, 1993.
PLAINTIFF"
EXMI8IT
2
1
.
!f the Borrower defaults in the payment of any amounts payable
under this Note and such default continues for a period of ten days
after written notice thereof, or if the Borrower fails to comply
with any provisions of the Agreement and such failure to comply
shall continue for a period of thirty days after written notice
thereof, or if the Borrower shall become insolvent, make an
assignment for the benefit of creditors or become subject to any
proceeding, whether voluntary or involuntary, under any federal or
state bankruptcy or insolvency law, the Holder may, by written
notice to the Borrower, declare the unpaid balance of this Note to
be immediately due and payable.
No delay or failure of the Holder in exercising any right,
power or privilege hereunder shall affect any such right, power or
privilege, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such right, power
or privilege preclude any further exercise thereof, or of any other
right, power or privilege.
This Note may be prepaid at any time, in whole or in part
without penalty or premium.
If any provision of this Note shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof. but this Note shall be
construed as if such invalid or unenforceable provision had never
been contained herein.
2
ASSIGNMENT OF LOAN AGREEMENT AND PROMISSORY NOTE
TIllS ASSIGNMENT OF LOAN AGREEMENT AND PROMISSORY NOTE (the
"Assignment") is made and entered into this 3 \)3: day of August 1998. by and between Consumers
Reinsurance Company, an Arizona corporation, with offices located at 1200 Camp Hill By-Pass,
Camp Hill. Pennsylvania. hereinafter ("Assignor"), and Consumers Financial Corporation. a
Pennsylvania corporation. with offices located at 1200 Camp Hill By-Pass, Camp Hill, Pennsylvania.
hereinafter (" Assignee").
R Eel TAL S:
WHEREAS, Assignor made a loan (the "Loan") to Payroll Products & Systems, In<:.
(the "Borrower"), evidenced by that certain Promissory Note dated February 28, 1991 made by
Borrower payable to the order of Assignor in the original principal amount of Ninety Thousand
Dollars ($90.000.00) (together with any amendments, modifications or supplements thereto. the
"Note"); and
WHEREAS, the Note is secured by a certain Guarantee dated February 28, 1991,
granted by Americo Limited in favor of Assignor 10 secure the original principal amount of Ninety
Thousand Dollars ($90,000,00) (together wilh any amendments, modifications or supplements
thereto, the "Guarantee"); and
WHEREAS, Assignee is the ultimately controlling party of Assignor with its
subsidiary, Consumers Life Insurance Company, the sole shareholder of all of Assignor's issued and
outstanding common stock; and
WHEREAS, Consumers Life Insurance Company has entered into a Stock Purchase
Agleement to sell all of the outstanding conunon stock of Assignor to Life of the South Corporation.
a Georgia corporation. (the "Stock Purchase Agreement"); and
WHEREAS, prior to the closing of the Stock Purchase Agreement and in accordance
with the terms of the Stock Purchase Agreement, the parties hereto desire that the Loan. together
with the documents evidencing and securing the same, be assigned to Assignee. under the terms and
conditions set forth herein.
NOW THEREFORE. in consideration of the premises and of the agreements
hereinafter set forth., and for other good and valuable consideration. the receipt of which is hereby
acknowledged, the parties thereto agree as follows:
I. Incorporation by Reference The Recitals set forth above are incorporated
herein by reference as if fully set forth at length,
2 Assignment. Assignor hereby sells, assigns, transfers and sets O~ to Assignee
lwithout recourse) all of Assignor's rights, title and interests in and to the Loan. the Note, the
PLAINTIFP1l
EXHIBIT
4
Guarantee. and all sums of money due and to become due in respect thereof, as well as any other
documents ancillary to the Loan. the Note and the Guarantee (collectively. the "Loan Documents").
Assignee accepts such assignment and agrees to act as obligee pursuant to the respective terms of
each of the Loan Documents.
3. Reoresentations. Warranties and Covenants, Assignor represents. warrants
and covenants to Assignee as follows:
3.1 Power and Authority. Assignor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona. and has all the requisite power
and authority to execute, deliver and perform the Assignment and to assign and transfer to Assignee
all of the rights, title and interests assigned hereunder.
3.2 Authorization. The execution and delivery of this Assignment has been
duly authorized by all necessary action on behalf of Assignor and does not require any additional
consent or approval of any person or entity and does not or will not violate any provision of
Assignor's articles of incorporation or bylaws.
),3 Exclusive Prooerty. All of the rights, title and interests assigned to
Assignee hereunder are the exclusive property of Assignor, and Assignor has not granted to any other
person or entity any rights, title or interests with respect thereto.
3.4 Disclosure. Notwithstanding any other provisions contained herein.
Assignor has not represented, nor does Assignor warrant, the financial condition of the Borrower.
Assignor further discloses that Borrower is in default under the obligations of Borrower as evidenced
by the Loan [)ocuments, and Assignee is aware of the facts or any circumstances with regard to such
default as defined in the Loan Documents and which is the subject of the lawsuit tiled by Assignor
against Borrower under the caption styled as Consumers Reinsurance Company v, Payroll Products
Systems. loc.. Payroll Products & Systems Insurance All.encv. Inc. and Bell Fidelity Insurance
Markelina COQ)OI'Ilion in the Court ofConunon Pleas of Cumberland County, P A No. 97, Civil 4139
Civil Action-Law. Assigr.ce, at its own discretion and expense is authorized to continue with any such
JegaI action it deems necessary to collect the Loan and. if necessary, substitute itself as the Plaintiff
in said action.
4, Miscellaneous.
4, I SuccesSO" and Auitpls, This Assignment shall be binding on Assignor.
its suc;cessors and assigns, and shall ilUlre to the benefit of Assignee. its successors and assigns.
4,2 rooveminR Law This ~gt.ment sha11 be governed by, and construed
and interpreted in accordance with. the laws of the Commonwealth of Pennsylvania. including its
statutes oflimitation, but without regard to its IUIes concerning conflicts of laws.
-2.
LOAN AGREEMENT
PLAINTIFF'S
EXHIBIT
1
.., , ;-IL
TillS AGREEMENT is made this -.' day of February, 1991, by
and among CONSUMERS REIlISURANCE COMPANY ("Consumerll Re"), of 1200
camp Hill By-Pass, Camp Hill, ?ennsylvania, PAYROLL pRODUCTS & SYS-
TEMS, INC. l"pP&S"), of 11 Market Square, Suite 8, Newburyport,
Massachusetts, CONSUMERS LIFE INSURANCE COMPANY ("Consumers"), of
1200 Camp Hill By-Pass, Camp Hill, Pennsylvania, and AMERICa LIMITED
("Americo"), of Road Town, Tortola, British Virgin Islands.
WHEREAS, PP&S and Consumers have entered into a National
Marketing Partnership Agreement (the "partnership Agreement") dated
May 1, 1990: and
WHEREAS, in furtherance of the objectives of the Partnership
Agreement, Consumers Re, an affiliate of Consumers, has agreed to
adVance certain sums to PP&S upon the terms and conditions
hereinafter set forth:
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. I.2!n
Consumers Re hereby agrees to lend up to the Ninety Thousand
Dollars ($90,000) to PP&S. Such sum shall be made available to PP&S
in monthly installments of Fifteen Thousand Dollars ($15,000). The
loan shall be evidenced by PP&S's promissory note in a form as set
forth in Exhibit A attached hereto and made a part hereof (the
"Note"). The Note shall not bear interest and shall due and payable
on or before July 31, 1993.
2. ReDavment of Loan
PP&S hereby agrees that any amounts due to PP&S under the Part-
nership Agreement shall first be applied to the any outstanding
prinCipal balance of the Note. PP&S and Consumers shall execute and
deliver an Addendum to the Partnership Agreement in a form as set
forth in Exhibit B attached hereto and made a part hereOf.
3. Security for Note
Americo hereby agrees to guaranty PP&S' obligations under the
Note and to execute and deliver a guaranty in the form as set forth
in Exhibit C attached hereto and made a part hereof (the "Guaran-
llROMISSORY NOTE
$90,000.00
Camp Hill, PA
February 28, 1991
FOR VALUE RECEIVED, PAYROLL PRODUCTS & SYSTEMS, INC. Ithe
"Borrower"), of 11 Market Square, Suite ~8, Newburyport,
Massachusetts 01950, promises to pay to the order of CONSUMERs
REINSURANCE COMPANY (the "Holder"), at P. O. Box 26, Camp Hill
Pennsylvania 17011 lor at such other place as the Holder may from
time to time designate), in lawful money of the United States of
America, the unpaid principal balance due and owing under this Note
up to a maximum principal balance of Ninety Thousand Dollars
1$90,000.00), without any interest on the unpaid balance.
This Note is a master note evidencing advances up to a maximum
amount of $90,000 to be made by the Holder to the Borrower form
t.ime to time through July 31, 1991 pursuant to an Agreement dated
as of February 28, 1991 by and among the Borrower, the Holder and
Consumers Life Insurance company Ithe "Agreement"). The Borrower
shall be Obligated to repay only the actual amount advanced as
hereinafter specified, without any interest thereon as provided in
this Note. The Holder shall record all advances and repayments
under the Note on the schedule attached to this Note.
The unpaid principal balance due under this Note shall be due
dnd payable in full on July 31. 1993.
1
!f the Borrower defaults in the payment of any amounts payable
under this Note and such default continues for a pericd of ten days
after written notice thereof, or if the Borrower fails to comply
with any provisions of the Agreement and such failure to comply
shall continue for a period of thirty days after written notice
thereof, or if the Borrower shall become insol vent, make an
assignment for the benefit of creditors or become subject to any
proceeding, whether voluntary or involuntary, under any federal or
state bankruptcy or insolvency law, the Holder may, by written
notice to the Borrower, declare the unpaid balance of this Note to
be immediately due and payable.
No delay or failure of the Holder in exercising any right,
power or privilege hereunder shall affect any such right, power or
privilege, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such right, power
or privilege preclude any further exercise thereof, or of any other
right, power or privilege.
This Note may be prepaid at any time, in Whole or in part
without penalty or premium.
If any provision of this Note shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability Shall
not affect any other provision hereof. but this Note shall be
construed as if such invalid or unenforceable provision had never
been contained herein.
2
SCHEDULE ATTACHED TO AND FORMING
PAR'!' OF THE PROMISSORY NO'l'E
DA'1'ED FEBRUARY 28, 1991 OF
PAYROLL PRODUCTS & SYS'l'EMS. INC.
IN THE PRINCIPAL AMOUN'l' OF
$90,000
~
Amount of
Advance
Unpaid
Repayment princioal
ft/'ll
~:'1Iql
Gp.i'll
6f 411
oj :Jo(rlr
''1000.00
I~OOD.OlJ
II: ~04. 00
l
'SjOOo.oo
'-'; 0 DO. DO
;qoC().OO
~SjOOO.oO
a~, OOD,OO
75" 000.00
I
'la 000.00
7
4
Entered by
( in! Ual )
~fi'
~ &/7-7
jI:N7 ~/;z. 7
~~
~ ~O
ADDENDUM
THIS AGREEMENT is made this d!J iL day of February, 1991
between CONSUMERS LIFE INSURANCE COMPANY I "Consumers"), of 1200
Camp Hill By-Pass, Camp Hill, Pennsylvania 17011 and PAYROLL
PRODUCTS & SYSTEMS, INC. I"PP&S"), of 11 Market Square, Suite 8,
Newburyport, Massachusetts 01950. This Agreement amends and
supplements a certain agreement entitled "National Marketing
Partnership Agreement" (the Partnership Agreement) dated May 1,
1990 among the same parties. The parties agree as follows:
1. All profit sharing payments due to P~&S under and by
virtue of Section Nine of the Par::nership Agreement shall
ce paid to Consumers Reinsurance Company (Consumers Re)
for the pur;ose of reducing a cer::ain Promissorj Note of
P?&S to Consumers Re dated t:::s day. Profit-sharing
payments to P~&S under the Par::~ership Agreement shall
resume when the Promissory No~e is paid in full and all
ot~er debts owed by P~&S to Cons~ers Re shall have ceen
paid in full.
2. The Assignment of profit-shar:~g payments to Cons~~ers
Re shall be secondary to the r:;ht of set-off retained
by Consumers at Section ~Nel~e of the Partnership
Agreement, whic~ means that prcf:t-shar:ng pai~ents, if
due and payable, shall firs~ be a;plied to any debt cwed
by P~&S to Consumers if the righ~ of se::-off is asserted
by Consumers and secondly, paid to Consumers Re as
GUi\RANTY
ON EVEN DATE herewith PAYROLL PRODUCTS & SYSTEMS, INC., of 11
:'!arke~ Square, Suite !i8, Newburyport, Massachusetts 01950,
hcrc~~..1ftcr referred to as "Debtor", has executed and delivered to
CONSUMERS REINSURANCE COMPANY, of 1200 Camp Hill By-Pass, Camp
Hill, Pennsylvania l70ll. hereinafter referred to as "Creditor",
a Promissory Note, and certain other agreements. The Creditor has
unde=~aken to enter into such agre~~ents in reliance upon, among
other things, the security of this Guaranty to secure the
indebtedness of Debtor to Creditor.
THEREFORE, intending to be legally bound, to induce the
Creei tor to make advances to Debtor, the undersigned Guarantor does
hereby agree as follows:
1. The Guarantor unconditionally guarantees to Creditor the
prompt and punctual payment of all amounts due from
Debtor from and after the date hereof, by acceleration
on account of default or otherwise, and the performance
of all other obligations, including the obligations
undertaken by the Debtor to the Creditor in the
Promissory Note. The liability of the Guarantor under
this Guaranty shall be unlimited.
2. The liability of the Guarantor hereunder is absolute and
unconditional and shall not be affected in any way by
reason of any failure to pursue, repay or preserve any
rights against any personls), or the lack of any prior
enforcement of suc:t rights. The Guarantor hereby waives
1
any =~gh~ ~= requ~== any suc~ ;ric= enforc~menc, ~nd t~e
Guarantor aarees t~at any delay in enforcing or failure
to enforce any such rights shall in no way affec~ the
liabilit7 of t~e Guarantor hereunder, even if such rights
are thereby lost.
3. The Guarantor hereby waives all notices whatsoever with
respect to this Guaranty, present and future, inclUding
but not limited to notice of Creditor's acceptance hereof
and intention to act in reliance herein, of the terms and
conditions of t~e agreements between Creditor and Debtor.
the Guarantor hereby consents to the taking of, or
failure to take. frcm time to time without notice to the
Guarantor, any action of any nature whatsoe'ler with
respect to the agre~~ents cetween Debtor and Creditor,
inClUding but not limited to any renewals, extensions,
modifications, postponements, compromises, indUlgences,
wai vers, surre.'lders, exchanges and releases, and the
Guarantor shall remain fully liable herein,
not',Jithstanding any of the foregoing. the Guarantor
hereby waives t~e benefit of all laws now or hereafter
in effec~ in any way lL~iting or restricting the
liability of t~e Guarantor hereunder, including without
limitation la) all defenses whatsoever to the Guarantor's
liability hereunder except the defenses of Ii) payment:
I H) the ~erfcr:nance of the other obligations by the
Crecitcr under the agre~~ents, and (iii) lack of notice
2
as =aquired ~~ t~e ~:~e~ a;~aemen~5 ~hic~ ~~is Guaranty
sec...:=es, end (~) c..il =:..gnts ~o s\:ay of exec~:ion and
exemption of ;:::ope=':~: :::. c.ny c.ct::.on ::0 enforce the
1- . ....... - t" Gu-r--t...-,. '-o...-,ounc'''r
~a.c~.L~,,-Y at ..e . Co c.u__.... .._...._ _.
4. No =elay :n waking cemand en the Guaran::cr for
per::or;nance or payment ef t~e Guarantor's obligation
hereunder shall prejudice the r:.ght to enforce said
performance or payment.
S. The Guarantor herein further does hereby emco',;er any
attc:ney of any court: of record within the United States
or elsewhere to appear for t~em or anyone of t:~em, in
the event of default by Creditor. and after one or more
declarations filed, confess judc;;nent against them or
either of them as of any te~ for all sums due hereunder,
with costs of suit and attorney's ccmmission of five
percent (5%1 for collection and release of errors. and
wit~out stav of exec~tion and incuisition and eXtension
- .
upon any levy on real es::a::e is hereby waived, and
ccnde:nnation agreed to and the exemption of personal
property frcm le'rf and sale on any execlltion herein, is
also hereby expressly waived. and no benefit of e:te:nption
be claimed under and by virtue of any exe:npticn law now
in force in which may be hereafter passed.
6. This Guaranty is given in ccnnection with and evidences
the obligation of t~e under signed to make pa~~ent in
connection with a cc~mercial transacticn.
J
I. :n t~e even~ ~ny one C~ ~ore Ot the ~rovisions c=n~ained
in this Guaranty shall for any reason be held to be
invalid. illegal or unenforceable in any respec~. such
invalidity. illegality or unentorceability shall not:
affect any ether provisions of this Guaranty, but this
Guaranty shall be construed as if such invalid, illegal
or unenforceable provisions had never been contained
herein.
8. The liability of any Guarantor herein is not conditioned
upon the liability of any other Guarantor.
3. The liability of each of the parties, which together are
the Guarantors hereunder, shall be joint and several.
10. When the context so requires, the singular shall be
substituted for the plural and vice vers~
I~ WITNESS WHEREOF. on this c:J f
~. - k..l U I. 19 q I
day
of
bind the succ ssors and assigns of the undersigned, as applicable,
, intending to be legally bound. and to
the Guaran~c:: has caused this Guaranty to be duly executed and
delivered.
By ?1.~~#miud
:Ell7e*
~" Director
I.T.G. DIR.ECTORS (T&C) I.IM:Im>
i\TrEST:
4
.
AMERIca LIMITEO
He. the undersigned, being Directors of AMERICO LIMITED, Ithe "Com-
pany"), do hereby consent to the adoption of the following RESOLU-
TIONS:
RESOLVED:
that, pursuant to the terms of a Loan Agreement, by and among
Payroll Products & Systems, Inc., Consumers Reinsurance Company,
Consumers Life Insurance Company, and this Company, the Company
shall guaranty the obligation of Payroll Products & Systems, Inc. to
Consumers Reinsurance Company to repay a loan in an amount not more
than $90,000.
FURTHER RESOLVED:
that the company shall secure its guaranty by a pledge of its 12,000
shares of common stock of Consumers Financial Corporation and its
$40,000 share certificates in the Bermuda International Bond Fund.
FURTHER RESOLVED:
that Roger A. Dawes be, and hereby is, authorized and directed to
execute and deliver on behalf of the Company any and all documents
necessary to effect the foregoing resolutions.
lfk
Dated this 28th day of February, 1991
r.T.G. Directors (T&C) Limited
-' A"
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.' t1~,,, . (./7'1--r
P.... -,_
Vulcan limited
co: f,ATERAL
"
;.j
.
-
February 28, 1991
tOml
CONSUMERS LIMITED
Office
Grand Turk
Turks and Caiccs Islands
Gtntle:r:e:1:
In conslcention of credit or ot.,er .alumle considerations now or hereaiter e.'tended by you to the undenigned or any
of the~. or uoon the endorseme:1t, gumntee or surery of !he undenigned or any of !hem, the unde.~igned and each of
them h"eev usi~n. tnIlsfer and pledge to you. and gnnt to you a security interest and fion in, all property or the u.".
deni~ne:: or any of them now or hereaiter in your ponenion or ccnuol in my =acitv wnauoe.er. including but not
limite~ :0 the balance or my de;osit, uust or agency acwunt and the following: .
12,000 shares of Common Stock of Consumers Financial Corporation
Certificate No. (51
$40,000 share interest in tb:! BeIItWa Intematiooal
a..-.a.1 tUBl, 1IW.
all of wi':ic., prope!'!\', together with future additions md subsiwtiom. is herein clled tI'.. Collateral,said Collatenl to
be he!: :v you as c~llateraJ securiry for t.~e payment of all indebledness and limilities C~: or 10 beceme due, direa or
in cir:c:. ;csotule or contingent, joint or s..en!, now existing or her~:Uter am1n!. of the ~'ldmigne:: or my of them.
E;c1'l of '~e undenitned acre., to deliver to you upon requat additiorW se".airy to your misT.1c-.ion should !he Cal-
later:! he,e:n ptec;~ become umatisfactorv to you for any RUon. E.uh of the undenigned hm!:v au!horizes you to
re:Hec;: :~e CollmraJ or any part thereof 1t anv time. At or at any time after maturiry or;If'( limiliry or obliption of
:he unce~ltneo or lIIV of them to you, or on default by any partY on any ins:rument to wisich the undersigned or any
~f rilem :nail be malOr, endoner, surety, ~anntor or other partY, you are hereby authorizea. It your option and wi!h.
out rec:une apimt my o!hu penon or prcperry, to sell at public or plinlC sale or bl'll~er's baud all or any pan of
the said C:II11er.l WIthout demand. advertisement or notice of any kind e.".::t SUCl U m;y be rec;uired by law, and to
mign u:: ~e!iver t::. Callateral. me at:lllY such saie you orYOlIr alent may Il'.uc.'tue any ~r all oisaid Cclla;cnl. From
lh! pree:!:s of anv !uch sale or tales of the said Collueral, you are authoriud to dee= md reain all costs and u.
pense: I~:::ent thereto. indudinl rmonable utorney's fees. and to apply !he rnidue of WCl proc~ aC1inst !he Ii-
ibilities oi the unee.~i~ned or any oi them. In !he event of any such sale or sales you shail be liable to the undmigned
oniy for illY SUf1liUS ift.er the full lltisfaction of alllimilitin 10 you. The undenigned shad remain liable for any de.
ficit.
With ret:e:t 10 lIIV in!uument secured in ..hole Of' in pan by !he CcllatfraJ. uch of th undenigned henbY waives
aennnc!. ,mentlnent, pratfCt and nctic. of dishonor md consents, without notice, to UlY uttnSiCIIS or renewals thu
m;ov be V-..nt.ed by you.
Addren
Columbus Centre Bldg.
Roadtown. Torto1a
British Virgln Islands
Columbu$ Centre Bldg.
Roadtown, Torto1a
Dritish Virgin Islands
.~ heI: LmIT,"
I. T. G. oIRECIORS (T&C) I..IMI1ED
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'f ,rv?n cf.ts'}'" ,-
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....ddrtn
llROMISSORY NOTE
$90,000.00
Camp Hill, PA
February 28, 1991
FOR VALUE RECEIVED, PAYROLL PRODUCTS & SYSTEMS, INC. (the
"Borrower"), of II Market Square, Suite ~8, Newburyport,
Massachusetts 01950, promises to pay to the order of CONSUMERS
REINSURANCE COMPANY (the "Holder"), at P. o. Box 26, Camp Hill
PennsYlvania 17011 lor at such other place as the Holder may from
time to time designate), in lawful money of the United States of
America, the unpaid principal balance due and owing under this Note
up to a maximum principal balance of Ninety Thousand Dollars
($90,000.00), without any interest on the unpaid balance.
This Note is a master note evidencing advances up to a maximum
,,....,
amount of $90,000 to be made by the Holder to the Borrower farm
time to time through July 31, 1991 pursuant to an Agreement dated
as of February 28, 1991 by and among the Borrower, the Holder and
Consumers Life Insurance company Ithe "Agreement"). The Borrower
.5hall be obligated to repay only the actual amount advanced as
hereinafter specified, without any interest thereon as provided in
this Note. The Holder shall record all advances and repayments
under the Note on the schedule attached to this Note.
The unpaid principal balance due under this Note shall be due
and payable in full on July 31, 1993.
EXHiiIt
---~
2
1
!f the Borrower defaults in the payment of any amounts payable
under this Note and such default concinues for a period of ten days
after written notice thereof, or if the Borrower fails to comply
with any provisions of the Agreement and such failure to comply
shall continue for a period of thirty days after written notice
thereof, or if the Borrower shall become insolvent, make an
assignment for the benefit of creditors or become subjecc to any
proceeding, whether voluntary or involuntary, under any federal or
state bankruptcy or insolvency law, the Holder may, by written
notice to the Borrower, declare the unpaid balance of this Note to
be immediately due and payable.
No delay or failure of the Holder in exercising any right,
power or privilege hereunder shall affect any such right, power or
privilege, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such right, power
or privilege preclude any further exercise thereof, or of any other
right, power or privilege.
This Note may be prepaid at any time, in whole or in part
without penalty or pr~~ium.
If any provision of this Note shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, but this Note shall be
construed as if such invalid or unenforceable provision had never
been contained herein.
2
~ ..
ASSIGNMENT OF WAN AGREEMENT AND PROMISSORY NOTE
TIllS ASSIGNMENT OF LOAN AGREEMENT AND PROMISSORY NOTE (the
"Assignment") is made and entered into this ~,~ day or August 1998, by and between Consumers
Reinsurance Company, an Arizona corporation, with offices located at 1200 Camp Hill By.Pass,
Camp Hill, Pennsylvania, hereinafter ("Assignor"). and Consumers Financial Corporation. a
Pennsylvania corporation. with offices located at 1200 Camp Hill By-Pass. Camp Hill, Pennsylvania,
hereinafter (" Assignee").
R Eel TAL S:
WHEREAS. Assignor made a loan (the "Loan") to Payroll Products & Systems, Inc.
(the "Borrower"), evidenced by that certain Promissory Note dated February 28, 1991 made by
Borrower payable to the order or Assignor in the original principal amount or Ninety Thousand
Dollars ($90,00000) (together with any amendments, modifications or supplements thereto, the
"Note'); and
WHEREAS, the Note is secured by a certain Guarantee dated February 28. 1991,
granted by Americo Limited in ravor or Assignor to secure the original principal amount of Ninety
Thousand Dollars ($90,000,00) (together with any amendments, modifications or supplements
thereto, the "Guarantee"); and
WHEREAS, Assignee is the ultimately controlling party or Assignor with its
subsidiary, Consumers Lire Insurance Company. the sole shareholder ohll or Assignor's issued and
outstanding common stock; and
WHEREAS, Consumers Life Insurance Company has entered into a Stock Purchase
Agreement to sell all orthe outstanding common stock or Assignor to Lire orthe South Corporation.
a Georgia corporation. (the "Stock Purchase Agreement"); and
WHEREAS, prior to the closing orthe Stock Purchase Agreement and in accordance
with the terms orthe Stock Purchase Agreement. the parties hereto desire that the Loan, together
with the documents evidencing and securing the same, be assigned to Assignee. under the terms and
conditions set rorth herein.
NOW THEREFORE. in consideration or the premises and or the agreements
hereinafter set rorth. and for other good and valuable consideration. the receipt of which is hereby
acknowledged, the parties thereto agree as follows:
I. Incorporation by Rere~ The Recitals set forth above an: incorporated
herein by reference as if fully set forth at length
2, Assipnent. Assignor hereby sells. a.ssigns. tramfers ltIld sets over to Assignee
(without recourse) all of Assignor's rights. title and interests in and to the Loan, the Note. the
.
Guarantee. and all sums of money due and to become due in respect thereof. as well as any other
documents ancillary to the Loan, the Note and the Guarantee (collectively. the "Loan Documents").
Assignee accepts such assignment and agrees to act as obligee pursuant to the respective terms of
each of the Loan Documents.
3. Representations. Warranties and Covenants. Assignor represents. warrants
and covenants to Assignee as follows:
3.1 Power and Authority. Assignoris a corporation duly organized. validly
existing and in good standing under the laws of the State of Arizona, and has all the requisite power
and authority to execute. deliver and perform the Assignment and to assign and transfer to Assignee
all of the rights. title and interests assigned hereunder,
3,2 Authorization The execution and delivery of this Assignment has been
duly authorized by all necessary action on behalf of Assignor and does not require any additional
consent or approval of any person or entity and does not or will not violate any provision of
Assignor's articles of incorporation or bylaws.
3.3 Exclusive Pro~. All of the rights, title and interests assigned to
Assignee hereunder are the exclusive property of Assignor. and Assignor has not granted to any other
person or entity any rights. title or interests with respect thereto
3.4 Disclosure Notwithstanding any other provisions contained herein.
Assignor has not represented. nor does Assignor warrant, the financial condition of the Borrower.
Assignor further discloses that Borrower is in default under the obligations of Borrower as evidenced
by the Loan DocumentS, and Assignee is aware of the facts or any circumstances with regard to such
default as defined in the Loan Documents and which is the subject of the lawsuit tiled by Assignor
against Borrower under the caption styled as Consumers Reinsurance Company v. Pavro11 Products
Systems. Inc.. Payroll Products & Systems Insurance Agency. Inc and Bell Fidelity Insurance
MarketiltB Corporation in the Court of Common Pleas of Cumberland County. P A No. 97. Civi14139
Civil Action-Law. Assignee. at its own discretion and expense is authorized to continue with any such
legal action it deems necessary to collect the Loan and. if necessary. substitute itself as the Plaintiff
in said action,
4. Miscellaneous.
4.1 ~ ~ t\ssii!>>. This Assignment shall be binding on Assignor,
its succeSSOR and assigns. and shall inure to the benefit of Assignte. its successon and assigns,
4 2 Gomn!!lI.L.im' This Assignment sha11 be gO\-emed by,and construed
and interpreted in accordance with. the laws of the Commonwealth of PeM5ytvania. incIudilll its
statutes oflimitation. but without regard to ilS mles concerning eonllicts oflaws
.2.
---------=:::- ---
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.
CONSUMERS REINSURANCE
COMPANY.
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
Plaintiff
v.
NO. 97 Civil 4139
PAYROLL PRODUCTS & SYSTEMS,
INC., PAYROLL PRODUCTS &
SYSTEMS INSURANCE AGENCY, INC. CIVIL ACTION. LAW
and BELL FIDELITY INSURANCE
MARKETING CORPORATION,
Defendants
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
y,Titing 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 Plaintiff. You may lose money or property or other
rights important to you.
YOU SHOULD TAKE THIS PAPER TO YOUR LA WYER 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.
Office of the Court Administrator
Fourth Floor
Cumberland County Courthouse
Carlisle, PA 17013
Telephone: 717.240-6200
- ";";-"..-
NOTICIA
Le ban demandado 11 usled en III corte. Si usled quiere defenderse de estas demandllS
expuestas en IllS paginllS siguienles, usted tiene vienle (20) dillS de plaza aI partir de la fccha de la
demanda y la notificacion. Usled debc presentar una apariencia escrita 0 en persona 0 por
abogado y archivar en la corte en forma escrita sus defensas 0 sus objcciones a IllS demandas en
contra de su persona. Sea avisado que si usted no se defiende, la corte tomara medidas y puede
entrar una orden contra usted sin previa aviso notificacion y por cualquier queja 0 a1ivio que es
pedido en la peticion de demanda. Usted puede perder dinero 0 sus propiedades 0 otros derechos
importantes para usted.
LLEVE EST A DEMANDA A UN ABODAGO IMMEDlA T AMENTE. SI NO T1ENE
ABOGADO 0 SI NO T1ENE EL D1NERO SOFICIENTE DE PAGAR TAL SERVICIO,
VA Y A EN PERSONA 0 LLAME POR TELEFONO A LA OFICINA CUY A D1RECCION SE
ENCUENTRA ESCRlTA ABAJO PARA A VERlGUAR DONDE SE PUEDE CONSEGUIR
ASISTENCIA LEGAL.
Office of the Court Administrator
Fourth Floor
Cwnberland County Courthouse
Carlisle, PA 17013
Telephone: 717-240-6200
McNEES, WALLACE &; NURlCK
By /l...L-L. () 'flI
Harvey Freedcnberg
I.D. No. 23152
Helen L. Gemmill
Attorney 1.0. No. 60661
100 Pine Street
P. O. Box 1\66
Harrisbura. PA 17108-1\66
(7\7) 232-8000
Attorney for Plaintiff
Dated: December 16. 1991
CONSUMERS REINSURANCE
COMPANY,
IN TilE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
PlaintitT
v.
NO. 97 Civil 4139
PAYROLL PRODUCTS & SYSTEMS.
INC.. PAYROLL PRODUCTS &
SYSTEMS INSURANCE AGENCY,INC. CIVIL ACTION - LAW
and BELL FIDELITY INSURANCE
MARKETING CORPORATION,
Defendants
COMPLAINT
PlaintitTConsumers Reinsurance Company, for its complaint against Defendants Payroll
Products l!l. Systcms.lnc., Payroll Products & Systems Insurance Agency, Inc. and Bell Fidelity
Insurance Marketing Corporation. states as follows:
The Parties
I. PlaintitT Consumers Reinsurance Company ("Consumers Reinsurance") is a
business corporation with its principal place of business at 1200 Camp Hill By-Pass. Camp Hill,
Pennsylvania.
2. Defendant Payroll Products & Systems, Inc. ("PPl!l.S") is a business corporation
with its principal place of business at 1440 S. Rexford Drive. 1# 205, Los Angeles, California
90035. Upon infonnation and belief. PP&S is now known as Bell Fidelity Insurance Marketing
Corporation.
3. Defendant Plyroll Products & Systems Insurance Agency. Inc. ("PP&5 Agency")
Is I business corporation with its principal place of business It 1440 S. Rexford Drive, 1# 205,
Los Angeles, California 90035. Upon infannation and belief, PP&S Agency is a successor or
predecessor to PP&S and is now known as Bell Fidelity Insurance Marketing Corporation.
4. Defendant Bell Fidelity Insurance Marketing Corporation ("Bell Fidelity.) is a
business corporation with its principal place of business at 1440 S. Rexford Drive. # 205, Los
Angeles, California 90035. Upon infonnation and belief, Bell Fidelity was fonnerly known as
Payroll Products & Systems, Inc. or Payroll Products & Systems Insurance Agency, Inc.
Jurisdiction
5. This Court has personal jurisdiction over Defendants under 42 PaC.S.A. ~
5322(a)(I). (3) and (4).
Factual Backvround
6. On or about February 28, 1991. PP&S entered into a Loan Agteement with
Consumers Reinsurance. A copy of the Loan Agreement is attached hereto as Exhibit A.
7. Under the Loan Agreement, Consumers Reinsurance agreed to lend up to $90.000
to PP&S.
8. In cOMection with the Loan Agreement. PP&S executed a Promissory Note dated
February 28,1991. A copy of the Promissory Note is attached hereto as Exhibit B.
9. As reflected on the schedule attached to the Promissory Note and in accordance
\\ith the Loan Agreement. Consumers Reinsurance advanced $90.000 to PP&S.
10. As security for the Promissory Note. an entity known as Americo Limited
executed a Guaranty. A copy of the Guaranty is attached hereto as Exhibit C.
-2-
LOAN AGREEMENT
", ..~.
THIS AGREEMENT is r::ade this -.' day of February, 1991, by
and among CONSUMERS REIlISURANCE COMPANY I "Consumers Re"), of 1200
Camp Hill By-Pass, Camp Hill, ?ennsylvania, PAYROLL PRODUCTS & SYS-
TEI1S, INC. ("PP&S"), of 11 l1arket Square, Suite 8, lIewburyport,
11assachusetts, CONSUMERS LIFE IllSURANCE COMPANY ("Consumers"), of
1200 Camp Hill By-Pass, Camp Hill, Pennsylvania, and AMERICO LIMITED
("Americo"), of Road Town, Torto1a, British Virgin Islands.
WHEREAS, ?P&S and Consumers have entered into a National
Marketing Partnership Agreement (the "Partnership Agreement") dated
May 1, 1990: and
WHEREAS, in furtherance of the objectives of the Partnership
Agreement, Consumers Re, an affiliate of Consumers, has agreed to
advance certain sums to PP&S upon the terms and conditions
hereinafter set forth:
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Lan
Consumers Re hereby agrees to lend up to the Ninety Thousand
Dollars 1$90,000) to PP&S. Such sum shall be made available to PP&S
in mon~h1y installments of Fifteen Thousand Dollars ($15,000). The
loan shall be evidenced by PP&S's promissory note in a form as set
forth in Exhibit A attached hereto and made a part hereot (the
"~Iote"). The Note shall not bear interest and shall due and payable
on or before July 31, 1993.
2. aeDavment of Loan
PP&S hereby agrees that any amounts due to PP&S under the Part-
nership Agreement shall first be applied to the any outstanding
principal balance of the Note. PP&S and Consumers shall execute and
deliver an Addendum to the Partnership Agreement in a form a. set
forth in Exhibit B attached hereto and made a part hereot.
3. Security for Note
Americo hereby agrees to guaranty PP&S' obligation. under the
Note and to execute and deliver a guaranty in the form a. .et forth
in Exhibit C attached hereto and made a part hereof (the "CUaran-
..-..,. ....
PROMISSORY NOTE
$90,000.00
Camp Hill, PA
February 28, 1991
FOR VALUE RECEIVED, PAYROLL PRODUCTS , SYS'l'EMS, INC. (the
"Borrower" ) , of 11 Market Square, Sui te * 8, Newburyport,
Massachusetts 01950, promises to pay to the order of CONSUMERs
REINSURANCE COMPANY (the "Holder"), at P.O. Box 26, Camp Hill
Pennsylvania 17011 lor at such other place as the Holder may from
time to time designate), in lawful money of the United States of
America, the unpaid principal balance due and owing under this Note
up to a maximum principal balance of Ninety Thousand Dollars
1$90,000.00), without any interest on the unpaid balance.
This Note is a master note evidencing advances up to a maximum
amount of $90,000 to be made by the Holder to the Borrower form
t.ime to time through July 31, 1991 pursuant to an Agreement dated
as of February 28, 1991 by and among the Borrower, the Holder and
Consumers Life Insurance company (the "Agreement"). The Borrower
shall be obligated to repay only the actual amount advanced as
hereinafter specified, without any interest thereon as provided in
this Note. The Holder shall record all advances and repayments
under the Note on the schedule attached to this Note.
The unpaid principal balance due under this Note shall be due
and payable in full on July 31, 1993.
1
~-~-:~- ...---:-"-..-....... ~ ,.-.
Lf the Borrower defaults in the payment of any amounts payable
under this Note and such default continues for a period of ten days
after written notice thereof, or if the Borrower fails to comply
with any provisions of the Agreement and such failure to comply
shall continue for a period of thirty days after written notice
thereof, or if the Borrower shall become insolvent, make an
assignment for the benefit of creditors or become subjec~ to any
proceeding, whether voluntary or involuntary, under any federal or
state bankruptcy or insolvency law, the Holder may, by written
notice to the Borrower, declare the unpaid balance of this Note to
be immediately due and payable.
No delay or failure of the Holder in exercising any right,
power or priVilege hereunder shall affect any such right, power or
priVilege, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such right, power
or privilege preclude any further exercise thereof, or of any other
right, power or priVilege.
This Note may be prepaid at any time, in whole or in part
without penalty or premium.
If any prOvision of this Note shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall
not affect any other prOVision hereof, but this Note shall be
construed as if such invalid or unenforceable provision had never
been contained herein.v
2
SCHEDULE A'l"l'ACHED TO AND FORMING
PARi' OF '1'HE PROMISSORY NOT.!!:
DA'1'!D FEBRUARY 28, 1991 OF
PAYROLL PRODUCTS & SYS'rEMS, INC.
IN '1'HE PRINCIPAL AMOUN'l' OF
$90,000
Date
-
AIIIount of
Advance
Unpaid
RegaYment Principal
1t/fl
r1,..,/tt,
(ppi'll
1/'/'11
0/10ll1
~qOOO.DO
IJ;OOD.O CJ
,~ 4D4. OC
ISj 000.00
''; 000. 00
~OClO.OO
'I
If fiOOO.oO
uD, #01.00
75" a()O,OO
I
'lq D~O.O{j
"
Entered by
.(initial)
~f'
~ ~/'-7
~ ~/:z.7
~at
~ ~O
ADDENDUM
THIS AGREEMENT is made this ;;f iL day of February, 1991
between CONSUMERS LIFE INSURANCE COMPANY ("Consumers"), of 1200
Camp Hill By-Pass, Camp Hill, Pennsylvania 17011 and PAYROLL
PRODUCTS' SYSTEMS, INC. ("PP&S"), of 11 Market Square, Suite 8,
Newburyport, Massachusetts 01950. This Agreement amends and
supplements a certain agreement entitled "National Marketing
Partnership Agreement" (the Partnership Agreement) dated May 1,
1990 among the same parties. The parties agree as follows:
1. All profit sharing payments due to PP&S under and by
virtue of Section Nine of the Part~ership Agrea~ent shall
ce paid to Consumers Reinsurance C~~pany (Consumers Re)
for the pur;ose of reducing a ce:tain Prcmisso~f Note of
PP&S to Consumers Re dated t~.:.s day. Profit-sharing
payments to PP&S under the Part~ership Agreement shall
resume when the Promisso~1 Note is paid in full and all
ot~er debts owed by PP&S to Cons~~ers Re shall have been
paid in full.
2. T~e Assig~~ent of profit-shar.:.~; paymen~s to Cons~~ers
Re shall be seconda~1 to the r.:.;h~ of set-off retained
by Consumers at Section Twelve of the Partnership
Aqreernent, which means that pro~it-shar.:.nq payments, if
due and payable, shall first be applied to any debt owed
by PP&S to Consumers if the right of set-off is asserted
by Consumers and secondly, paid to Consumers Re as
GUi\RA..~
ON EVEN DATE herewith PAYROLL PRODUCTS & SYSTEMS, INC., of 11
~arkec Square, Suite .8, Newburyport, Massachusetts 01950,
hereinafter referred to as "Debtor", has executed and delivered to
CONSUMERS REINSURANCE COMPANY, of 1200 Camp Hill By-Pass, Camp
Hill, Pennsylvania 17011, hereinafter referred to as "creditor",
a Promissory Note, and certain other agreements. The Creditor has
under~aken to enter into such agreements in reliance upon, among
ether things, the security of this Guaranty to secure the
indebtedness of Debtor to Creditor.
THEREFORE, intending to be legally bound, to induce the
Creditor to make advances to Debtor, the undersigned Guarantor does
hereby agree as follows:
1. The Guarantor unconditionally guarantees to Creditor the
prempt and punctual payment of all amounts due from
Debtor from and after the date hereof. by acceleration
on account of default or otherwise, and the performance
of all other obligations, including the obligations
undertaken by the Debtor to the Creditor in the
Promissory Note. The liability of the Guarantor under
this Guaranty shall be unlL~ited.
2. The liability of the Guarantor hereunder is absolute and
unconditional and shall not be affected in any way by
reason of any failure to pursue, repay or preserve any
rights against any personls), or the lack of any prior
enforce.'llent of such rights. The Guarantor hereby wuve.
1
any =:gh~ ~= =e~u:=e any suc~ ~ricr enforc~ment, ~nd t~e
Guaran~or agrees that any delay in enforcing 0= failure
to enforce any such rights shall :n no way affec: the
liability of the Guarantor hereunder, even if such rights
are thereby lost.
3. The Guarantor hereby waives all notices whatsoever with
respect to this Guaranty, present and future, including
but not lL"lIited to notice of Creditor's acceptance hereof
and intention to act in reliance herein, of the terms and
conditions of the agreements between Creditor and Debtor.
the Guarantor hereby consents to the taking of, or
failure to take, from time to time without notice to the
Guarantor, any action of any nature whatsoever with
respect to the agreements between Debtor and Creditor,
including but not limited to any renewals, extensions,
modifications, ~ostponements, compromises, indulgences,
waivers, surre.'lders, exchanges and releases, and the
Guarantor shall remain fully liable herein,
notwithstandi~g any of the foregoing. the Guarantor
hereby waives the benefit of all laws now or hereafter
in effect in any way limiting or restricting the
liability of the Guarantor hereunder, including without
limitation I a I all defenses whatsoever to the Guarantor's
liability hereunder except the defenses of (il payment:
( ii I the performance of the other obliqations by the
Creditor under the aqreements, and (iiil lack of notice
2
as =;~uired :.::
";"n "'--0'"
....- - .....-..
~;=e~men:s ',;hlCh
:::is Guaranty
sec~=es, and (::) a.ll =.:..;:h::.s :0 stay of exec'..::ion and
exemp~icn of ;rcpe:~:,. . - a.ny ac:.:.on :0 enrorc:e the
_u
liabili ty of the Guaram:::::: ::ereunder.
No :elay ion ::laking demand on the ~uarant:::r for
L
per:ormance or payment of t~e Guarantor' s obligation
hereunder shall prejUdice the right to enforce said
performance or payment.
S. The Guarantor herein further does hereby empower any
att:::rney of any court of reco::d within the United States
or elseWhere to appear :or th~~ or anyone of them, in
the event of default by Creditor, and after one or more
declarations filed, confess judgment against: th~~ or
either of them as of any tern for all sums due hereunder.
with costs of suit and attorney's commission of five
percent 15\1 fer collection and release of errors. and
without stay of execution and inquisition and extension
upon any levy on real estate is hereby wai'Jed, and
condemnation agreed to and the eX~~ption of personal
property from levy and sale on any execution herein, is
also hereby expressly waived. and no benefit of exemption
be claimed under and by virtue of any exempticn law now
in force in which may be hereafter passed.
6. This Guaranty is given in connection with and evidences
the Obligation of the under signed to make payment in
connection with a co~mercial transaction.
3
7. :n t~e even~ ~ny one c= ~ore at the ~rovisions c:ncained
in this Guaranty shall :or any reason be held to ce
invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not
affect any ether provisions of this Guaranty, but this
Guaranty shall be construed as if such invalid, illegal
or unenforceable provisions had never been contained
herein.
8. The liability of any Guarantor herein is not conditioned
upon the liability of any other Guarantor.
? The liability of each of the parties, which together are
the Guarantors hereunder, shall be joint and several.
10. When the context so requires, the singular shall be
subStituted for the plural and vice versa.,
1:;. WITNEsS WHEREOF, on this ~fW0 day of
-<"" Wu u,. 19 q) , intendir:q to be legally bound, and to
bind the succ ssors and assiqns of the undersigned, as applicable,
the Guaram:c: has caused this Guaranty to be dUly executed and
delivered.
ATTEST:
~7{u-
By fL~
By
~~ Director
LI.G. DIREI:1'ORS (ISC) I.DIIn:D
4
AMERICO LIMITED
CERTIFICATE OF RESOLUTIONS
The undersigned hereby certifies that he is the Secretary of
AMERICO LIMITED, that the following resolutions were adopted by
unanimous consent of the Directors of the Corporation on February
1991, and that said resolutions remain in full force and effect as
of the date hereof.
RESOLVED:
that, pursuant to the terms of a Loan Agreement, by and among
Payroll Products & Systems, Inc., Consumers Reinsurance Company,
Consumers Life Insurance Company, and this Company, the Company
shall guaranty the obligation of Payroll Products & Systems, Inc. to
Consumers Reinsurance Company to repay a loan in an amount not more
than $90,000.
FURTHER RESOLVED:
that the Company shall secure its guaranty by a pledge of its 12,000
shares of common stock of Consumers Financial Corporation and its
$40,000 share certificates in the Bermuda International !ond F~~d.
FURTHER RESOLVED:
that Roger A. Dawes be, and hereby is, authorized and directed to
execute and deliver on behalf of the Company any and all documents
necessary to effect the foregoing resolutions.
Executed this 28th day of February , 1991.
;1 J; r
'-1}. ~ hI ,~i"'lJ-..l
'w"Ul.c:an iimU~ - secdttary ,
AMERICO LIMITED
co: r.ATERAL PLED( ~
Februarv 28, 1991
lOlli'
CONSUMERS LIMITED
Office
Grand Turk
Turks and Caicos Islands
Gentleme.~:
In consicention of credit or other valuUlle considentiens new Cll' hen=~fter extended by you to the undenilned or any
of the::!. or uoon the endorsement, lumtltee or suretY of the undenigned or any of them, the unde."ligned and ucII of
them he,:cy ulien. lnnsfer and pledee Ie you, and Innt to you ~ sKUntv inten=n and lien in, .all propertY of the u:l.
dmiened or any or them new or hel'C3rter in your possessien Cll' canuel in my Qllacitv whauonel', includinl but not
limileo :a the balance of any dellosir. UUlt or apincy account and the followinr.
12,000 shares of Common Stock of Consumers Financial Corporation
Certificate No. (sl
$40,000 shal:e intereSt in the Be""'yt" Intemat:icna1
~ llJ(X]., .w'W.
all or wr.ich IlrOllem', lepither with ful\lre addiliens and subsil\luom, is herein Qiled the Coll~tenl. said CollateDl to
be he!c ;v you U collater.U securitY for t.':e payment of .all indebtedness and liUlilities c!-.:e or to become due, direct or
in c:irec:. .bsolute or continpint, joint or sem'al, new eltistinc or hcruftu arisinl. of the W1dersignea or my of them.
~:. of tne undmil/led acrees to deliver Ie you upon request uldilloml securitY to your satisf:1c-.ion should the CoI-
l.terll tlm:n Illecit: become umatisfattory Ie you for any ruson. E.1d1 of the undenicnee hmby authorizes you lD
recleo;: :ne CollalC.-.i or any pm thereof U my time. At or at my time after mll\1ricy of my IlUliiicy or obliption of
:,"e unce"!'l/leo or UlV of them Ie you, or on default by my PUt'( en any insU'Ulllent Ie which tile undersigned or any
'If the::! !naH be :!lanr, endoner, luretY, &\lmtltor or other PartY, you.ve hereby authcriud. u your option and with.
OUI rec:~rse 1C1inn my other penon or prepertv, to sell at publiC or pn-me sale or braker'S board all or any pan of
the sata C:lIallr.l WIthout demand.1dvcrtilemetlt or notice of any kind ClCu:nsuch as may be rec;uired by ~w, and to
:usien u.: deliver t.~l Ccllatenl ami Uany such u.le you or your apnt may p"~rc.'1ue any or all of said CoII~tera1. From
Ih: proc~:s of UlV lUch sale or sales of thl said Collallnl, you are authoriud to dll!'.:c and rewn III coso Il'Id ex.
penses In:::enllhereto. inclueline ruJenable moml'Y'S fees. and to apoly the residul of such proceeds acainst the li.
Ibililies oi the unce."lilnld or my of them. In the event of any IUch sale or sallS you shail bllilbllIe the IIndmicntd
onlV for any surlllUS Ifter the fuU utisfac-.ion of allliUlilitles to you. The uncItnicneel s1Wl renWn liable for any de.
ficit.
With Its:ect to my insuument secured in "holl or in pUt by tilt CoI11ttn1. IKh of tI:e undmicned hereby "aiYtS
demand. ~mlntment, prellct IIScI netice af dishonor and conuna, wichout notice, to any utlmions or renewals that
may be pilei by you.
Addm,
Columbus Centre Bldg.
Roadtown, Torto1a
British Virqin Islands
Columbus Centre Bldg.
Roadtown, Torto1a
British Virgin Islands
.- hC': LIHI=
I.T.G. DIRECIORS (T&C) LIHI1lJl
~/r~?t! cf..c 111 ~
I
Addl'fSl
'"
....
.
.
llROMISSORY NOTE
$90,000.00
Camp Hill, PA
February 28, 1991
FOR VALUE RECEIVED, PAYROLL PRODUCTS & SYSTEMS, INC. (the
"Borrower") , of 11 Market Square, Sui te 18, Newburyport,
Massachusetts 01950, promises to pay to the order of CONSUMERs
REINSURANCE COMPANY (the "HOlder"), at P. O. Box 26, Camp Hill
Pennsylvania 17011 lor at such other place as the Holder may from
time to time designate), in lawful money of the United States of
America, the unpaid principal balance due and owing under this Note
up to a maximum principal balance of Ninety Thousand Dollars
1$90,000.00), without any interest on the unpaid balance.
This Note is a master note evidencing advances up to a maximum
amount of $90,000 to be made by the Holder to the Borrower form
~ime to time through July 31, 1991 pursuant to an Agreement dated
as of February 28, 1991 by and among the Borrower, the Holder and
Consumers Life Insurance company I the "Agreement"). The Borrower
shall be obligated to repay only the actual amount advanced as
hereinafter specified, without any interest thereon as provided in
this Note. The Holder shall record all advances and repayments
under the Note on the schedule attached to this Note.
The unpaid principal balance due under this Note Shall be due
and paYable in full on July 31, 1993.
1
.
~
Zf the Borrower defaults in the payment of any amounts payable
under this Note and such default continues for a period of ten days
after written notice thereof, or if the Borrower ~ai1s to comply
with any provisions of the Agreement and such failure to comply
shall continue for a period of thirty days after written notice
thereof, or if the Borrower shall become insolvent, make an
assignment for the benefit of creditors or become subject to any
proceeding, whether voluntary or involuntary, under any federal or
state bankruptcy or insolvency law, the Holder may, by written
notice to the Borrower, declare the unpaid balance of this Note to
be immediately due and payable.
No delay or failure of the Holder in exercisinq any right,
power or privilege hereunder shall affect any such riqht, power or
privilege, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such right, power
or privilege preclude any further exercise thereof, or of any other
right, power or privileqe.
This Note may be prepaid at any time, in whole or in part
without penalty or premium.
If any provision of this Note shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, but this Note shall be
construed as if such invalid or unenforceable provision had never
been contained herein.
2
GUARANTY
ON EVEN DATE herewith PAYROLL PRODUCTS & SYSTEMS, !NC., of 11
:.!arket Square, Suite 48, Newburyport, ~Iassachusetts 01950,
hereinafter referred to as "Debtor", has executed and delivered to
CONSUMERS REINSURANCE COMPANY, of 1200 Camp Hill By-Pass, Camp
Hill, Pennsylvania 17011. hereinafter referred to as "Creditor",
a Promissory Note, and certain other agreements. The Creditor has
under~aken to enter into such agreements in reliance upon, among
cther things, the security of this Guaranty to secure the
indebtedness of Debtor to Creditor.
THElmFORE, intending to be legally bound, to induce the
Creditor to make advances to Debtor, the undersigned Guarantor does
hereby agree as follows:
1. The Guarantor unconditionally guarantees to Creditor the
prompt and punctual payment of all amounts due from
Debtor from and after the date hereof, by acceleration
on account of default or otherwise, and the performance
of all other obligations, including the obligations
undertaken by the Debtor to the Creditor in the
Promissory Note. The liability of the Guarantor under
this Guaranty shall be unlimited.
2. The liability of the Guarantor hereunder is absolute and
unconditional and shall not be affected in any way by
reason of any failure to pursue, repay or preserve any
rights against any personlsl. or the lack of any prior
enforcement of such rights. The Guarantor hereby waive.
1
..
..
.
as =z':tui,=ed .:.::
......t':J .....--n....
.....- - .....--
::.;:-eemen:~
..;n.lC~
:::is GI.1arant7
sec~=es. and (~) all :~ghts :0 stay of exec~:ion and
exempt:ion of ;:c1=er~~i . - :;.ny action :0 enforce the
liability of the Guaran:== :-.ereunder.
No :.elay :.n ::laking demand on the Guarantor for
L
performance or payment of tlle Guarantor's obligation
hereunder shall prejudice the right to enforce said
performance or payment.
5. The Guarantor herein further does hereby empower any
attorney of any court of record within the United States
or elsewhere to appear for :hem or anyone of t~em, in
the event of default by Creditor, and after one or more
declarations filed. confess judc;ment against them or
either of them as of any te~ for all sums due hereunder,
with costs of suit and attorney's commission of five
perc~nt 15\) for collection and release of errors, and
without: stay of execution and inquisition and extension
upon any levy on real estate is hereby wai'/ed. and
condemnation agreed to and the exemption of personal
property from levy and sale on any execution herein, is
also hereby expreSSly waived. and no benefit of exemption
be claimed under and by virtue of any exempticn law now
in force in Which may be hereafter passed.
6. This Guaranty is given in connection with and evidences
the Obligation of the under Signed to make payment in
connection with a commercial transaction.
1
..
...
-
, .
:n t~e event ~ny one c= ~ore ot the provisions c:nta~ned
in this Guaranty shall :or any reason be held to be
invalid. illegal or unentorceable in any respect, such
invalidity, illegality or unenforceability shall not
affect any other provisions of this Guaranty, but this
Guaranty shall be construed as if such invalid, illegal
or unenforceable provisions had never been contained
herein.
8. The liability of any Guarantor herein is not conditioned
upon the liability of any other Guarantor.
9. The liability of each of the parties, Which together are
the Guarantors hereunder, shall be joint and several.
10. When the context so requires, the singular shall be
substituted for the plural and
vice versa..
~fW0
day
--'"
, intending to be legally bound, and to
WITNESS WHEREOF,
U , 19 q J
this
on
bind the succ ssors and assigns of the undersigned, as applicable,
the Guarantc= has caused this Guaranty to be duly executed and
celi'/ered.
ATTEST:
~71tt:
v. ...:_-~. Director
I.T.G. DmrrotlS (T&C) l.L'im:D
By
. 'ted
4
.
of
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STATE OF: ''_._
COUNTY OF:
. ,CALlEillUUA,
LOS ANGELES
-.-----.
PROOF OF SERVICE
CASE:
CONSUMERS REI NSURAll.C1;;..dA ,,1'''''''''1'1
h"!NII
q7_411q
"
PAYROLL PRODUCTS
1'1 ii1ltl'II'IHI,1Il1(c.,1
SERVICE OF PROCESS ON:
PAYROLL PRODUCTS ~ &lSTEMS. INC..
NAMI Of INflfY to SI stRYlD
APS International
APS INTERNA TlClNAl PlAZA. 7800 GlENROY ROAD
MINNEAPOliS. MN 55439-3122
NAME OF SERVER:
DATE OF SERVICE:
PLACE OF SERVICE:
DOCUMENTS
SERVED:
PERSON SERVED
AND METHOD
OF SERVICE:
*"""""""....
-'-
MtoN __I""'" ___
~..-
DESCRIPTION OF
PERSON RECEIVING
DOCUMENTS:
PRDOF OF
DUE & DIUGENT
ATTEMPT:
*c...~....
:r:.- ..l.~lIIC.
~..-
SIGNATURE OF
SERVER:
NoIMllithOn
o !loquored
o ~ Iloquored
JEFF HIGLEY . ufKll~~Jm~d. hmng duly sworn, deposes and says
lh..1 he "'\I<t~ ,II 11M' fllIIt' lit ""'1\1. t' IIV'Of fhp .kJl~ tI' '.....'111';' '.\f' W.IS nul ,I pmtv 10 tfll!> act,un,
th..I 0,,11", ~ eLlv ut
NOV. 1!1..'ll-., 1\' 11
u'd>>ek -AM
~ 1440 S. REXFORD DR. 1205,
11l1l...."_lh()1 LOS ANGELES
~JI,j!l~ ( If
CA
lIll' \"~k1'.,ul'''''1 ""_"\'1'11 lh.' .tI'lI~'..,~II~~~~,
WRIT OF SU~'n.QIlViuDOC......n"""D1
A true ;tnd nJfr('.:t ("('lily of tilt. aftlle...-utl ,),tll"'" """'t' "f'f~~1 un lilt, .,l)l:IVI' fl;lmro parly or w,lrwu m the
toIk>wlnymdnrl(>f
o Bv pPrM"'ilUv rtt"M-!HlllJ Hit"" 1Il1!) tht' h.mds nl U'M' IM>(\on 10 tM~ Sf.tvl'd
*D ISub!tlltufe) By Icavmg ;Il opV ,It hr.i/I'M'f u",...1 pl.. t' II' ,dllKit' ,"'\/llh \.onM' 1)t'f<,.()fJuf "iUtlah'I!.tye and
dlsc~.)f'l ttmn ff'~hnQ tht'ft~ln_ III WIt
ClBv dl"lvenf~ them 10 an off"t'! Of 111.1I\'~I,"IJ .IUt"11 ....hO~f' name .md title IS
DAVID G. DEMBICER. PRESIDENT. AND AGENT FOR SERVICE
01....
The Jlf!f'j{Xl r~!'(:''t\llr~1 ItlH"_urllt1nh I" l!t'",,-r,h"jt <IS t.,UOV\lS
St'. M Sklll Color \-JHT H,llf C..k... R.RnUN' . faCial Hd'f
~ (pfo. ) Ii. Ii. Hf>Mlhl uwo.- I ~ I 7 W!lghl h"fHll 1 J 5
. Tv IN ..... of"", ."0""'''' ""'~I, "oMtpet'sn" ...nnnt ~Mt 1M us Mtht..,..",- t._ of _wc:.
o AfTER DUE AND OlUGENT EFFORTS. UNDERSIGNED WAS UNABLE TO EFFECT SERIIlCE
o FACTS INOlCATlNG DEHNDENT IS AVOIOlNG SERIIlCE ARE
*OATES Of SEfMCE
ATTEMPTED
TIM!.,
Al11MPllO
__II'fklol'._M
_ _flllo'l"'_M
ndu.", M
AOORESS
ATTEMPTED
REASON fOR
NON SEfMCE
~'1tdL"l.i.lft>SUIll.~~\dtl~ Ht Pt""tt",
that thP fur'Vltntd K 1ft,", n:wrPl. 1
Suh!.<-t.tw>ci & 5Wtwn tu tw-ltll't! me thf5
6 NOV
...:r-
N.: UfMWY'f'f
tdiltt>)
Sandy M. Geln..
::"u.- "'-It
0;.__
~ 1__1f
(612) 831-7776
(612) 83HIlSO
HlOO.J28. 7171
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Consuners Reinsurance Carpany
w.
Payroll Products , SystenB,
Inc., Payroll Products ,
SystenB Insurance Ager-cy, Inc.
and Bell Fideltiy Insurance
Miu:iceting 0:l..~4tioo
------------------------------------
Stlft1nvw1-iD
Civil Actioo - Law
------------------
MelIus, )iIoll~ , anick
Harvey Freedenbe%g, Esq.
Atty 1.0. No. 23152
Helen L. Gennill
Atty 1.0. No. 60661
100 Pine St.
P.O. 8:Ix ll66
H4J:rlsburg, PA 17108
(717) 2328000
--------------...------------------
Attanley
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4. Paragraph 4 of the Complaint is denied as slated. Dell Fidelity Insurance
Marketing Corporation maintains its corporate ollices at 1440 S. Rexford Drive,
Apartment 11205. Los Angelos, CA, 90035.
5. Jurisdiction is not contested.
6. Admilled.
7. Admilled.
8. Admilled.
9. Paragraph 9 is admined in part and denied in part. It is admilled that PP&S
received $90,000.00 from Consumers Reinsurance and/or its alliliates, it is denied,
however that such payments were kin accordance with the loan agreementk. By way of
further response. the loan agreement was an inteb'f8l part of the overall business
arrangement between the parties which was and has been breached by the Plaintiffs.
10. Admilled.
II. Admined.
12. Denied. To the contrary, Plaintiffs are in material breach of the business
arrangement between the parties and, therefore, no repayment of the ad\'ance is or has
been due.
13. Paragraph 13 of the Complaint is denied To the contra!)' I'I'&:S is not
obligated in any amount or upon any theory llf law or '-'quity ttlthe Plaintiffs. To the
contrary, Plaintills are indebted to I'I'&:S in AN amount subsl3ntially in cxC\.'Ss of
590,00000
14. Paragraph 14 of the Complaint is denied as al1er reasonable investigation
this party is without sunicient infonnation or knowledge to fonn a belief as to the
truthfulness thereof If it is true that the "pledged shares" have hI.-en "reregistered" to
Consumers Reinsurance. then such "reregistration" was improper and unlawful and
constituted a fraudulent and tortious conversion of property belonging to another. By
way of further response. to the extent such "pledged shares" have been "reregistered" to
Consumers Reinsurance. the v'alue of such shares should be credited against any claim
asserted in the Complaint
I S. Paragraph I S is admitted in part and denied in part. It is admitted that
Plaintiffhas made demand for payment. It is denied that any payment is ow~-d
16 Defendant incorporat~'S herein by reference its response to paragraphs I-I S
of the Complaint.
17. Denied. To the contrary, Consumers Reinsurance participated in a fraud by
inducing PP&S into entering into several agreements when Consumers Reinsurance
never intend~-d to perfonn responsibly or ethically thereunder. I'P&S is not indebted to
Consumers Reinsurance in any amount or upon any theor)'.
18. Denied. To the contrary, Consumers Reinsurance and its alliliates have not
perfonned as requin.'d
19. Parab'l'llph 19 of the Complaint is denil.'If To the contrar)', PP&S has not
breached and IS not il1lk.-bted to the P1.lInltIT upon any theory of law or ~'\Iuity.
20. Paragraph 20 of the Complaint is denied. Consumers Reinsurance has not
been damaged but to the contrary has been unjustly enriched through its fraudulent
conversion of funds properly belonging to PP&S and by funher fraudulently convening
to its own usc the pledged shares.
21. Paragraph 21 of the Complaint is denied. None of the named Defendants
are indebted to the PlaintilT upon any theory of law or equity.
WHEREFORE. Defendants deny that they are indebted to the PlaintilT and
request that judgement be entered in their favor.
22. Defendants incorporate herein by reference their responsc to paragraphs I.
21 of the Complaint.
23. Admitted.
24. Parab'l'llph 24 of the Complaint is denied as stated. The Promissory Note
was one of sc\'eral intCl,'l'lIted documents including a "partnership agreemenC PlaintilT
has failed to perfonn under thosc agreements and thus is not entitled to any payment
upon any theory of law or equity.
25. Paragraph 25 is admitted in part and denied in pan. It is admitted that
590,000.00 was advanced to PP&S under the tcons of the integrated contractual
agreement.
26. Paragraph 26 of the Complaint is denied 115 stated Had PlaintilTproperly
perfonned its responSibilities under the intq,'l'lIted ag1\:ements then it would have
rel:o\'ered the 590,000.00 ad\ancc through CredIts against the Defendant's share of profits
pursuant to the "Partnership ^greemenC As a result ofthe failure of Consumers
Reinsurance to conduct itself properly it is not entitled to any payment upon any theory
of law or equity.
27. Denied for Ihe reasons previously stated.
28. Paragraph 28 of the Complaint is denied as aller reasonable investigation
this party does not ha"e sufficient information or knowledge to limn a belief as to the
truthfulness of the averment.
29. Paragraph 29 of the Complaint is denied for the reasons previously stated.
30. Paragraph 30 of the Complaint is denied for the reasons previously stated.
3 I. Paragraph 3 I of the Complaint is denied for the reasons previously stated.
WHEREFORE. Defendant's deny that they are indebted to the Plaintiffs in any
amount or upon any theory of law or equity.
NEW 1\1,\ TIER
32. Defendants believe. and therefore aver, that Consumers Reinsurance
Company and Consumers Life Insurance Company are related entities "ith common
management and business direction such that they are. for all practical intents and
purposes, conducting business as one entity.
33. The Loan Agreement as alleged in the Complaint is an incorporated part of a
business arrangement between the parties and which included the Partnership Agreement
dated May I, 1990.
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4. Paragraph 4 orthe Complaint is denied as stated. Bell Fidelity Insurance
Marketing Corporation maintains its corporate offices at 1440 S. Rexford Drive.
Apartment #205. Los Angelos. CA. 90035.
5. Jurisdiction is not contested.
6. Admitted.
7. Admitted.
8. Admitted.
9. Paragraph 9 is admitted in part and denied in part. It is admitted that PP&S
received 590.000.00 from Consumers Reinsurance and/or its affiliates. it is denied.
however that such payments were "in accordance with the loan agreement". By way of
funher response. the loan agreement was an integral part of the overall business
arrangement between the parties which was and has been breached by the Plaintiffs.
10. Admitted.
11. Admitted.
12. Denied. To the contrary. Plaintiffs are in material breach of the business
arrangement between the parties and. therefore. no repayment of the advance is or has
been due.
13, Paragraph 13 oflbe Complaint is denied. To the contrary PP&S is not
obligated in any amoURt or upon any theory of law or equity to the Plaintiffs. To the
contrary. Plaintiffs are indebted to PP&S in AN amount substantially in excess of
590,000.00.
14. Paragraph 14 of the Complaint is denied as after reasonable investigation
this parly is without sufficient infonnation or knowledge to fonn a belief as to the
truthfulness thereof. lfit is true that the "pledged shares" have been "reregistered" to
Consumers Reinsurance. then such "reregistration" was improper and unlawful and
constituted a fmudulent and tortious conversion of property belonging to another. By
way of further response. to the extent such "pledged shares" have been "reregistered" to
Consumers Reinsurance. the value of such shares should be credited against any claim
asserted in the Complaint.
I S. Paragraph ISis admilled in pari and denied in part. It is admilled that
Plaintiff has made demand for payment. It is denied that any payment is owed.
16. Defendant incorpomtes herein by reference its response to paragmphs 1.\ 5
of the Complaint.
\7. Denied. To the contrary. Consumers Reinsurance participated in a fmud by
inducing PP&S into entering into several agreements when Consumers Reinsurance
never intended to perfonn responsibly or ethically thereunder. PP&S is not indebted to
Consumers Reinsurance in any amount or upon any theory.
18. Denied. To the contrary. Consumers Rdnsumnce and its alliliates have not
perfonned as required.
19. Paragraph 190fthe Complaint is denied. To the contrary. PP&S has not
breached and is not indebted to the Plaintiff upon any theory of law or equity.
20. Paragraph 20 of the Complaint is denied. Consumers Reinsurance has not
been damaged but to the contrary has been unjustly enriched through its fraudulent
conversion of funds properly belonging to PP&S and by further fraudulently converting
to its own use the pledged shares,
21. Paragraph 21 of the Complaint is denied. None of the named Defendants
are indebted to the Plaintiff upon any theory oflaw or equity.
WHEREFORE. Defendants deny that they are indebted to the Plaintiff and
request that judgement be entered in their favor.
22. Defendants incorporate herein by reference their response to paragraphs 1-
21 of the Complaint.
23. Admitted.
24. Paragraph 24 of the Complaint is denied as stated. The Promissory Note
was one of several integrated documents including a "partnership agreement". Plaintiff
has failed to perform under those agreements and thus is not entitled to any payment
upon any theory of law or equity.
25. Paragraph 25 is admitted in part and denied in part. It is admitted that
$90.000.00 was advanced to PP&S under the terms of the integrated contractual
agreement.
26. Paragraph 26 of the Complaint is denied as stated. Had Plaintiffproperly
performed its responsibilities under the integrated agreements then it would have
recovered the S90.000,OO advance through credits against the Defendant's share of profits
pursuant to the "PlII111ership Agreement". As a result of the failure of Consumers
Reinsurance to conduct itself properly it is not entitled to any payment upon any theory
oflaw or equity.
27. Denied for the rea~ons previously stated.
28. Paragraph 28 of the Complaint is denied as after reasonable investigation
this party does not have sufficient infonnation or knowledge to fonn a belief as to the
truthfulness of the avennent.
29. Paragraph 29 of the Complaint is denied for the reasons previously stated.
30. Paragraph 30 of the Complaint is denied for the reasons previously stated.
31. Paragraph 31 of the Complaint is denied for the reasons previously stated.
WHEREFORE, Defendant's deny that they are indebted to the PlaintilTs in any
amount or upon any theory of law or equity.
NEW MAlTER
32. Defendants believe, and therefore aver, that Consumers Reinsurance
Company and Consumers Life Insurance Company are related entities with common
management and business direction such that they are. for all practical intents and
purposes. conducting business as one entity.
33. The Loan Agreement as alleged in the Complaint is an incorporated pan of a
business arrangement between the parties and which included the Partnership Agreement
dated May 1,1990.
PRAECIPE FOR LIST.lNG ~ASE FOR TRIAL
(Must be typewritten and submitted in duplicate)
ro '!liE PIOl'I-KJNJI'ARY Of' ctf.lBERLA/IO COUNI'Y
Please list the following case:
(Check one)
for JURY trial at the next tenn of civil court.
( X
for trial without a jury.
-----------------------------------------
CAPl'IOO Of' CASE
(entire caption nust be stated in full)
(check one)
Consumers Reinsurance Company,
( X ) Civil Action - Law
Appeal fran Arbitration
(other)
(Plaintiff)
vs.
Payroll Products & Systems, Inc.,
Payroll Products & Systems
Insurance Agency, Inc. and
Bell Fidelity Insurance
Marketing Corporation,
'I11e trial list will be called on
and
Trials cannence on
( Ilefendan 1:9
Pretrials will be held on
(Briefs are due 5 days before pretrials.)
('I11e party listing this case for trial shall
provide fortt"Mi th a copy of the praecipe to
all counsel, p.II'S\WIt to local ~ 214.1.)
vs.
No. 4139
Ci vi!
Term
19 97
Indicate the attorney wOO will try case for the party wbJ files this praecipe.
Helen L. Gemmill, McNees, Wallace & Nurick, 100 Pine Street,
P.O. Box 1166, Harrisburg, PA 17108-1166 (717) 231-5273
Indicate trial 00Wl5el for other parties if known. Steven B. Larchuk,
Malone, Larchuk & Middleman, P.C., Suite 310, 117 VIP Drive, Wexford, PA 15090
(412) 934-6888
'nIis case is ~ for trial.
ILL l.. t;-:JJ
Signed.
Print Nlnl. Helen L l;emmlll
Date.
Attorney for: PI..lntlff
2. Admitted in part and denied in part. The Consumers Parties deny that No. 97.
4139 is related to No. 99.0712 and deny that the two cases have common parties and many
common issues. The Consumers Parties admit the remaining allegations of para graph 2 oftht:
Motion.
3. The Consumers Parties admit that counsel for PP&S recommended and requested
that the two cases be tried together, asserting the alleged reasons set forth in paragraph 3 of the
Motion.
4. Admitted with qualification. The Consumers Parties admit that their counsel
objected to the consolidation because No. 97-4139 was to be tried non.jury and No. 99-0712 was
to be tried by ajury. Additionally, counsel for the Consumers Parties objected to the
consolidation because the cases are not related and because No. 97-4139 was ready for trial and
No. 99-0712 was not ready for trial.
S. Admitted.
6. Denied. Counsel for PP&S had the authority to waive the jury trial demand and
did so as a strategic decision to avoid an earlier trial in the non.jury case docketed to No. 97-
4139. S<< Warden v. Zanella, 238 PI. Super. 137,423 A.2d 1026, 1028 (1980) (attorney's
strategic decision to waive jury trial was binding on attorney's client). As such, PP&S's
counsel's waiver of the jury trial demand was binding on PP&S. S= il1. Counsel for PP&S was
fully aware of the effect of his consent to waive the jury demand. Counsel for PP&S stated that
the jury demand was irnpol1ant to PP&S but chose to waive it Counsel for PP&S even joked
that as a result of the waiver he might be fired by his client.
.2..
7. Denied. The Consumers Parties answer to paragraph 6 above is incorporated by
reference. Further. PP&S should not be pennitted to withdraw its jury waiver. The jury waiver
decision was made to obtain a strategic advantage in Ihis case. namely the delay of the trial in the
loan action docketed to No. 97-4139 and the perceived advantage of having the cases tried
together. PP&S has failed to articulate any legal excuse to justify withdrawal of the consent to
proceed non-jury. S= Rodney v, Wise. 500 A,2d. 1187 (Pa. Super, 1985){finding waiver of
jury trial binding where waiver was made to obtain a delay in the start of trial and party failed to
articulate legal excuse for withdrawal of waiver).
WHEREFORE. the Consumers Parties request that the Motion to Reinstate Matter to
Jury Trial List be denied.
McNEES. WALLACE & NURlCK
By /I.L. L . r;..JJ
Harvey Freedenberg
1.0. No, 23152
Helen L. Gemmill
I.D. No. 60661
too Pine Street
P.O. Box 1166
Hanisburg, PAm 08
(717) 232-8000
Date: October to. 2000
Attorneys for Consumers Reinsurance Company;
Consumers Life Insurance Company; and
American Men:hants Life Insurance Company, Inc.
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INDEX OF WITNESSES
FOR THE PLAINTIFF
DIRECT
James Robertson
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R. Fredric Zullinger
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INDEX OF EXHIBITS
FOR THE PLAINTIFF
ADMITTED
Ex. No. 1 - Loan Agreement
Ex. No. 2 - Promissory Note
Ex. No. 3 - Certification
Ex. No. 4 - Assignment of
loan agreement & promissory
note
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THE COURT:
MR, LARCHUK:
MS. GEMMILL:
THE COURT:
MS. GEMMILL:
Good morning.
Good morning, Your Honor.
Good morning.
Ms. Gemmill.
Your Honor, Helen Gemmill on
behalf of the plaintiff, Consumers Reinsurance Company.
The case that's before you today is a case solely about the
repayment of a loan. Consumers Reinsurance Company, the
plaintiff, loaned $90,000.00 to the defendant, Payroll
Products & Systems, Inc., PP&S. That loan has never been
repaid. And we are before you in this case today to seek a
judgment against PP&S for failure to pay that loan.
Now, the evidence will show that on February
28th, I991, Consumers Reinsurance Company --
THE COURT: If it is any help. I have read
the complaint, and I have read the answer, and I have read
the new matter. I do understand the issue. And they are
saying to the contrary, that this note is part of an
overall comprehensive agreement, and I guess I have to sort
that out.
MS. GEMMILL: Sure. And let me address that
briefly. because I think that is important. This case is
not about whether or not a separate company. Consumers Life
Insurance Company, reached a separate agreement, a National
Marketing Partnership Agreement, with Payroll Products &
3
1 Systems, Inc. And they have asserted that this separate
2 breach by a separate company is a defense to this action.
3 Under Pennsylvania law it is not a defense to this action,
4 because the contracts are separate. They are severable.
5 There is separate consideration for each contract.
6 The case before the court today, the
7 consideration was the payment of $90,000.00, the promise to
8 repay the loan. The case that is going to be tried before
9 a jury sometime next year, Your Honor. for breach of this
10 National Marketing Partnership Agreement, is whether
11 Consumers did all the things they were supposed to do under
12 the agreement, and that's Consumers Life Insurance Company,
13 not Consumers Reinsurance Company. whether Payroll
14 Products & Systems, Inc.. did everything that they were
15 supposed to do under that agreement.
16 Consumers Life Insurance, we submit, did not
17 breach that agreement. But even if they did, that does not
18 excuse the performance of Payroll Products & Systems, Inc.,
19 to repay this loan. The loan is separate. It says
20 repayment is supposed to be made by July 1, 1993. It was
21 not repaid. There was certain collateral that was
22 available. Consumers Reinsurance Company has never
23 collected that collateral. So the full amount is due and
24 owing in this case.
25 So we would ask the court to exclude any
4
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1 evidence that relates to the alleged breach by the separate
2 company, Consumers Life Insurance Company. with respect to
3 the separate contract. National Marketing Partnership
4 Agreement, and just try the only case that's before this
5 court today.
6 THE COURT: Well, that's one thing I am
7 going to do for sure, is try the only case that's before
8 me. There is no question about that. But the question is
9 whether the defense is viable or not. And I can't rule on
10 that in advance of hearing the evidence.
11 MS. GEMMILL: Your Honor --
12 THE COURT: I mean, Mr. Larchuk. I am making
13 argument for you. Is there anything you want to say before
14 I carryon as I have?
15 MR. LARCHUK: I will be happy to make some
16 opening remarks --
17 THE COURT: Essentially there is a motion in
18 limine to eliminate your defense is what I am hearing.
19 MR. LARCHUK: One of the defenses.
20 THE COURT: Okay.
21 MR. LARCHUK: There are some other defenses.
22 If I may...
23 THE COURT: Go ahead.
24 MR. LARCHUK: Based on the court's ruling,
25 our side has re-evaluated our strategy and concluded that
s
1 we are going to allocate our resources, such as they are,
2 to the case to be tried later.
3 THE COURT: Okay.
4 MR. LARCHUK: We do have some other defenses
5 other than just the global breach of an integrated
6 relationship defense, which is the one we talked about in
7 your chambers previously --
8 THE COURT: And so I would not anticipate
9 then hearing about that today?
10 MR. LARCHUK: You will not be hearing about
11 that today.
12 MS. GEMMILL: Then never mind, Your Honor, I
13 think that is the correct legal response there at this
14 point.
15
THE COURT: It reminds me of some author,
16 whose name escapes me at the moment, once referred to as a
17 tempest in a teapot. Shall we take the evidence and then
18 you can make what closing arguments, which you seem to be
19 making now, let's make them at the end of the case. Go
20 ahead.
21 MS. GEMMILL: Sure, Your Honor. Then on
22 behalf of Consumers Reinsurance Company I will call James
23 Robertson to the stand.
24 Whereupon, JAMES ROBERTSON, having been duly
25 sworn, testified as follows:
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DIRECT EXAMINATION
BY MS. GEMMILL:
Q Sir, would you please state your name?
A James C. Robertson.
Q And in 1991 what was your position with
Consumers Reinsurance Company?
A President.
Q Can you tell me what was the business of
Consumers Reinsurance Company back in 1991?
A It was in the insurance business and
primarily doing reinsurance.
Q What is reinsurance?
A Reinsurance is where a company who doesn't
actually have agents working for it receives business from
other insurance companies that have the agents.
Q I want to hand you
MS. GEMMILL: Your Honor, could I have leave
to approach the witness?
THE COURT: Sure.
BY MS. GEMMILL:
Q Mr. Robertson, I have handed you a document
that has been identified as Plaintiff's Exhibit 1. Can you
tell the court what Plaintiff's Exhibit 1 is?
A It is a loan agreement.
Q And who are the parties to the loan
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agreement?
A Consumers Reinsurance Company, Payroll
Products & Systems, Inc.
Q And if I could ask you to turn to the second
page of the loan agreement. Is that your signature that
appears there?
A Yes.
Q And in what capacity did you sign this loan
agreement?
A President.
Q And do you recognize the signature of the
person on behalf of Payroll Products & Systems. Inc.?
MR. LARCHUK: Your Honor. we will stipulate
to the authenticity of the document if that will help.
THE COURT: Sure.
MS. GEMMILL: Let me move forward.
BY MS. GEMMILL:
Q
Sir, under Plaintiff's Exhibit 1, the loan
19 agreement, what did Consumers Reinsurance agree to do. in a
20 nutshell. if you could summarize it?
21 A In the loan agreement?
22 Q Yes.
23 A We agreed to lend PP&S $90.000.00.
24 Q Under the loan agreement when was that
25 $90,000.00 due to be repaid by PP&S?
II
1 A On or before July 31, 1993.
2 Q Was the $90,000.00 advanced by Consumers
3 Reinsurance Company to PP&S?
4 A Yes.
5 Q And let me hand to you what we have marked
6 as Plaintiff's Exhibit 2. Mr. Robertson, what is
7 Plaintiff's Exhibit 2?
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A A promissory note.
Q And who holds this promissory note?
A Consumers Reinsurance Company.
Q If you will turn to the fourth pag~ of the
exhibit, can you tell me what that reflects?
A It says Schedule of Advances on the
Promissory Note.
Q Were these advances that were made by
Consumers Reinsurance Company to PP&S?
A Yes.
Q Have those amounts ever been repaid by PP&S
to Consumers Reinsurance Company?
A No.
Q Mr. Robertson, I have handed you what's been
marked as Plaintiff's Exhibit 3. Can you identify what
that document is?
A It is a certified copy of a resolution of
Consumers Reinsurance Company. of the resolution of the
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Board of Directors of Consumers Reinsurance Company.
o And as the date of Exhibit 3, February 28,
1991, were you a member of the Board of Directors of
Consumers Reinsurance Company?
A Yes.
o Are you currently the president of Consumers
Reinsurance Company?
A No.
o What has happened to that company?
A We sold the company.
o Do you know when that sale took place?
A I don't recall what date.
o Let me hand to you what we have marked as
Plaintiff's Exhibit 4. Can you identify what Plaintiff's
Exhibit 4 is?
A Assignment of Loan Agreement and Promissory
Note.
Q And if you will turn to the last page, does
your signature appear there?
A Yes.
Q In a nutshell, what is this assignment
document?
A What is the assignment document?
Q Yes. What was assigned?
A Well. we assigned the loan agreement and
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promissory note.
o Who assigned it to who?
A Consumers Reinsurance Company assigned it to
Consumers Financial Corporation.
o And what date was that done?
A The 31st of August 1998.
o And that was after this lawsuit was filed on
July 30th, 1997?
A I believe that's correct.
o And has the $90,000.00 ever been repaid to
Consumers Financial Corporation?
A No.
MS. GEMMILL: Your Honor, I would offer
Exhibits 1, 2, 3 and 4 into evidence.
THE COURT: They are admitted unless there
is objection.
17 MR. LARCHUK: No objection, Your Honor.
18 THE COURT: Very well.
19 MS. GEMMILL: That's all I have, Your Honor.
20 CROSS-EXAMINATION
21 BY MR. LARCHUK:
22 0 Mr. Robertson, the plaintiff in this case is
23 not Consumer Financial Corporation, is that correct? The
24 plaintiff in this case is Consumer Reinsurance Company?
25 A Correct.
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1 Q And I think what you have just said, and as
2 you have confirmed for the court through Plaintiff's
3 Exhibit 4, is that Consumers Reinsurance Company no longer
4 owns this note?
A
It was assigned to Consumers Financial
Corporation, yes.
Q Which is a different corporation?
A It is the parent company of Consumers
Reinsurance Company.
Q Is it a different corporation, sir?
A Yes.
Q So the corporation that actually owns the
note is not in the courtroom today?
A No. The corporation that owns the note is
Consumers Financial Corporation.
Q How long have you been the president of
Consumers Financial Corporation?
A Since 1968.
Q Are you a shareholder?
A Yes.
Q Have you been a shareholder since 1968?
A Yes.
0 Have you kept track of the market value of
the stock from month-to-month, day-to-day?
A No.
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o Do you have any recollection as to the
market value of the stock in 1993?
A Not off the top of my head. no.
o Give us your best estimate, sir, as
president of the corporation?
MS. GEMMILL: Your Honor, I object to him
giving an estimate. I also object on relevance grounds.
THE COURT: Well, an estimate is overruled,
but perhaps you can tell us where you are going with regard
to this line of testimony, Mr. Larchuk?
MR. LARCHUK: Yes. Your Honor. As the
documents revealed, collateral included 12,000 shares of
Consumer Financial Corporation. If Your Honor will look at
the complaint at some point, paragraphs eleven and fourteen
of the complaint recite that that collateral was taken. If
there was a default in 1993, then, obviously, if they have
already recovered some of the collateral, that that,
whatever it may be, is less.
THE COURT: Go ahead,
BY MR. LARCHUK:
o
Sir, what was the value of the stock in
23 A I don't know.
24 0 If I were to tell you that it was at least
2S $3.00, would you quarrel with that?
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A No. I couldn't quarrel with it.
Q Sir, the documents that have just been
offered into evidence also recite the payment of the
obligation was to come from the profits that PP&S was to
enjoy from another transaction, are you aware of that?
A I don't recall just where the payments were
to come from, but as I remember, they were to pay it
whether there were any profits or not.
Q Who controlled whether there would be
payments of profits?
A It was a joint control of PP&S and not
consumers. PP&S had to produce profitable business before
we could share those profits with PP&S.
MR. LARCHUK: No further questions. Thank
you, Your Honor.
MS. GEMMILL: Short redirect.
REDIRECT EXAMINATION
BY MS. GEMMILL:
Q Mr. Robertson, do you know whether the
shares of stock that were pledged as collateral for this
loan were ever re-registered by Consumers Financial
Corporation or by Consumers Reinsurance?
A I don't know.
MS. GEMMILL:
THE COURT:
Thank you.
Thank you.
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1 MS. GEMMILL: Your Honor, at this time we
2 will call Fredric Zullinger to the stand.
3 Whereupon, R. FREDRIC ZULLINGER, having been
4 duly sworn, testified as follows:
5 DIRECT EXAMINATION
6 BY MS. GEMMILL:
Q
A
Q
A
Would you please state your full name?
R. Fredric Zullinger.
Where are you currently employed?
I am employed by Consumers Life Insurance
Company.
Q
Going back to 1991, what relationship did
you have with Consumers Reinsurance Company?
A I was the treasurer and chief financial
officer.
Q And what relationship. going back to 1991,
did you have with Consumers Financial Corporation?
A I was also the treasurer and chief financial
officer.
Q And today. with Consumers Financial
Corporation, what is your relationship?
A Treasurer and chief financial officer.
Q Now, in your capacity as treasurer and chief
financial officer of Consumers Financial Corporation, were
you aware that certain shares of stock in Consumers
IS
1 Financial Corporation were pledged as collateral for this
2 loan?
3
A
Yes, I was.
4 0 And you have heard Mr. Larchuk just refer to
5 some allegations in the complaint that state that those
6 shares were re-registered. Did that in fact happen?
7 A No. It did not.
a 0 Why not?
9 A I don't honestly recall. There may have
10 been some discussions about doing that, but I know it
11 didn't happen.
12 Q Who currently holds those shares of
13 Consumers Financial Corporation that were pledged for this
14 loan agreement?
15 A The original share certificates are still in
16 the name of Americo, Inc.
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And have those share certificates ever been
applied to pay any portion of the outstanding loan between
Consumers Reinsurance Company and PP&S?
A No. They have not.
o Has there ever been any application of any
other funds to pay the $90,000.00 that is outstanding on
the loan between Consumers Reinsurance Company and PP&S?
A No.
MS. GEMMILL: Thank you.
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CROSS-EXAMINATION
BY MR. LARCHUK:
Q Sir. who is Mr. Walsh?
A Mr. Walsh is a former employee and officer
of the Consumers companies.
Q And, in fact, he was the one that signed the
verification that was attached to the original complaint in
this matter, is that correct, William J. Walsh, Jr.,
executive vice-president and chief operating officer of
Consumers Reinsurance Company?
A He did serve in that capacity.
MR. LARCHUK: No further questions.
MS. GEMMILL: Your Honor, that's all the
plaintiff has.
THE COURT: Any testimony from the
defendants?
MR. LARCHUK: No, Your Honor. Ready to
18 close.
19 THE COURT: Okay. Very well.
20 MR. LARCHUK: Your Honor, in an essence,
21 putting aside all of the very complicated matters that will
22 be reserved for another day, in this specific case we have
23 three key issues. as I see it from the documents and
24 testimony you have heard thlS morning.
25 First of all. is the right party in the
17
1 courtroom? I have taken the time, since it was handed to
2 me, to read the Assignment of Loan Agreement and Promissory
3 Note, which was presented to the court as Plaintiff's
4 Exhibit 4. And although it invites Consumers Financial
5 Corporation to substitute itself for the plaintiff in this
6 case. that has never occurred based on the record.
7 So based on the testimony before the court,
8 we have a situation where the wrong party is before the
9 court claiming rights to a note it no longer owns. So for
10 that reason alone. the case should be dismissed. judgment
11 should be entered for the defendants.
12 Second. if the court will examine the
13 promissory note, which was offered as Plaintiff's Exhibit
14 2, you will note in the second full paragraph that it
15 recites. this note is a master note evidencing advances up
16 to a maximum amount of $90.000.00 to be made by the holder
17 to the borrower -- that says form. but I am sure it means
18 from -- time to time through July 31. 1991.
19 If the court will then turn to the last page
20 of the same exhibit, you will note that there are two
21 recitations of advances subsequent to July 31, 1991.
22 Specifically, an advance on August 1. 1991. for $15,000.00,
23 and August 30th. 1991, for another $15,000.00.
24 I would submit to the court that based upon
25 the documents and record before you, that $30,000.00 is
18
1 outside of the scope of any note or collection activity
2 under the documents before you. So that the most that
3 could be sought to be collected in this case, assuming you
4 had the correct party before you, would be $60,000.00.
5 Finally, Your Honor. part of the record in
6 this case, and as I referenced previously, is the
7 complaint. At paragraphs eleven and thirteen of the
8 complaint the following judicial -- or I should say -- I
9 guess that is right. judicial admissions are made by the
10 plaintiffs.
11 At paragraph eleven, quote, Americo
12 Limited's Guaranty was secured in part by a pledge by
13 Americo Limited of 12,000 shares of Consumers Financial
14 Corporation (the "Pledged Shares") .
15 Then at paragraph thirteen I am sorry.
16 paragraph fourteen, As a result, the Pledged Shares were
17 re-registered to Consumers Reinsurance.
18 This was the original complaint verified by
19 what the testimony has today confirmed to be an officer of
20 the corporation authorized to bind the corporation. There
21 has been no amendment of this complaint. There has been no
22 correction to it. In essence, at most what the court has
23 before it is conflicting testimony between people from the
24 same corporation as to whether they have already exercised
25 part of their collateral l'emedy', I would suggest to the
19
1 court that in light of that conflict their own pleading
2 controls.
3 That raises the question of what was the
4 value of those 12,000 shares. Based on the testimony of
5 the plaintiffs, who have the burden in this case, based
6 upon Mr. Robertson's own testimony. he wouldn't quarrel
7 with my suggestion that the value of the shares in 1993,
8 the year of the default, were at least $3.00 a share. So
9 applying that to 12.000 shares. that's $36,000.00.
10 So I would submit to the court that if there
11 is a plaintiff's award at all in this case. it ought to be
12 limited to $24.000.00. Also. by the terms of the
13 documents -.
14 THE COURT: You get that figure by
15 subtracting thirty-six from sixty, of course?
16 MR. LARCHUK: Yes, sir. And with respect to
17 any claims for interest or attorneys' fees, there is no
18 recitation in these documents that attorneys' fees can be
19 sought. There has been no submission of an attorney fee
20 bill. Also, the documents themselves specifically recite
21 that interest is not to run on the advances. And it makes
22 no exception for interest to begin running after an alleged
23 default.
24 So to summarize. I don't believe any award
2S should be awarded, because you have the wrong partles. If
20
1 any award is entered, it should be limited to $24,000.00.
2 Thank you, Your Honor.
3 THE COURT: You made yourself very clear.
4 Ms. Gemmill.
5 MS. GEMMILL: Your Honor, the evidence that
6 has been presented before you this morning shows that
7 $~O,OOO.OO is owed by PP&S to Consumers Reinsurance
8 Company.
9 Now. let me first address the question of
10 which party is before the court today. The evidence
11 clearly shows that the time this lawsuit was filed
12 Consumers Reinsurance Company was the party that held the
13 rights to the loan.
14 Now, Pennsylvania Rule of Civil procedure
15 2352 says a successor to an interest may be substituted.
16 There is no requirement that that successor be substituted
17 as a party to the action.
18 THE COURT: So you are requesting a verdict
19 in favor of Consumers Reinsurance Company?
20 MS. GEMMILL: Consumers Reinsurance Company.
21 And then pursuant to the assignment documents, which we put
22 here before the court, and in all fairness so that there
23 will not be any question as to who would ultimately get the
24 money, those funds would then go to Consumers Financial
25 Corporation. But we are asking for a judgment in favor of
21
1 Consumers Reinsurance Company.
2 And there is no requirement that Consumers
3 Financial Corporation had been substituted as the party.
4 And. in fact, if the defendant wanted that, Rule 2352 has a
5 provision for an adverse party in which they can file a
6 praecipe to require that to happen. They did not do that
7 in this case. At this point they can't complain that the
8 right party is not before the court.
9 A full $90,000.00 was advanced to PP&S. It
10 is shown on the attachment to the promissory note. Mr.
11 Robertson testified that this amount was advanced. Now,
12 the loan agreement itself says that PP&S agrees to repay up
13 to $90.000.00 advanced. There is no restriction in the
14 loan agreement as to advances that occur after a certain
15 date.
16 Paragraph one lends up to $90,000.00. So
17 the fact that some of the advances occurred after July
18 31st. 1991, is irrelevant. Plus there was no testimony
19 before the court that said that these advances were made
20 outside of the context of the promissory note or the loan
21 agreement.
22 We don't have any witness on behalf of the
23 defendant that has come here and said these amounts were
24 not part of the loan agreement. The testimony of Mr.
25 Robertson was that all of these amounts were advanced as
22
1 part of the loan agreement and promissory note. For that
2 reason. the full $90,000.00 is due and owing.
3 Let me just briefly address this issue of
4 the collateral. Mr. Zullinger testified that the shares
5 were not registered. Granted, that's contrary to what was
6 in the complaint. The complaint is wrong on that point.
7 And Mr. Zullinger, under oath here today, has corrected
8 that. The shares were never re-registered. Because they
9 were not re-registered. because the collateral was never
10 taken, the amount of the loan cannot be reduced by this
11 court.
12 And even if -- by somehow that the amounts
13 could be reduced because of that re-registration of shares,
14 which never occurred. there has been no evidence as to what
15 the value of those shares was at the time that the shares
16 were to be re-registered,
17 The defendants have arbitrarily picked 1993,
18 the date that the default occurred, and said well what was
19 the value of the shares then. They provided no specific
20 evidence other than trying to get Mr. Robertson to guess as
21 to what it might have been back in 1993 what the value of
22 the shares were.
23 Share ",\lues fluctuate every single day.
24 This conclusory sort of guessing, oh, it must have been
2S about $3.00 a share. that's not evidence before this court.
23
1 That is not evidence that the court can use to reduce the
2 amount of the loan that's due and owing. And repayment of
3 a loan is a defense. It is not the plaintiff's burden to
4 prove that the loan was not repaid. It is the burden of
5 the defendants to come forward and say we repaid. We
6 repaid either by application of collateral. We repaid by
7 giving you money.
8 There has been no evidence before this court
9 today to support a defense of repayment. The amounts have
10 not been repaid. 90,000 were advanced, and we request
11 judgment in favor of Consumers Reinsurance Company in that
12 amount.
13 And let me just also briefly address the
14 question of interest. We have requested pre-judgment and
15 post-judgment interest. We have not requested attorneys'
16 fees. That's why there was no evidence of that. The note
17 did not bear interest until July 31st, 1993. We request
18 the court to award pre-judgment interest from the date of
19 default, July 31st, 1993, the statutory interest rate at
20 six percent, going forward to the date of judgment. and
21 then post-judgment interest until paid, also in the
22 statutory interest rate of six percent. Thank you.
23 THE COURT: Okay. I understand your
24 positions. I will look at it. If either side wants to
25 submit any legal authority of any kind, this question of
24
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J
CERTIFICATION
..
I hereby certify that the proceedings are
"
contained fully and accurately in the notes taken by me on
the abovecause and that this is a correct transcript of
same.
~ rJt~
Barbara E. Graham
Official Stenographer
The foregoing record of the proceedings on
the hearing of the within matter is hereby approved and
directed to be filed.
:/:"'" 10 Jw I
D e
N/1J
K,vin A. Hess. J.
~inth Judicial District
f
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