HomeMy WebLinkAbout03-0957J.K. MILLER CORPORATION
and CURTIS E. BOWEN,
Plaintiffs,
CARLA D. SMITH, individually and in
her fiduciary capacity as Administrator
of the ESTATE OF DAVID E. SMITH,
Defendants
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW AND EQUITY
NOTICE
YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims
set forth in the following pages, you must take action within twenty (20) days after this
Complaint and Notice are served, by entering a written appearance personally or by
attorney and filing in writing with the Court your defenses or objections to the claims set
forth against you. You are warned that if you fail to do so the case may proceed
without you and a judgment may be entered against you by the Court without further
notice for any money claimed in the Complaint or for any other claim or relief requested
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4th Floor
Cumberland County Courthouse
Carlisle, PA 17013
717-240-6200
J.K. MILLER CORPORATION
and CURTIS E. BOWEN,
Plaintiffs,
CARLA D. SMITH, individually and in
her fiduciary capacity as Administrator
of the ESTATE OF DAVID E. SMITH,
Defendants
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW AND EQUITY
NO.
COMPLAINT
J.K. Miller Corporation and Curtis E. Bowen, by their counsel, Keefer Wood Allen
& Rahal, LLP, file this action against Cada D. Smith, individually and in her fiduciary
capacity as Administrator of the Estate of David E. Smith, averring as follows:
1. Plaintiff, J.K. Miller Corporation ("J.K. Miller"), is a corporation organized
and existing under the laws of the Commonwealth of Pennsylvania, with a principal
place of business located at 80 Wabash Avenue, Pittsburgh, Pennsylvania 15220.
2. Plaintiff Curtis E. Bowen is an adult individual who resides at 320 North
24th Street, Camp Hill, Cumberland County, Pennsylvania 17011.
3. Defendant Carla D. Smith, an adult individual who resides at 1008 Forbes
Road, Carlisle, Cumberland County, Pennsylvania 17013, is the surviving spouse of
David E. Smith ("Decedent"), who died on September 27, 2000.
4. Defendant Carla D. Smith is also named as a defendant herein in her
fiduciary capacity as Administrator of Decedent's estate ("Estate"), docketed to No.
10.
exhibit "A."
11.
A true and correct copy of the PNC Loan agreement is attached hereto as
To fulfill one of the conditions of the Loan and thereby carry out their
agreement with each other to jointly acquire the business and real estate of J.K. Miller
Co., Inc. (hereinafter referred to on occasion as the "Business"), Bowen and Decedent
assigned their respective interests in life insurance policies owned by them to the lender
to the extent of $300,000 for each individual.
12. The assignments of life insurance were intended to satisfy any
indebtedness of the Business under the Loan that existed upon the death of Bowen or
Decedent, up to the amount of the assignment.
13. The assignment of life insurance on the life of Decedent was specifically
approved in writing by SBA, as set forth in a writing dated October 30, 1996, a true and
correct copy of which is attached hereto as exhibit "B."
14. The SBA approval set forth in exhibit "B" amended and modified the PNC
Loan agreement to make Decedent's assignment of life insurance an express provision
thereof.
15. Accordingly, for good and valuable consideration, Decedent and
defendant Cada D. Smith executed an assignment to PNC of Decedent's life insurance,
Group Policy No. GO-14273, Certificate #325335, to the extent of PNC's interest, or
$225,000. A true and correct copy of the executed assignment is attached hereto as
exhibit "C."
-3-
16. On or about October 30, 1996, Decedent and PNC confirmed in writings,
true and correct copies of which are attached hereto as exhibits "D" and "E,"
respectively, that the assignment of Decedent's life insurance policy had been delivered
to, and accepted by, PNC.
17. For his part, Bowen also executed and delivered to PNC and URA an
assignment of life insurance proceeds on Bowen's life in a total amount equal to the
amount assigned by Decedent, his partner in Smith & Bowen.
18. Bowen and Decedent each executed personal guaranties in favor of PNC
to unconditionally, jointly and severally, guarantee the due and punctual payment of all
indebtedness owed to PNC by the borrowers with respect to the Loan.
19. Defendant Smith joined as co-signer in Decedent's guaranty.
20. J.K. Miller Corporation was an intended third party beneficiary of the
assignment of life insurance by Decedent and defendant Smith, to the extent of the
borrowers' indebtedness to PNC.
21. As a borrower, a guarantor of the Loan and partner in Smith & Bowen,
Bowen was an intended third party beneficiary of the assignment of life insurance by
Decedent and defendant Smith, to the extent of Bowen's indebtedness on his personal
guaranty to PNC.
-4-
22. The respective assignments of life insurance by Decedent and Bowen
were intended to benefit not only the lender but also to benefit each other by reducing
the indebtedness of the Business in the event one of the individuals died in order to
compensate the survivor for the loss of the other's services and any impairment to the
security provided by the decedent's co-guaranty.
23. Up to the time of Decedent's death in 2000, the Smith & Bowen
partnership and J.K. Miller Corporation actively engaged in the business enterprises for
which they were formed by Bowen and Decedent.
24. At all relevant times, J.K. Miller Corporation paid, as a business expense,
the premiums for the life insurance assigned by Decedent to PNC and URA.
25. From the time of Decedent's death to the present, Bowen has continued
to operate the Business.
26. Pursuant to his agreements with Decedent, Bowen made timely offers to
defendant Smith to purchase Decedent's interests in the Business, but the parties have
been unable to agree on terms.
27. After Decedent's death, Bowen learned that the insurer paid the proceeds
of Decedent's life insurance policy to defendant Smith, rather than to PNC, except for a
portion that was paid to URA pursuant to the Loan agreement.
28. As of the date of this complaint, the balance and accrued interest owed to
PNC on the Loan exceeds the sum of $158,000.
-5-
35. Plaintiffs are intended third party beneficiaries of the assignment of life
insurance by Decedent and defendant Smith, as affirmatively expressed in the Loan
documents.
36. In the alternative, to the extent their status as intended third party
beneficiaries is not deemed to affirmatively appear in the Loan documents, plaintiffs
aver they are nonetheless intended beneficiaries of the assignment because
recognition of their right to performance is appropriate to effectuate the intentions of the
parties that plaintiffs receive the benefit of the promised assignment in the event of
Decedent's death.
37. As intended third party beneficiaries, plaintiffs have standing to enforce
the assignment in this action.
38. As a direct and proximate result of defendant's breach of contract, as
described above, plaintiffs have been damaged in a total amount that exceeds the
jurisdictional limit for mandatory arbitration in this Court.
WHEREFORE, plaintiffs respectfully request that this Honorable Court enter an
award of damages in their favor and against defendant Carla D. Smith, individually and
in her fiduciary capacity as Administrator of the Estate of David E. Smith, in an amount
exceeding the limit for mandatory arbitration in this Court, plus interest, costs and such
other and further relief as the Court determines to be fair and just.
-'7-
Page 1
Loan No. GP 966995 30 05 PGH
SIC 3679
SMALL BUSINESS ADMINISTRATION, an Agency
of the United States of America
Convention Tower, 5th Floor
960 Penn Avenue
Pittsburgh, Pennsylvania 15222
AUTHORIZATION AND LOAN AGREEMENT
GUARANTY PARTICIPATION
PNC BANK, NATIONAL ASSOCIATION
10 YORK STREET
GETTYSBURG, PA 17325
ATTN: RALPH HULTIN
(hereinafter called LENDER). LENDER's application dated
September 30, 1996 recommending the Small Business Administration
(hereinafter called SBA) to guaranty 75% of a loan in the amount
of $225,000 to be made by LENDER to:
J.K. Miller Corporation, a Pennsylvania Corporation; and Curtis
E. Bowen and David E. Smith, individually, and as co-partners t/a
Smith & Bowen; co-borrowers
78-96 Wabash Avenue
Pitsburgh, Pa 15220
(hereinafter called Borrower), is hereby approved pursuant to
Section 7(a) of the Small Business Act, as amended.
1. The following forms are herewith enclosed:
(a)
Three copies of Note, SBA Form 147, the original
executed Note (retained by LENDER), one executed copy
for SBA and one copy for Borrower. The SBA copy must
be sent to the SBA District Office immediately after
first disbursement. Also send to SBA, one executed
copy of Guaranty(s), SBA Form 148, if any. The
Guaranty fee covering the amount guarantied by SBA must
be paid by LENDER within 90 days of the date of this
Authorization to the following address:
Small Business Administration
Collection Activities Branch
Denver, CO 80259
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes; 04/01/96
(b)
(c)
(d)
(e)
Page 2
The SBA Loan Number must be written on the guaranty fee
check. LENDER may charge Borrower for such fee only
after LENDER has paid the fee to SBA and an initial
disbursement is made on Loan. This fee may be deducte4
from working capital loan proceeds, if available. The
guaranty fee is $5,06Z.50.
Copies of the Settlement Sheet, SBA Form
1050, are to be completed and executed by
LENDER and Borrower to reflect each
disbursement. Prompt reporting is necessary.
Return the first two copies ("Denver FOD"
copy and "Servicing Office" copy) to the SBA
District Office.
Compensation Agreement, SBA Form 159, shall be executed
by Borrower, its representative and LENDER and returned
to SBA for fees charged by its representatives or if
Borrower is charged fees for service by LENDER or an
associate of LENDER. Representatives include
accountant, appraisers, engineers, architects,
attorneys or any party aiding Borrower in obtaining or
disbursement of this loan. If no such fees have been
charged, please write "None" after identifying the
representatives and services and return the form,
executed by the Borrower and the LENDER, to SBA. If
Representative has performed the work under a retainer,
details must be furnished.
The original copy of this Authorization, SBA Form 529B,
(and documents itemized below) shall be executed at
first disbursement and retained in loan file by the
LENDER. (A copy of the Authorization, amendments and
itemized documents should be given to the Borrower.
SBA shall receive copies of documents as requested.
SBA Form 148 -- Guaranty Agreement
SBA Form 652 -- Assurance of Compliance
SBA Form 928 -- Federal Mortgage
SBA Form 1059-- Security Agreement
SBA Form 155 -- Standby Agreement
SBA Form 722 -- Equal Employment Opportunity Poster.
SBA Form 641 -- Request For Counseling
Application completion letter (LENDER must prior to
disbursement complete and send to SBA).
LENDER shall furnish other LENDER forms.
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 3
2. This Authorization is subject to:
(a)
Provisions of the Guaranty Agreement between LENDER and
SBA, dated September Zg, 1978, as amended, and the
policies, regulations and instructions of SBA.
(b)
First disbursement of the loan being made not later
than ?EREE MOtH(s), and no disbursements being made
later than SIX MO~"~H(s), from the date of this
Authorization, unless such time is extended pursuant to
prior written consent of SBA.
(c)
Receipt by LENDER of evidence satisfactory to it in its
sole discretion, that there has been no unremedied
adverse change since the date of the application, or
since any of the preceding disbursements, in the
financial or any other condition of the Borrower which
would warrant withholding or not making any such
disbursement or any further disbursement.
(d)
The representations made by Borrower or
obligors in the loan application, the
requirements or conditions set forth in
LENDER's application form including the
support documents thereto, the conditions set
forth herein and any future conditions
imposed by LENDER (with prior SBA approval).
(e)
LENDER agrees to pay an annual fee equal to one half of
one percent (0.5%) of the guaranty portion of the
outstanding balance, calculated and submitted
quarterly. Such fee will be submitted with the
quarterly 1175 report to SBA or an agent designated by
SBA. This fee may not be charged to the borrower.
Failure to submit the fee when due will result in the
cancellation of SBA's guaranty on this loan.
TERMS OF LOAN
(a) Repayment terms. (To be set forth in Note.)
$225,000 with interest on the unpaid principal computed
from the date of each advance, payable monthly
beginning one (1) month from the date of this Note;
installments of principal and interest in the amount of
$Z,490.68; payable monthly, beginning ONE (1) MONT~(s)
from the date of this Note; provided, however, the
amount of the installment may change in accordance with
this Note. This is a variable interest rate loan in
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 4
which the interest rate shall fluctuate in accordance
with this Note. This base rate (hereinafter defined as
the "Prime Rate" as published in the Wall Street
Journal under "Money Rates") as of October 3, X996
(date application submitted to SBA), was 8.Z5% per
annum. The interest rate (spread) to be added to the
base rate at beginning of each adjustment period shall
be ~.Z$%. The initial interest rate is established on
this loan at NINE AND THREE TENTHS PERCENT (9.30)%.
The interest rate on the Note shall increase or
decrease by adding the interest rate (spread) to the
base rate at the beginning of each adjustment period.
Each adjustment period shall be thirty-six months
beginning the first business day following the prior
adjustment period.
At said adjustment period, the remaining monthly
installments shall change to reamortize the outstanding
balance of principal and interest.
The balance of principal and interest and all other
indebtedness is due and payable on or before THIRTEEN
(~3) YEAR(s) from the date of this Note; provided
further that any installment shall be applied first to
interest accrued to date of receipt of said installment
and the balance; if any, to principal; balance at
maturity.
The holder of the Note shall give written notice to the
undersigned of each increase or decrease in the
interest rate within thirty days after the effective
date of each rate adjustment; however, the fluctuating
of the interest rate is not contingent on whether the
notice is given.
If the Borrower shall be in default in installment on
the indebtedness as the SBA purchases its guaranteed
portion of said indebtedness, the rate of interest on
both the guaranteed and unguaranteed portion shall
become fixed at the rate in effect as of the initial
date of default. If the Borrower shall not be in
default in installment when SBA purchases its
guaranteed portion, the rate of interest on both the
guaranteed and unguaranteed portion herein shall be
fixed at the rate in effect as of the date of purchase
by SBA.
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 5
(b) USE OF PROCEEDS:
(1) $15o,0oo
to purchase land and buildings from
Miller Co., Inc., Seller, located at 78-
96 Wabash Avenue, Pittsburgh, PA 15220.
(2) G75,000
to purchase assets of business sold by
J.K. Miller Co., Inc. to J.K. Miller
Corporation, including but not limited
to inventory, equipment, machinery,
furniture, furnishings, leasehold
improvements, and fixtures.
(c)
COLLATERAL:
(1)
First mortgage on real estate at
78-96 Wabash Avenue, Pittsburgh, Pa presently
owned by J.K. Miller Co., Inc. to be owned by
Smith & Bowen as presently recorded in DBV 9423
page 562, DBV 8338 page 231, DBV 5310 page 325,
DBV 4658 page 520, DBV 6309 page 791, and DBV 5736
page 665; legal descriptions on Agreement of Sale
dated 9/21/96 contained in loan application
package.
(2)
Purchase Money Security interest in machinery and
equipment, furniture and fixtures, leasehold
improvements, and inventory purchased with loan
proceeds; and first security interest on machinery
and equipment, furniture and fixtures now owned
and hereafter acquired, cash and non-cash proceeds
of foregoing and all other proceeds (including but
not limited to insurance and litigation proceeds)
currently located at 78-96 Wabash Avenue,
Pittsburgh, Pa;
said security interest to be evidenced by executed
Security Agreement and perfected by filing
Financing Statements in conformity with applicable
UCC.
(3)
Security interest on inventory, accounts
receivable, books, records, invoices, contract
rights, chattel paper, documents, instruments, and
general intangibles, now owned and hereafter
acquired, cash and non-cash proceeds of the
foregoing and all other proceeds (including but
not limited to insurance and litigation proceeds),
currently located at 78-96 Wabash Avenue,
Pittsburgh, Pa;
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 6
said security interest to be evidenced by executed
Security Agreement and perfected by filing
Financing Statements in conformity with applicable
UCC; and subject only to a lien in the approximate
amount of $100,000, held by PNC Bank, N.A..
(4)
Guaranty, SBA Form 148, by David E. Smith & Carla
D. Smith, husband and wife.
(5)
Guaranty, SBA Form 148, by Curtis E. Bowen & Karen
J. Bowen, husband and wife.
(6)
Guaranty, SBA Form 148, by Precision Quartz
Products, Inc., a Pennsylvania Corporation·
(7)
Perfected Assignment of lease and lease proceeds
with right of reassignment in LENDER covering real
estatelocated at 78-96 Wabash Avenue, Pittsburgh,
Pa containing Acknowledgment of Notice by
lessee(s); said lease(s), Acknowledgment of Notice
and Assignment to be satisfactory to LENDER/SBA.
Borrower shall provide LENDER with copy of said
leases.
(8)
Borrower agrees that additional shares of stock
shall-not be authorized or issued, nor shall any
existing share be sold, transferred, encumbered or
reclassified by Corporation or Shareholders
without the prior written consent of LENDER;
Notice of this limitation must be noted on all
shares of stock and on the Corporate Register.
(9)
Perfected assignment of life insurance on Curtis
E. Bowen in the amount of $300,000. No additional
life insurance is to be purchased from business
income or assets without prior written approval of
SBA. LENDER shall provide written notification to
insurance company that Assignees are to receive
copies of any notice of cancellation or
termination. Proceeds must be payable solely to
assignee.
To further induce LENDER to make and SBA to guarantee this
loan, LENDER and SBA impose the following conditions:
(a)
Execution of all documents required in paragraph 1
above.
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 7
(b)
Reimbursable Expenses - Borrower shall, on demand,
reimburse LENDER for any and all expenses incurred, or
which may be hereafter incurred, by LENDER from time to
time in connection with or by reason of Borrower's
application for, and the making and administration of
the loan.
(c)
Books, Records, and Reports - Borrower shall at all
times keep proper books of account in a manner
satisfactory to LENDER and/or SBA. Borrower hereby
authorizes LENDER or SBA to make or cause to be made,
at Borrower's expense and in such manner and at such
times as LENDER or SBA may require, (a) inspections and
audits of any books, records and papers in the custody
or control of Borrower or others, relating to
Borrower's financial or business conditions, including
the making of copies thereof and extracts therefrom,
and (b) inspections and appraisals of any of Borrower's
assets. Borrower will furnish to LENDER and SBA for
the period ending September 30, ~996 and quarterly
thereafter (no later than 3 months following the
expiration of any such period) and at such other times
and in such form as LENDER may prescribe, Borrower's
financial and operating statement. Borrower hereby
authorizes all Federal, State and municipal authorities
to furnish reports of examination, records, and other
information relating to the conditions and affairs of
Borrower and any desired information from reports,
returns, files and records of such authorities upon
request therefor by LENDER or SBA.
(d)
Borrower shall not execute any contracts for management
consulting services without prior approval of LENDER
and SBA.
(e)
Distribution and Compensation - Borrower shall not,
without the prior written consent of LENDER and SBA (a)
if Borrower is a corporation, declare or pay any
dividend or make any distribution upon its capital
stock, or purchase or retire any of its capital stock,
or consolidate, or merge with any other company, or
give any preferential treatment, make any advance
directly or indirectly by way of loan, gift, bonus, or
otherwise, to any company directly or indirectly
controlling or affiliated with or controlled by
Borrower, or any company, or to any officer,
director or employee of Borrower, or of any such
company, (b) if Borrower is a partnership or
individual, make any distribution of assets of the
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 8
business of Borrower, other than reasonable
compensation for services, or give any preferential
treatment, make any advances, directly or indirectly by
way of loan, gift, bonus, or otherwise, to any owner,
partner or any of its employees, or to any company
directly or indirectly controlling or affiliated with
or controlled by Borrower, or any other company.
(f) PRECLOSING CONDITIONS:
(1)
Borrower is to submit appraisal on real estate, to
be acquired with proceeds. Appraisal must be
satisfactory to lender.
(2) Borrower must provide evidence satisfactory to
LENDER that $100,000 cash money has been injected
by David E. Smith and Curtis~ ~ E.,,A~ into the
a.
(3) Borrower is to submit to LENDER evidence that the
following loan(s) have been approved; said
evidence must be satisfactory to LENDER:
Creditor Amount
PNC Bank, N.A.
$100,000 (line of credit)
URA $75,000
(4)
Standby Agreement, SBA Form 155, or similar
Subordination Agreement is required as to debts
owed by Borrower as follows:
Creditor Amount
~ J.K. Miller Co., Inc. $100,000
..'/~.'~ payments may be_mad~ U~de~~ the instrument evidencing
~: one above s~ano y .....
'~-" however, Aa~Nm~xl~m~j~m~n~x~fx~f~3~kxxxxxxxx'~xlf?
so long as Borrower is not in default under the
Note or any agreement executed in connection with
subject loan. As used herein, "default" shall mean a material
default in the payment terms of the Note, as such terms may be
modified, amended or otherwise changed, through workout negotiation~
or otherwise. In the event of a modification or amendment of
the payment terms of the Note, Standby Creditor agrees to modify
and amend its payment terms with Borrower proportionately.
SBA Form 529B(7A)--PDO Rev. 10/O1/93
changes: 04/01/96
Page 9
Standby Agreement, SBA Form 155, or similar
Subordination Agreement is required as to debts
owed by Borrower as follows:
Creditor Amount
J.K. Miller Co., Inc. .$100,000 _
however, pay~_ents may be.made under the instrument evidencing the
above s~andbv debt. so lonq .as .........
^minx ~xx~xxx~xxxxm~g~xm a~x ~ax~g~xx~gx~a~x~x~x~x
..~' :R~t~xRx~x~x~x~sx~x~xx~x~x~
~6~~ Borrower is not in default under the Note or
any agreement executed in connection with subj.ct
loan. *(See insert to left)
Title insurance satisfactory to LENDER is required
as to real estate described at item 3(c) (1).
Record search evidencing proper lien position as
to personalty required at item 3(c)(Z) and
3(c) (3).
Prior to the first disbursement, the LENDER must
be in receipt of evidence of the kind described
below from an independent authoritative source
which is sufficient to indicate to the LENDER that
the property is not in a special flood hazard
area (SFHA). Property is defined as the asset(s)
financed as a part of the SBA financial assistance
and/or other collateral deemed necessary by the
field office. If such evidence is not provided to
the LENDER, the borrower must obtain, and
maintain, a Standard Flood Insurance Policy (SFIP)
or other appropriate special flood hazard
insurance in amounts and coverages equal to the
lesser of (1) the insurable value of the property
or (2) the maximum limit of the coverage
available. Such insurance must contain a
mortgagee clause similar in character to the ISO
Commercial Risk Services, Inc. Standard Mortgagee
Clause, and as to personalty, ISO Commercial Risk
Services, Inc. Lender Loss Payment Form CP 12 18.
Borrower can show that special flood hazard
insurance has been acquired by submitting a copy
of the policy or providing evidence of premium
payment for the appropriate coverage to a licensed
insurance agent. Borrower will not be eligible
for either any future disaster assistance or SBA
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 10
business loan assistance if the special flood
hazard insurance is not maintained as stipulated
herein throughout the entire term of this loan.
As evidence that the property is not located
within a special flood hazard area subject to
flooding, mudslides or erosions, the Lender may
rely on a determination of special flood hazard
area status by the borrower's property & casualty
insurance company, real estate appraiser, title
insurance company, a local government agency or
other authoritative source acceptable to SBA which
would ordinarily have knowledge of the special
flood hazard area status for the property.
(Compliance with the local building codes will
satisfy this requirement).
(9)
Updated financial statements will be required if
this loan is not closed prior to December 31, 1996
or there is an indication of adverse change, as
defined in paragraph 2(c).
(10) Borrower must provide to LENDER the following:
A Bill of Sale covering assets of the business
known as J.K. Miller Co., Inc. between J.K. Miller
Co., Inc., seller(s), and J.K. Miller Corporation,
purchaser(s) ,and Satisfactory evidence that no
outstanding liabilities exist except those which
have been disclosed to purchaser and the LENDER.
(11) Borrower and Guarantors, if any, (including all
partners, if partnership), must certify and must
have proof of payment of all federal, state and
local taxes due prior to disbursement (including
real, personal, individual, corporate and
partnership, if any. The accountant may certify
that the accountant is familiar with above and
that above taxes are paid through date of
disbursement.
(12) Borrower certifies that no principal who owns at
least 50% of the voting interest of the company is
delinquent more than 60 days under the terms of
any (a) administrative support order, (b) court
order, (c) repayment agreement that requires
payment of child support.
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 11
(13) The ownership of the real estate shall remain
unchanged until the loan is paid in full or SBA
approves a change in writing.
(14) Lease and landlord's waiver satisfactory to LENDER
and SBA is required covering premises at 78-96
Wabash Avenue, Pittsburgh, Pa. Lease term must be
THIRTEEN (13) YEAR(s) (including legally
enforceable options to renew). Borrower agrees
not to change location or acquire new locations
without prior landlord's waiver, mortgagee waiver
and lease for new location satisfactory to LENDER
and SBA.
Waiver must specifically identify any collateral
which could be claimed to be a real estate fixture
or owned by the landlord. Waiver must make
landlord rights subject to LENDER and SBA right as
to both lessee and any guarantors of the lease.
(15) Lender must verify by use of IRS Form 4506 that
the copies of the tax returns or financial
statments included in the loan application
generally conform with the actual returns sent to
IRS. If significant discrepancies exist between
the IRS data and financial data submitted with the
application, Lender must notify SBA in writing
without informing the borrower and withhold
disbursement until notified by SBA if the
disbursement of the loan may proceed.
(16) LENDER must provide an environmental questionnaire
for property at paragraph 3(c)(1) which property
must be viewed by the LENDER and the questionnaire
must be signed by borrower documenting that the
property shows no evidence of any environmental
risks; however, if there is any reason that this
cannot be obtained, then an Environmental Audit,
Phase I, by a qualified independent Environmental
Auditor satisfactory to LENDER must be received by
LENDER. The audit must include an identification
of past practices and an evaluation of regulations
compliance based upon document screening, site
visitation and inspection. A Phase II full
evaluation must be done if the Phase I Audit
indicates a need for a full evaluation and
recommendation. A high risk Phase II evaluation
will be considered an adverse change.
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 12
(17) Assurance of Compliance, SBA Form 652, must be
executed.
(g) OTHER CONDITIONS:
(1)
Salaries or drawings (direct or indirect) of
Borrower's officers, directors, principals or
their successors shall be limited to annual
amounts as follows:
Name of Officer
Amount
David E. Smith
Curtis E. Bowen
$50,000
$50,000
plus enough to pay income tax on profits if
Borrower corporation elects to be taxed as
partnership pursuant to Sub Chapter S of the
Internal Revenue Code, without prior written
consent of the Lender.
(2)
Borrower agrees to accept management counseling as
determined by SBA, (SBA Form 641).
(3)
Borrower must receive prior approval from LENDER
to make any changes in the business name,
location, or legal structure of the business
entity.
(4)
Borrower shall not, during the term of this loan,
create, incur, guarantee, endorse (except
endorsements in course or regular business
collections) assume or suffer to exist any
indebtedness, except this Note and indebtedness
created or incurred in the ordinary course of
trade.
(5)
Borrower shall not, prior to payment in full of
subject loan evidenced by this Note, without prior
written consent of the LENDER, sell, transfer,
pledge, mortgage, or otherwise cause or permit to
be encumbered in any manner whatsoever, any of
Borrower's property or assets, whether now owned
or hereafter acquired (except by purchase money
liens upon property acquired after the date of the
Note, and other
liens upon such property at the time of the
acquisition thereof).
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 13
(6)
Fixed assets, lease purchases and equipment lease
expenditures are limited to SZ0,000 a year,
without prior written consent of the Lender.
(7)
Borrower agrees, to the extent feasible, to
purchase only American-made equipment and products
with the proceeds of this loan.
(8)
Borrower agrees to notify LENDER in writing
immediately of any litigation, insolvency,
execution or other type of adverse proceedings
affecting Borrower or Borrower's property.
(9)
Borrower shall provide and maintain hazard
insurance (fire and extended coverage) in the
amount of maximum insurable value covering real
estate at 78-96 Wabash Avenue, Pittsburgh, Pa and
maximum insurable value covering contents at
78-96 Wabash Avenue, Pittsburgh, Pa; and must
contain a mortgagee clause as to real estate
similar in character to the ISO Commercial Risk
Services, Inc. Standard Mortgagee Clause, and as
to personalty, ISO Commercial Risk Services, Inc.
Lender Loss Payment Form CP 12 18.
(10) During the term of the loan if any portion of
Borrower's income is derived from illegal gambling
activities or if one-third or more of Borrower's,
or any of principal owners, annual gross income,
including rental income, is derived from gambling
activities legal within this State, the entire
balance of this loan will become due and payable
immediately.
(11) Borrower must submit annual financial statements
(balance sheet, profit and loss) within lZ0 days
of the close of the fiscal year, which must be
signed and dated.
(12) The annual financial statements must be Compiled
without exception or qualification, by an
independent, certifie4 public accountant, in
accordance with the General Accepted Accounting
Principles (GAAP).
(13) Borrower must provide a summary by aging of
inventory and accounts receivable and accounts
payable quarterly.
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 14
(14) LENDER and Borrower agree that in the event of
default or attachment, garnishment or other legal
process against any of Borrower's accounts or
assets held by LENDER, that LENDER shall exercise
all rights of setoff available to LENDER, until
loan is paid. All funds received are to be placed
against the outstanding loan balance prior to the
bank requesting that SBA honor its guaranty.
(15) Borrower certifies that currently they are and
shall remain in compliance with all environmental
laws, rules and regulations concerning all phases
and aspects of the operations of the business.
Borrower has no proceedings alleging violations of
environmental laws pending; has no knowledge of
contamination and shall clean up waste resulting
from any future violations. Any subsequent
failure to comply with said applicable
environmental laws, rules and regulations, shall
be a default of the loan.
(16) Borrower is to display Equal Opportunity Poster,
SBA Form 722, at his place of business where it is
clearly visible to employees, applicants for
employment, and the general public.
(17) Borrower shall submit, when requested by LENDER, a
Certification that it is in compliance with all
terms and conditions of the Authorization and Loan
Agreement and all other requirements pertaining to
the subject loan.
(18) Borrower agrees that all changes, if any, made in
this Authorization after the approval date are
hereby incorporated by reference.
(19) LENDER may impose other conditions which are not
inconsistent with this Authorization and the
LENDER/SBA Guaranty Agreement.
(20) Borrower agrees to pay a late charge equal to 5%
of the payment amount due if such payment is not
received within fifteen days of the due date.
Funds received from the borrower will be applied
first to interest to the date of receipt, then to
principal and then to the late fee.
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Page 15
Parties Affected - This Agreement shall be binding upon
Borrower's heirs, executors, administrators, successors.and
assigns. No provisions stated herein shall be waived
without prior written consent of SBA. The loan shall be
administered as provided in the LENDER/SBA Guaranty
Agreement.
SMALL BUSINESS ADMINISTRATION
Philip Lader
Administrator~
Acting Chief
Finance Division
Date of Authorization: 10/1S/96
Borrowers, jointly and severally, hereby agree to the conditions
imposed herein and further agree that the terms and conditions
herein are for the benefit of, and may be enforced by, LENDER and
SBA, its successors and assigns. This Authorization and Loan
Agreement, and amendments, constitute the Loan Agreement between
LENDER and Borrower.
J.K. Miller Corporation, a Pennsylvania Corporation; and Curtis
E. Bowen and David E. Smith, individually, and as co-partners t/a
Smith & Bowen; co-borrowers
J.K. Miller Corporation, a Pennsylvania Corporation
/(--)°' :50" ~"~-, (Corporate
. ~h~it~h, ~=cr~%ry.~r~?~;~e.w- Date Seal)
Curtis E. Bowen and David E. Smith, individually, and as co-
partners t/a Smith & Bowen
rth
SBA Form 529B(7A)--PDO Rev. 10/01/93
changes: 04/01/96
Date
Date
SMALL BUSINESS ADMINISTRATION (SBA)
STANDBY AGREEMENT
-,-, induce PNC R~,~u. ~-!~-~! ~_~ci=_tien ("Lender") to make.
(SBA or other Lending institution)
.nd in consideration of the making by Lender of all. or any part, of the Loan ("Loan"), authorized to be made to
.. Miller Corporation, a Peunsylva~a Corporation; and Curtis E. Bowen and Dasd E. S~th,
.lvidua%ly, and as co-parnners n/a S~nh & Bowen; co-borrowers
"Borrower"). by Author~ation of SBA da~ed Octobar ~ , 19 96 . and ~y ~d ~1
~mendments in Loan conditions, heretofore and hereafter made (which Authorga~ion and amendments are here~aftec
ollecdvely called "Authorization").
~orrower. J.K. ~ller Co., Inc.
(Name of Standby Creditor)
"Standby C redi[or"~ and each endorser, grantor and sure~y with respect ~o the Claim (~ "Claim" is hereinafter defined)
. ho is a party hereto ("Secondary Obligors"), hereby severally represent, warran~ and covenan~ co and with each
~[her. and to and with the Lender. its successors and ~si~s, as follows:
i. There is owing by Bo~ower ~o Standby Creditor the amour of One Hundred ~ousan~ollars ($ 100,000.00 )
~'ithout m[erest' ~~~~~~~
~~~~ . ~. ~e CI~ is no~ evidenced
v any promisory note, bond or other written obligation of ~y kind whatever except,$100 . 000 . 00 note dated 1.0/30/96
. ~rue and correct copy of each such note, bond or other written obligation (~ any) is ~nexed hereto ~d made a
art hereof. The name of each endorser, guarantor and surety (ff any), liable upon the Clmm, or any part ~hereof, is
.s follows:
~O ~
2. Without the prior written consent of Lender, S~dby Creditor ~d the Seconda~ Obl~ors will take no action
~) to ~sert, collect or enforce all, or any part of, the Cl~m, except amo~ which St~dby Creditor is per~tted to
cceive and retain pursuant to the Authorization; or ~) to re~e upon ~y co[laterM for ~e Cl~m, except co~ateral
:ecified in. and permitted to be realized upon by, the Au~hor~ation, ~d except collateral given prior to the date of
~orrower's application for the Loan, proyidid that no action sh~l be token to remco on ~y collatorS, the Hen on
:hich Standby Creditor is required by the Auth0r~ation Co subord~ate to the lien of the moggage secur~g the Note
f Borrower, SBA Form 147, ("Note") executed pursuit to the Autho~a~on.
3. Standby Creditor and the Seconda~ Obligors w~l prompdy pay to the holder of the Note (~less the Authori-
ation provides otherwise) all amounts which may be received by them or ~y of them on accost of the Clx. except
~a~ there need not be paid to such holder any proceeds of collater~ re~ation upon which is pe~itted by the preced~g
ection 2(b) hereof, or such amounts, if any, ~ Standby Creditor may be entitled to receive ~d retm pursuit to the
.uthorization, or such ~ounts, ~ any, ~ shall be paid to Standby Creditor on accost of the ClaLm by the Seconda~
'~ligo~s, or any of them, who have executed this St~dby Agreement.
4. Borrower will not (unless the Authorization provides othe~ise) pay the amour of, or ~y amour on accost
f. or give any collateral, ~ security for, the Claim, to St~dby Creditor, or to the Seconda~ Ob~ors, or any of them,
xcep~ the proceeds of the collateral, ff any, realization upon which is permitted by the preced~g Section 2~) hereof
nd except such amounts, if any, ~ the Author~ation may permit Borrower to pay to Standby Creditor.
5. Standby Creditor and the Seconda~ Obligors shall forthwith rele~e ~d deliver to Borrower ~ collateral upon which
ealization is not permitted by the preceding Section 2(b) hereof, ~d, ff the collateral is held by a party who is no~ a party
: this Standby Agreement, will forthwith direct and require such party to rele~e and deliver ~1 such collater~ to Bo~ower
~ Lender.
6. This Standby Agreement and all obligations hereunder or with respec~ hereto, of Borrower, Standby Creditor,
nd ~he Secondary Obligors, shall continue in full force and effect until payment m ~11 of the indebtedness evidence
v the Note, notwithstanding any action which Lender, or Borrower, or others, with the consent of Lender, may rake
3trike out whichever words pertaining to interest are inapplicable.
BA FORM 155 (5-89) REF: SOP 5010 PREVIOUS EDITIONS ARE OBSOLETE.
or refrain from tal~ing wi~h respect to such indebtedness, or the Note, or any collateral 5r subcbllateral therefor, or
any agreement~ (including guaranties) executed in connection therewith, or any collateral given to secure the perform-
ance of any such agreement or agreements. Standby Creditor and the Secondary Obligors hereby grant to Lender
full power, in its uncontrolled discretion and without notice to Standby Creditor or Secondary Obligors, to deal in any
manner with the indebtedness evidenced by the Note and the collateral therefor, including, but without limiting the
generality of the foregoing, the following powers:
(a) To modify or otherwise change any terms of all or any part of the Loan or the rate of interes~ thereon (but not
to increase the principal amount of the Note, except as provided therein), to grant any extension or renewal thereof
and other indulgence with respect thereto, and to effect any release, compromise or settlement with respect thereto.
(b) To enter into any agreement of forbearance with respect to all or any part of the indebtedness evidence by the
Note, or with respect to ali or any part of the collateral securing the Note, and to change the terms of any such
agreement.
(c) To forbear from calling for additional collateral to secure the Note or to secure any obligation comprised in the
collateral securing the Note.
(d) To consent to the substitution, exchange, or release of all or any part of the collateral securing the Note, whether
or not the collateral, if any, received by Lender upon any such'substitution, exchange, or release shall be of the
same or of a different character or value than the collateral surrender by Lender.
(e) To forbear from realizing on any or ail of the collateral securing the Note as in its uncontrolled discretion Lender
may deem proper.
The obligations of Standby Creditor and the Secondary Obligors hereunder shall not be released, discharged, or in any
way affected, nor shall Standby Creditor or the Secondary Obligors have any rights or recourse against Lender by reason
of any action Lender may take or omit to take under the foregoing powers.
7. The failure of any party, whether or not named or otherwise referred to as a party hereto, to sign or become
obligated under this Standby Agreement, shall not release or affect the liability of any party signatory hereto.
This agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.
Dated, this
Signed~and )in the presence
t Witne.~
Ralph Hultin, Assistant Vice President
Address (imclude ZIP Code)
?
J.K. Miller Corporation, a Pennsylvania Corporatio
& Curtis E. Bowen & David E. Smith, individually,
as co-~tner_~ t/a $~th ~
Curtis E. Bowen, Preside~i~rr°wer
(9.) J.K. Miller Co., Inc.
/ Standby Creditor
JOhn K. Miller, President
(3)
Guarantors, Endorsers, Sureties
NOTE--This Standby Agreement (a) should- be executed, and witnessed or acknowledged, all in a manner satisfactory to
Lender's counsel; and (b) may contain such further provisions as the Lender deems advisable or necessary.
g~A F¢~RM I,%~ ~,.N!ll ' U.S Gov~ment PHn~imj Offlcelg~2-312-624/62~4:~
Exhibit B
71.7 334-2.I57
C
October 2~, 1996
David ~fiLlm-
Smn~ Business Ad ~mLuLw. ratf. on
Convend. on T~w~-, 5t.~ Fk~r
960 ~P~n Av~ue
~ttsbur§h, PA i52'22
RE: y. 2<.. NEiler Cor~. Lean
Dear Dav~
,Th~.e life inrarr...ace zm. ui~ment for the above-referm~c.~ icon .~'~ou/d be idenfiea, l for Curt g:w,~n and '
Dave S~--~.'.'-~: $500,000. This S300,000 i.s to be roll; wit~ ~?TS,000 ~xi~ed to ?NC 2.nd $75,C00
~xig'n..ed ta r2:e ~ba,-gh. Eu-~hess Gmwt.h t::und~
Ralph W. r4uldn, Assis'~.nt Vice
EusLn~s P-~n- kL-~g
Exhibit C
Ir45TRUCTIOfJ$
1. This form may be u:.ed for arW assignments that are not gift assignments, If the assignment is a collateral assignment, the
phrase "as the Assignee's interest may appear" must [~ inserted on the line below the address of the Assignee.
2. If the a~ignment is [or value but IlO[ a collateral assignment and a Beneficiary has previously ~en designated to receive the
beneli~s payable upon death BI the Insured, tl~e Insored should, ~lore making dm assignment, execute and submi~ to ~he
Plan Agent a ~neficlary change form ~o the eHecl of rcplaclng ~l~e deslgnaled Beneficiary by the estate BI the Insured.
3. Unless ~he ~nefi~s payable u~n deadl of th~ Insured have previously ~en made ~yable lo the estate of the Insured. the
Beneficiary's signature is required (whether the assignment is a collateral assignment or not).
,I. Aher an assignment for value which is no~ a collateral assignment has ~en made, it is advisable d~at tl~e Assig~ee. i~, order
to avoid complications u~on death of the Insured, promptly make a Beneficiary designation naming U~e person{s) endded to
receive ~he ~nefils payable upon deaU~ of fl~e Insured. The Assignee may also ~ desig,la:ed as Beneficiary. Provision d~ould
also ~ made for a conti~genl Oeneli~iary to whom benelils would ~ payable in the ~ent U~at the primary ~entdiciory
predeceased the Insured.
~. Upon death of Ule Assignee {v~heUler the assignnmnl i~ a collateral assignment or not) tile Assignee's rights will ~ass to his
estate, unless other arla~gements have ~en made. In ~he abseoee of such arrangemems, the Assig.ee should consider U~e
advisability of having a will in existence at the time ut ~he Assignee's dead~ containing specific directions to ~l~e Ass;gnee's
executor on bow to dispose of ~lle es~ale's rights in tim insurance covered by the assignment.
6. The Insured's I~al advisor should ~ consulled ~fore tim In.red makes fl~e assignment.
7. The Insured should submit fl~e assignment to :he Plan A~nt. After r~ording, the original and a photo copy will ~
returned to fl~e hlsu~ed. The original should he delivered to the Assignee and the copy attached to ~he Insured's CertU icate
of Insurance. I ~ / ~ '~ / q 6
A~SIGNMEN~ OF GROUP INSURANCE
FO~ VALUE RECEIVED, d~e undersigned Insured, ~ l]nvL~L~_ grot t'h
being of legal age. he~eh~ as~i~ins, transfers and ~ets .ver unlo the Assig.ee, ~ ~
whose address is
5fr~et City
"AS THE ASSIGNEE":; INTEREST HAY APPEAP," ( $ ~ ~ ~C; (~ Instruction I. above)
all of the [nsured"s right, tide, claim, interest, benefit, =nd all other incidents of ownership of whatever nature, whh ~ the
Insured now bas or hereafter may have in arid to the insurance under Group Policy No. GO-14273, as evidenced by Certificate
No. b6860[~ or any Certifi~te issued in replacement thereof, issued by
Ce~t. 11325335
TIlE PRUDENTIAL INSURANCE COMPANY OF AME[UCA
~nounC: ~300~00U (hereinafter referred to as the Company)
in accordance with the terms and conditions of said Group Policy or ~s may ~ allowed the Insurance with respect thereto.
The Assignee shall ~ under no obligation to pay any required con[ributions hereafter ~coming due, but may, with the
~nsent of the Plan A~nt, pay such contributions directly to the Plan Agent. Since the Insured has no right under said Policy
lo pay any ~ch contri~tions directly to the ~mpany, it is understood that the Assignee shaU have no such right.
In witness whereof I have hereunto ~t my b~n~seal, this
_ {SEAL)
(,~e Instruction 3. above)
WiIness to Signature of A~ignee
$igna~uf[, of Assign~
The Company assumes no obligation as to the validity or suHiciency of this Assignment, and does not pass upon its
legality, but reserves the right to demand proof of interest in case of claim. If payment is being made to any trustee, the
Company may assume that such trustee is acting in such fiduciary capacity until notice in writing to the contrary is received by
the Company at a Home Office, and any payment made to such trustee prior to receipt of such notice shall discharge the
Company from all liability as to such payment.
The Company agrees that a recording and fiting of this Assignment in the manner hereinafter indicated shall, as to the
insurance thereby assigned, coostitute the Company's waiver of a provision, if any, contained in said Group Policy otherwise
prohibiting such assignment.
Recorded and filed at:
New York, New York
Plan Ag'ent
Exhibit D
VERIFICATION OF LIFE INSURANCE POLICY
Borrower:
TO:
J. K. MILLER CORPORATION, A PENNSYLVANIA
CORPORATION; AND CURTIS E. BOWEN AND
DAVID E. SMITH, INDIVIDUALLY, AND AS
CO-PARTNERS TIA SMITH & BOWEN (TIN:
25-1794383)
78-96 WABASH AVENUE
PITT~EJURGH, PA
Lender:
BANKERS TUST CO., TRUSTEE OF THE AICPA INSURANCE
TRUST
2O0 PARK AVENUE
NEW YORK, NEW YORK 10164-2498
PNC BANK, NATIONAL ASSOCIATION
4242 CARLISLE PIKE
CAMP HILL, PA 17001--8874
IDATE 10-30-1996
POLICY NO. GP. #GO-14273,.PART. #LO325335
LIFE OF DAVID E. SMITH
Dear Sir or Madam:
The above-described life insurance policy has been submitted to us as collateral security for loans or other financial accommodations. Will you
please furnish us with the following information on Life Insurance Policy Number GP. #GO-14273, PART. fLO325335. A copy of this letter is
enclosed for your reply.
~. Is premium payable: ~Annually USemi-Annually I'l(~uadedy 0Monthly GOther:
2. Amount of such premium: $. Dale to which premium is paid:
:3. Cash valce st date to which premium is paid: $.
4. Accumulated dividends in addition to cash valuo:$
5. Principal Amount of loans or liens on policy:
6. Accrued unpaid interest on above loans or liens at % will be duo from (date):
?. Interest at % hes been paid in advance to (date):
8. Are there any existing essignmonts of record'/ r-~No [~Yes If yes, please explain below.
Name of holder of interest:
Addrose:
g. Does tho policy have automatic premium loan provisions'/ F~No ~-lYos
10. is tho policy payable in a lump sum'/ [-]No I"lYea if no, pleese ~xplain below.
11. Is Insured receiving benefits under disability provisions at this date? F~ No [~Yes If yes, pleese explain below.
12. Beneficiary Designation:
EXPLANATIONS:
BANKERS TUST CO., TRUSTEE OF THE AICPA INSURANCE T UST
request$ that you furnish Lender with the above information.
RETURN
TO:
PNC BANK, NATIONAL ASSOCIATION
4242 CARLISLE PIKE
CAMP HILL, PA 17001-8874
THIS COPY
TO BE RETURNED TO LENDER
LASER PRO. Reg. U.S. Pat. & T.M. Off., Ver. 3.22.= (c) 1996 CFI ProServices. Inc.
All Rigl~ts Reserve(].
Exhibit E
COLLATERAL RECEIPT
Borrower: J. K. MILLER CORPORATION, A PENNSYLVANIA Lender:
CORPORATION; AND CURTIS E. BOWEN AND
DAVID E. SMITH, INDIVIDUALLY', AND AS
CO-PARTNERS T/A SMITH & BOWEN (TIN:
2~--17943~3)
Grantor:
78-96 WABASH AVENUE
PITTSBURGH, PA 15220
DAVID E. SMITH (SSN: 350-44-9940)
1008 FORBES ROAD
CARLISLE, PA 17013
PNC BANK, NATIONAL ASSOCIATION
4242 CARLISLE PIKE
CAMP HILL, PA 17001-8874
Description of Collateral
Life Insurance Policy Number GP. #GO-14273, PART.
#LO325335 Issued by BANKERS TUST CO., TRUSTEE OF
THE AICPA INSURANCE TRUST
Custody Control
Signatures
Date Released
Return Receipt Acknowledgement:
Grantor acknowledges the receipt of
all collateral, Includirlg all unmalured
coupons, If any.
.......................... ·- ............ ::::::::::::::::::::::::::::::::::
(Grantor',, Signature)
Instructions for Returning Collalerel
and Disposition of Coupons:
LASER PRO. Reg. U.S. Pal. & T.M. Off., Vet. 3.22a (c) 1996 CFI ProServices, inc. All righl$ reserved. I'PA-G50 F3.22 RWHMILLE.LN C30. OVLI
J.K. MILLER CORPORATION
and CURTIS E. BOWEN,
Plaintiffs,
Mo
CARLA D. SMITH, individually and in
her fiduciary capacity as Administrator
of the ESTATE OF DAVID E. SMITH,
Defendants
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW AND EQUITY
No. 03-957 Civil
ACCEPTANCE OF SERVICE
I accept service of the complaint on behalf of defendant Carla D. Smith,
individually and in her fiduciary capacity as Administrator of the Estate of David E.
Smith, as of March 11,2003, and certify that I am authorized to do so.
Dated: March /~, 2003
,~n'13. Sheridan,~s-quire
/~'erratelli, Schiffman, Brown
/ / & Ca!hoon, P.C.
~/' 2080 Linglest°wn Road, Suite 201
Harrisburg, PA 17101
J.K. MILLER CORPORATION
and CURTIS E. BOWEN,
Plaintiffs
Ve
CARLA D. SMITH, individually and in
her fiduciary capacity as Administrator
of the ESTATE OF DAVID E. SMITH,
Defendants
: IN THE COURT OF COMMON PLEAS
: CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW AND EQUITY
NO. 03-957
DEFENDANTS' PRELIMINARY OBJECTIONS TO
PLAINTIFFS' COMPLAINT
.PRELIMINARY AVERMENTS
1. The Plaintiffs initiated this cause of action by filing a Complaint against these
Defendants. This Complaint contains four Counts titled as follows:
Count I: Breach of Contract - Third Party Beneficiary
Count II: Breach of Irnplied Contract
Count III: Specific Performance - Equitable Assignment
Count IV: Unjust Enrichment: Quasi-Contract
2. Carla Smith is the widow of David Smith. Curtis Bowen alleges that he is the
former partner of David Smith. J.K Miller Corporation is alleged to be a business corporation in
which David Smith held a proprietary interest during his life.
3. Generally, the Plaintiffs' Complaint seeks to have Defendants pay over to the
Plaintiffs certain life insurance proceeds which the Defendants received following the death of
David E. Smith, the former husband of Defendant Carla D. Smith.
4. The Plaintiffs contend that the Defendants owe this money to the Plaintiffs
because, the Plaintiffs claim, during the life of David Smith he promised to secure certain debts
to PNC Bank by encumbering the benefits of his life insurance policy.
5. This Complaint was filed as a Civil Action in Law and Equity.
6. The Plaintiff's Complaint is verified by the affidavit of Plaintiff Curtis Bowen "on
his own behalf and in his capacity as president of J.K. Miller Corporation." (Complaint
verification, paragraph 1).
7. The Plaintiffs acknowledge in their Complaint that David Smith is deceased.
(Complaint, paragraph 3)
MOTION TO STRIKE VERIFICATION
8. All other paragraphs of this pleading are incorporated into this Motion.
9. According to the averments of the Complaint the Plaintiff's interests in this
litigation are contrary to the interests of the decedent and to those who derive rights from the
decedent.
10. Accordingly, testimony by the Plaintiffs relative to the issues raised in the
Complaint is barred by the Pennsylvania dead Man's Act, 42 Pa.C.S. §5930(1).
11. The Defendants specifically d~o no__~t waive the operation of the Dead Man's Act.
12. In cases where a witness's testimony is barred by the Dead Man's Act, that
witness is incompetent to testify by affidavit. _.Keegan v. Fahnestock & Co., Inc_., (1996 W.L.
530000 (E.D. Pa)).
13.
Wherefore, the Plaintiffs' affidavit must be stricken.
MOTION TO STRIKE COMPLAINT OR IN THE ALTERNATIVE
FOR A DEMURRER TO ALL COUNTS OF THE COMPLAINT
14. All other paragraphs of this pleading are incorporated into this Motion.
15. Upon the striking of the Affidavit, the Plaintiffs' Complaint is unverified in
violation ofPa. R.C.P. 1024.
16. Throughout the Plaintiffs' Complaint, the Plaintiffs allege that there was an
agreement between David E. Smith (the Defendants' decedent) and the Plaintiffs whereby David
Smith made certain oral promises concerning the disposition of his life insurance proceeds.
17. The Plaintiffs are incompetent to testify (either orally or by verification) as to
their dealings with David Smith.
18. Any such testimony or averment violates the Pennsylvania Dead Man's Act, 42
Pa.C.S. §5930(1).
19. Accordingly, the Defendants move to strike all averments concerning dealings
between the Plaintiffs and David E. Smith, including those averments at paragraphs 5, 11, 12, 15,
16, 18, 20, 21, 22, 26, 35, 36, 41, 46, 47, 48, 49, 52, and 53.
20. Upon the striking of averments concerning alleged dealings between the Plaintiffs
and David E. Smith, during the life of David E. Smith, the Plaintiffs' Complaint fails in all of its
claims.
21. Wherefore, the Plaintiffs' Complaint must be stricken or in the alternative that the
Court grant the Defendants' demurrer and dismiss this Complaint in its entirety.
..MOTION TO STRIKE COMPLAINT FOR FAILURE
TO COMPLY WiTH RULE OF COURT
22. All other paragraphs of this pleading are incorporated into this Motion
23. The Plaintiffs have styled their Complaint as an action in law and equity.
24. The proper style of this Complaint should be as an action in equity, with a count
seeking damages at law.
WHEREFORE, the Defendants request that the Plaintiffs' Complaint be stricken.
PRELIMINARY OBJECTION IN THE NATURE OF A
_DEMUR TO COUNT l
25. All other paragraphs of this pleading are incorporated into this Motion
26. Count I of the Plaintiffs' Complaint, entitled Breach of Contract- Third Party
Beneficiary, requests that the Court enter an award of damages in Plaintiffs' favor and against the
Defendants based upon the Defendants' alleged violation of a certain loan agreement which the
Plaintiffs identify and attach to the Complaint as Exhibit A.
27. The Plaintiffs allege in their Complaint that the Defendants or their decedent have
breached the loan agreement by failing and refusing to pay over to PNC Bank certain life
insurance proceeds which were allegedly assigned to PNC bank by the Defendants' decedent.
28. The Plaintiffs contend that they are third party beneficiaries of the promise and
contract between the Defendants and PNC Bank.
29. A review of the loan document attached to the Plaintiffs' Complaint as Exhibit A
reveals that there is no promise between the Defendants or their decedent and PNC Bank to pay
over life insurance proceeds.
4
30. The loan agreement attached as Exhibit A to the Plaintiffs' Complaint contains no
obligation on the part of the Defendants or their decedent to deal with the decedent's life
insurance proceeds in any way whatsoever to the benefit or advantage of the Plaintiffs, PNC
Bank or any person or entity other than the Defendants.
31. Accordingly, the Plaintiffs' Complaint on its face reveals that the claim for breach
of contract is frivolous.
32. WHEREFORE, the Defendants request that Count I to the Plaintiffs' Complaint
be dismissed.
PRELIMINARY OBJECTION IN THE NATURE OF ^
DEMUR TO COUNT IV
33. All other paragraphs of these Preliminary Objections are hereby incorporated into
this Motion by reference thereto.
34. Count IV of the Plaintiffs' Complaint, sounding in "Unjust Enrichment-Quasi
Contract," alleges that the Plaintiffs are entitled to relief based upon "decedent's assignment of
his life insurance to PNC." (Complaint, paragraph 52).
35. For the reasons stated above, the Plaintiffs' Complaint reveals that there was no
assigranent of life insurance proceeds by the Defendants or their decedent to PNC.
36. Accordingly, the Plaintiffs' Complaint on its face reveals that the Plaintiffs are
not entitled to the relief which they seek in Count IV of the Complaint.
37.
Complaint.
WHEREFORE, the Defendants request that this Court dismiss Count IV of the
Dated:
Respectfully submitted,
SERRATELLI, SCItIFFMAN,
BROWN & CALl-lOON, P.C.
By. ,//J~hn D. Sheridan,-'TEsquire
f/~upreme Court I.D. #82275
/J 2080 Linglestown Road, Suite 201
Harrisburg, PA 17110
717-540-9170
Attorney for Defendants
CERTIFICATE OF SERVICE
I, John D. Sheridan, Esquire, hereby certify that I have served a true and correct copy of the
foregoing document by depositing such in the regular U.S. Mail, addressed as follows:
Donald M. Lewis, III, Esquire
Keefer, Wood, Allen & Rahal, LLP
P.O. Box 11963
Hamsburg, PA 17108-1963
Dated: .-~-"g'-J~"'03
J.K. MILLER CORPORATION
and CURTIS E. BOWEN,
Plaintiffs,
CARLA D. SMITH, individually and in
her fiduciary capacity as Administrator
of the ESTATE OF DAVID E. SMITH,
Defendants
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW AND EQUITY
No. 03-957
PRAECIPE TO DISCONTINUF
TO THE PROTHONOTARY:
Please mark the above matter in the docket as settled and discontinued.
Respecffully submitted,
KEEFER WOOD ALLEN & RAHAL, LLP
Dated: December 3, 2003
By
(~'E. PEPINSKY, JR.
Attor'f~e~ I.D. #23702
Donald M. Lewis III
Attorney i.D. #58510
210 Walnut Street
P. O. Box 11963
Harrisburg, PA 17108-1963
717-255-8051 and 8038
Attorneys for plaintiffs
CERTIFICATE OF SERVICF
I, Donald M. Lewis III, Esquire, attorney for plaintiffs, hereby certify that I have
served the foregoing paper upon counsel of record this date by depositing a true and
correct copy of the same in the United States mail, first-class postage prepaid,
addressed as follows:
John D. Sheridan, Esquire
Serratelli, Schiffman, Brown
& Calhoon, P.C.
2080 Linglestown Road, Suite 201
Harrisburg, PA 17101
Dated: December 3, 2003
KEEFER WOOD ALLEN & RAHAL, LLP
B~ C~