HomeMy WebLinkAbout00-08862
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WILLIAM FREEMAN, Individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
DOCKET NO. !)ooo -~~;;1.
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN 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 by the Plaintiff.
You may lose money or property or other rights important to you.
YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF
YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE
THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL
HELP.
CUMBERLAND COUNTY BAR ASSOCIATION
2 LIBERTY AVENUE
CARLISLE, PA 17013
(717) 249-3166
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WilLIAM FREEMAN, Individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
DOCKET NO.
PENNSYLVANIA STATE BANK,
WilLIAM E. MillER, JR, PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER, SR, JOHN B. lAMPI,
MARIONG. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WilLIAM J. SPONAUGLE,
Defendants
IN EQUITY
COMPLAINT
AND NOW comes the Plaintiff, by and through his attorneys, the Offices of
Fenstermacher and Associates, P.C., and files this Complaint, as follows:
1. Plaintiff William Freeman ("Freeman") isan adult individual currently
residing at 1756 Conway Heath, Camp Hill, Cumberland County, Pennsylvania 17011.
2. Defendant Pennsylvania State Bank ("Bank") is a corporation incorporated
under the laws of the Commonwealth of Pennsylvania with an address for conducting
business at 2148 Market Street, Camp Hill, Cumberland County, Pennsylvania 17011.
3. Defendant William E. Miller, Jr. is an adult individual with a current
address of 2148 Market Street, Camp Hill, Cumberland County, Pennsylvania 17011.
4. Defendant Patricia Anastasio is an adult individual with an address of 246
North 26th Street, Camp Hill, Cumberland County, Pennsylvania 17011.
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5. Defendant Robert J. Dietz is an adult individual with an address of 740
Brentwater Road, Camp Hill, Cumberland County, Pennsylvania 17011.
6. Defendant Carl A. Hoffman is an adult individual with an address of 3940
Locust Lane, Harrisburg, Dauphin County, Pennsylvania 17105.
7. Defendant Joseph M. Hummer, Sr. is an adult individual with an address
of 6110 Pine Knoll Drive, Harrisburg, Dauphin County, Pennsylvania 17105.
8. Defendant John B. Lampi is an adult individual with an address of 1144
Dry Powder Circle, Mechanicsburg, Cumberland County, Pennsylvania 17055.
9. Defendant Marion G. Molinari is an adult individual with an address of
4071 West Tilden Road, Harrisburg, Dauphin County, Pennsylvania 17105.
10. Defendant John A. Obrock is an adult individual with an address of 2210
Wynnwood Court, Enola, Cumberland County, Pennsylvania 17025.
11. Defendant Richard J. Patterson is an adult individual with an address of
545 Bridgeview Drive, Lemoyne, Cumberland County, Pennsylvania 17043.
12. Defendant William J. Sponaugle is an adult individual with an address of
975 Eby Road, Palmyra, Dauphin County, Pennsylvania 17078.
13. The named Defendants comprise the Board of Directors and officers of
the Bank,
14. At all times material hereto, and as of the date of the filing of this
Complaint, Freeman was, and is, the owner of shares of stock of the Bank.
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15. Freeman has made a demand upon the Board of Directors to enforce the
rights of the shareholders and the Bank, which have been affected as set forth herein.
16. As of this date, the Board of Directors have failed to adequately respond
to such demands, or taken the necessary steps to rectify the damage being done to the
shareholders and the Bank.
17. Absent bringing this action at this time, irreparable harm may occur to the
shareholders and the Bank.
18. On July 19, 2000, the Bank terminated the employment of Freeman as
President and CEO of the Bank.
19. The reason for such termination was due to the Bank's determination that
Freeman and the Board of Directors possessed "differences of opinion" and "could no
longer effectively work together".
20. Freeman was not terminated "for cause" or due to financial difficulties of
the Bank.
21. Since the termination of Freeman, the Bank has failed and refused to pay
to Freeman amounts owed under an Executive Employment Agreement (hereinafter the
"Agreement").
22. Due to the Bank's actions, Freeman has had to institute legal proceedings
(the "Freeman litigation") to obtain compensation due him, requiring the Bank to expend
monies for unnecessary legal fees.
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23. The Agreement requires the Bank to pay 10% interest on all sums due
Freeman under the Agreement not paid on or before July 26, 2000.
24. Due to the Bank's delay and failure to abide by the Agreement, the Bank
was required to pay additional sums, in the form of interest, due Freeman.
25. Due to the Bank's actions, they have paid interest on the amounts due at
the rate of 10% per annum, as required under the Agreement, from July 26, 2000.
26. As part of the Freeman litigation, the Bank has taken the position that
certain calculations of stock options are incorrect, in that they overstate the number of
options due Freeman.
27. Those calculations would affect not only stock options provided to
Freeman, but also all other members of the Board of Directors.
28. The Bank has stated that Freeman is not entitled to the options as
calculated by Freeman, and as reported by the Bank in their annual statements and
proxy statements.
29. Assuming that the Bank is correct, then the options awarded to the
individual members of the Board of Directors would then also be incorrectly overstated.
30. Upon information and belief, the Bank has not rescinded any options
awarded to members of the Board of Directors which the Bank itself has determined to
be incorrectly overstated.
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31. Assuming that the Bank's position is correct, then the Bank has knowingly,
fraudulently and/or negligently filed and reported materially incorrect matters in the
annual statements and proxy statements.
32. Defendant's counsel, the firm of Shumaker Williams, P.C., reviewed the
year-end audits, and did not raise an issue as to the matters reported therein.
33. Despite Shumaker Williams, P.C. reviewing and approving the annual
statements and proxy statements, Shumaker Williams, P.C., in representing the Bank in
the Freeman litigation, now states that such statements were incorrect.
34. The Bank's auditors, Beard & Co. and Greenawalt & Co., reviewed and
approved the year-end audits, annual statements and proxy statements.
35. The Bank has failed to surcharge Shumaker Williams, P.C., Beard & Co.
and/or Greenawalt & Co. for failing to properly review and audit the annual statements
and proxy statements.
36. Upon information and belief, the Bank has not taken any steps to file or
report amended statements.
37. Upon information and belief, the Bank has, on at least one occasion,
provided options to a member or past member of the Board of Directors, to which he
was not entitled.
38. In terminating Freeman without cause, the Bank has opened itself to.
unnecessary liability and expense under the Freeman litigation.
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39. Pursuant to Freeman's Executive Employment Agreement, the Bank was
obligated to create a committee of its Board of Directors to review with Freeman his
performance and general relationships with the members of the Board of Directors.
Said committee was to be created no later than February 1, 2000.
40. The Bank failed to create this committee, or in any way address with
Freeman his performance or relationship with the Board of Directors.
41. By failing to address any supposed deficiency in Freeman's performance
and/or relationship with the Board of Directors, the Bank breached the Agreement with
Freeman.
42. Rather than address any supposed deficiencies of Freeman, the Bank
abruptly terminated Freeman without cause.
43. By terminating Freeman without just cause prior to the expiration of the
Agreement, the Bank was then obligated to make a lump sum payment to Freeman in
the amount of $372,446, plus interest at 10% per annum for each day said sum was not
paid beyond July 26, 2000.
44. In addition to the lump sum payment of $372,446, due to the termination
of Freeman, the Bank is also required to continue to payor provide to Freeman all other
prerequisites and benefits due him until April.
45. By abruptly terminating Freeman without cause, the Bank has endured
substantial negative publicity.
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46. By abruptly terminating Freeman without cause, the Bank failed to have a
managed transition.
47. By abruptly terminating Freeman, the Bank is now paying salary for both
Freeman and the new CEO who has taken over Freeman's duties.
48. The Bank has failed to establish a transitional plan in order to allow the
Bank to maintain its financial position during the upheaval caused by Freeman's abrupt
termination.
49. The Bank has engaged in a continuing policy whereby it employed certain
specific general contractors and/or subcontractors for Bank construction projects, who
were bank customers, rather than engage in competitive bidding.
50. The actions of the Board of Directors, as set forth herein, was a breach of
the fiduciary duty owed to the Bank and the shareholders by the renters of the Board of
Directors, in both their capacity as directors and shareholders.
51. In order to fully compensate the Bank and its shareholders for the
damages they incurred as a result of the aforesaid breaches of fiduciary duty, the Board
of Directors should:
a. Compensate the shareholders for losses occasioned by improperly
granting former Directors stock options and/or take steps to have former Directors
surrender said options or shares obtained through exercise of said options.
b. Require the cancellation of any options to the members of the
Board of Directors that have been extended beyond the original terms without payment
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of reasonable consideration, and the option to be exercised to cancel said shares
and/or dividends to the shareholders as compensation for the dilution of their stock
interests.
c. Pay to William Freeman, the value of shares for all options
identified in the Bank's. proxy statements and financial statements, or alternatively,
amend all prior proxy statements, financial statements, and state, federal filings to
provide notice of what the Bank now claims is inaccurate information, and further seek
surcharge against the Bank's auditors and attorneys who reviewed and approved said
filings and reports.
d. Amend the number of options provided to each member of the .
Board of Directors to a lesser amount consistent with the Bank's position that the prior
proxy statements and financial statements incorrectly state a higher number of options
available to the individual members of the Board, and further require the surrender of
any shares obtained by individual members of the Board of Directors as a result of the
allegedly incorrect statements.
e. Pay to the Bank and its shareholders all charges incurred as a
result of the Bank's required payments of interest to Freeman as a result of not timely
making payments due him as a result of his termination, as well as the costs and legal
fees incurred by the Bank as a result of such termination.
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f. Pay to the Bank and its shareholders all losses incurred as a result
of the need to pay for additional personnel, including those hired to assume the position
of CEO previously held by Freeman.
g. Pay to the shareholders the difference between the value of their
shares at the time Freeman was terminated and the date of payment.
h. Repay to the Bank all moneys expended in the last seven years on
bank office construction projects in which all work was steered to customers of the Bank
and/or Directors of the Bank or affiliated businesses, rather than through a competitive
bidding process.
WHEREFORE, Plaintiff William Freeman, individually and on behalf of
Pennsylvania State Bank and its shareholders, respectfully request this Honorable
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Court enter judgment for him and against the Defendants for the relief requested herein,
along with costs, interest, attorney fees and all other relief deemed fair and equitable.
Respectfully submitted,
FENSTERMACHER AND ASSOCIATES, P.C.
ohn R. Fenstermacher
Supreme Court I.D. #29940
Mark K. Emery
Supreme Court I.D. #72787
5115 East Trindle Road
Mechanicsburg, PA 17050
(717) 691-5400
Attorney for Plaintiffs
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VERIFICATION
I, William Freeman, hereby certify and verify that the facts set forth in the
foregoing Complaint are true and correct to the best of my knowledge, information and
belief. I understand that any false statements herein are subject to the penalties of 18
Pa. C. S. 94904 relating to unsworn falsification to authorities.
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William Freeman
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WILLIAM FREEMAN,
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
: IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
v.
DOCKET NO. 2000 - 8862
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN 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 by the Plaintiff.
You may lose money or property or other rights important to you.
YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF
YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE
THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL
HELP.
CUMBERLAND COUNTY BAR ASSOCIATION
2 LIBERTY AVENUE
CARLISLE, PA 17013
(717) 249-3166
"----
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WILLIAM FREEMAN,
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
v. DOCKET NO. 2000 - 8862
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants IN EQUITY
AMENDED COMPLAINT
AND NOW comes the Plaintiff, by and through his attorneys, the Offices of
Fenstermacher and Associates, P.C., and files this Complaint, as follows:
1. Plaintiff William Freeman ("Freeman") is an adult individual currently
residing at 1756 Conway Heath, Camp Hill, Cumberland County, Pennsylvania 17011.
2. Defendant Pennsylvania State Bank ("Bank") is a corporation incorporated
under the laws of the Commonwealth of Pennsylvania with an address for conducting
business at 2148 Market Street, Camp Hill, Cumberland County, Pennsylvania 17011.
3. Defendant William E. Miller, Jr. is an adult individual with a current
address of 2148 Market Street, Camp Hill, Cumberland County, Pennsylvania 17011.
4. Defendant Patricia Anastasio is an adult individual with an address of 246
North 26th Street, Camp Hill, Cumberland County, Pennsylvania 17011.
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5. Defendant Robert J. Dietz is an adult individual with an address of 740
Brentwater Road, Camp Hill, Cumberland County, Pennsylvania 17011.
6. Defendant Carl A. Hoffman is an adult individual with an address of 3940
Locust Lane, Harrisburg, Dauphin County, Pennsylvania 17105.
7. Defendant Joseph M. Hummer, Sr. is an adult individual with an address
of 6110 Pine Knoll Drive, Harrisburg, Dauphin County, Pennsylvania 17105.
8. Defendant John B. Lampi is an adult individual with an address of 1144
Dry Powder Circle, Mechanicsburg, Cumberland County, Pennsylvania 17055.
9. Defendant Marion G. Molinari is an adult individual with an address of
4071 West Tilden Road, Harrisburg, Dauphin County, Pennsylvania 17105.
10. Defendant John A. Obrock is an adult individual with an address of 221 0
Wynnwood Court, Enola, Cumberland County, Pennsylvania 17025.
11. Defendant Richard J. Patterson is an adult individual with an address of
545 Bridgeview Drive, Lemoyne, Cumberland County, Pennsylvania 17043.
12. Defendant William J. Sponaugle is an adult individual with an address of
975 Eby Road, Palmyra, Dauphin County, Pennsylvania 17078.
13. The named Defendants comprise the Board of Directors and officers of
the Bank.
14. At all times material hereto, and as of the date of the filing of this
Complaint, Freeman was, and is, the owner of shares of stock of the Bank.
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15. Freeman has made a demand upon the Board of Directors to enforce the
rights of the shareholders and the Bank, which have been affected as set forth herein.
Said demand was made in writing on January 22, 2001. A copy of said demand is
attached hereto as Exhibit "A" and is incorporated fully herein.
16. As of this date, the Board of Directors have failed to adequately respond
to such demands, nor has the Board of Directors taken the necessary steps to rectify
the damage being done to the Bank.
17. On July 19, 2000, the Bank terminated the employment of Freeman as
President and CEO of the Bank.
18. The reason for such termination was due to the Bank's determination that
Freeman and the Board of Directors possessed "differences of opinion" and "could no
longer effectively work together".
19. Freeman was not terminated "for cause" or due to financial difficulties of
the Bank.
20. Since the termination of Freeman, the Bank has failed and refused to pay
to Freeman amounts owed under an Executive Employment Agreement (hereinafter the
"Agreement"). By correspondence to Bank's counsel, dated January 19, 2001, the
Bank was advised of the specific amounts claimed to be due. Said correspondence is
attached and incorporated fully herein as Exhibit "B".
21. Due to the Bank's actions, Freeman has had to institute legal proceedings
(the "Freeman litigation") in the form of arbitration as mandated under the Agreement to
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obtain compensation due him, requiring the Bank to expend monies for unnecessary
legal fees.
22. The Agreement requires the Bank to pay 10% interest on all sums due
Freeman under the Agreement not paid on or before July 26, 2000.
23. Due to the Bank's delay and failure to abide by the Agreement, the Bank
was required to pay additional sums, in the form of interest, due Freeman.
24. Due to the Bank's actions, they are required to pay interest on the
amounts due at the rate of 10% per annum, as required under the Agreement, from July
26,2000.
25. By correspondence, and attachments thereto, dated January 19, 2001,
directed to the Bank's counsel, the Bank was advised of the specific number of options
Freeman claims are due him.
26. As part of the Freeman litigation, the Bank has taken the position that the
above-referenced calculation of stock options is incorrect, in that it overstates the
number of options due Freeman.
27. The calculations were originally placed on computer disk by Freeman,
along with information regarding options due members of the Board of Directors.
However, the Bank has maintained said disk since Freeman's date of termination and,
despite requests, has failed and refused to provide said disk, or the information
contained therein, to Freeman or his counsel.
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28. Those calculations would affect not only stock options provided to
Freeman, but also all other members of the Board of Directors.
29. The Bank has stated that Freeman is not entitled to the options as
calculated by Freeman, and as reported by the Bank in their annual statements and
proxy statements for years 1998 and 1999.
30. Assuming that the Bank is correct, then the options awarded to the
individual members of the Board of Directors would then also be incorrectly overstated.
31. Upon information and belief, the Bank has not rescinded any options
awarded to members of the Board of Directors which the Bank itself has determined to
be incorrectly overstated.
32. Assuming that the Bank's position is correct, then the Bank has knowingly,
fraudulently and/or negligently filed and reported materially incorrect matters in the
annual statements and proxy statements for years 1998 and 1999.
33. Defendant's counsel, the firm of Shumaker Williams, P.C., reviewed the
year-end audits, and did not raise an issue as to the matters reported therein.
34. Despite Shumaker Williams, P.C. reviewing and approving the annual
statements and proxy statements, Shumaker Williams, P.C., in representing the Bank in
the Freeman litigation, now states that such statements were incorrect.
35. The Bank's auditors, Beard & Co. and Greenawalt & Co., reviewed and
approved the year-end audits, annual statements and proxy statements.
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36. The Bank has failed to surcharge Shumaker Williams, P.C., Beard & Co.
and/or Greenawalt & Co. for failing to properly review and audit the annual statements
and proxy statements.
37. Upon information and belief, the Bank has not taken any steps to file or
report amended statements.
38. Upon information and belief, the Bank has, on at least one occasion,
provided options to Nickson Oyer, to which he was not entitled.
39. In terminating Freeman without cause, the Bank has opened itself to
unnecessary liability and expense under the Freeman litigation.
40. Pursuant to Freeman's Executive Employment Agreement, the Bank was
obligated to create a committee of its Board of Directors to review with Freeman his
performance and general relationships with the members of the Board of Directors.
Said committee was to be created no later than February 1, 2000.
41. The Bank failed to create this committee, or in any way address with
Freeman his performance or relationship with the Board of Directors.
42. By failing to address any supposed deficiency in Freeman's performance
and/or relationship with the Board of Directors, the Bank breached the Agreement with
Freeman.
43. Rather than address any supposed deficiencies of Freeman, the Bank
abruptly terminated Freeman without cause.
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44. By terminating Freeman without just cause prior to the expiration of the
Agreement, the Bank was then obligated to make a lump sum payment to Freeman in
the amount of $372,446, plus interest at 10% per annum for each day said sum was not
paid beyond July 26, 2000.
45. In addition to the lump sum payment of $372,446, due to the termination
of Freeman, the Bank is also required to continue to payor provide to Freeman all other
prerequisites and benefits due him until April, 2002.
46. By abruptly terminating Freeman without cause, the Bank has endured
substantial negative publicity.
47. By abruptly terminating Freeman without cause, the Bank failed to have a
managed transition.
48. By abruptly terminating Freeman, the Bank is now paying salary for both
Freeman and the new CEO who has taken over Freeman's duties.
49. The Bank has failed to establish a transitional plan in order to allow the
Bank to maintain its financial position during the upheaval caused by Freeman's abrupt
termination.
50. The Bank has engaged in a continuing policy whereby it employed certain
specific general contractors and/or subcontractors for Bank construction projects,
including businesses owned or controlled by Defendants Hummer and Deitz, rather than
engage in competitive bidding.
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51. The actions of the Board of Directors, as set forth herein, was a breach of
the fiduciary duty owed to the Bank and the shareholders by the members of the Board
of Directors, in both their capacity as directors and shareholders.
52. In order to fully compensate the Bank for the damages it incurred as a
result of the aforesaid breaches of fiduciary duty, the Board of Directors should:
a. Compensate the Bank for losses occasioned by improperly granting
former Directors stock options and/or take steps to have former Directors surrender said
options or shares obtained through exercise of said options.
b. Require the cancellation of any options to the members of the
Board of Directors that have been extended beyond the original terms without payment
of reasonable consideration, and the option to be exercised to cancel said shares
and/or dividends to the shareholders as compensation for the dilution of their stock
interests.
c. Amend all prior proxy statements, financial statements, and state,
federal filings to provide notice of what the Bank now claims is inaccurate information,
and further seek surcharge against the Bank's auditors and attorneys who reviewed and
approved said filings and reports.
d. Amend the number of options provided to each member of the
Board of Directors to a lesser amount consistent with the Bank's position that the prior
proxy statements and financial statements incorrectly state a higher number of options
available to the individual members of the Board, and further require the surrender of
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any shares obtained by individual members of the Board of Directors as a result of the
allegedly incorrect statements.
e. Pay to the Bank all charges incurred as a result of the Bank's
required payments of interest to Freeman as a result of not timely making payments due
him as a result of his termination, as well as the costs and legal fees incurred by the
Bank as a result of such termination.
f. Pay to the Bank all losses incurred as a result of the need to pay for
additional personnel, including those hired to assume the position of CEO previously
held by Freeman.
g. Repay to the Bank all moneys expended in the last seven years on
bank office construction projects in which all work was steered to Directors of the Bank
or affiliated businesses, rather than through a competitive bidding process.
WHEREFORE, Plaintiff William Freeman, on behalf of Pennsylvania State Bank,
respectfully requests this Honorable Court enter judgment for him and against the
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Defendants for the relief requested herein, along with costs, interest, attorney fees and
all other relief deemed fair and equitable.
Respectfully submitted,
FENSTERMACHER AND ASSOCIATES, P.C.
By:
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John R. Fenstermacher
Supreme Court 1.0. #29940
Mark K. Emery
Supreme Court I.D. #72787
5115 East Trindle Road
Mechanicsburg, PA 17050
(717) 691-5400
Attorney for Plaintiffs
DATED: March 8, 2001
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FENSTERMACHER AND ASSOCIATES, P.C.
ATTORNEYS AND COUNSELORS AT lAW
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January 22, 2001
VIA FACSIMILE 234-6808
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Ronald M. Katzman, Esquire
Goldberg, Katzman & Shipman, P.C.
P. O. Box 1268
Harrisburg, PA 17108-1268
RE: William V. Freeman v. Pennsylvania State Bank, et al.
~
Dear Ron:
On behalf of William V. Freeman and Pennsylvania State Bank, we make the
following demands, through counsel, of the Board of Directors of Pennsylvania State
Bank (hereinafter PSB):
r
. That the Board of Directors and PSB pay restitution to the shareholders for
losses occasioned by shares owned by Nickson Oyer acquired as a result of
the Board's action granting an extension of the terms of certain stock options
to Nickson Oyer, without consideration, and/or the Board granting permission
to Nickson Oyer to exercise expired options or granting option extensions
without any consideration. Alternatively, the Board shall institute litigation
requiring the surrender of those shares to PSB from Nickson Oyer or pay to
PSB and the shareholders the loss incurred by the shareholders by the
dilution of shareholder interest and/or loss of economic opportunity to make a
similar purchase.
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. That the Board and PSB require the cancellation of any options that have
been extended to Board members beyond their original term without the
payment of any reasonable consideration for said extension and, if the
options have been exercised, to cancel said shares or, alternatively, to pay
dividends to the shareholders for the dilution of their stock interest and the
loss of economic opportunity to make a similar purchase.
PLEASE RESPoND TO:
THE JONAS RUPP HOUSE
5115 EAST TRINDLE ROAD
MECHANICSBURG. PENNSYLVANIA 17050
MECHANICSBURG OFFICE,
(717) 691-5400
FAX (717) 691-5441
www.fenstermacher.cc
OCEAN CITY OFFICE
26 BAY AVENUE
OCEAN CIl'!, N,I 08226
(609) 391-9461
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Ronald M. Katzman, Esquire
Page 2
January 22, 2001
. That the Board and PSB pay to Mr. William Freeman, as set forth in the PSB
1999 proxy and financial statements, the value of shares that Mr. Freeman
now holds and/or options disclosed in said financial statement and/or proxy
information or, alternatively, to amend all previous financial statements, proxy
statements and federal and state filings to provide notice of the inaccuracies
of said filings, as is required by law, and to further seek surcharge against
PSB's auditors and attorneys for their failure to properly prepare, audit and
research the filings and reports of PSB.
. That the Board pay to PSB and its shareholders all fees and costs incurred
due to its failure to pay William Freeman pursuant to his Employment
Agreement and to further require the Board to pay to PSB and its
shareholders all monies paid to Mr. Freeman due under said Employment
Agreement incurred by the improper termination of Mr. Freeman by the Board
of Directors.
. That the Directors pay to PSB and its shareholders all additional sums paid to
personnel, including any new personnel, to assume the responsibilities that
Mr. Freeman held as Chief Executive Officer of the Bank up to and including
April 30, 2002.
. That the Board of Directors pay the Bank and its shareholders the difference
between the value of the shareholders' stock at the time that Mr. Freeman
was terminated and the current date, as such loss was occasioned by the
Board's failure to properly terminate Mr. Freeman and properly plan for a
management transition and protect the shareholders' investment in the Bank.
. That the Board of Directors repay to PSB the captial used to buy shares of
PSB as treasury stock in 2000, as it reduced stock dividends to shareholders
and artificially inflated the stock value of PSB shares and, further, pay to its
shareholders the difference between the artificially inflated value and the
stock's actual value.
. That the Board of Directors repay to PSB all monies expended by PSB on the
construction of new bank offices for the past 7 years in which non-competitive
bidding was employed and/or only bank business customers or board
members or their affiliated businesses were employed as general contractors
or subcontractors.
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Ronald M. Katzman, Esquire
Page 3
January 22, 2001
Please be advised that these matters should be completed no later than fifteen
(15) days from this date.
Very truly yours,
FENSTERMACHER AND ASSOCIATES, P.C.
By:
John R. Fenstermacher
crs
Enclosures
cc: William V. Freeman
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FENSTERMACHER AND ASSOCIATES, P.C.
AITORNEYS AND COUNSELORS AT LAW
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January 19, 2001
VIA FACSIMILE 234-6808
,
Ronald M. Katzman, Esquire
Goldberg, Katzman & Shipman, P.C.
P. O. Box 1268
Harrisburg, PA 17108-1268
RE: William V. Freeman v. Pennsylvania State Bank, et al.
Dear Ron:
As we discussed in our meeting of January 17, 2001, I wanted to outline our
position regarding the rights of Mr. Freeman under the Employment Agreement.
Our position is that Mr. Freeman was unilaterally terminated, without cause, on
July 9, 2000. As a result of the actions and inactions of Pennsylvania State Bank, they
have materially breached the Executive Employment Agreement by and between Mr.
Freeman and Pennsylvania State Bank. As I mentioned to you in our meeting,
Paragraph 13 of the Agreement provides that the Bank, no later than February 1, 2000,
was to have formed a committee to review Mr. Freeman's performance and to notify the
Board of Directors no later than May 1, 2000 of its recommendation as to renewal of the
Agreement for an additional year beyond April 30, 2001. As a result of this breach of
the Agreement, the Agreement was automatically extended for another year, until April
30,2002. Accordingly, all salary, benefits and other incentives are due Mr. Freeman
through April 30, 2002 and must be paid. It is our position that accrued vacation pay
plus the highest annual direct salary rate during the five-year period ending on the date
of such termination, and an amount no less than his highest annual incentive
compensation, in cash, should be paid during such period of time. Accordingly, it is our
MECHANICSBURG OFFICE,
(717) 691-5400
FAX (717) 691-5441
www.fenstermacher.cc
OCEAN CITY OFFICE
26 BAY AVENUE
OCEAN CITY. NJ 08226
(609) 391-9461
PLEASE RESPOND TO:
THE JONAS RUPP HOUSE
5115 EAST TRINDLE ROAD
MECHANICSBURG. PENNSYLVANIA :17050
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Ronald M. Katzman, Esquire
Page 2
January 19, 2001
position, as has been set forth in earlier correspondence to previous counsel, that Mr.
Freeman is due the following, subject to deduction of salary previously paid:
Accrued Vacation of $13,015
1999 direct salary of $156,180
1998 bonus payment of $17,028
$186,223 per year, or a total of $372,446.
Additionally, it is our position that Paragraph 12 a (3) of the aforesaid Agreement
provides that Mr. Freeman was to have been paid no later than July 27, 2000.
Additional contributions should have been credited to his executive accounts through
April 30, 2001 under all retirement plans of the Board. Because of the extension of the
Agreement to April 30, 2002, there should have been an immediate payment of $9,600
to Mr. Freeman. As to Mr. Freeman's participation in the Supplemental Fixed
Retirement Plan, he should be credited with participation in the Plan until April 30, 2002
and, accordingly, receive the benefit.
It is our further position that Mr. Freeman and his dependents shall be covered
until April 30, 2002 by all survivor rights and insurance and benefit programs of the
Bank. As a result of the extension of the contract, all other fringe benefits including, by
way of illustration and not limitation, employee benefit plans, profit sharing plans,
savings plans, stock option plans, major medical, hospitalization, health and accident
plans, retirement plan, life insurance and disability insurance, should be extended and
reflect payments through the date of April 30, 2002. Additionally, through April 30,
2002, Mr. Freeman would be entitled to an automobile that is no more than three years
old and has less mileage than 60,000 miles and, further, that club memberships to the
Country Club and Rotary Club should be paid through April 30, 2002.
Paragraph 14 of the Agreement provides for damages for breach of contract.
Clearly, the damages to Mr. Freeman have been extreme and only exacerbated by the
manner in which Mr. Freeman was terminated without cause, and then a release made
to the press which publicly indicted Mr. Freeman. Accordingly, Mr. Freeman's future
earnings have been impacted, as well as his reputation in the community. Additionally
because of the actions of Pennsylvania State Bank, Mr. Freeman has incurred
substantial attorney's fees and costs in attempting to resolve this conflict. You will note
& .
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Ronald M. Katzman, Esquire
Page 2
January 19, 2001
that in that paragraph there is a provision that states that the non-breaching party shall
be entitled to reimbursement for attorney's fees incurred in the prosecution of these
actions. Accordingly, that is why there has been the demand for such payment.
I attach as an exhibit to this correspondence an outline of the various stock and
options which Mr. Freeman holds and which, it is our position, should all be put back to
the Bank for payment. As I discussed with you, it has been the position of our client
from the outset that the best manner of concluding this entire dispute was for a total
termination of any relationship between Mr. Freeman and the Bank, includin9 that of
stock ownership.
As I mentioned at our meeting, it is our intent to file the Complaint for the
derivative action next Friday unless all these matters are resolved. Thank you.
Very truly yours,
FENSTERMACHER AND ASSOCIATES, P.C.
By:
John R. Fenstermacher
crs
Enclosures
cc: William V. Freeman
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WILLIAM V. FREEMAN
STOCK/OPTION OWNERSHIP
Option
No.
Strike Price
Total Strike Price
Original Options
12,629
4.16
$52,536.64
Incentive Options
1995
1999
2386 5.20 12,407.20
2619 6.62 17,337.78
2699 11.06 29,850.94
3190 11.41 36,397.90
2503 14.55 00.00
13,397 Total Price of Incentive Options $95,993.82
Total Price of All Options $148,530.46
1997
1997
1998
Total Options
23,523
12.00
282.276.00
133,745.54
Net Due
Total Shares Owned by Mr. Freeman
28,394 12.00
(To be purchased by Board of Directors and/or PSB)
$340,728.00
Total Due From All Options/Shares
$474,473.54
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VERIFICATION
I, William Freeman, hereby certify and verify that the facts set forth in the
foregoing Amended Complaint are true and correct to the best of my knowledge,
information and belief. I understand that any false statements herein are subject to the
penalties of 18 Pa. C. S. 94904 relating to unsworn falsification to authorities.
jJ.m~
DATE: 3- 7-=(
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CERTIFICATE OF SERVICE
AND NOW, on this 8th day of March, 2001, I, Mark K. Emery, Esquire,
hereby certify that I have served the foregoing Amended Complaint by mailing a true and
correct copy by United States first class mail, addressed as follows:
Ronald M. Katzman, Esquire
Goldberg, Katzman & Shipman, P.C.
P. O. Box 1268
Harrisburg, PA 17108-1268
FENSTERMACHER AND ASSOCIATES, P.C.
By:
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Mark K. Emery
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WILLIAM FREEMAN, Individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
v.
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
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: IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
DOCKET NO. (JU ?/t0d-- ~
IN EQUITY
PRAECIPE FOR WRIT OF SUMMONS
TO THE PROTHONOTARY:
Please issue a Writ of Summons against the above-named Defendants.
Addresses for each named Defendant are attached hereto as Exhibit "A".
DATED: December 28, 2000
Respectfully submitted,
FENSTERMACHER AND ASSOCIATES, P.C.
By: ~~~~~
Mark K. Emery
Supreme Court I.D. #72787
5115 EastTrindle Road
Mechanicsburg, PA 17050
(717) 691-5400
Attorney for Plaintiffs
- ~ __ . I - -,
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Pennsylvania State Bank
2148 Market Street
Camp Hill, PA 17011
William E. Miller, Jr.
2148 Market Street
Camp Hill, PA 17011
Patricia Anastasio
246 North 26th Street
Camp Hill, PA 17011
Robert J. Dietz
740 Brentwater Road
Camp Hill, PA 17011
Carl A. Hoffman
3940 Locust Lane
Harrisburg, PA 17105
Joseph M. Hummer, Sr.
6110 Pine Knoll Drive
Harrisburg, PA 17105
John B. Lampi
1144 Dry Powder Circle
Mechanicsburg, PA 17055
Marion G. Molinari
4071 West Tilden Road
Harrisburg, PA 17105
John A. Obrock
2210 Wynnwood Court
Enola, PA 17025
Richard J. Patterson
545 Bridgeview Drive
Lemoyne, PA 17043
William J. Sponaugle
975 Eby Road
Palmyra, PA 17078
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CERTIFICATE OF SERVICE
AND NOW, on this 6th day of February, 2001, I, John R. Fenstermacher,
Esquire, hereby certify that I have served the foregoing Complaint by mailing a true and
correct copy by United States first class mail, addressed as follows:
Ronald M. Katzman, Esquire
Goldberg, Katzman & Shipman, P.C.
P. O. Box 1268
Harrisburg, PA 17108-1268
FENSTERMACHER AND ASSOCIATES, P.C.
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WILLIAM FREEMAN,
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
: IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
v.
DOCKET NO. 00-8862 Equity
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
PLAINTIFFS' ANSWER TO DEFENDANTS'
PRELIMINARY OBJECTIONS
AND NOW comes the Plaintiff, by and through his attorneys, the Offices of
Fenstermacher and Associates, P.C., and files this Plaintiffs' Answer to Defendants'
Preliminary Objections, as follows:
I. Denied as a conclusion of law.
(a) Denied as a conclusion of law.
(b) Denied as a conclusion of law. By way of further response,
it is specifically denied that Freeman approved any of the numerous
actions constituting the Board of Directors breaches of fiduciary duty.
(c) Denied as a conclusion of law.
(d) Denied as a conclusion of law. By way of further response,
as Defendants assert, a written demand was made upon the Defendants
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on January 22, 2001. As of this date, Defendants have not responded to
those demands even though reasonable time and opportunity has been
provided to them.
WHEREFORE, Plaintiffs respectfully request this Honorable Court deny
Defendants' Preliminary Objections.
II. (a) Denied as a conclusion of law. By way of further response,
all such information is in the possession, custody and control of the
Defendants. In particular, the referenced information was contained in a
computer disk generated by the Plaintiff, which Defendants confiscated on
the date of Freeman's termination. Despite repeated requests,
Defendants refused to provide that computer disk or the information
contained therein to the Plaintiffs until after the filing of both the Complaint
and the Amended Complaint.
(b) Denied as a conclusion of law. By way of further response,
all such information is in the possession, custody and control of the
Defendants and therefore Defendants are fully able to adequately respond
to the Complaint.
(c) Denied as a conclusion of law. By way of further response,
it is absurd for the Defendants and its Board of Directors, as well as their
legal counsel, to allege that they are not fully aware of the potential liability
and expense the Bank is opening itself up to under the referenced
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arbitration proceedings in particular as Defendants counsel in the present
action is also their counsel in the ongoing arbitration proceeding.
(d) Denied as a conclusion of law. By way of further response,
such referenced negative publicity is cornmon knowledge to any
reasonable person.
(e) Denied as a conclusion of law. By way of further response,
such information is in the possession, custody and control of the
Defendants and therefore Defendants are fully able to adequately respond
to the Complaint.
(f) Denied as a conclusion of law. By way of further response,
the Complaint fully complies with the Pennsylvania Rules of Civil
Procedure.
WHEREFORE, Plaintiffs respectfully request this Honorable Court deny
Defendants' Preliminary Objections.
III. (a) Denied as a conclusion of law. By way of further response,
see Paragraph I(c).
(b) Denied as a conclusion of law. By way of further response,
Defendants' argument as set forth in Paragraph III(b) is so illogical as to
render a complete response impossible.
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(c) Denied as a conclusion of law. By way of further response,
the Amended Complaint fully complies with the Pennsylvania Rules of
Civil Procedure.
WHEREFORE, Plaintiffs respectfully request this Honorable Court deny
Defendants' Preliminary Objections.
IV. (a) Denied as a conclusion of law. By way of further response,
the alleged defects Defendants assert are not properly raised through
Preliminary Objections.
(b) Denied as a conclusion of law. By way of further response,
the alleged defects Defendants assert are not properly raised through
Preliminary Objections.
WHEREFORE, Plaintiffs respectfully request this Honorable Court deny
Defendants' Preliminary Objections.
Respectfully submitted,
FENSTERMACHER AND ASSOCIATES, P.C.
By:
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Mark K. Emery
Supreme Court I.D. #72787
5115 East Trindle Road
Mechanicsburg, PA 17050
(717) 691-5400
Attorney for Plaintiffs
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CERTIFICATE OF SERVICE
AND NOW, on this ~ day of April, 2001, I, Mark K. Emery, Esquire,
hereby certify that I have served the foregoing Plalintiffs' Answer to Defendants'
Preliminary Objections by mailing a true and correct copy by United States first class mail,
addressed as follows:
Ronald M. Katzman, Esquire
Goldberg, Katzman & Shipman, P.C.
P. O. Box 1268
Harrisburg, PA 17108-1268
FENSTERMACHER AND ASSOCIATES, P.C.
By: ~yU'---
Mark K. Emery
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Commonwealth of Pennsylvania
County of Cumberland
WILLIAM FREEMAN , Individually and on
::o,b<;halfc or.:tli$hS:haT,.h61UElIlSF of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK
-vs-
PENNSYLVANIA STATE BANK, WILLIAM E.
MILLER,Jr., PATRICIA MlASTASIO,
ROBERT J. DIETZ, CARL A. HOFFMAN,
JOSEPH M. HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A. OBROCK, RICHARD J.
PATI'ERSON, and WILLIAM J. SPONAUGLE
Court of Conunon Pleas
- '","-"---'--""
No. ___QO~1lB62._.EQUITY___n_______hh ~____
In _ __ _~~yj._l}\.~j:_tQ~_ ~:j.j:'y________________ _..
S~~ Attach~d for Addr~ss~s
To~~1JNL\.N.J}U?.T.1j,T!Lj~A~J__I\!ILr..l8M..EL_MILLER, JR., PATRICIA ANASTASIO, ROBERT JC. DIETZ,
CARL A. HOFFMAN, JOSEPH M. HUMMER, SR., JOHN B. LAMPI, MARION G. MOLINARI, JOHN A. OBROCK,'" ..",
You are hereby notified that RICHARD J. PATI'ERSON, and WILLIAM J. SFCN'\LG[EC
.~_~,_!l!A0~~1]y'~_g:t!?s1tr~Kg:ttm~Jf1m;_9f}~f;):~Yl\]TIKJ:i'J15-~_~L..and
PENNSYLVANIA STATE BANK
the Plaintiff ha commenced an action in _tiviLl\c.tion.Equi.tY__n_______________u__________..
against you which you are required to defend or a default judgment may be entered against you.
(SEAL)
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By _ () A. A I ~~~~~w:J~u~'
(J/.J4!V.L~D~puty 1r)
Date __P..""c~<:.r-29.~_2.ll.Q.Q_______ 19____
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Pennsylvania State Bank
2148 Market Street
Camp Hill, PA 17011
William E. Miller, Jr.
2148 Market Street
Camp Hill, PA 17011
Patricia Anastasio
246 North 26'h Street
Camp Hill. PA 17011
Robert J. Dietz
740 Brentwater Road
Camp Hill, PA 17011
Carl A. Hoffman
3940 Locust Lane
Harrisburg, PA 17105
Joseph M. Hummer, Sr.
6110 Pine Knoll Drive
Harrisburg, PA 17105
John B. Lampi
1144 Dry Powder Circle
Mechanicsburg, PA 17055
Marion G. Molinari
4071 West Tilden Road
Harrisburg, PA 17105
John A Obrock
2210 Wynnwood Court
Enola, PA 17025
Richard J. Patterson
545 Bridgeview Drive
Lemoyne, PA 17043
William J. Sponaugle
975 Eby Road
Palmyra, PA 17078
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WILLIAM FREEMAN, Individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
DOCKET NO. {}()~ CCf( 6 J
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
ACCEPTANCE OF SERVICE
I, Ronald M. Katzman, Esquire, counsel for all Defendants in the above-
captioned matter, hereby accept service of the Writ of Summons on behalf of said
Defendants, in full satisfaction of the Pennsylvania Rules of Civil Procedure.
Date: JAI,j". ~ 1 2.eo!
!l.1iAt!it.
Ronald M. Katzma
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PRAECIPE FOR LISTING CASE FOR ARGUMENT
(Must be typewritten and subnitted in duplicate)
TO THE PROTHONOTARY OF CUMBERLAND COUNTY:
Please list the within matter for the next Argunent Court.
------------------------------------------------------------------------------------.---
CAPTION OF CASE
,(entire caption must be stated in full)
WILLIAM FREEMAN, on behalf of the Shareholders
of PENNSYLVANIA STATE BANK, and PENNSYLVANIA
STATE BANK,
( Plaintiff)
vs.
PENNSYLVANIA STATE BANK, WILLIAM E. MILLER, JR.,
PATRICIA ANASTASIO, ROBERT J. DIETZ, CARLA A.
HOFFMAN, JOSEPH M. HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A. OBROCK, RICHARD J.
PATTERSON, and WILLIAM J. SPONAUGLE,
( Defendant)
No. 8862 -6vrl ~ "W' 2000
1. State matter to be argued (Le.. plaintiff's IIOtion for new trial. defendant's
demurrer to complaint. etc.): Defendants' Preliminary Objections
2. Identify =unsel who will argue case:
(a)
for plaintiff:
.!\ddress :
Mark K. Emery; John R. Fenstermacher
5115 East Trindle Road
Mechanicsburg, PA 17050
(b)
for defendant:
Address:
Ronald M. Katzman
Goldberg, Katzman & Shipman, P.C.
P.O. Box 1268
Harrisburg, PA 17108
3. I will notify all parties in writing within 1:1IiO days that this case has
been listed for argurent.
4. Argunent Court Date:
May 23, 2001
Dated: J 'dB -0 {
~~
Attorney for
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WILLIAM FREEMAN, individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
v.
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
AND NOW, this
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
NO. 2000 -8862
IN EQUITY
ORDER
day of
2001, upon consideration of the Defendants' Preliminary Objections to the Plaintiffs'
Amended Complaint, it is hereby ORDERED that the Preliminary Objections are
SUSTAINED and the Plaintiffs' Amended Complaint is dismissed.
BY THE COURT:
J.
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WILLIAM FREEMAN, individually arid
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
NO. 2000 -8862
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ;
CARL A. HOFFMAN, JOSEPH M.
HUMMER SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
NOTICE TO PLEAD
TO: William Freeman and Pennsylvania State Bank, Plaintiffs
c/o John R. Fenstermacher, Esquire
5115 East Trindle Road
Mechanicsburg, PA 17050
You are hereby notified to plead to the Defendants' Preliminary Objectio~s within
twenty (20) days from servic~; hereof or judgment may be entered against you.
By:
Respectfully submitted,
Goldberg, Katzman and Shipman, P.C.
L~rW~ ~
Ronald M. Katzman, quire
Attorney I.D. #07198
320 Market Street
P. O. Box 1268
Harrisburg, PA 17108-1268
(717) 234-4161
Attorneys for Defendants
Date:
3/ j.,7 /(!)I
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GOLDBERG, KATZMAN "SHIPMAN, P.C.
Ronald M. Katzman, Esquire - 1.0. #07198
Attorneys for Defendants
320 Market Street
Strawberry Square
P. O. Box 1268
Harrisburg, PA 17108-1268
Telephone: (717) 234-4161
Fax: (717) 234-6808
WILLIAM FREEMAN, individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
NO. 2000 -8862
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PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
Rla~JMJNJ'RIQI;JicTJQN$rnQM\tfiNQiQ~Me~.iNT;
AND NOW, come defendants by their counsel, Goldberg, Katzman & Shipman,
P.c., who file the following preliminary objections in response to the Amended
Complaint filed by plaintiffs to the above term and number:
1. RULE l02S(a)(2)
The Amended Complaint fails to conform to law or rule of court in the following
particulars.
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A. Plaintiff William V. Freeman lacks standing to bring this action because
he is not competent to fairly and adequately represent the interests of
the shareholders due to the fact that he is using the suit for personal
gain, including as leverage a claim against defendant 6ank as averred in
paragraphs 20 and 21 of the Amended Complaint, and as explicitly
threatened in the last paragraph of Exhibit "6" to the Amended Complaint
(January 19, 2001 letter from Plaintiff's counsel to the undersigned,
threatening the filing of the derivative action if Plaintiff's demands in his
personal litigation were not met). Thus, he is acting in violation of Pa.
R.C.P. No. 1506(c), and in violation of a rule of law as set forth in
Recchion. Westinahouse Electric Corp. v. Kirbv, 637 F.5upp. 1309 (W.D.
Pa. 1986);
6. Plaintiff lacks the capacity to sue because he has instituted this action
with unclean hands, due to the fact that he participated in and approved
the matters averred in paragraphs 32, 38, and 50 and he also received
monies as averred in paragraphs 22-24 which he admits he was not
entitled to retain. Thus, he is acting in violation of Pa. R.C.P. No.
1506(c).
C. Plaintiff has failed to comply with Section 7.03(d) of the American Law
Institute Principles of Corporate Governance, which has been
2
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incorporated into the Jaw of Pennsylvania through the Supreme Court
holding of Cuker v. Mikalauskas, 692 A.2d 1042 (1997). The Plaintiff
brought suit by filing a writ of summons on December 29, 2000, before
making a written demand under date of January 22, 2001, as alleged in
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Plaintiff has failed to comply with Section 7.03(d) of the American Law
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Institute Principles of Corporate Governance, which has been
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incorporated into the law of Pennsylvania through the Supreme Court
holding of Cukerv. Mikalauskas, 692 A.2d 1042 (1997). The Plaintiff filed
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his original complaint on February 6,2001, only 15 days after serving the
written demand on the Directors under date of January 22, 2001, which
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by law did not afford the Board of Directors a reasonable opportunity to
respond to the demands;
WHEREFORE, the Defendants respectfully request that this Honorable Court
Sustain their Preliminary Objections and dismiss the Plaintiffs' Amended Complaint.
II. THE AMENDED COMPLAINT IS INSUFFICIENTLY SPECIFIC AND
VIOLATES RULE 102S(a)(3) IN THE FOLLOWING PARTICULARS
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A. In paragraphs 26-37 the Plaintiff has made averments concerning not
only his stock options, but also those of directors; he has failed to allege
with sufficient particularity the nature of the directors' options that were
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allegedly overstated, including the number of stock options, and their
origin.
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dates thereof and the reason for his not being entitled thereto;
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B.
In paragraph 38, plaintiff has failed to identify the "at least one occasion"
that options were provided to Nickson Oyer, the number of options, the
,]
c.
In paragraph 39, plaintiff has failed to allege with sufficient particularity
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what liability and expense the bank is allegedly opening itself up to.
D.
In paragraph 46, plaintiff has failed to aver with sufficient particularity
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what, if any, "substantial negative publicity" has occurred, when it
occurred, the nature thereof, and any causal relationship between the
publicity and any loss or damage;
E. In paragraph 50, plaintiff has failed to allege dates when the employment
of contractors and/or subcontractors occurred, the costs, the names of
contractors, and sufficient information to identify the specific projects
involved;
4
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F. In paragraph 51, the plaintiff has failed to specifically allege when the
various breaches of fiduciary duty occurred.
WHEREFORE, the Defendants request that an Order be entered requiring the
Plaintiffs to amend the Complaint to plead with more specificity those matters alleged
in paragraphs 26-39, 46, and 50-51, so that an Answer can be provided.
III. VIOLATION OF 1028(a)(4)
A. The averments of the Amended Complaint are legally insufficient in that
plaintiff has failed to allege that an appropriate demand, with a
reasonable time to respond, had been made upon the defendants as set
forth in Section I above.
B. As averred in paragraph 45, Freeman is entitled to certain entitlements
subsequent to any termination of employment no matter how and when
it occurred, and defendant Bank would be legally required to pay those
entitlements while also paying replacement personnel; therefore, the
Amended Complaint is legally insufficient in claiming damages as alleged
in paragraphs 48 and 52(f).
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C. The averments of paragraph 50 are legally insufficient, in that the plaintiff
has failed to allege that any harm or loss occurred as a result of the
actions averred;
WHEREFORE, the Defendants respectfully request that this Honorable Court
sustain their Preliminary Objections and dismiss the Plaintiffs' Amended Complaint.
IV. VIOLATION OF 102S(alCS)
A. Plaintiff William Freeman lacks capacity to sue and the averments of
Section I above are incorporated by reference.
B. Plaintiff lacks the capacity to sue because he has instituted this action
with unclean hands, due to the fact that he participated in and approved
the matters averred in paragraphs 32, 38, and 50 and he also received
monies as averred in paragraphs 22-24 which he admits he was not
entitled to retain.
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WHEREFORE, the Defendants respectfully request that this Honorable Court
sustain their Preliminary Objections and dismiss the Plaintiffs' Amended Complaint.
Respectfully submitted,
Goldberg, Katzman and Shipman, P.C.
By:
~Ah,~
Ronald M. Katzman, uire
Attorney 1.D. #07198
320 Market Street
P. O. Box 1268
Harrisburg, PA 17108-1268
(717) 234-4161
Attorneys for Defendants
Date: March 27, 2001
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VERIFICATION
I, John B. Lampi, a Director of Pennsylvania State Bank and one of the
Defendants herein, hereby acknowledge that I am an authorized agent of the
Defendants in this action; that I have read the foregoing Preliminary Objections; and
that the facts and statements made therein are true and correct to the best of my
knowledge, information and belief. I understand that false statements therein are
made subject to the penalties of 18 Pa.C.S. 9 4904, relating to unsworn falsification
to authorities.
/1a}-( h :71/00/
Dated:
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I served a true and correct copy of the foregoing
document upon all parties or counsel of record by depositing a copy of same in the
United States Mail at Harrisburg, Pennsylvania, with first-class postage prepaid,
addressed to the following:
William Freeman and Pennsylvania State Bank
c/o John R. Fenstermacher, Esquire
5115 East Trindle Road
Mechanicsburg, PA 17050
Respectfully submitted,
Goldberg, Katzman and Shipman, P.C.
By:
L~$
Ro'nald M. Katzman, E uire
Attorney l.D. #07198
320 Market Street
P. O. Box 1268
Harrisburg, PA 17108-1268
(717) 234-4161
Attorneys for Defendants
Date: March 27, 2001
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WILLIAM FREEMAN, individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
NO. 2000 -8862
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
ORDER
AND NOW, this
day of
2001, upon consideration of the Defendants' Preliminary Objections to the Plaintiffs'
Amended Complaint, it is hereby ORDERED that the Preliminary Objections are
SUSTAINED and the Plaintiffs' Amended Complaint is dismissed.
BY THE COURT:
J.
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WILLIAM FREEMAN, individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
NO. 2000 -8862
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
ORDER
AND NOW, this
day of
2001, upon consideration of the Defendants' Preliminary Objections to the Plaintiffs'
Amended Complaint, it is hereby ORDERED that the Preliminary Objections are
SUSTAINED and the Plaintiffs' Amended Complaint is dismissed.
BY THE COURT:
J.
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WILLIAM FREEMAN, individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
NO. 2000 -8862
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
ORDER
AND NOW, this
day of
2001, upon consideration of the Defendants' Preliminary Objections to the Plaintiffs'
Amended Complaint, it is hereby ORDERED that the Preliminary Objections are
SUSTAINED and the Plaintiffs' Amended Complaint is dismissed.
BY THE COURT:
J.
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WILLIAM FREEMAN! individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK! and
PENNSYLVANIA STATE BANK!
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY! PENNSYLVANIA
v.
NO. 2000 -8862
PENNSYLVANIA STATE BANK!
WILLIAM E. MILLER! JR.! PATRICIA
ANASTASIO! ROBERT J. DIETZ!
CARL A. HOFFMAN! JOSEPH M.
HUMMER SR.! JOHN 8. LAMPI,
MARION G. MOLINARI! JOHN A.
OBROCK, RICHARD J. PATTERSON!
and WILLIAM J. SPONAUGLE!
Defendants
IN EQUITY
ORDER
AND NOW, this
day of
2000, upon consideration of the Defendants' Preliminary Objections to the Plaintiffs'
Complaint! it is hereby ORDERED that the Preliminary Objections are SUSTAINED
and the Plaintiffs' Complaint is dismissed.
BY THE COURT:
J.
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WILLIAM FREEMAN, individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
,
v.
NO. 2000 -8862
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
NOTICE TO PLEAD
TO: William Freeman and Pennsyivania State Bank, Plaintiffs
c/o John R. Fenstermacher, Esquire
5115 East Trindle Road
Mechanicsburg, PA 17050
You are hereby notified to piead to the Defendants' Preliminary Objections within
twenty (20) days from service hereof or judgment may be entered against you.
Respectfully submitted,
Goldberg, Katzman and Shipman, P.C.
By: L~~
Ronald M. Katzman, Es Ire
Attorney I.D. #07198
320 Market Street
P. O. Box 1268
Harrisburg, PA 17108-1268
(717) 234-4161
Attorneys for Defendants
Date: )" Ii,. -0/
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GOLDBERG, KATZMAN 8< SHIPMAN, P.C.
Ronald M. Katzman, Esquire - J.D. #07198
Attorneys for Defendants
320 Market Street
Strawberry Square
P. O. Box 1268
Harrisburg, PA 17108-1268
Telephone: (717) 234-4161
Fax: (717) 234-6808
WILLIAM FREEMAN, individually and
on behalf of the Shareholders of
PENNSYLVANIA STATE BANK, and
PENNSYLVANIA STATE BANK,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v.
NO. 2000 -8862
PENNSYLVANIA STATE BANK,
WILLIAM E.MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARL A. HOFFMAN, JOSEPH M.
HUMMER SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON,
and WILLIAM J. SPONAUGLE,
Defendants
IN EQUITY
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AND NOW, come defendants by their counsel, Goldberg, Katzman & Shipman,
P.C., who file the following preliminary objections in response to the complaint filed by
plaintiffs to the above term and number:
1. RULE 1028(a)(2)
The complaint fails to conform to law or rule of court in the following particulars.
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A. Plaintiff William V. Freeman lacks standing to bring this action because he
is not competent to fairly and adequately represent the interests of the
shareholders due to the fact that he is using the suit for personal gain,
including as leverage a claim against defendant Bank as averred in
paragraphs 21 and 22 of the complaint, and thus is acting in violation of
Pa. R.C.P. No. 1506(c);
B. Plaintiff has failed to comply with Pa. R.C.P. No. 1506(a)(2) and also with
Section 7.03(b) of the American Law Institute Principles of Corporate
Governance which has been incorporated into the law of Pennsylvania
through the Supreme Court holding of Cuker v. Mikalauskas, 692 A.2d
1042 (1997) by failing to aver with sufficient detail efforts made to secure
enforcement of his claims by the corporation
C. The complaint fails to set forth in separate counts as required by Pa.
R.C.P. No. 1020(a) claims for derivative shareholders action, direct
damage to shareholders, and claim by Freeman personally.
D. To the extent that the complaint seeks a remedy for the shareholders or
for Freeman for harm that occurred to the corporation, the complaint is
in violation of the rule that where an alleged wrong is primarily against a
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corporation, such injury is insufficient to give rise to a direct cause of
action by a shareholder. Burdon v, Erskine, 264 Pa. Super. 584, 401
A.2d 369 (1979).
E. To the extent the complaint attempts to act on behalf of all shareholders
as a class, the complaint fails to comply with Pa. R.C.P. No. 1703(a), in
that it was commenced by filing a writ instead of a complaint.
WHEREFORE, the Defendants respectfully request that this Honorable Court
sustain their Preliminary Objections and dismiss the Plaintiffs' complaint.
II. THE COMPLAINT IS INSUFFICIENTLY SPECIFIC AND VIOLATES RULE
102S(a)(3) IN THE FOLLOWING PARTICULARS
A. In paragraphs 15 and 16, plaintiff has failed to aver with the required
particularity the nature of the demand, when it was made, and what
response was made by the Board of Directors;
B. In paragraph 17, Plaintiff has failed to aver with the required particularity
what "irreparable harm" may occur;
3
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C. In paragraph 21, Plaintiff has failed to aver with the required particularity
what amounts the Bank has allegedly failed and refused to pay, and that
are allegedly owed under the Executive Employment Agreement;
D. Plaintiff has failed to aver in paragraph 22 the nature of the legal
proceedings instituted.
E. Plaintiff has failed to aver in paragraphs 26-36 the number of stock
options involved, their origin, and those which have been provided to the
Board of Directors as well as those which have been provided to plaintiff
Freeman;
F.
In paragraphs 31 through 35, Plaintiff has failed to identify with sufficient
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particularity the annual statements, proxy statements, and year-end
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audits to which the Complaint refers;
G. In paragraph 37, plaintiff has failed to identify the "at least one occasion",
to whom options were provided, and the dates thereof and the reason for
not being entitled thereto;
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H. In paragraph 38, plaintiff has failed to allege with sufficient particularity
what liability and expense the bank is allegedly opening itself up to.
1. In paragraph 45, plaintiff has failed to aver with sufficient particularity
what, if any, "substantial negative publicity" has occurred, when it
occurred, the nature thereof, and any causal relationship between the
publicity and any loss or damage;
J. In paragraph 49, plaintiff has failed to allege dates when the employment
of contractors and/or subcontractors occurred, the costs, the names of
contractors, and the specific projects involved;
K. In paragraph 50, the plaintiff has failed to specifically allege when the
various breaches of fiduciary duty occurred;
L. To the extent the complaint attempts to act on behalf of all shareholders
as a class, the complaint fails to comply with Pa. R.C.P. No. 1703(a), in
that it was commenced by filing a writ instead of a complaint, and also
fails to comply with Pa. R.C.P. No. 1704.
5
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WHEREFORE, the Defendants request that an Order be entered requiring the
Plaintiffs to amend the Complaint to plead with more specificity those matters alleged
in paragraphs 15-17, 21-22, 26-36, 31-35, 37-38,45, and 49-50, and, to the extent
that the complaint attempts to act on behalf of all shareholders as a class, properly
plead class action allegations as required by Pa. R.C.P. 1704, so that an Answer can
be provided.
III. VIOLATION OF 1028(a)(4)
A. The averments ofthe complaint are legally insufficient in that plaintiff has
failed to allege that an appropriate demand had been made upon the
defendants as set forth in Section I above.
B. As averred in paragraph 44, Freeman is entitled to certain entitlements
subsequent to any termination of employment no matter how and when
it occurred, and defendant Bank would be legally required to pay those
entitlements while also paying replacement personnel; therefore, the
complaint is legally insufficient in claiming damages as alleged in
paragraphs 47 and 51(f).
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sought remedies for himself and individual shareholders for harm that
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The averments of the complaint are legally insufficient in that plaintiff has
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allegedly occurred to the defendant Bank, as set forth in Section 1.
WHEREFORE, the Defendants respectfuliy request that this Honorable Court
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sustain their Preliminary Objections and dismiss the Plaintiffs' complaint.
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IV. VIOLATION OF 1028(a)(S)
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Plaintiff William Freeman lacks capacity to sue and the averments of
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Section I paragraph above are incorporated by reference.
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There is a misjoinder of causes of action in that plaintiff has combined a
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behalf of the corporation, and with a personal claim for damages on his
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behalf alone. Plaintiff thereby has violated Pa. R.C.P. 1508.
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C. Plaintiff lacks the capacity to sue because he has instituted this action
with unclean hands, due to the fact that he participated in and approved
the matters averred in paragraphs 37, 45, 48 and 49 and he also
received monies as averred in paragraphs 23-25 which he admits he was
not entitled to retain.
WHEREFORE, the Defendants respectfully request that this Honorable Court
sustain their Preliminary Objections and dismiss the Plaintiffs' complaint.
Respectfully submitted,
By:
Ronald M. Katzman,
Attorney 1.D. #07198
320 Market Street
P. O. Box 1268
Harrisburg, PA 17108-1268
(717) 234-4161
Attorneys for Defendants
Date: ;<,/(;, -OJ
58993,1
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VERIFICATION
I, John B. Lampi, a Director of Pennsylvania State Bank and one of the
Defendants herein, hereby acknowledge that I am an authorized agent of the
Defendants in this action; that I have read the foregoing Preliminary Objections; and
that the facts and statements made therein are true and correct to the best of my
knowledge, information and belief. I understand that false statements therein are
made subject to the penalties of 18 Pa.C.S. g 4904, relating to unsworn falsification
to authorities.
d .c;;j/'0CCOY /t6 ,;jJc?O /
Date : / I,
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CERTIFICATE OF SERVICE
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I HEREBY CERTIFY that I served a true and correct copy of the foregoing
document upon all parties or counsel of record by depositing a copy of same in the
United States Mail at Harrisburg, Pennsyivania, with first-class postage prepaid,
addressed to the following:
William Freeman and Pennsylvania State Bank
c/o John R. Fenstermacher, Esquire
5115 East Trindle Road
Mechanicsburg, PA 17050
Respectfully submitted,
Goldberg, Katzman and Shipman, P.C.
By:
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Ron~ld M. Katzman, E uire
Attorney 1.D. #07198
320 Market Street
P. O. Box 1268
Harrisburg, PA 17108-1268
(717) 234-4161
Attorneys for Defendants
Date: February 16, 2001
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WILLIAM FREEMAN, ON BEHALF : IN THE COURT OF COMMON PLEAS OF
OF THE SHAREHOLDERS OF : CUMBERLAND COUNTY, PENNSYLVANIA
PENNSYLVANIA STATE BANK,
AND PENNSYLVANIA STATE BANK,
PLAINTIFF
V.
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARLA A. HOFFMAN, JOSEPH M.
HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON
AND WILLIAM J. SPONAUGLE,
DEFENDANTS : 00-8862 EQUITY
IN RE: PRELIMINARY OBJECTIONS OF DEFENDANTS
TO PLAINTIFF'S COMPLAINT
BEFORE BAYLEY. J. AND HESS. J.
ORDER OF COURT
AND NOW, this
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day of May, 2001, the within suit, IS DISMISSED.
Mark K. Emery, Esquire
F or Plaintiff
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Ronald M. Katzman, Esquire
For Defendants
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WILLIAM FREEMAN, ON BEHALF
OF THE SHAREHOLDERS OF
PENNSYLVANIA STATE BANK,
AND PENNSYLVANIA STATE BANK,
PLAINTIFF
: IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
V.
PENNSYLVANIA STATE BANK,
WILLIAM E. MILLER, JR., PATRICIA
ANASTASIO, ROBERT J. DIETZ,
CARLA A HOFFMAN, JOSEPH M.
HUMMER, SR., JOHN B. LAMPI,
MARION G. MOLINARI, JOHN A.
OBROCK, RICHARD J. PATTERSON
AND WILLIAM J. SPONAUGLE,
DEFENDANTS : 00-8862 EQUITY
IN RE: PRELIMINARY OBJECTIONS OF DEFENDANTS
TO PLAINTIFF'S COMPLAINT
BEFORE BAYLEY. J. AND HESS. J.
OPINION AND ORDER OF COURT
Bayley, J., May 31, 2001:--
Plaintiff, William Freeman, was president and CEO of defendant, Pennsylvania
State Bank. The Bank terminated his employment on July 19, 2000. Plaintiff continues
to own a significant amount of the stock of the Bank. He commenced this stockholder's
derivative action against the Bank, its officers and the members of its board of directors,
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00-8862 EQUITY
by having a writ of summons issued on December 29,2000. On January 22, 2001, he
made a written demand to the Bank to secure the enforcement of secondary rights. He
filed a complaint on February 6, 2001, and an amended complaint on March 8, 2001.
Defendants filed preliminary objections to the amended complaint which have been
briefed and argued. One of the objections is that the amended complaint must be
dismissed for lack of standing because plaintiff did not make a written demand upon the
board of directors of the Bank to prosecute the action or take the corrective measures
he seeks before this suit was commenced.
In Cuker v. Mikalauskas, 692 A.2d 1042 (Pa. 1997), the Supreme Court of
Pennsylvania adopted the American Law Institute Principles of Corporate Governance.
Those principles require a shareholder to exhaust intracorporate remedies before filing
a stockholder's derivative action. Id. As set forth in Drain v. Covenant Life Insurance
Company, 712 A.2d 273 (Pa. 1998), a shareholder must make a written demand upon
the board of directors of the corporation requesting that it prosecute the action or take
corrective measures. "Demand on the board is excused only if the shareholder shows
that irreparable injury to the corporation would otherwise result, and then demand must
be made promptly after commencement of the action." Id. "If irreparable injury would
not result, the court should dismiss a derivative action that is commenced before the
response of the board to a demand unless the board does not respond within a
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reasonable time". Id.'
Pa. Rule of Civil Procedure 1007 provides:
An action may be commenced by filing with the prothonotary
(1) a praecipe for a writ of summons, or
(2) a complaint. (Emphasis added.)
In his amended complaint, plaintiff avers that he made a written demand to the
board of directors of Pennsylvania State Bank on January 22, 2001. This was after he
commenced this suit by having a writ of summons issued on December 29, 2000.
Plaintiff has not alleged irreparable harm in his amended complaint as an excuse for
failing to make a written demand on the board before he commenced suit. Citing Pa.
Rule of Civil Procedure 126, he argues in his brief that because a sufficient amount of
time passed since he instituted suit for defendants to have taken the corrective action
he seeks, dismissing this action would amount to "[t]he most technical application of the
demand requirement, the application of which would not lead to a 'just, speedy and
, Pa. Rule of Civil Procedure 1506 relating to stockholder's derivative actions provides:
(a) In an action to enforce a secondary right brought by one or
more stockholders or members of a corporation or similar entity because
the corporation or entity refuses or fails to enforce rights which could be
asserted by it, the complaint shall set forth: . . .
(2) the efforts made to secure enforcement by the corporation
or similar entity or the reason for not making any such efforts . . .
(Emphasis added.)
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inexpensive determination' of the action."2
Notwithstanding Rule 126, when the Supreme Court of Pennsylvania in Drain v.
Covenant Life Insurance Company, supra, states that "If irreparable injury would not
result, the court should dismiss a derivative action that is commenced before the
response of the board to a demand unless the board does not respond within a
reasonable time," we are not at liberty to disregard that requirement by treating it as a
technicality. Accordingly, the following order is entered.'
AND NOW, this
ORDER OF COURT
1 h'r'"" day of May, 2001, the within suit, IS DISMISSED.
Edgar B. Bayley, J.
.;
Mark K. Emery, Esquire
For Plaintiff
Ronald M. Katzman, Esquire
For Defendants
:saa
2 Pa. Rule of Civil Procedure 126 provides: "The rules shall be liberally construed to
secure the just, speedy and inexpensive determination of every action or proceeding to
which they are applicable. The court at every stage of such action or proceeding may
disregard any error or defect of procedure which does not affect the substantial rights of
the parties."
, This disposition makes it unnecessary to review the other issues raised in defendant's
preliminary objections to plaintiffs amended complaint.
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