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HomeMy WebLinkAbout03-5160RHOADS & SINON LLP, Plaintiff COMMUNITY FINANCIAL, INC. and COMMUNITY TRUST COMPANY, Defendants IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW No. 03- JURY TRIAL DEMANDED NOTICE YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claim 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 YOU CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. LAWYER REFERRAL SERVICE Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 (717) 249-3199 Michael W. Winfield, Esquire Attorney I.D. No. 72680 RHOADS & S1NON LLP One South Market Square, 12th Floor P.O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff RHOADS & SINON LLP, Plaintiff COMMUNITY FINANCIAL, INC. and COMMUNITY TRUST COMPANY, Defendants IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW No. JURY TRIAL DEMANDED COMPLAINT NOW COMES Plaintiff, Rhoads & Sinon LLP, on its own behalf, and files this Complaint against Defendants, Community Trust Company and Community Financial, Inc., alleging the following: 1. Rhoads & Sinon LLP ("R&S") is a limited liability partnership organized and existing under the laws of the Commonwealth of Pennsylvania, with a principal place of business located at 1 South Market Square, Harrisburg, Dauphin County, PA 17101. 2. Defendants Community Trust Company and Community Financial, Inc. (collectively referred to as "Community"), are both corporations organized and existing under the laws of the Commonwealth of Pennsylvania, and both having a principal place of business located at 3907 Market Street, Camp Hill, Cumberland County, Pennsylvania 17011. 486392.1 3. On January 3, 2003, Community's Board of Directors unanimously voted to retain R&S to provide legal services to Community regarding various issues that Community had with the Pennsylvania Department of Banking. 4. R&S's representation of Community commenced on January 3, 2003, with R&S representing Cornn~unity at a meeting with the Pennsylvania Department of Banking. 5. On January 7, 2003, R&S provided Community with a formal retention letter describing the terms of the representation. 6. On January 8, 2003, Community executed the retention letter and returned same to R&S. A true and correct copy of the fully executed retention letter is attached hereto as Exhibit "A" and incorporated by reference. 7. Beginning on January 3, 2003 and extending through January 13, 2003, R&S provided 66 hours of legal services to Community, at Community's ~equest, amounting to $16,066.25 in legal fees, and $41.10 in expenses. 8. On January 13, 2003, at a meeting of the Board of Directors of Community, R&S hand delivered a statement for services rendered for the amount set forth in paragraph 7 above, Statement to Community, along with a request that payment be made. A true and correct copy of the statement for services is not attached, but is in the possession of both parties. 9. Notwithstanding the above, Community failed to remit payment in any amount to R&S for any of the services it provided to Comanunity. -2- 10. R&S issued demand letters on April 21, 2003, July 15, 2003 and August 19, 2003 to Community, demanding that payment be made for all amounts due and owing to R&S for services provided. True and correct copies of said letters are attached hereto collectively as Exhibit "B" and incorporated by reference. 11. Notwithstanding the above, Community has failed and/or otherwise refused to remit payment in any amount to R&S for any of the services provided to Community. COUNT I Breach of Contract 12. reference. The averments of paragraphs 1 through 11 are incorporated herein by 13. Community and R&S entered into an agreement, the terms of which are codified in R&S's engagement letter attached hereto as Exhibit "A". 14. R&S provided legal services as requested by Community in accordance with the parties' agreement. 15. Contrary to the requirements of the parties' agreement, Community failed to remit a retainer and otherwise failed to pay R&S for any and all legal services R&S provided to Community during the course of R&S's representation of Community. 16. Community's failure to remit payment constitutes a material breach of contract for which Community is liable to R&S for the full amount of services provided -3- as set forth in R&S's Statement attached hereto as Exhibit "B", along with prejudgment interest at the statutory rate. WHEREFORE, Rhoads & Sinon LLP respectfully requests that judgment be entered in its favor, and against Defendants Community Trust Company and Community Financial, Inc., jointly and severally, in the amount of $16,107.35, along with prejudgment interest and such other relief as this Court deems appropriate. COUNT II (In The Alternative) Quantum MernitFLlniust Enrichment 17. reference. The averments of paragraphs 1 through 16 are incorporated herein by 18. At all times relevant hereto, Community requested that R&S provide legal services to it with the expectation of compensating R&S for the services provided at R&S's standard rates. 19. R&S provided services to Community, at Community's request, between January 3 and 13, 2003, thereby conferring a benefit upon Community, for which, at all times relevant hereto, R&S expected to receive payment. 20. The reasonable value of the services provided by R&S to Community is $16,107.35. 21. Defendants have been unjustly enriched by receiving the benefits of the services provided without paying for same. -4- 22. R&S is entitled to the reasonable value of the services it provided to Community at Community's request, as set forth in its Statement attached hereto, and otherwise set forth above. WHEREFORE, Rhoads & Sinon LLP respectfully requests that judgment be entered in its favor, and against Defendants Community Trust Company and Community Financial, Inc., jointly and severally, in the amount of $16,107.35, along with prejudgment interest and such other relief as this Court deen~ a~propriate. By: Michac~ W. Winfield ~ One Sot~th Market Square P. O. BoX 1146 . Harrisburg, PA 17108-1 (717) 233-5731 -5- VERIFICATION Drake D. Nicholas, deposes and says, subject to the penalties of 18 Pa. C.S. §4904 relating to unswom falsification to authorities, that he is a Managing Partner ofRhoads & Sinon LLP, that he makes this verification by its authority, and that the facts set forth in the Complaint are tree and correct to the best of ~ge, icfa~ati lief. Date: ~/O~'/O.Tt ~~j~~~ie ROBERT H. LONG IR. SHER LL T. MOYER 3AN P, PADEN RICHARD B, WOOD DEAN F. PIERMA EI KENNETH L. 3DELT~ DEBRA M, KRIETE TODD 3. SHILL DAVID M. BARASCH THOMAS 3. NEH[LLA ALSO ADM[~'ED TO THE OISTR[CT OF COLU N 8lA BAR ALSO ADM£TTI~O TO THE FLORIDA BAR Re: ATTORNEYS AT LAW TWELFTH FLOOR ONE SOUTH MARKET SQUARE P.O. BOX 1146 HARRISBURG, PA 17108-1146 TELEPHONE (717) 233-5731 FAX (717) 231 ~69'i E M A I L dnicholas~rhoad$-sinon.corn W E B S I T E: www.rhoads-sinon.com January7, 2003 Community Financial, Inc., Community Trust Company ("Community") OFCOUNSEL HENRY W. RHOAD$ RETIRED FRANK A. SlNON JOHN C. DOWLING PAUL H. RHOADS DIRECT DIAL NO, (717) 231-6622 FILE NO. 8332/02 Kerry L. McLaughlin, President & Chief Executive Officer COMMUNITY TRUST COMPANY 3907 Market Street Camp Hill, PA 17011 Dear Kerry: On January 3, 2002, the Executive Committee of Community voted unanimously to engage our services to represent Community with respect to various ongoing matters. Pursuant to the requirements of the Rules of Professional Conduct for attorneys practicing in the Commonwealth of Pennsylvania, this letter describes the basis on which our Firm will provide legal services to Community and bill for those services. As you are aware, Community is currently dealing with various significant issues, some of which have been brought to light pursuant to an ongoing examination by the Department of Banking. As a result of the complexity of the situation at hand, as we indicated to you last week, we will require a retainer at the outset of our representation. The retainer which we request is in the amount of $75,000.00. Community will receive a monthly statement for services rendered. In determining fees, the major factor is usually time expended. We assign hourly rates for each member of our legal staff based on years of experience, specialization, and level of professional attainment. At present, the rates per hour range from $130 to $200.00 per hour for associate attorneys and $190.00 to $260.00 per hour for partners. We will also charge for the services rendered by our law clerks and paralegals whose hourly rates are $100.00 per hour for law clerks and $80.00 to $110.00 per hour for paralegals. These hourly rates will prevail until December 31, 2003, at which time the rates will be reviewed and may be subject to adjustment. We intend to avoid duplication of work and will assign projects to personnel who can accomplish the work efficiently and professionally. 456490.1 YORK; AFFILIATED OFFICE: LANCASTER: January 7, 2003 Page 2 Our statements will reflect a credit for services rendered against the mount of the balance of the retainer. We reserve the right to require an additional retainer of $25,000.00 if the amount billed agmnst the retainer should at any time reach a balance of $5,000.00. In addition to our fees, our statements for services rendered will include charges for disbursements, including photocopying, travel (transportation, lodging and meals), computerized legal research, filing fees, transcripts, postage, messenger and courier services, long-distance telephone charges, etc. We have procedures designed to avoid acceptance of assignments that would create a conflict of interest. We have reviewed our records and have discovered no conflicts arising out of our representation of Community Trust Company and Community Financial, Inc. in this matter. We reserve the right to terminate our attorney-client relationship for non-payment of fees or costs. If this arrangement meets with your approval, please sign below and return this letter along with the requested retainer to my attention. We have enclosed a copy of this letter for your records. DDN/cjw yours, ACCEPTED BY COMMUNITY TRUST COMPANY I~RI~ L~i~eLAUGHLIN, Director, President & CEO and Member of the Memorandum of Understanding Compliance Committee ACCEPTED BY COMMUNITY FINANCIAL, INC. This~;~ day of .~:?t~,w~.~ ,2003 ~CB G, ~O~g~, ~ire~tor and Member of the Memorandum of Understanding Co~plianc~ Committee DEAN F, PIERMATTE[ KENNETH L, 3OEL~ DEBRA M. KRIETE ATT~)RNEYS AT LAW TWELFTH FLOOR ONE SOUTH MARKET SQUARE P.O. BOX 1146 HARRISBURG, PA 17108-1146 TELEPHONE (717) 233-5731 FAX (717) 231-6694 E H A I L dnicholas@rhoads-sinon.com W E B S I T E; www.rhoads-sinon.com April 21, 2003 Re: Community Trust Company OFCOUNSEL HENRY W. RHOAD$ RETIRED FRANK A. $INON (717) 231-6622 8332/02 Lowell R. Gates, Esquire Gates & Associates PC 1013 Mm;ama Road, Suite 100 Lemoyne, PA 17043-1144 Dear Lowell: As you are aware, there is an outstanding invoice due from Community Trust Company to Rhoads & Sinon LLP in the amount of $16,107.35. On several occasions, we have been asked to clarify or further detail items on our statement and have promptly provided such information. I will again point out that this invoice includes only time devoted on behalf of Community Trust Company fi'om the date we were retained by a vote of your Board of Directors up t~ough the special Board meeting at Community Trust Company on tl~e evening of January 13, 2003. Suffice it to say that we believe we have provided more than adequate time for Community Trust Company to satisfy our invoice. We, therefore, expect irmuediate payment of this invoice. DDN/jle cc: Charles J. Ferry, Esquire 20ANNE BOOK D~RIST~NE Re: ATTORNEYS AT LAW TWELFTH FLOOR ONE SOUTH MARKET SQUARE P.O, BOX 1146 HARRISBURG, PA 17108-1146 TELEPHONE (717) 233-5731 FAX: (717) 231-6637 EMAIL: rnwinfieJd@rhoads-sinon.com W E B S I T E: www.rhoads-s~non.corn July 15, 2003 Community Financial, Inc./Community Trust Company OFCOUNSEL HENRY W. RHOADS RETIRED JOHN C. DOWLING PAUL H. RHOADS t907'1984 DIRECT DIAL NO. (717) 237-6703 FILE NO. 6300/10 Lowell Gates, Esquire Gates Lowell & Associates, P.C. 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 VIA FAX #731-9627 and U.S. Mail Dear Mr. Gates: This letter is being sent to you in your capacity as General Counsel to Community Financial, hac. and Community Trust Company (collectively referred to as "the Companies"). This firm was retained by the Companies to provide services in conjunction with issues relative to the Pennsylvania Department of Banking. Those services were provided and the Companies were properly invoiced in the amount of $16,107.35. To date, no payments have been received by this firm for the services provided and properly invoiced. A copy of the unpaid invoice with a description of the services provided is enclosed for your convenience. Repeated attempts have been made to obtain payment for the above-referenced services to no avail. Please be advised that if we do not receive payment within I0 days of the date of this letter, we will commence an action before a court of competent jurisdiction in order to collect all amotmts due and owing without further notice. If you wish to discuss this matter, please do not hesitate to contact me. Very truly y~,~., Enclosure cc: Charles J. Ferry, Esquire Drake D. Nicholas, Esquire MWW/lgr Mich~ W. Winfield BRUCE WALTSR RHOAD~ & ~I~0~ LLP ATTORNEYS AT LAW TWELFTH FLOOR ONE SOUTH HARKET SQUARE P.O, BOX 1146 HARRISBURG, PA 17108-1146 TELEPHONE (717) 233-5731 FAX: (717) 231-6637 EMAIL: mwinfield~rhoads-sinon.com W E B S ! T E: www. rhoads-sinon.com August 19, 2003 OFCOUN$1~L HENRY W. RHOADS PAULH. RHOAD$ FRANK A. SiNON. DIRECT DIAL NO. (717) 237-6703 6300/10 Re: Community Financial, Inc./Community Trust Company Susan A. Russell, Acting President and CEO Community Trust Company 3907 Market Street Camp Hill, PA 17011 Dear Ms. Russell: * Please allow this to confirm receipt of your letter dated August 12, 2003 regarding outstanding legal fees to this firm for services provided to Community Trust Company and Community Financial, lac. during January of this year. Per your request, I am enclosing a copy of the Fee Agreement letter executed by representatives of both companies. I am also including copies of correspondence to Community. Trust Company on January 27, 2003 and correspondence dated April 21, 2003 to Mr. Gates regarding the unpaid invoice at issue. Please be advised that this invoice has been outstanding for some time, and your company has 'had ample opportunities to review the items and receive clarification. Indeed, this firm has provided clarification of our invoice to your company in the past. Please be advised that in the event that our invoice is not paid in full, within 10 days from the date of this letter, we will file an appropriate action before an appropriate court to collect all sums due and owing. Enclosures Very truly yours, 484127.1 YORK: AFFILIATED OFFICE: LANCASTER: '--~ SHERIFF'S RETURN - REGULAR CASE NO: 2003-05160 P COMMONWEALTH OF PENNSYLVANIA: COUNTY OF CUMBERLAND RHOADS & SINON LLP VS COMMUNITY FINANCIAL INC ET AL CPL. MICHAEL BARRICK , Cumberland County,Pennsylvania, says, the within COMPLAINT & NOTICE COMMUNITY FINANCIAL INC DEFENDANT at 1525:00 HOURS, on the at 3907 MARKET STREET CAMP HILL, PA 17011 SUSAN RUSSELL, PRESIDENT/CEO a true and attested copy of COMPLAINT & NOTICE Sheriff or Deputy Sheriff of who being duly sworn according to law, was served upon the 2nd day of October 2003 by handing to ADULT IN CHARGE together with and at the same time directing Her attention to the contents thereof. Sheriff's Costs: Docketing 18.00 Service 9.66 Affidavit .00 Surcharge 10.00 .00 37.66 Sworn and Subscribed to before me this ~ ~ day of ~ ~03 A.D. ot~onot ary ' So Answers: R. Thomas Kline 10/03/2003 R HOADS & S IN ON /////~ / // / ~' Deputy S~erif f SHERIFF'S RETURN - REGULAR CASE NO: 2003-05160 P COMMONWEALTH OF PENNSYLVANIA: COUNTY OF CUMBERLAND RHOADS & SINON LLP VS COMMUNITY FINANCIAL INC ET AL CPL. MICHAEL BARRICK , Cumberland County, Pennsylvania, says, the within COMPLAINT & NOTICE COMMUNITY TRUST COMPANY DEFENDANT at 1525:00 HOURS, on the at 3907 MARKET STREET CAMP HILL, PA 17011 SUSAN RUSSELL, PRESIDENT/CEO a true and attested copy of COMPLAINT & NOTICE Sheriff or Deputy Sheriff of who being duly sworn according to law, was served upon the 2nd day of October , 2003 by handing to ADULT IN CHARGE together with and at the same time directing Her attention to the contents thereof. Sheriff's Costs: Docketing Service Affidavit Surcharge 6 00 00 00 10 00 00 16 00 Sworn and Subscribed to before me this '/ ~ day of ~{b.~ ~ ~O~k~ A.D. · F~othonotary R. Thomas Kline lO/O3/ oo3 /"7/'7 RHOADS & S INON~/// ,' IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA RHOADS & SINON, LLP, Plaintiff, COMMUNITY FINANCIAL, INC. and COMMUNITY TRUST COMPANY, Defendants. ) ) ) ) ) ) ) ) ) ) CIVIL ACTION - LAW NO. 03-5160 Civil Term TI E PL TO: Rhoads & Sinon, LLP c/o Michael W. Winfield, Esquire One South Market Street PO Box 1146 Harrisburg, PA 17108-1146 You are hereby notified to file a written response to the enclosed Defendants' Preliminary Objections to plaintiffs Complaint within twenty (20) days from service hereof or a judgment may be entered against you. Respectfully submitted, GATES, HALBRUNER & HATCH, P.C. Pa. Sup. Ct. ID No. 84180 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 (717) 731-9600 (Attorneys for Defendants) DATE: October 22, 2003 IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA RHOADS & SINON, LLP, Plaintiff, COMMUNITY FINANCIAL, INC. and COMMUNITY TRUST COMPANY, Defendants. CIVIL ACTION - LAW NO. 03-5160 Civil Term ORDER AND NOW, this day of 2003, upon consideration of Defendants' Preliminary Objections to Plaintiffs Complaint, brief in support thereof and any response thereto, it is hereby ORDERED and DECREED that Defendants' Preliminary Objection in the nature of a motion to compel Plaintiff to join Kerry L. McLaughlin as a necessary party is SUSTAINED. BY THE COURT: Albert N. Peterlin, Esquke Gates, Halbrtmer & Hatch, P.C., 1013 Mumma Road, Suite 100, Lemoyne, PA 17043 Michael W. Winfield, Esquire Rhoads & Sinon, LLP, One South Market Street, PO Box 1146, Harrisburg, PA 17108-1146 Albert N. Peterlin, Esquire Gates, Halbruner & Hatch, P.C. 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 (717) 731-9600 (Attorneys for Defendants) IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA RHOADS & SINON, LLP, Plaintiff, COMMUNITY FINANCIAL, INC. and COMMUNITY TRUST COMPANY, Defendants. ) ) ) ) ) ) ) ) ) ) CIVIL ACTION - LAW NO. 03-5160 Civil Term DEFENDANTS' PRELIMINARY OBJECTIONS TO PLAINTIFF'S COMPLAINT The Defendants, Community Financial, Inc. ("CFI") and Community Trust Company ("CTC'), collectively referred to hereinafter as the "Corporations", by and through their attorneys, Gates, Halbruner & Hatch, P.C., make the following preliminary objections to Plaintiff, Rhoads & Sinon, LLP's ("Rhoads & Sinon") Complaint in the form of a Motion to Dismi~qs for Failure to Join a Necessary Party or, in the alternative, to Compel Plaintiffto Join a Necessary Party, and in support thereof, avers as follows: L BACKGROUND 1. The Corporations are local small businesses that provide trust services and operate primarily in Cumberland County, Pennsylvania. 2. At all times relevant hereto, Kerry L. McLaughlin ("McLaughlin') held the offices of President and Chief Executive Officer and was a member of the Board of Directors of the Corporations. 3. In or about November, 2002, McLaughlin conspired with individual members of the Board of Directors in order to usurp control of the Corporations by, among things, attempting to minimize the involvement of the current Chairman of the Bottrd of Directors, Lowell R. Gates ("Gates") with the Corporations and by attempting to remove Gates from the Board of Directors entirely. 4. Upon information and belief, beginning in or about November, 2002, McLaughlin retained the services of Rhoads & Sinon for the purpose of obta:ining legal counsel to assist McLaughlin in effectuating his scheme to usurp control of the Corporations. 5. McLaughlin met with and communicated electro~xically and by other means with Rhoads & Sinon on multiple occassions beginning in or about November, 2002 through and including January 13, 2003 in fmtherance of his scheme to usurp control of the Corporations. 6. In or about November and December, 2002, the Corporations underwent a standard periodic examination ("Examination") by the Pennsylwmia Department of Banking. 7. Following the conclusion of the Examination, the Pennsylvania Department of Banking scheduled an exit interdew ("Exit Interview") for January 3, 2003 at which all of the members of the Board of Directors were required to attend. 8. Prior to the Exit Interview, Gates suggested that all of the members of the Board of Directors of the Corporations should meet before the Exit In~Ierview in order to discuss the examination and issues expected to be addresseed by the Depan:ment of Banking at the Exit Interview. 9. McLanghlln, among other members of the Board of Directors, refused to meet with the other members of the Board of Directors of the Corporations prior to the Exit Interview and, as a result, no meeting of the members of the Board of Directors was held prior to the Exit Interview. 10. Prior to the Exit Interview, at the behest of McLtmghlin; certain members of the Board of Directors of the Corporations met clandestinely with Rhoads & Sinon regarding the usurpation of control of the Corporations and without the knowledge, approval or authorization of the full Board of Directors. 11. McLaughlin did not inform the Chairman of the Board or the remaining members of the Board of Directors of the Corporations that he had retained Rhoads & Sinon for the Exit Interview until the morning of January 3, 2003 immediately prior to the Exit Interview. 12. Other than to usurp control of the Corporation, there is and was no valid business purpose to have counsel present at the Exit Interview with the Pennsylvania Department of Banking where the examination had already been conducted without the desire or need for counsel present during the examination itself. 13. Prior to the Exit Interview, the Board of Directors did not authorize McLaughlin to retain the services of Rhoads & Sinon, but rather, the Board of Directors had for years retained the law firm of Saul Ewing, LLP to represent the Corporations ]regarding Pennsylvania Department of Banking matters. 14. At the Exit Interview, without the knowledge that McLaughlin had conspired to usurp control of the Corporations or that McLaughlin had been in contact with P, hoads & Sinon prior thereto for this express purpose, the Executive Committee of the Board of Directors of the Corporations, until such time as a full board meeting could be called, unanimously voted to retain Rhoads & Sinon for the limited purpose of representing the Corporations at the Exit Interview and in establishing a Memorandum of Understanding Compliance Committee ("MOU Committee"). 15. At no time relevant hereto, did Rhoads & Sinon disclose the conflict of interest regarding their representation of the Corporations and McLaug~lin, individually. 16. The establishment of the MOU Committee, designed and created pursuant to the counsel of Rhoads & Sinon, at the Exit Interview was intended to remove Gates f~om involvement in the Corporations and to create substantial and dkect control over the Corporations by the MOU Committee and Rhoads & Sinon. 17. The MOU Committee was directly or indirectly controlled by McLaughlin. 18. Subsequent to the Exit Interview, in order to corttinue representing the Corporations, Rhoads & Sinon expressly required the Corporations to retain their law firm only upon full board approval and the provision of a retainer in the mnount of seventy-five thousand and 00/100 dollars ($75,000.00). 19. The Board of Directors of the Corporations did not, at any time relevant hereto, authorize the retention of Rhoads & Sinon or authorize McLaughlin or Bruce G. Hokan ("Holran") to enter into a contract for professional services with Rhoads & Sinon. 20. McLaughlin and Hokan signed the retainer letter ("Retainer Letter") dated January 7, 2003 on January 8, 2003 without the approval or authorization of the Board of Directors of the Corporations. 21. On or about January 8, 2003, McLaughlin signed and attempted to deliver a corporate check, made payable to Rhoads & Sinon, LLP, in the mount of seventy-five thousand 4 and 00/100 dollars ($75,000.00) to Rhoads & Sinon without the approval or authorization of the Board of Directors of the Corporations. 22. The full Board of Directors voted not to retain P&toads & Sinon at the duly called special meeting of the Board of Directors of the Corporations held on January 13, 2003, but rather voted to retain Saul Ewing, LLP with regard to the relevant Department of Banking Effective January 31, 2003, McLaughlin tendered his full resignation from the offices of President and Chief Executive Officer and as a member of the Board of Directors of the Corporations. I. M[QTION TO DISMISS COMPLAINT FOR FAILURE TO JOIN A NECESSARY PARTY OR. IN THE ALTERNATIVE. TQ I~OMPEL JOIN'DER OF A NECESSARY PARTY 24. Defendants incorporate herein by reference Paragraphs 1 through 23 above as though fully set forth at length herein. 25. Pursuant to Pa.R.C.P. 1028(a)(5), a Complaint may be dismissed for, or joinder of necessary parties compelled, where a necessary party has not been joined in a cause of action. 26. Beginning in or about November, 2002 continuing through and including January 13, 2003, Rhoads & Sinon represented the interests of McLaughlin> individually, in his attempt to usurp control of the Corporations. 27. At no time relevant hereto did the full Board of Directors of the Corporations authorize or approve the retention of Rhoads & Sinon. 28. McLaughlin is a necessary and indispensable party to the resolution o f this action. WHEREFORE, Defendants, Community Financial, Inc. and Community Trust Company, respectfully request this Court enter an Order dismissing the Plaintiff, Rhoads & Sinon, LLP's, Complaint with prejudice or, in the alternative, compelling Plaintiff to join Kerry L. McLaughlin as a defendant, and for such other relief as is just and proper. Respectfully submitted, GATES, HALBRUNER & HATCH, P.C. Pa. Sup. Ct. ID No. 84180 1013 Mumma Road, Suite 100 Lemoyue, PA 17043 (717) 731-9600 (Attorneys for Defendants) DATE: October 22, 2003 6 I, Susan A. Russell, verify that I am the acting President of Community Financial, Inc. and Community Trust Company and am authorized to execute ttfis Verification on its behalf; that I have reviewed the foregoing Defendants' Preliminary Objections to Plaintiffs Complaint and verify that it is tree and correct to the best of my knowledge, information and belief. I further verify that these statements made by me are subject to the penalties of 18 Pa.C.S.A. § 4904 relating to unswom falsification to authorities. By: Susan A. Russell, acting President CommuniP. f Financial, Inc. and Community Trust Company Dated: October 22, 2003 CERTIFICATE OF SERVICE_ I, Albert N. Peterlin, Esquire, hereby certify that a true mad correct copy of the foregoing Defendants' Preliminaxy Objections to PlaintiWs Complaint, has been served this day upon the following counsel of record by United States first class mail, postage prepaid, addressed as follows: Michael W. Winfield, Esquire Rhoads & Sinon, LLP One South Market Street PO Box 1146 Harrisburg, PA 17108-1146 GATES, HALBRUNER & HATCH, P.C. l~ft/N. Pe~rli~,~E~u'~nle Attorney for Defendants DATED: October 22, 2003 PRAECIPE FOR LISTING CASE FOR ARGUMENT (Must be typewritten and sul~nitted Jn duplicate) TO THE PROTHONOTARY OF CUMBERLAND COUNTY: Please ]ist the within matter for the ne~:t Argtm~_nt Court. CAPTION OF CASE (entire caption must be stated in f~ll) Rhoads & Sinon, LLP (Plaintiff) Conm~nnity Financial, Inc. and ( Defepdant ) Community Trust Company No. 03-5160 Civil term I~i 2003 1. State matter to be argued (i.e., plaintiff's nDtion for new t~ial, defencIm t's d~nu~z~-~ to c~la~nt, etc. ): Defendants ' Preliminary Objections to Plaintiff ' s Complaint 2. Identify counsel who wJ 1 ] argue case: (a) for pla~tiff: Michael W. Winfield, Esquire ~ress: Rhoads & Sinon, LLP, One South Market St., PO Box 1146 Harrisburg, PA 17108-1146 (b) for defendant:Albert N. Peterlin, Esquire ~ress: Gates, Halbruner & Hatch, PC, 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 3. I w~ ] 1 notify a]] parties in writing within t~ days that this case has been ] i sted for ar~3tm~-nt. 4. Arc3un~_nt Court Date: December 3, 2003 Dated:0ctober 22, 2003 CERTIFICATE OF SERVICE_ I, Albert N. Peterlin, Esquire, hereby certify that a tree and correct copy of the foregoing Praecipe for Listing Case for Argument, has been served this day upon the following counsel of record by United States first class mail, postage prepaid, addressed as follows: Michael W. Winfield, Esquire Rhoads & Sinon, LLP One South Market Street PO Box 1146 Harrisburg, PA 17108-1146 GATES~ HALBRUNER & HATCH, P.C. v ~lb--~ter ~, I1~ e~t~er'lin'~ E s~'Ulr~e Attorney for Defendants DATED: October 22, 2003 Thomas A. French, Esquire Attomey I.D. No. 39305 Michael W. Winfield, Esquire Attorney I.D. No. 72680 Pd-IOADS & SINON LLP One South Market Square, 12th Floor P.O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff RHOADS & SINON LLP, Plaintiff COMMUNITY FINANCIAL, 1NC. and COMMUNITY TRUST COMPANY, Defendants IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 03-5160 Civil Term JURY TRIAL DEMANDED PLAINTIFF'S ANSWER TO DEFENDANTS' PRELIMINARY OBJECTIONS NOW COMES the Plaintiff, Rhoads & Sinon LLP ("R&S"), and answers the Preliminary Objections asserted by the Defendants, Community Financial, Inc. ("CFI") and Community Trust Company ("CTC") (collectively "the Corporations"), as follows: 1. Admitted upon information and belief. In further answer, R&S incorporates by reference the averments set forth in ¶2 of its Complaint. 2. Admitted. 3. Denied. R&S is without information sufficient to determine the truth or veracity regarding conversations between Mr. McLaughlin and any individual members of the Board of 494055.1 Directors as referenced in this paragraph. According, R&S denies the averments of the paragraph in their entirety. 4. Denied. It is denied that Mr. McLaughlin individually retained the services of R&S in or about November of 2002 or at any time relevant hereto for any purpose. In further answer, at all times relevant hereto, R&S was retained by the Corporations to provide legal counsel to the Corporations regarding issues raised during an examination by the Pennsylvania Department of Banking with regard to certain IRAs, for which the Corporations served as custodian, and which were placed with the Corporations by individuals represented by, and at the recommendation of, Lowell Gates, Esquire. All remaining averments in this paragraph are denied. 5. Denied as stated. It is admitted that R&S was contacted by Mr. McLaughlin in his capacity as President and CEO of the Corporations regarding the issues being raised by the Pennsylvania Department of Banking and Mr. Gates' involvement in same. It is denied that R&S was retained by the Corporations in or about November of 2002. In further answer, and as stated in the Complaint, R&S was retained on January 3, 2003 to represent the Corporations vis- &-vis the resolution of issues with the Pennsylvania Department of Banking. All remaining averments in this paragraph are denied. 6. Denied as stated. It is admitted that at or about the time period alleged, the Corporations were being examined by the Pennsylvania Department of Banking, pursuant to which issues had been raised regarding, inter alia, certain IRAs as referenced in paragraph 4 above, the legality of those IRAs, and an apparent conflict of interest arising from Lowell Gates' -2- position as a director for the Corporations, his representation of the individuals whose IRAs were being questioned, and his recommendation regarding the treatment of those IRAs. 7. Denied as stated. It is admitted that on January 3, 2003, the Pennsylvania Department of Banking scheduled a meeting with the Corporations. Upon information and belief, and in further answer, the Department of Banking summoned or otherwise required all of the members of the Board of Directors to attend. R&S is without sufficient information to determine the truth of the remaining averments of this paragraph and therefore denies same. 8. Denied as stated. Upon information and belief, it is admitted that Gates requested a meeting of all members of the Board of Directors of the Corporations prior to the meeting scheduled with the Department of Banking on January 3, 2003. R&S is without information sufficient to determine the truth of the remaining averments of this paragraph, and therefore denies same. 9. Denied as stated. Upon information and belief, it is admitted that McLaughlin and other members of the Board of Directors of the Corporations declined to meet with Gates and others prior to the Department of Banking meeting scheduled for January 3, 2003, and consequently no meeting of the Board of Directors of the Corporations was held in advance of the Department of Banking meeting. R&S is without information sufficient to determine the truth of the remaining averment of this paragraph, and therefore denies same. 10. Admitted in part, denied in part. It is admitted that prior to the January 3, 2003 meeting with the Department of Banking, R&S met with a majority of the members of the Board -3- of Directors of the Corporations regarding the Department of Banking issues in general, and the IRAs in particular. It is further admitted that R&S was requested to attend the January 3, 2003 meeting for the purpose of being retained by the Corporations to represent the Corporations' interests vis-h-vis the Department of Banking. It is admitted that not all of the Directors of the Corporations were aware of, or were in attendance at, said meeting. The remaining averments of this paragraph are denied. 11. Denied. It is denied that Mr. McLaughlin retained R&S. R&S was retained by the Corporations on January 3, 2003 as stated above. In further answer, a majority of the Board of Directors requested R&S to be present at the January 3, 2003 meeting with the Department of Banking for the purpose of being retained by the Corporations, to represent the Corporations vis- h-vis the issues pending with the Department of Banking. The remaining averments of this paragraph are denied. 12. Denied. To the contrary, given the nature and severity of the issues raised by the Pennsylvania Department of Banking regarding the operations of the Corporations as a result of the Department's examination during 2003 and, further, because of the Corporation's failure to adequately respond to resolve adverse comments provided by the Department during previous years' examinations, it was not only prudent, but extremely advisable for the Corporations to be represented at the Exit Interview by competent and well-respected bank regulatory counsel, such as Rhoads & Sinon. 13. Denied. R&S is without information sufficient to determine what authorization, if any, the Board of Directors gave to Mr. McLaughlin prior to the meeting with the Department of -4- Banking on January 3, 2003 to retain the services of R&S, or whether in fact such authorization was necessary pursuant to the Corporations' Bylaws. In further answer, Mr. McLaughlin did not retain the services of R&S prior to the January 3, 2003 meeting. R&S incorporates by reference its answers contained in paragraphs 4-10 as though set forth here at length. R&S is without information sufficient to determine the truth of the remaining averments and therefore denies sable. 14. Denied as stated. It is admitted that on January 3, 2003, immediately prior to the meeting with the Department of Banking, the Executive Committee of the Corporations unanimously voted to approve the retention of R&S to represent the Corporations' interests before the Department of Banking. In further answer, immediately following the meeting with the Department of Banking, the full Board of Directors of the Corporations unanimously voted to ratify the retention of R&S as counsel to the Corporations vis-fi-vis the Department of Banking issues, and to provide counsel regarding the establishment of a Memorandum of Understanding Compliance Committee ("MOU Committee"). In further answer, R&S incorporates by reference its answers contained in paragraphs 4-10 as though set forth here at length. All remaining averments in this paragraph are denied. 15. Denied as stated. It is denied that R&S represented Mr. McLaughlin individually at any time relevant to these matters. In further answer, it is denied that R&S maintained any conflict of interest vis-fi-vis its representation of the Corporations. It is admitted that R&S did not disclose any conflict of interest because there was no conflict of interest to disclose. All remaining averments in this paragraph are denied. -5- 16. Denied as stated. It is admitted that R&S was involved in the establishment of the MOU Committee, at the request and with the authorization of the Corporations, and for the purposes of complying with the recommendations and requirements of the Department of Banking. It is specifically denied that the MOU Committee was intended to create substantial and direct control over the Corporations by R&S. The remaining averments are denied. 17. Denied as stated. It is admitted that Mr. McLaughlin was instrumental in convening a meeting of the Executive Committee of the Board of Directors of the Corporations for the purpose of forming a MOU Committee of the Board to adequately and responsibly respond to adverse comments of the Pennsylvania Department of Banking with regard to examinations of the Corporations. It is denied that Mr. McLaughlin directly or indirectly controlled such MOU Committee because, as a matter of corporate law, a duly constituted Committee of the Board of Directors acts by majority vote of Committee members, assuming a quorum is present. 18. Denied as stated. It is admitted that subsequent to the meeting held on January 3, 2003 referenced herein, R&S sent a formal retention letter to the Corporations, a copy of which is attached to the Complaint as Exhibit "A", and incorporated herein by reference. All remaining allegations inconsistent with the contents of that letter are denied. 19. Denied. It is specifically denied that the Board of Directors of the Corporations did not, at any time relevant hereto, authorize the retention of R&S. The full Board of Directors specifically ratified the retention of R&S at the January 3, 2003 meeting with the Department of Banking. R&S is without information sufficient to determine any specific authorizations granted -6- or withheld from Mr. McLaughlin or Mr. Holran with regard to the execution of R&S's engagement letter, and therefore denies the averments regarding same. 20. Denied as stated. It is admitted that Mr. McLaughlin and Mr. Holran executed the retention letter attached to the Complaint as Exhibit "A". For the reasons set forth in R&S's Answer to averment number 19 as set forth above, R&S denies the remaining averments of this paragraph. 21. Denied as stated. It is admitted that on or about January 8, 2003, Mr. McLaughlin signed and delivered a corporate check made payable to R&S in the amount of $75,000 as a retainer for R&S's services provided to the Corporations. R&S is without information sufficient to determine what approvals or authorizations were given or withheld from Mr. McLaughlin by the Board of Directors of the Corporations, and therefore denies all averments regarding same. In further answer, and upon information and belief, Mr. Gates stopped payment on the retainer check prior to its deposit by R&S. 22. Denied as stated. R&S was not present at the special meeting of the Board of Directors at the Corporations on January 13, 2003, when any alleged vote was made regarding the retention of R&S, and therefore denies the averments of this paragraph regarding same. In further answer, the full Board of Directors had previously ratified the retention of R&S by the Corporations' Executive Committee on January 3, 2003, and consequently any vote rendered at the January 13, 2003 meeting would have been to terminate the representation that had already been commenced. It is admitted that R&S's representation of the Corporations ceased on -7- January 13, 2003. In further answer, R&S seeks payment in the matter for the services provided from January 3 through 13, 2003. 23. Admitted upon information and belief. 24. R&S incorporates by reference its answers to paragraph 1 through 23 above as if set forth here at length. 25. Denied as stated. It is admitted that Pa. R.Civ. P. 1028(a)(5) provides that non- joinder of a necessary party is a sufficient ground for the filing of preliminary objections. The remaining averments of this paragraph are denied as conclusions of law which require no response. In further answer, the provisions of Pa. R.Civ. P. 1028(a) are incorporated herein by reference. Any implication that this Rule provides a basis for the preliminary objections raised by Defendants based upon the facts and circumstances of this matter is specifically denied. 26. Denied. R&S at no time relevant hereto represented the interests of Mr. McLaughlin individually. Rather, at all times relevant hereto, R&S represented the interests of the Corporations in light of issues being raised by the Pennsylvania Department of Banking with regard to, inter alia, certain IRAs and Mr. Gates' involvement in same. All remaining averments of this paragraph are denied. 27. Denied. R&S incorporates by reference its answers contained in paragraphs 4-7, 10, 11 and 14 in further response. 28. Denied as a conclusion of law which requires no response. To the extent a response is required, it is specifically denied that Mr. McLaughlin is a necessary and -8- indispensable party to the resolution of this action under any conceivable theory, or that R&S would have any legal basis to include Mr. McLaughlin as a party in this action. WHEREFORE, Plaintiff, Rhoads & Sinon LLP, respectfully requests that this Court enter an order dismissing Defendants' Preliminary Objections, directing that Defendants file an answer to the Complaint, and awarding Plaintiff its costs and fees in addressing these Preliminary Objections pursuant to Rules 1023.1 and 1023.4 of the Pennsylvania Rules of Civil Procedure. RHOADS & SE ~NLLP % By:~ ~'~{~"/ Thomas A\ French Michael W~Winfield One South Market Square P. O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff -9- VERIFICATION Drake D. Nicholas, deposes and says, subject to the penalties of 18 Pa. C.S. §4904 relating to unswom falsification to authorities, that he is a Managing Partner of Rhoads & Sinon LLP, that he makes this verification by its authority, and that the facts set forth in the Answer to Defendants' Preliminary Objections are tree and correct to the best of his knowledge, information and belief. Date: CERTIFICATE OF SERVICE I hereby certify that on November 12, 2003, a tree and correct copy of the Plaintiff's Answer to Defendants' Preliminary Objections was served by means of United States mail, first class, postage prepaid, upon the following: Albert N. Peterlin, Esquire Gates, Halbruner & Hatch, P.C. 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 RHOADES & SINON, LLP, PLAINTIFF : IN THE COURT OF COMMON PLEAS OF : CUMBERLAND COUNTY, PENNSYLVANIA COMMUNITY FINANCIAL, INC. AND COMMUNITY TRUST COMPANY, DEFENDANTS : 03-5160 CIVIL TERM IN RE: PRELIMINARY OBJECTIONS OF DEFENDANTS TO pLAINTIFF'S COMPLAINT BEFORE BAYLEY J. ORDER OFCOURT AND NOW, this ~_~__~d~ay of December, 2003, the preliminary objections of defendants, Community Financial, Inc. and Community Trust Company to plaintiff's complaint, ARE DISMISSED. ,/l~ichael W. Winfield, Esquire One South Market Square P.O. Box 1146 Harrisburg, PA 17108-1146 For Plaintiff i~lbert N. Peterlin, Esquire 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 For Defendants :sal IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA RHOADS & SINON, ~LLP, Plaintiff, COMMUNITY FINANCIAL, INC. and COMMUNITY TRUST COMPANY, Defendants. CIVIL ACTION - LAW NO. 03-5160 Civil Term NOTICE TO PLEAD TO: Rhoads & Sinon, LLP c/o Michael W. Winfield, Esquire One South Market Street PO Box 1146 Harrisburg, PA 17108-1146 You are hereby notified to file a written response to the enclosed Answer with New Matter in the Form of Affirmative Defenses within twenty (20) days from service hereof or a judgment may be entered against you. Respectfully submitted, GATES, HALBRUNER & HATCH, P.C. (/'~lb~t ~l. ~erl~n, lffsquire~/ Pa. Sup. Ct. ID No. 84180 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 (717) 731-9600 (Attorneys for Defendants) Albert N. Peterlin, Esquire Gates, Halbruner & Hatch, P.C. 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 (717) 731-9600 (Attorneys for Defendants) IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA RHOADS & SINON, LLP, Plaintiff, COMMUNITY FINANCIAL, INC. and COMMUNITY TRUST COMPANY, Defendants. CIVIL ACTION - LAW NO. 03-5160 Civil Term ANSWER WITH NEW MATTER IN THE FORM OF AFFIRMATIVE DEFENSES Defendants, Community Financial, Inc. ("CFI") and Community Trust Company ("CTC"), collectively referred to hereinafter as the "Corporations" or the "Defendants", by and through their attorneys, Gates, Halbruner & Hatch, P.C., hereby' responds to the Complaint of Plaintiff, Rhoads & Sinon, LLP ("Rhoads & Sinon" or "Plaintiff') in accordance with the numbered paragraphs as follows: 1. Admitted. 2. Admitted. 3. Denied. The averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, the Board of Directors of the Corporations voted not to retain Rhoads & Sinon at a duly called special meeting of the Board of Directors held on January 13, 2003 (the "Special Meeting") which meeting was the first duly called meeting of the Board of Directors of the Corporations held in 2003. 4. Admitted in part, denied in part. It is admitted only that the Executive Committee of the Corporations voted to retain Rhoads & Sinon on January 3, 2003 for the limited purpose of representing the Corporations at an exit interview which occurred on the morning of January 3, 2003 with the Pennsylvania Department of Banking regarding a standard periodic examination. All other averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at la'iai. By way of further response, Rhoads & Sinon represented the interests of individual directors prior to the exit interview on January 3, 20133; Rhoads & Sinon failed to disclose this conflict of interest to the Executive Committee or the Board of Directors of the Corporations; and, thereafter, the Board of Directors of the Corporations voted not to retain Rhoads & Sinon at the first duly called meeting of the Board of Directors held in 2003. 5. Admitted in part, denied in part. It is admitted tuffy that Rhoads & Sinon presented the Corporations with a retention letter regarding their contemplated representation of the Corporations. All other averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at thai. By way of further response, Rhoads & Sinon represented the interests of individual directors prior to the exit interview on January 3, 2003; Rhoads & Sinon failed to disclose this conflict of interest to the Executive Committee or the Board of Directors of the Corporations; and, thereafter, the Board of Directors of the Corporations voted not to retain Rhoads & Sinon at the ftrst duly called meeting of the Board of Directors held in 2003. 6. Denied. The averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, the retention letter was signed by Kerry L. McLaughlin ("McLaughlin") and Brace G. Holran ("Holran") who were not authorized to execute the retention letter; where Rhoads & Sinon represented the individual interests of McLaughlin and/or Holran in their effort to usurp control of the Corporations; and where the Board of Directors of the Corporations voted not to retain Rhoads & Sinon at the first duly called meeting of the Board of Directors held in January, 2003. 7. Denied. The averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. 8. Admitted in part, denied in part. It is admitted only that Charles J. Ferry, Esquire ("Ferry") and Drake D. Nicholas, Esquire ('~Nicholas") attended the January 13, 2003 special meeting of the Board of Directors of the Corporations; that Ferry. and Nicholas are attorneys with Rhoads & Sinon; and that Ferry and Nicholas delivered a statement to the Corporations setting forth purported services rendered to the Corporations. All other averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, the services provided were in the individual interests of McLanghlin and/or Holran and their attempt to usurp control of the Corporations. 9. Admitted in part, denied in part. It is admitted only that the Corporations have not remitted any monies to Rhoads & Sinon at any time relevant hereto. All other averments contained in this paragraph are denied, wherefor, strict proof, if relevant, is demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by the Corporations where the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. 10. Admitted in part, denied in part. It is admitted only that Rhoads & Sinon issued three (3) demand letters dated April 21, 2003, July 15, 2003 and August 19, 2003 regarding payment for purported services rendered to the Corporations. All other averments contained in this paragraph are denied, wherefore, strict proof, if relevant is demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by the Corporations where the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. 11. Admitted in part, denied in part. It is admitted only that the Corporations have not remitted any monies to Rhoads & Sinon at any time relevant hereto. All other averments contained in this paragraph are denied, wherefor, strict proof, if relevant, is demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by the Corporations where the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. COUNT I BREACIt OF CONTRACT 12. Denied. Corporations hereby incorporate by reference the answers to paragraphs 1 through 11 as though fully set forth herein. 13. Denied. The averments contained in this paragraph constitute conclusions of law to which no response is required. To the extent a response is required, the averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, McLaughlin and Holran were not authorized to execute the engagement letter referred to in this paragraph and Rhoads & Sinon specifically required, in writing, full board approval of the retention of Rhoads & Sinon by the Corporations. 14. Denied. The averments contained in this paragraph constitute conclusions of law to which no response is required. To the extent a response is required, the averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. 15. Admitted in part, denied in part. It is admitted only that the Corporations have not remitted any monies to Rhoads & Sinon at any time relevant hereto. To the extent the averments contained in this paragraph constitute conclusions of law, no response is required. To the extent a response is required, the averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by the Corporations where the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. 16. Denied. The averments contained in this paragraph constitute conclusions of law to which no response is required. To the extent a response is required, the averments contained in this paragraph are denied, wherefore, strict proof, if relevant, iis demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by 19. Denied. The averments contained in this paragraph constitute conclusions of law to which no response is required. To the extent a response is required, the averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by the Corporations where the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. 20. Denied. The averments contained in this paragraph constitute conclusions of law to which no response is required. To the extent a response is required, the averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by the Corporations where the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. 21. Denied. The averments contained in this paragraph constitute conclusions of law to which no response is required. To the extent a response is required, the averments contained in this paragraph are denied, wherefore, strict proof, if relevant, :is demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by the Corporations where the services provided were in the individual interests of McLaughlin and/or Holran and their attempt to usurp control of the Corporations. 22. Denied. The averments contained in this paragraph constitute conclusions of law to which no response is required. To the extent a response is required, the averments contained in this paragraph are denied, wherefore, strict proof, if relevant, is demanded at trial. By way of further response, it is specifically denied that any sums are due and owing to Rhoads & Sinon by the Corporations where the services provided were in the individual interests of McLaughlin and/ or Holran and their attempt to usurp control of the Corporations. WHEREFORE, Community Financial, Inc. and Community Trust Company demands this Honorable Court enter judgment in their favor and against Plaintiff, Rhoads & Sinon, LLP, dismissing Count II of Plaintiff's Complaint with prejudice, together with costs, attorneys fees, and such other relief as the Court may deem just and proper. NEW MATTER IN THE FORM OF AFFIRMATIVE DEFENSES Defendants, Community Financial, Inc. and Community Trust Company, by way of New Matter asserts the following affirmative defenses to the claims of Plaintiff, Rhoads & Sinon, LLP: 23. At all times relevant hereto, Kerry L. McLaughlin ("McLaughlin") held the offices of President and Chief Executive Officer and was a member of the Board of Directors of the Corporations. 24. In or about November, 2002, McLaughlin conspired with individual members of the Board of Directors in order to usurp control of the Corporations by, among things, attempting to minimize the involvement of the current Chairman of the Board of Directors, Lowell R. Gates ("Gates") with the Corporations and by attempting to remove Gates from the Board of Directors entirely. 25. Upon information and belief, beginning in or about November, 2002, McLaughlin retained the services of Rhoads & Sinon for the purpose of obtaining legal counsel to assist McLaughlin in effectuating his scheme to usurp control of the Corporations. 26. McLaughlin met with and communicated electronically and by other means with Rhoads & Sinon on multiple occassions beginning in or about November, 2002 through and including January 13, 2003 in furtherance of his scheme to usurp control of the Corporations. 27. In or about November and December, 2002, the Corporations underwent a standard periodic examination ("Examination") by the Pennsylvania Department of Banking. 28. Following the conclusion of the Examination, the Pennsylvania Department of Banking scheduled an exit interview ("Exit Interview") for January 3, 2003 at which all of the members of the Board of Directors were required to attend. 29. Prior to the Exit Interview, Gates suggested that all of the members of the Board of Directors of the Corporations should meet before the Exit Interview in order to discuss the examination and issues expected to be addressed by the Deparmaent of Banking at the Exit Interview. 30. McLaughlin, among other members of the Board of Directors, refused to meet with the other members of the Board of Directors of the Corporations prior to the Exit Interview and, as a result, an informal meeting by four (4) of the members of the Board of Directors was held prior to the Exit Interview. 31. Prior to the Exit Interview, at the behest of McLaughlin, certain members of the Board of Directors of the Corporations met clandestinely with Rhoads & Sinon regarding the usurpation of control of the Corporations and without the knowledge, approval or authorization of the full Board of Directors. 32. McLanghlin did not inform the Chairman of the Board or the remaining members of the Board of Directors of the Corporations that he had retained Rhoads & Sinon for the Exit Interview until the morning of January 3, 2003 immediately prior to the Exit Interview. 33. Other than to usurp control of the Corporation, there is and was no valid business purpose to have counsel present at the Exit Interview with the Pennsylvania Department of Banking where the examination had already been conducted without the desire or need for counsel present during the examination itself. 34. Prior to the Exit Interview, the Board of Directors did not authorize McLaughlin to retain the services of Rhoads & Sinon, but rather, the Board of Directors had for years retained the law finn of Saul Ewing, LLP to represent the Corporations regarding Pennsylvania Department of Banking matters. 35. At the Exit Interview, without the knowledge that McLaughlin had conspired to usurp control of the Corporations or that McLaughlin had been in contact with Rhoads & Sinon prior thereto for this express purpose, the Executive Committee of the Board of Directors of the Corporations, until such time as a full board meeting could be called, unanimously voted to retain Rhoads & Sinon for the limited purpose of representing the Corporations at the Exit Interview and in establishing a Memorandum of Understanding Compliance Committee ("MOU Committee"). 36. At no time relevant hereto, did Rhoads & Sinon disclose the conflict of interest regarding their representation of the Corporations and McLaughlin, individually. 37. The establishment of the MOU Committee, designed and created pursuant to the counsel of Rhoads & Sinon, at the Exit Interview was intended to remove Gates from involvement in the Corporations and to create substantial and direct control over the 10 Corporations by the MOU Committee and Rhoads & Sinon. 38. The MOU Committee was directly or indirectly controlled by McLaughlin. 39. Subsequent to the Exit Interview, in order to continue representing the Corporations, Rhoads & Sinon expressly required the Corporations to retain their law firm only upon full board approval and the provision of a retainer in the mount of seventy-five thousand and 00/100 dollars ($75,000.00). 40. The Board of Directors of the Corporations did not, at any time relevant hereto, authorize the retention of Rhoads & Sinon or authorize McLaughlin or Bruce G. Holran ("Holran") to enter into a contract for professional services with Rhoads & Sinon. 41. McLaughlin and Holran signed the retainer letter ("Retainer Letter") dated January 7, 2003 on January 8, 2003 without the approval or authorization of the Board of Directors of the Corporations. 42. On or about January 8, 2003, McLaughlin signed and attempted to deliver a corporate check, made payable to Rhoads & Sinon, LLP, in the amount of seventy-five thousand and 00/100 dollars ($75,000.00) to Rhoads & Sinon without the approval or authorization of the Board of Directors of the Corporations. 43. The full Board of Directors voted not to retain Rhoads & Sinon at the duly called special meeting of the Board of Directors of the Corporations held on January 13, 2003, but rather voted to retain Saul Ewing, LLP with regard to the relevant Department of Banking matters. 44. Effective January 31, 2003, McLaughlin tendered his full resignation from the offices of President and Chief Executive Officer and as a member of the Board of Directors of 11 the Corporations. 45. FIRST AFFIRMATIVE DEFENSE Rhoads & Sinon has failed to state a claim against Defendants upon which relief can be granted where, inter alia, Rhoads & Sinon failed to disclose the conflict of interest regarding its representation of individual directors; Rhoads & Sinon represented the interests of individual directors and not the Corporations interests; McLaughlin and Holran were not authorized to execute the retention letter; Rhoads & Sinon expressly required the Corporations to retain Rhoads & Sinon only upon full board approval; and the Board of Directors of the Corporations voted not to retain Rhoads & Sinon at the first special meeting of the Board of Directors to be held in January, 2003. SECOND AFFIRMATIVE DEFENSE 46. Rhoads & Sinon's claims are barred by failure of consideration where, inter alia, Rhoads & Sinon represented the interests of individual directors and not the interests of the Corporations. THIRD AFFIRMATIVE DEFENSE 47. Rhoads & Sinon's claims are barred by the doctrine of unclean hands. As a matter of equity Rhoads & Sinon's claims should not be heard where, inter alia, Rhoads & Sinon failed to disclose the conflict of interest regarding its representation of individual directors of the Corporations; Rhoads & Sinon represented the interests of individual directors and not the Corporations interests; McLaughlin and Holran were not authorized to execute the retention letter; Rhoads & Sinon expressly required the Corporations to retain Rhoads & Sinon only upon full board approval; and the Board of Directors of the Corporations voted not to retain Rhoads & 12 Sinon at the first special meeting of the Board of Directors to be'. held in January, 2003. FOURTH AFFIRMATIVE DEFENSE 48. Rhoads & Sinon's claims are barred by the doctrine of rescission as a result of Rhoads & Sinon's fraudulent misrepresentations regarding, inter alia, its representation of the interests of individual directors and not the Corporations interests and its failure to disclose the conflict of interest regarding its representation of individual directors. FIFTH AFFIRMATIVE DEFENSE 49. Rhoads & Sinon has failed to satisfy all conditions precedent and/or subsequent to recover on its claim where, inter alia, Rhoads & Sinon represented the interests of individual directors of the Corporations and failed to disclose the attendant conflict of interest. SIXTH AFFIRMATIVE DEFENSE 50. Rhoads & Sinon's claims are barred in whole or tn part by the doctrine of estoppel where, inter alia, Rhoads & Sinon failed to disclose the conflict of interest regarding its representation of individual directors; Rhoads & Sinon represented the interests of individual directors and not the Corporations interests; McLaughlin and Holran were not authorized to execute the retention letter; and the Board of Directors voted not to retain Rhoads & Sinon and the first special meeting of the Board of Directors to be held in January, 2003. SEVENTH AFFIRMATIVE DEFENSE 51. Corporations are excused from performing as a result of Rhoads & Sinon's misrepresentations regarding, inter alia, its representation of the interests of individual directors and not the Corporations interests and its failure to disclose the conflict of interest. EIGHTH AFFIRMATIVE DEFENSE 13 52. As to Count I, Rhoads & Sinon's claims are barred by the doctrine of the Statute of Frauds where, inter alia, McLaughlin and Holran were not authorized to execute the retention letter; Rhoads & Sinon expressly required full board approval of their retention; and the Board of Directors voted not to retain Rhoads & Sinon at the first special meeting of the Board of Directors duly called in January, 2003. NINTH AFFIRMATIVE DEFENSE 53. Rhoads & Sinon's claims are barred by the doctrine of justification where, inter alia, Rhoads & Sinon failed to disclose the conflict of interest regarding its representation of individual directors of the Corporations; Rhoads & Sinon represented the interests of individual directors and not the Corporations interests; McLaughlin and Holran were not authorized to execute the retention letter; Rhoads & Sinon expressly required the Corporations to retain Rhoads & Sinon only upon full board approval; and the Board of Directors of the Corporations voted not to retain Rhoads & Sinon at the first special meeting of the Board of Directors to be held in January, 2003. TENTH AFFIRMATIVE DEFENSE 54. Rhoads & Sinon's claim are barred by its failure to join an indispensable party. ELVENTH AFFIRMATIVE DEFENSE 55. R_hoads & Sinon lacks standing to assert the claims advanced. TWELFTH AFFIRMATIVE DEFENSE 56. Rhoads & Sinon's claims are barred in whole or in part by its own negligence. THIRTEENTH AFFIRMATIVE DEFENSE 57. Rhoads & Sinon's claims are barred in whole or in part by the doctrine of waiver. 14 FOURTEENTH AFFIRMATIVE DEFENSE 58. Rhoads & Sinon's claims are barred by the doctrine of cancellation. FIFTEENTH AFFIRMATIVE DEFENSE 59. Rhoads & Sinon's damages, if any, were casued by persons other than the Corporations and for which the Corporations are not chargeable. SIXTEENTH AFFIRMATIVE DEFENSE 60. Rhoads & Sinon's claims are barred in whole or m part by the doctrines of mutual and/or unilateral mistake. DATE: Respectfully submitted, GATES, HALBRUNER &HATCH, P.C. ~J'b~'fN. P~erl~m'~'~sqh~r~e ~ ~L~'~/V Pa. Sup. Ct. ID No. 84180 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 (717) 731-9600 (Attorneys for Defendants) 15 VERIFICATION I, Susan A. Russell, verify that I am the acting President of Community Financial, Inc. and Community Trust Company and am authorized to execute this Verification on its behalf; that I have reviewed the foregoing Answer with New Matter in the Form of Affirmative Defenses and Counterclaim and verify that the facts contained therein are tree and correct to the best of my knowledge, information and belief. I further verify that these statements made by me are subject to the penalties of 18 Pa.C.S.A. § 4904 relating to unsworn falsification to authorities. By: Susan A. Russell, Acting President & CEO Community Financial, Inc. and Community Trust Company CERTIFICATE OF SERVICE I, Albert N. Peterlin, Esquire, hereby certify that a tree and correct copy of the foregoing Answer with New Matter in the Form of Affirmative Defenses, has been served this day upon the following counsel of record by United States first class mail, postage prepaid, addressed as follows: DATED: Michael W. Winfield, Esquire Rhoads & Sinon, LLP One South Market Street PO Box 1146 Harrisburg, PA 17108-1146 GATES, HALBRUNER & HATCH, P.C. Alb/i;tN. P~terlin, Ekquireuz/ ~-////\~ Attorney for Defendants Thomas A. French, Esquire Attorney I.D. No. 39305 Michael W. Winfield, Esquire Attorney I.D. No. 72680 RHOADS & SINON LLP One South Market Square, 12th Floor P.O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff RHOADS & SINON LLP, Plaintiff COMMUNITY FiNANCIAL, 1NC. and COMMUNITY TRUST COMPANY, Defendants IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 03-5160 Civil Term JURY TRIAL DEMANDED PLAINTIFF'S REPLY TO DEFENDANTS' NEW MATTER IN THE FORM OF AFFIRMATIVE DEFENSES NOW COMES the Plaintiff, Rhoads & Sinon LLP, by and through its counsel and files the following Reply to Defendants' New Matter in the Form of Affirmative Defenses, and avers as follows: 23. Admitted. 24. Denied. R&S is without information sufficient to determine the truth or veracity regarding conversations between Mr. McLaughlin and any individual members of the Board of Directors as referenced in this paragraph. Accordingly, R&S denies the averments of the paragraph in their entirety. 502534.1 25. Denied. It is denied that Mr. McLaughlin individually retained the services of R&S in or about November of 2002 or at any time relevant hereto for any purpose. In or about December 2002, the Corporations approached R&S regarding advice concerning certain IRAs for which Community Trust Company served as Custodian. In further answer, at all times relevant hereto, R&S was retained by the Corporations to retain provide legal counsel to the Corporations regarding issues raised during an examination by the Pennsylvania Department of Banking with regard to certain IRAs, for which the Corporations served as custodian, and which were placed with the Corporations by individuals represented by, and at the recommendation of, Lowell Gates, Esquire. All remaining averments in this paragraph are denied. 26. Denied as stated. It is admitted that R&S was contacted by Mr. McLaughlin in his capacity as President and CEO of the Corporations regarding certain IRAs maintained by Community Trust Company as Custodian, pursuant to concerns being raised by the Pennsylvania Department of Banking over these IRAs and Mr. Gates' involvement in same. It is denied that R&S was formally retained by the Corporations in or about November of 2002. In further answer, and as stated in the Complaint, R&S was formally retained on January 3, 2003, to represent the Corporations vis-g-vis the resolution of issues with the Pennsylvania Department of Banking. All remaining averments in this paragraph are denied. 27. Denied as stated. It is admitted that at or about the time period alleged, the Corporations were being examined by the Pennsylvania Department of Banking, pursuant to which issues had been raised regarding, inter alia, certain IRAs as referenced in paragraph 25 above, the legality of those IRAs, and an apparent conflict of interest arising from Lowell Gates' -2- position as a Director for the Corporations, his representation of the individuals whose IRAs were being questioned, and his recommendation regarding the treatment of those IRAs. 28. Denied as stated. It is admitted that on January 3, 2003, the Pennsylvania Department of Banking scheduled a meeting with the Corporations. Upon information and belief, and in further answer, the Department of Banking summoned or otherwise required all of the members of the Board of Directors to attend. R&S is without sufficient information to determine the truth of the remaining averments of this paragraph and therefore denies same. 29. Denied as stated. Upon information and belief, it is admitted that Gates requested a meeting of all members of the Board of Directors of the Corporations prior to the meeting scheduled with the Department of Banking on January 3, 2003. R&S is without information sufficient to determine the truth of the remaining averments of this paragraph, and therefore denies same. 30. Denied as stated. Upon information and belief, it is admitted that McLaughlin and other members of the Board of Directors of the Corporations declined to meet with Gates and others prior to the Department of Banking meeting scheduled for January 3, 2003. R&S is without information sufficient to determine the truth of the remaining averment of this paragraph, and therefore denies same. 31. Admitted in part, denied in part. It is admitted that prior to the January 3, 2003 meeting with the Department of Banking, R&S met with a majority of the members of the Board of Directors of the Corporations regarding the Department of Banking issues in general, and the -3- IRAs in particular. It is further admitted that R&S was requested to attend the January 3, 2003 meeting for the purpose of being retained by the Corporations to represent the Corporations' interests vis-h-vis the Department of Banking. It is admitted that not all of the Directors of the Corporations were aware of, or were in attendance at, said meeting. The remaining averments of this paragraph are denied. 32. Denied. It is denied that Mr. McLaughlin retained R&S. R&S was retained by the Corporations on January 3, 2003 as stated above. In further answer, a majority of the Board of Directors requested R&S to be present at the January 3, 2003 meeting with the Department of Banking for the purpose of being retained by the Corporations, to represent the Corporations vis- h-vis the issues pending with the Department of Banking. ']?he remaining averments of this paragraph are denied. 33. Denied. To the contrary, given the nature and severity of the issues raised by the Pennsylvania Department of Banking regarding the operations of the Corporations as a result of the Department's examination during 2003 and, further, because of the Corporation's failure to adequately respond to resolve adverse comments provided by the Department during previous years' examinations, it was not only prudent, but extremely advisable for the Corporations to be represented at the Exit Interview by competent and well-respected bank regulatory counsel, such as Rhoads & Sinon. 34. Denied. R&S is without information sufficient to determine what authorization, if any, the Board of Directors gave to Mr. McLaughlin prior to the meeting with the Department of -4- Banking on January 3, 2003 to retain the services of R&S, or whether in fact such authorization was necessary pursuant to the Corporations' Bylaws. In further answer, Mr. McLaughlin did not retain the services of R&S prior to the January 3, 2003 meeting. R&S incorporates by reference its answers contained in paragraphs 25-31 as though set forth here at length. R&S is without information sufficient to determine the truth of the remaining averments and therefore denies same. 35. Denied as stated. It is admitted that on January 3, 2003, immediately prior to the meeting with the Department of Banking, the Executive Committee of the Corporations unanimously voted to approve the retention of R&S to represent the Corporations' interests before the Department of Banking. In further answer, immediately following the meeting with the Department of Banking, the full Board of Directors of the Corporations unanimously voted to ratify the retention of R&S as counsel to the Corporations vis-h-vis the Department of Banking issues, and to provide counsel regarding the establishment of a Memorandum of Understanding Compliance Committee ("MOU Committee"). In further answer, R&S incorporates by reference its answers contained in paragraphs 25-31 as though set forth here at length. All remaining averments in this paragraph are denied. 36. Denied as stated. It is denied that R&S represented Mr. McLaughlin individually at any time relevant to these matters. In further answer, it is denied that R&S maintained any conflict of interest vis-h-vis its representation of the Corporations. It is admitted that R&S did not disclose any conflict of interest because there was no conflict of interest to disclose. All remaining averments in this paragraph are denied. -5- 37. Denied as stated. It is admitted that R&S was involved in the establishment of the MOU Committee, at the request and with the authorization of the Corporations, and for the purposes of complying with the recommendations and requirements of the Department of Banking. It is specifically denied that the MOU Committee was intended to create substantial and direct control over the Corporations by R&S. The remaining averments are denied. 38. Denied as stated. It is admitted that Mr. McLaughlin was instrumental in convening a meeting of the Executive Committee of the Board of Directors of the Corporations for the purpose of forming a MOU Committee of the Board to adequately and responsibly respond to adverse comments of the Pennsylvania Department of Banking with regard to examinations of the Corporations. It is denied that Mr. McLaughlin directly or indirectly controlled such MOU Committee because, as a matter of corporate law, a duly constituted Committee of the Board of Directors acts by majority vote of Committee members, assuming a quorum is present. 39. Denied as stated. It is admitted that subsequent to the meeting held on January 3, 2003 referenced herein, R&S sent a formal retention letter to the Corporations, a copy of which is attached to the Complaint as Exhibit "A", and incorporated herein by reference. All remaining allegations inconsistent with the contents of that letter are denied. 40. Denied. It is specifically denied that the Board of Directors of the Corporations did not, at any time relevant hereto, authorize the retention of R&S. The full Board of Directors specifically ratified the retention of R&S at the January 3, 2003 meeting with the Department of -6- Banking. R&S is without information sufficient to determine any specific authorizations granted or withheld from Mr. McLaughlin or Mr. Holran with regard to the execution of R&S's engagement letter, and therefore denies the averments regarding same. 41. Denied as stated. It is admitted that Mr. McLaughlin and Mr. Holran executed the retention letter attached to the Complaint as Exhibit "A". For the reasons set forth in R&S's Answer to averment number 40 as set forth above, R&S denies the remaining averments of this paragraph. 42. Denied as stated. It is admitted that on or about January 8, 2003, Mr. McLaughlin signed and delivered a corporate check made payable to R&S in the amount of $75,000 as a retainer for R&S's services provided to the Corporations. R&S is without information sufficient to determine what approvals or authorizations were given or withheld from Mr. McLaughlin by the Board of Directors of the Corporations, and therefore denies all averments regarding same. In further answer, and upon information and belief, Mr. Gates stopped payment on the retainer check prior to its deposit by R&S. 43. Denied as stated. R&S was not present at the special meeting of the Board of Directors at the Corporations on January 13, 2003, when any alleged vote was made regarding the retention of R&S, and therefore denies the averments of this paragraph regarding same. In further answer, the full Board of Directors had previously ratified the retention of R&S by the Corporations' Executive Committee on January 3, 2003, and consequently any vote rendered at the January 13, 2003 meeting would have been to terminate the representation that had already -7- been commenced. It is admitted that R&S's representation of the Corporations ceased on January 13, 2003. In further answer, R&S seeks payment in the matter for the services provided from January 3 through 13, 2003. 44. Admitted upon information and belief. REPLY TO FIRST AFFIRMATIVE DEFENSE 45. These averments are based upon legal conclusions to which no response is required. To the extent a response is required, R&S denies all averments as set forth for the reasons set forth above. By way of further denial, R&S represented the Corporations, and did not represent any individual Directors. For the reasons set forth in R&S's Answer to averment number 43 as set forth above, R&S denies all remaining averments of this paragraph. REPLY TO SECOND AFFIRMATIVE DEFENSE 46. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies all averments as set forth. By way of further denial, R&S represented the interests of the Corporations and did not represent the interest of any individual Directors. REPLY TO THIRD AFFIRMATIVE DEFENSE 47. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, for the reasons already set forth above, R&S denies all remaining averments of this paragraph. -8- REPLY TO FOURTH AFFIRMATIVE DEFENSE 48. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies all averments as set forth for the reasons set forth above. REPLY TO FIFTH AFFIRMATIVE DEFENSE 49. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies all averments as set forth for the reasons set forth above. REPLY TO SIXTH AFFIRMATIVE DEFENSE 50. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies all remaining averments of this paragraph for the reasons set forth above. REPLY TO SEVENTH AFFIRMATIVE DEFENSE 51. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies all averments o£this paragraph for the reasons set forth above. -9- REPLY TO EIGHTH AFFIRMATIVE DEFENSE 52. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies all remaining averments of this paragraph for the reasons set forth above. REPLY TO NINTH AFFIRMATIVE DEFENSE 53. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies all remaining averments of this paragraph for the reasons set forth above. REPLY TO TENTH AFFIRMATIVE DEFENSE 54. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies the averments of this paragraph. By way of further denial, the Corporations' Affirmative Defense of failure to join an indispensable party was raised via Preliminary Objections which this Honorable Court dismissed. REPLY TO ELEVENTH AFFIRMATIVE DEFENSE 55. This averment calls for a legal conclusion to which no response is required. To the extent a response is required, R&S denies the averment set forth in this paragraph. -10- REPLY TO TWELFTH AFFIRMATIVE DEFENSE 56. This avermem is based upon a legal conclusion to which no response is required. To the extent that a response is required, all averments are denied. In further answer, R&S' claims are based upon breach of contract, to which negligence is not a viable Affirmative Defense. REPLY TO THIRTEENTH AFFIRMATIVE DEFENSE 57. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies the averment set forth in this paragraph. REPLY TO FOURTEENTH AFFIRMATIVE DEFENSE 58. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies the averment set forth in this paragraph. REPLY TO FIFTEENTH AFFIRMATIVE DEFENSE 59. This avermem is based upon a legal conclusion to which no response is required. To the extem a response is required, R&S denies the averment set forth in this paragraph. REPLY TO SIXTEENTH AFFIRMATIVE DEFENSE 60. This averment is based upon a legal conclusion to which no response is required. To the extent a response is required, R&S denies the averment set forth in this paragraph. -11- WHEREFORE, Plaintiff, Rhoads & Sinon LLP, respectfully requests that this Court enter judgment in its favor and against Defendants and grant such other relief as the Court deems appropriate. By: Michael W. Winfield One So~th Market Square P. O. Bo~x 1146 Harrisburg PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff -12- CERTIFICATE OF SERVICE I hereby certify that on January 29, 2004, a tree and correct copy of the Plaintiff's Reply to Defendants' New Matter in the Form of Affirmative Defenses was served by means of United States mail, first class, postage prepaid, upon the following: Albert N. Peteflin, Esquire Gates, Halbruner & Hatch, P.C. 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 L~nne ~. Ritter Thomas A. French, Esquire Attorney I.D. No. 39305 Michael W. Winfield, Esquire Attorney I.D. No. 72680 RHOADS & SINON LLP One South Market Square, 12th Floor P.O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff RHOADS & SINON LLP, Plaintiff COMMUNITY FINANCIAL, INC. and COMMUNITY TRUST COMPANY, Defendants IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 03°5160 Civil Term JURY TRIAL DEMANDED PRAECIPE TO ATTACH VER/FICATION TO THE PROTHONOTARY: Kindly insert the attached Verification of Drake D. Nicholas to the Reply to Defendants' New Matter in the Form of Affirmative Defenses which was recently filed in ~ RHGADS & matter. N LLP ~'~ Thoma~ A. French Michael~W. Winfield One Soufh Market Square P. O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff 503629.1 VERIFICATION Drake D. Nicholas, Esquire, deposes and says, subject to the penalties of 18 Pa. C.S. §4904 relating to unswom falsification to authorities, that he is a Managing Partner of Rhoads & Sinon LLP, that he makes this verification by its authority, and that the facts set forth in the Reply to Defendants' New Matter in the Form of A~-~Defenses are tree and correct to the best of his knowledge, information and belie7 Date: CERTIFICATE OF SERVICE I hereby certify that on January 30, 2004, a true and correct copy of the Praecipe to Attach Verification was served by means of United States mail, first class, postage prepaid, upon the following: Albert N. Peterlin, Esquire Gates, Halbruner & Hatch, P.C. 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 Lynne ~. Ritter Thomas A. French, Esquire Attorney I.D. No. 39305 Michael W. Winfield, Esquire Attorney I.D. No. 72680 RI-lOADS & SINON LLP One South Market Square, 12th Floor P.O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff RHOADS & SINON LLP, Plaintiff COMMUNITY FINANCIAL, 1NC. and COMMUNITY TRUST COMPANY, Defendants IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - [,AW NO. 03-5160 Civil Term JURY TRIAL DEMANDED PRAECIPE TO DISCONTIN1UE TO THE PROTHONOTARY: Kindly mark the above-captioned action as settled, discontinued and ended, with prejudice. RHOADS & SINO~N LLP Thomfs A. Fr~n[l~ Michael W. Winfield One South Market Square P. O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for Plaintiff 513927.1 CERTIFICATE OF SERVICE I hereby certify that on April 16, 2004, a true and correct copy of the Plaintiff's Reply to Defendants' New Matter in the Form of Affirmative Defenses was served by means of United States mail, first class, postage prepaid, upon the following: Albert N. Peterlin, Esquire Gates, Halbruner & Hatch, P.C. 1013 Mumma Road, Suite 100 Lemoyne, PA 17043 DICKINSON COLLEGE, Plaintiff THEDA K_ELL, aPrda THEDA DENNISON, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO.03-5719 CIViL ACTIOTN-LAW JURY TRIAL OF TWELVE DEMANDED PRAECIPE TO SETTLE, DISCONTINUE AND END Plaintiff requests the above-captioned matter be marked settled, discontinued and ended without prejudice. MARTSON DEAJLDQRFF WiLLIAMS & OTTO D'IVi-ff R. Gallbwa2¢, l~squir& I. D. Number 87326 Ten East High Street Carlisle, PA 17013 (717) 243-3341 Date: April 19, 2004 Attorneys for Plaintiff CERTIFICATE OF SERVICE I, Nichole L. Myers, an authorized agent for Martson Deardorff Williams & Otto, hereby certify that a copy of the foregoing Praecipe was served this date by depositing same in the Post Office at Carlisle, PA, first class mail, postage prepaid, addressed as follows: Ms. Theda Dennison 175 Lathami Drive Griswold, CT 06351 MARTSON DEAI~'dDORFF WILLIAMS & OTTO Nichole L. Myers (J Ten East High Street Carlisle, PA 1713,13 (717) 243-3341 Dated: April 19, 2004