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HomeMy WebLinkAbout77-1928\, COURT OF COMMON PLEAS TWELFTH .JUDICIAL DISTRICT DAUPHIN COUNTY, PENNSYLVANIA JOHN C. DOWLING February 15, 1977 JUDGE COURT HOUSE HARRISBURG Miss Bernice Duke Secretary to President Judge Dale F. Shughart Cumberland County Court House Carlisle, Pennsylvania 17013 Re: Francis E. Fels, et al. v. _John/Lawrence Associates,Inc. , et al. Dear Miss Duke: I am enclosing herewith the original and three copies of the Adjudication in the above case. One copy is for judge Shughart and another for the Cumberland County Review. I am mailing copies to counsel--d~r ct. ;~ ~'' O N C . DOWLIlVG encls . 4 JCD:pk ~ f r. :~. ,~ry,~k y yours , ~-~~ •.rr FRANCIS E. FELS, BARBARA N. FELS, LEROY C . BROWN, BEATRICE BROWN, and LANCE R. KNAUTH JOHN/LAWRENCE ASSOCIATES , INC . , a Pennsylvania business corporation, and JOHN L. WORRILOW IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION NO. 1 OCTOBER TERM 1973 EQUITY A D J U D I C A T I O N BY THE CHANCELLOR: Plaintiffs admittedly signed on far a hazardous voyage but claim that they were at least entitled to an honest helmsman through the fathoms of corporate speculation, not being willing to accept the reflections of the Bard that "fortune brings in some 1 boats that are not steer'd" They are shareholders in the now drowned john/Lawrence Associates, Inc. (herE"~rafter JLA)• and.~av~ brought ~„ sea of accusations against Captain john L. Worrilow, a director. From the pleadings and -from the testimony adduced at the several hearings , we find the following threshhold facts: 1 , jLA is a Pennsylvania business corpo~atioii, organized under Articles of Incorporation filed on October 21 , 1970 , and at the present time is defunct. 2. Defendant, john L. Worrilow, is a majority stockholder in jLA and was elected a member of the Board of Directors on May 5, 1972. 3. The general purpose of jLA was to serve as an investment counselor and as a promoter of new business ideas . In addition , although it was never carried out, jLA wa s to serve as a broker of intrastate securities . 4. Beginning in 1970 and continuing through 1972, JLA promoted various "high risk" business interests. JLA would typically aid in the incorporation and sale of stock of a 1 . Cymbeline, Act IF, Sc. 3. eta 1. • - ~ new business venture, at times retaining an equity interest and would also furnish various advisory services for a fee. 5. From the date of incorporation until January 22, 1973, john Graf was the president and chief executive officer of jLA and, essentially, ran the business as a one man corporation. On January 22, 1973, the Board of Directors voted him out of office although he still continued as a director. 6. At this time, jLA had no significant income and was barely keeping its head above water. Accounts payable included $1 , 500 to airplane pilots , payments due on a company airplane, rent due, ahd a disputed engineering survey fee. Assets were cromprised of office furniture, equity in three mo't'or vehicles and a twin engine airplane, and certain accounts receivable and investments which, where relevant, will be subsequently discussed in detail. 7 . After the ja nua ry 2 2 , 19 7 3 meeting , defendant Worrilow assumed control of a 11 corporate activities . No Board of Directors meetings were held, no officers elected, and except fora shareholders' meeting called by plaintiffs after their formally filed written request for such a meeting was ignored, no shareholders meeting was ever held . Plaintiffs' claims fall into two categories: 1) that defendant, Worrilow, negligently managed the affairs of jLA ,and 2) that, while acting as a director, he invested his own money in corporate ventures without first appraising JLA of the opportunity, thereby depriving JLA of an investment opportunity. Both of these are alleged to be in violation of his fiduciary duty to jLA. Before discussing each separate transaction, some basic and fundamental corporate law applicable to the present facts should be recognized.. The Business Corporation Law, §1408 is a suitable departing point. "Officers and directors shall be deemed to stand in a fiduciary relation to the corporation, and shall discharge the duties of their respective positions in good faith and with that diligence, care and skill which ordinarily prudent men would exercise under similar circumstances." 15 P.S. §1408. 2 • ~-~. ~ ~ ~ - ~ Our Supreme Court, per Justice Roberts, said that directors and officers must ., . "adhere to the highest standards of respo~5"ib~e 'fiducier~ conduct" . SEABORD INDUSTRIES, INC . v . MONACO, 442 Pa . 256 (19'1) ~, In SELHEIMER v . MANGANESE CORP. , 423 Pa . 563, 581 (1966), the court listed . .~ .~ y ,3 certain "well established principle'" i~s2d" in determining the personal liability of a director. ". (a) the directors of a business corporation are not insurers that their actions will result in pecuniary profit and they are, in the course of their duties, called upon to undertake certain calculated 'business risks'; (b) for errors in judgment, exercised in good faith, the directors of a corporation should not be penalized; (c) 'what may be negligence in one case may not be want of ordinary care in another , and the question of negligence is therefore ultimately a question of fact, to be determined under all the circumstances": BRIGGS v. SPAULDING, 141 U.S. 132, 152, 11 S.Ct. 924, 931. (Emphasis supplied). Cf. Bowerman v. Hamner, 250 U.S. 504, 39 S. Ct. 549. Also implicit in §1408 is that corporate officers may not usurp opportunities available to the corporation. BROWN v. PRESBYTERIAN MINISTERS FUND, 340 F.Sup. 748 , 750 (E.D. Pa . 1972) . This so called "Corporate Opportunity Doctrine" is a species of the duty of a fiduciary to act with individed loyalty. In SEABOARD INDUSTRIES, supra, the court stated the Corporate Opportunity Doctrine as it has been interpreted by Pennsyl- vania Courts: ". [Officers and directors] must devote themselves to the corporate affairs with a view to promote the common interests and not their own, and they cannot, either directly or indirectly, utilize- their position to obtain any personal profit or advantage other than that enjoyed also by their fellow shareholders: BIRD COAL AND IRON CO. v. HUMES, 157 Pa. 278, 287, 27 A.750, 752; PORTER v. HEALY, 244 Pa. 427, 435, 436, 91 A. 428, 431. In short, there is demanded of the officer or director of a corporation that he furnish to it his undivided loyalty; if there is presented to him a business opportunity which is within the scope of its own activities and of present or potential advantage to it, the law will not permit him to seize the opportunity for himself; if he does so, the corporation may elect to claim all of the benefits of the transaction. Nor is it material that his dealings may not have caused a loss or been harmful to the corporation; the test of his liability is whether he has unjustly gained enrichment. (p. 259, 260) . To establish liability, the plaintiffs must show that the directors breach of his fiduciary duty was the proximate cause of the injury to the corporation. BELLIS v. THAL, 3• ~~~ 373 F. Sup. 120 (E .D. Pa. 1974) and for liability to attach for theft of corporate opportunity, it must be shown that the director has profited or been unjustly enriched. HOWELL v . McCLOSKEY, 3 57 Pa . 100 (1953) . Plaintiffs remedy in Corporate Oppor- tunity cases is either damages or the imposition of a constructive trust. BROWN>v. PRESBYTERIAN MINISTERS, supra. With the above principles in mind, we shall separately examine the diverse and 2 sometimes curious business undertakings of jLA ,incorporating therein the necessary Findings of Fact. 1 . THE EHRGOOD TRANSACTION, OR THE CASE OF THE PURLOINED NOTE . On September 19, 1972, 40,000 shares of jLA were issued to Pauline Ehrgood, john Worrilow's sister. Consideration took the form of a demand note for $35,.000, payable on March 1, 1973 and $25,000 in cash. Shortly after Mr. Graf was fired, he returned the note to his sister, receiving nothing in return, thereby depriving jLA of a $35,000 asset. A clearer example of breach of fiduciary duty can hardly be imagined. For those who are over meticulous, BELLIS v. THAL, supra, should help. The court there found that the fiduciary duty had been violated because a debt of $22,950 was canceled in exchange for the redemption of 2,295 shares of stock w#:th a $10 par value, holding that there was no obligation on the corporation's part to redeem the stock. Defendant contends that he is not responsible for his conduct because he returned the note only after consulting with corporate counsel who advised him that it was 2. Not relevant to the present controversy, but worthy of mention, are some of the short lived and speculative ventures entered into by jLA ~,.urdh as: the matter of the lost vehicles , the unsuccessful balloon ascent a;nd the Ethiop'ia~ safari. One of the corporations more substantial investments was $45,0'0`0 `in 'United~Hover draft, Inc. which had purchased the patents to a new modification to be used on a-FHovercraft vehicle. Three of these air floating Hovercrafts were taken by a 11/Ir. Bens{or to California where they were to undergo modifications . Mr. Benson and the three vehicles disappeared. jLA also advanced an undetermined amount of money for expenses ~to Rc~,bert Sparks who, after two unsuccessful attempts, was trying to cro~s,tle At~ar~tic' Ocean i'n a hot~air balloon. Perhaps the most extraordinary venture was. jLA Productions which promoted a safari to Ethiopia to bring back a "new" high quality leather. 4, 4~5 • - ~ worthless . We cannot agree with defendant. A director can only rely on advice of counsel if it is a rea sonable reliance . In CORNELL v . SEDDINGER, 237 Pa . 389 (1912) , the court held that a director who relied on a treasurer's report could be held responsible if there were facts which would arouse the suspicions of an ordinarily prudent businessman. See also 25 A.L.R. 3rd 941E 23. Similarly relying on advice of counsel will be no defense to directors of a savings and loan association where they permit a loan prohibited by statute. FEDERAL SAVING AND LOAN INSURANCE CORP. v . GEISEN, 392 F. 2d 900 (1968) . Referring to instances where directors or trustees commit ultra vires acts on advice of counsel, FLETCHERS CYCLOPEDIA CORPORATIONS, §1027 (1975) enlightens us with the following: "Where -the question of ultra vires is involved in doubt, the cases go far to hold that the advice of counsel is a protection to the trustee or director who has sought such advice and honestly acted under it. But while ~dvi.ce~of counsel is sometimes deemed a defense, it is not always a defense Indeed, it is difficult to imagine an instance of any kind where one charged with a specific duty can negligently violate that duty with impunity by simply obtaining from some attorney advice which is obviously repugnant to the plain facts of the case". "A director or officer of a corporation cannot excuse himself from liability for negligence by urging that he acted in a state of mental lethargy induced by confidence in or reliance upon a domination of others" . FLETCHERS CYCLOPEDIA CORPORATIONS, §1060 (1975) . We believe that the facts, were known ~or should have been known by the defendant who had served as a director of other. corporatic~,ns in .the past and, in effect, was managing the affairs of jLA'singlehandedly. If the question was interwoven with legal -, complexities , defendant's reliance :would have been justified . .Such is not the case. The question was simple. Was Mrs. Ehrgood's promissory note without value? Defendant believes that it was because the shares received by Mrs . Ehrgood were not worth the price paid, ($60,000). If this is the case, Mrs. Ehrgood has a cause of action against jLA. But the adequacy of the consideration does not make her note worth- less in the eyes of JLA. We find that defendant breached his fiduciary duty by returning the note and his negligent reliance on corporate counsel will not relieve him from liability. 5 . t-(, 1 ~ • - ~ 2. JOHN/LAWRENCE ASSOCIATES, INTERNATIONAL, OR THE CURIOUS. INCIDENT OF THE CHINESE AMBASSADOR. Former President Nixon's White House years will no doubt receive mixed reviews by historians. Few, however, would disagree that his most notable achievements came in the area of foreign policy, specifically with Communist China . His 1972 visit not only provided Americans with a look at this mysterious country, it also opened the door for potential trade between U.S:: Corporations and China. Enter john/Lawrence Associates, International (hereinafter jLAI.) which was incorporated by JLA in August, 1972; its main purpose being to engage in trade with China . JLA received 200, 000 shares in JLAI which represented one-third of the available shares . The principals of JLAI, john Rubin, Paul Applebaum and David Chow were also given 200,000 shares between them. There is testimony as to certain private sales for $1 .25 per share to three individuals -Loose, Lu and Mayer although the evidence is quite scant on this point. In October, 1973, Messrs. Graf, Chow and Rubin met with the Ambassador of the Peoples Republic of China at the Chinese Embassy in Ottowa , Canada . They were given permission to attend the Centori Fair and to engage izi trade with China . Plaintiffs' complaint centers around a meeting in New York in February, 1973,where Worrilow met with the individuals who were managing JLAI and returned to them various ~. corporate records , together with the stock- certificate, for the 200, 000 shares which had been issued to jLA. Defendant received no consideration for the return of the stock. Plaintiffs contend that defendants conduct was a breach of his fiduciary duty. Defendants' response is that there was some confusion as to who was the president of JLAI because Mr. Rubin had acted as president while in China . Defendant also suggests that no value can be established for the shares held by jLA in JLAI. In any event, it is obvious that Mr. Worrilow breached his fiduciary duty. Regardless of who was president of jLAI, Worrilow did not act in the best interests of JLA when he surrendered a corporate asset, receiving no consideration. 6. ~~~ • - i However, we do concur with defendants that there is insufficient evidence to establish the amount of damages resulting from this oriental puzzle. There is some vague reference in the testimony to an offer of $150,000 for the stock held by jLA in the Inter- national Trading. Corporation. There is one reference to an offer being made by an attorney Goldstein, not otherwise identified (N.T. 56) . Later there is testimony that a gentleman whose name cannot be recal~l,ec~~~=but who was an auctioneer of some sort had z~~~. ..x *: v made an offer (N.T. 59) . A party cannot recover,:~vi'thdut establishing at least a reasonable basis for an inference of fact that he has been actually ct~mage~l: 'The amount of damages are not ;: ~. presumed but must be proven by the establishment of facts sufficient to furnish a basis for their assessment, according to some legal rule. 11 P.L. Encyc. 235. The burden is upon the person seeking damages to fix the loss with reasonable precision through witnesses with knowledge of the facts. RUNNER v. NAT. INDUST. BLDRS., 64 D. & C. 2d 65 (1972). See also DONAHUE v. R. C. MAHON CO., 210 Pa.SuperiorCt. 210 (1971). The testimony quoted above, which is all that can be derived from the recon~,in no way meets the required standard, and hence the breach of duty is "Damnun Absque Injuria". During the time that defendant was a .director, he personally invested $130,000 in jLAI, most of this after january 22, 1973. There is no question that he was introduced to the New York principals as a director of jLA. Plaintiffs allege that by investing his own money without first notifying jLA and giving them an opportunity, he breached his fiduciary duty. We have no difficulty in finding a transgression of the fiduciary obligation. Defendant first had to present the opportunity for investment to the corporation. If he had done so and jLA had declined, it would be a different 'story. Defendant contends that there was no breach of duty or theft of Corporate Opportunity because he never made any money. This. is partially correct. He did deprive JLA of the 7 , y-t ~ '.~ R, s. opportunity for "potential profit" in JLAI This i'i~ its"elf is a breach of his fiduciary duty. But for a director or officer to be liable for theft of Corporate Opportunity, there must be some profit or enrichment on his part. jLAI is now defunct and defendants' investment lost; thereby wiping out any possibility of profit. Therefore, defendant cannot be liable for violating the Corporate Opportunity Doctrine. 3 . BRECK ELECTRONICS -- OR THE ADVENTURE OF THE TAPES . Breck Electronics operated three retail stores, specializing in stereo tape players. On October 12, 1970, JLA entered into an agreement to assist Breck in acquiring additional capital and loaned them $5,000. Before he was fired, Mr. Graf tried, without success, to collect what was owed JLA. In the spring of 1973, defendant invested $25,000 of his personal money, without notifying the corporation. Defendant testified that he learned of Breck Electronics while serving as a .director of JLA. Plaintiffs assert violation of the Corporate Opportunity Doctrine. However, in 1973, Breck Electronics went into bankruptcy and defendants' investment was lost. Since defendant has not profited or been enriched, he is not liable for theft of Corporate Opportunity. 4. GREAT EASTERN LAND AND CATTLE COMPANY -- THE SINGULAR PROBLEM OF THE GREAT TRAIN ROBBERY. Great Eastern Land and Cattle Company had purchased a railroad located in the Ozark mountains which had been the scene of a number of robberies by Jesse James. Thinking that this would be a profitable tourist attraction, they requested a loan from jLA . Mr. Graf and Mr. Worrilow met with representatives of Great Eastern and in July, 1972, jLA loaned them $10,000 and received a mortgage on residential property in Texas. In August, 1972, Mr. Graf was informed by the president of Great Eastern that they did not need jLA's further assistance because Mr. Worrilow agreed to loan them $50,000. As in the Breck Electronics situation, there was an infraction of the fiduciary duty ~. g ~ (~ . . • - ~ but defendant has received no profit or return on his investment and therefore cannot be accountable for usurping a Corporate Opportunity. 5. THE CURTIS LIFT TOW, OR THE AFFAIR OF THE MISSING BROKER. On November 1 , 1972 , jLA purchased from one Joseph Curtis .the patents for the "Curtis Lift Tow" , a device that could be attached to a pickup truck which would enable it to pull a semi-trailer. jLA had a tentative agreement to sell the patent to a Mr. Terrell for $ 50 , 000. Three weeks after Mr. Terrell met with jLA , he withdrew his offer, saying that he had received a letter from Mr. Bartholomew, a jLA employe. The contents of the letter are not known. Mr. Bartholomew subsequently offered to purchase the patents from jLA on December 15 , 19 72 , paying $15 , 000 to JLA for the patent rights . Plaintiffs contend that Bartholomew was merely acting as an agent for the defendant and that it was a personal investment on his part. Plaintiffs' claim is without merit. There is nothing in the record to suggest any principal/agent relationship. Bartholomew did receive the money from defendant but it was merely a loan, evidenced by a promissory note. Title was in Bartholomew's name. Mr. Graf said that he was under no compulsion to sell to Bartholomew and he consulted no other potential buyers. If there was any interference, it was by Bartholomew. 6. THE COUNTER CLAIM, OR THE .REMARKABLE DISAPPEARANCE OF THE CORPORATION Defendant, by way of a couriterclaim;seeks indemnification from jLA fora trans- action involving Arthur Miller Associates, In:c. , a loc~a~l residential developer who came to jLA to secure credit for new home construction. .jLA obtained $125,000 for Arthur Miller from the Dauphin Deposit bank and, in return, jLA gave a promissory note to Dauphin Deposit, defendant signing as guarantor. Arthur Miller was unable to meet its obligations and the bank called the loan. JLA could not pay and defendant was forced to reimburse the bank from his personal funds . His main complaint seems to be that he 9. ~a0 Y.. i ~. ~ has no rights in the mortgage which jLA had secured on unsold homes of Arthur Miller.. In August, 1974, an action to quiet title was instituted by Capitol industries against JLA. jLA was served at its prior address on Simpson Ferry Road. However, corporate offices had been previously moved to another location. No change of address was given. to the Secretary of the Cgm~onwealth as required by law. 15 P.S. 421, 1893, t P .L . 3 55 , June 8 . jLA did not appear for the hearing and the mortgage was declared void . When a corporation changes its address , the duty rests with the president to notify the Secretary of the Commonwealth and theAuditor General. 15 P.S. 421. While the defendant did not hold the title of president, he was for all intents and purposes the chief executive officer of jLA, after the departure of john Graf . It was , therefore, incumbent upon him to notify the Secretary of the Commonwealth of the corporation's new location. In not doing so, we find that he was negligent. "No indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence of misconduct in the performance of his duty to the corporation unless and only to the extent `that the court of common pleas of the county in which the registered office of the corporation is located or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circum- stances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court of common pleas or such other court shall deem proper. 15 P.S. 1410 (b) as amended, 1968, July 20, P.L. 459. 10. '~ ar 1 ~ CONCLUSIONS OF LAW 1 . With respect to the Ehrgood note transaction,_we find defendant breached his fiduciary duty to JLA by returning a promissory note for $35,000 to .Mrs. Ehrgood and receiving no consideration in return. 2. In the transactions involving JLAI, defendant breached his fiduciary duty to JLA, first by returning 200,000 shares of stock; and second, by investing his own money in JLAI without notifying jLA of the opportunity to do so. However, .plaintiffs have failed to prove any damages resulting from these breaches . 3. In the situations involving. $ck electronics and Great Eastern, we find defendant ,4 .. breached his fiduciary duty in not offering-the investment to jLA but is not liable for theft -. of Corporate Opportunity because there as no profit'o'r enrichment on his part. 4. We find there was no~breach cif fiduciary duty orb theft of Corporate Opportunity i nvolving the Curtis Lift Tow in that there was no interference by defendant in the lost sale by JLA, or subsequent purchase by;a corporate employe. 5. Defendant is not entitled to any indemnification from JLA for his payment of JLA's note of which he was a guarantor, because his loss was due to his own negligence. 11. ~~~ • „~.~, , . . DECREENISI ~r- ~ .. 9..:'X ` i e P" v. ~ AND NOW, this 15th day of February, T977, it is hereby Ordered and Decreed that judgment be entered in favor of the plaintiffs against the defendant, john L. Worrilow, in the sum of $35,000 for the use and benefit of defendant, John/Lawrence Associates, Inc . The Prothonotary is directed to enter this Decree Nisi and to notify the parties, or their counsel. If no exceptions are filed within twenty days after entering of this decree , a final Decree Upon Praecipe will be entered . 12. y-a3 i; .. 4 .' - _ i _,. , . ..' ,, . , ~. ~.. . - r :~~ . . - ~,b~. ~1 L~'~ o~~_ 31:31S 2-18-7~ FRANCIS E. FEL5, BARBARA N. FELS, LEROY C. BROWN, BEATRICE BROWN AND LANCE R. KNAUTH, Plaintiffs v. JOHN/LAWRENCE ASSOCIATES, INC. . a Pennsylvania business corpora-: tion and JOHN L. WORRILOW, Defendants TN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 1 EXCEPTION TO ADJUDICATION CIVIL ACTION OCTOBER TERM, 1973 IN EQUITY John L. Worrilow, by its counsel McNees, Wallace & Nurick, excepts to the finding by the Court, as more fully reviewed under paragraph 1 of the adjudication, titled "The Ehrgood Transaction", and the conclusion of law numbered 1, that defendant breached his fiduciary duty to the corporation in returning the said note to Pauline Ehrgood, and further to the decree nisi, that judgment be entered against the defendant for the sum of $35,000. The basis of such. exception is that the conduct of defendant as recited in the adjudcation, did not constitute a breach of his fiduciary duty to the corporation and further that in any event the conduct of the defendant in returning the note did not cause any monetary damage to the corporation, since the note and the cause of action upon the note have not been extinguished. McNEES, WALLACE & NURICK By C/ C~CJ~ ~ ~-- ~ ~~~~ David E. Lehman Attorneys for John L. Worrilow ~ ~~ ~~ ~~~ ~ r ~ ~~ i -- FRANCIS E, FELS, BARBARA N, FELS , LERQX C , BROWN , BE~,TI~Z CE , BROWN AND LANCR ~. , I~NAUTH , ~l.aintiffs, , t v, JOHN./LAWR,ENCE. ASSQCI_ATES, INC, , a Pennsyhra,nia business corpora Lion and JOHN L, WORRILOW, ; De,f endants , c I',N THE COURT. OF CON~MON PLEAS OF CUMBERL~VD COUN'~X, ~ENNSYLV,ANIA CZV?L ACTION NO, 1 OCTOBER TERM, 1973 ZN R:QUZTX PLAINTIFFS' EXCEPTIONS TO ;A,DJUDI;C~T~ON 1, Plaintiffs, by their counsel, Wm H, Nash Jx,, Excapts to the Findings of the. court and its Conclusions of Law in the above captioned case as followsc (a) Exception to Conclusion of Law No, 2 in so far as the Court holds .that ,,.,, Plaintiffs have failed to prove any damages resulting from these ba;eaches,",.fox the reason that Plaintiffs believe .that they did prove damages, (_b) Exception to Conclusion of Law No, 3 in so far as the .Court. holds ",,,, we-find. defendant,,,,, is not liable for theft of Corporate Opportunity because there was no profit or enrich-- went on his paxt~" for. the reason that Plaintiffs believe that .they prQVed damages, or alternatively .that profit ox enrichment is not necessary under the circumstances of this. case, (c) Exception to Conclusion of Law No, 4 in Which the Court held "We.find there was no breach of fiduciary duty ox .theft of Corporate. Opportunity involving the Curtis Lift Tow in that there was no interference by .defendant in the lost sale by JLA, or sub- sequerit purchase by a corporate employe," for the xeasgns set forth in the preceeding clause, 2, Plaintiff also. excepts to .the pecxee.Nis in so far as it pro, vides for a judguzent only in the sum of $35,OQ0,00 rather .than the ~. 1 ~. ~- a ~ .y y. ~ larger sum which would follow from a revexsal of the CQnc.lusons of Law except from above.. 3, P1a,lnt~~s excepts from the k'nc~ngs of the Couxt .n sa fax as they support the Conclusions of Lsw which are excepted to above by ~laint,~~s , 4, ~lai,nta.ffs furthex except from the Couxt's failure to find that they axe entthed to counsel fees s,nd cost,, ~, .,~ a M~«~w- ~ ~. . ~,, t4 ney fo ~lalnt~,~fs 2 ~a~ ~ 1~ LAW OFF[CES POST OFFICE BOX 801 414 N. THIRD STREET HARRISBURG, PENNSYLVANIA 17108 WM. H. NAST, ,J R. ANTHONY J. GIANFORTI May 9, 1977 Prothonotary of Cumberland County Cumberland County Court House Carlisle,- Pennsylvania TELEPHONE (717) 299.064!{ RE: Fels. v, John Lawrence Associates, I.nc , et a1 N0, 1 OCTOBER TERM, 1973 IN EQUITY. (Judge Dowling, Visiting Judge) Gentlemen; Would you be so kind as to schedule the above captioned case for argument on Plaintiff's and Defendant's Exceptions to .the Adjudi- cation by the Court dated February l5, 1977, Since the case was heard by Judge Dowling, it is not clear to me whether this would be scheduled for the argument court to be-heard June 8, or whether the argument would be specially set, In either events would you advise me as to the date of the argument and the times for the filing of the briefs , I am sending a copy of this Letter, thereby giving notice of my request that this be set down for argument, to bath David LeYr~nan, Esquire, Attorney for Defendant, and Judge Dowling, If you require the completion of printed forms, kindly forward a set to me fcr execution, - Very truly yours, Wm H. Nast, Jr.~ -- WHN/mlk cc; David Lehman, Esquire The Honorable Judge Dowling ~30 r3 ~, -~ r~ ~~ ..-,. G --' '° :. ,..x ~ ;' ~... o _-- n C,~ t~ ~ G~r ~' ~y ~ ~~ ...s • COURT OF COMMON PLEAS TWELFTH JUDICIAL DISTRICT DAUPHIN COUNTY, PENNSYLVANIA ~101-tN C. DOWLING June 13, 1977 JUDGE Miss Bernice Duke Secretary to President Judge Dale F. Shughart Cumberland County Court House Carlisle , Pennsylvania 17013 Re; Francis E , Fels et al . , v , john/Lawrence Associates , Inc. , et al. No. 1 October Term 1973 Dear Miss Duke: COURT HOUSE HARRISBURG I am enclosing herewith the original and two copies of a Final Decree in the above matter. Copies have been forwarded to V ~~: encls . cc: David E. Lehman, Esquire William H. Nast, jr. , Esquire jCD:pk ~f- 3l 1 ours , ~4. ~~~ . DOWLIN "' 1 ~ FRANCIS E . FELS , BARBARA N . EELS ,;~,,, LEROY C . BROWN, BEATRICE" BROWN, and LANCE R. KNAUTH v. JOHN/LAWRENCE ASSOCIATES, INC . , a Pennsylvania business corporation, and JOHN L. WORRILOW IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 1 OCTOBER TERM 1973 EQUITY -- CIVIL ACTION. O P I N I O N BY THE COURT: 1 The Chancellor, in an adjudication under date of February 15, 1977 ,held that the defendant, john L. Worrilow, as a result of a breach of his fiduciary duty, was liable to the plaintiffs in the sum of $35,000 but that with respect to various other transactions in which he had also breached his fiduciary duty, he was not liable either because plaintiffs had failed to prove damages or because no profit or enrichment resulted to the defendant. Both parties have filed exceptions to the adjudication which, however, raise no factual or legal issues which were not fully discussed in the Chancellor's opinion. A review of the matter leads us to the conclusion that the Findings of Fact and Conclusions of Law of the Chancellor should be sustained. We therefore enter the following FINAL DECREE AND NOW, this 13th day of June, 1977, the exceptions of both plaintiffs and defendant, John L. Worrilow, are overruled and a Final Decree is entered in accordance with the Decree Nisi. 1 . Not a s yet reported . FRANCIS E. FELS, BARBARA N. FELS, LEROY C. BROWN, BEATRICE BROWN, and LANCE R. KNAUTH, Plaintiffs. v. JOHN/LAWRENCE ASSOCIATES, INC., a Pennsylvania business corpora- tion, and JOHN L. WORRILOW, Defendants. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTX, PENNSYLVANIA Ef~UITY - CIVIL ACTION N0. 1 OCTOBER TERM 1973 NOTICE DF APPEAL et al., Notice is hereby given that Francis E. Fels,/plaintiffs above named,. hereby appeals to the Superior Court of Pennsylvania from the order. entered in this matter on the 13th day of June, 1,977. P~. 0~. BOXY 3 414 North T~. Harrisburg (717) 233-~ ........... ........ .squire i ' d Street ennsylvania 17108 45 ~. 3 ~- I hereby certify Ghat Z am .this. day serving. the foregoing document. upon the persons and in .the manner indicated below, which service satisfies the requirements of Pa, R.A.P. 121:. David E. Lehman, Esquire McNees, Wallace & Nurick 100. Pine Street Harrisburg, Pennsylvania 17108 Hon. John C. Dowling Dauphin County Court House Front & Market Streets Harrisburg, Pennsylvania 17108 Dated: June. 23, 1977 /[ / f 1///// V f Rua ba. i.i..va., v , uv..i..~_+,... P . 0 . Box. 30 414 North TH' d Street Harrisburg, Pennsylvania 17108 Of counsel for Francis E. Fels, et al. Plaintiffs. ~ 3 S° ` } ~k`'.ti y C i ti- x .~ X .. - ~ ~ - - ~ ~•.~ ~' . ~, - ,. ~ .~ .. ,. ~~/V~ Y ',~, FRA_JCIS E. FELS, BARBARA N. FELS, LEROY C. BROWN, BEATRICE BROWN, and LANCE R. 1:t~AUTH, Plaintiffs. v. JOIIIJ/LAWRET3CE ASSOCIAt'ES, INC. , a Pennsylvania business corpora- tion, and JOHN L. WORRILOW, ItJ T"t~E COURT OF COMI~40it PLEAS . OF r CU2•SBERL.~.JD COUi3TY, PEPJNSYLVANIA EQUZTY -CIVIL ACTIOiY :: t Defendants. ~d0. 1 OCTOBER ~'ERM • ~ I973~ . ~ . ~. ~ ~ v ~ Z :mss c-a .~ . ' NOl ZCE OF APPEAL m N ~, ~; cp ~ --~ _ =~ ; ~+ • ;~ ~ ~, O et ate., ~ ~ -, Notice is hereby given th at Francis E. Fels, ~~~~in~~.€'~sk:~ Ye named, hereby appeals to the Superior Court of Pennsylvania fror.~ the order entered in this matter on the 13th day of June, 1977. __~ ~~ ~~1~-s~~gt~~rd Street Harrisburg,-Pennsylvania (717) 233-S84S 17108 Service of the Notice of Appeal is hereby accepted and a receipt of a copy acknowledged. ~~~~~~ David E. Le man, Esquire, Attorney for the Defendant John L. Worrilow McNees, Wallace & Nurick 100 Pine Street Harrisburg, Pennsylvania 17108 ,'s ' i ~ ~~ 'on. Jo Dow ing Specia y Presiding ~-} 3'1 r,~-~ C.~. om ~~ t " ~ ~ _..., -,~ . :- ~1 ;~itrtll ~~ .t M r"" ~taC9 J ~ ~ x~2CD _ ~ ~ ~~#+M ..J ~ ""K~ "'~-~ 1• ~) FRANCIS E. FELS, BARBARA N. IN THE COURT OF COMMON PLEAS OF FELS, LEROY C. BROWN, BEATRICE CUMBERLAND COUNTY, PENNSYLVANIA BROWN, and LANCE R. KNAUTH, Plaintiffs EQUITY - CIVIL ACTION v. ' JOHN/LAWRENCE ASSOCIATES, INC., NO. 1 OCTOBER TERM, 1973 a Pennsylvania business corpo- ration, and JOHN L. WORRILOW, 'Defendants NOTICE OF APPEAL Notice is hereby given that John L. Worrilow, defendant above named, hereby appeals to the Superior Court of Pennsylvania from the order entered in this matter on the 13th. day of June, 1977. MCNEES, WALLACE & NURICK Jul 12, 1977 By ~~y~~- , Y David E. Lehman P. O. Box 1166 Harrisburg, PA 17108 0717) 236-9341 ~ ~~ r t ~) T hereby certify that I am this day serving the foregoing document upon the persons and in the manner indicated below, which service satisfies the requirements of Pa. R.A.P. 121, by certified mail, return receipt requested. William H. Nast, Jr., Esquire P. O. Box 301 414 North. Third Street Harrisburg, PA 17108 Hon. John C. Dowling Dauphin County Courthouse Front & Market Streets Harrisburg, PA 17108 Dated : July 12 , 19 7 7 ~Q~lfr ~ ~• ~'1~12~~./ David E. Lehman Of Counsel for John L. Worrilow, Defendant ~- 3 9 I r' -__ p y ,~ 51 I ,~ F ~S cIS ~ - FELS , BARBARA N . p LEROY C. BRO~~1N, BEATRICE \~~ $ROWIV, and LANCE R. KNAUTH, Plaintiffs ,~v . ~HN/LAWRENCE ASSOCIATES, INC.,• Penn~ania business cor~o- atibn, and JOHZt L. WORRILOZ9, Defendants _ r l ~4 IN THE COURT OF CUMBERLAND COUNTY ..~ EQUITY - .CIVIL A.:TION N0. 1 OCTOBER TERM, 1973 ~ ~1 ~F .L~tIA ris .. C O ~ ~ ~ C r~ ~ NOTICE OF APPEAL ~ ~ r ~ ~ 9 ~'' a ~ ~ .~, ~ r++ r - Q ~ C'~ d ;~ ~ "r! Notic~ is hereby given that John L. Worri~."ow,~ ~ ~ -• defendant above named, hereby appeals to the Superior Court of Pennsylvania from the order entered in this matter on the 13th day of June, 1977. July 12, 1977 °'~ .-q - .. .' J ~ i .~, p~ /" ..«~ McNEES, WALLACE & NURICK By ~aCJ/ ~~~ David E. Lehman P. O. Box 1166 Harrisburg, PA 1.7108 (717) 236-9341 i ' ,. y ~ i g ~~~. ` 1~ '° air i; ~ _ ' ` ti: ~~~~ ~ ~ - y ~~ ,. -.,.. ,i ~~••~ ..r.,.....~. _ r .. ~~ ~- yr ~. r- e--- w- .s ~-~ ..~z as ~ <t u~ w ~ u~ as-m ,~ c~~+-x r t, m ,,,Gr +~- a~ ~ cage _~ w~~2 c:: '~ ~ ~ F i- ...~ "' o~ 7' ~ ,•~'~_ ~~ _ ~. ~, ~~~C l , i ~~ ~g ~~ 2~ u ~~ ~, C,~ , I CERTIFICATE AND TRANSMITTAL OF ~RECQRD UNpER ~A1 iJ 5 Y i ~ V Ara i A ~,~,~,~S2F...6P.E~~LJ~.BT~_~.'31~ ),r t~_1 g33.Sz.~. To the prothonotary of the appellate court to which the within matter has been appealed: . T~iti UfJUERSiGrJE1?, prothonotary c1t the Court of Comr~on Pleas of : lij~,~~,. ,L(~,. County, the said court being. a court of record, do hereby certify that annexed hereto is a true and correct copy of the whole and entire record, includir-c~ an opinion of the court as required by Pa. R. A. P, 1925, the ori41na1 papers and exhibits, if any, on file, the transcript of the proceedings, if any, and the docket entries in the following matter: in compliance ~+ith Pa. R. A. P, 1931(c). The documents comprising the record have been numbered from Na. 1 to Sao, ~~~ and attached hereto as Exhibit A is a list of the documents correspondingly numbered and identified +rith reasonable definiteness, including ~xith respect to each document, the number of paces comprising the document. The date on to the appellate court ^r [Seal of CaurtJ which t~ record has been transmitted 1 s __._.d~~.~...d.. R ///~~ ~w+~+r~....~w~.wr...r~r.w.w~....~..s Prothonotary ~ • Among the Records and ,Proceedings enrolled in the court of Common Pleas in and for the county of C ~m r1 and in the Commonwealth of Pennsylvania No. 1928 Oct. T. 1977 & No. 2042 Oct. T. 1977 to No. 1 Oetob r Term, 19 73 is contained the following COPY of A~$earance DOCKET ENTRY $15.50 Pd. Atty. Francis E. Fels, Barbara N. Nast, Jr. Fels, Leroy C. Brown, Beatrice Brown and Lance R. Knauth 1 vs. John/Lawrence Associates, Inc. a Pennsylvania business corporation and John L. Worrilow Sntd. Dec. 7, 1973 T. & E. Atty. $15.50 Sheriff's Costs: Docketing 10.75 Service 1.20 Lebanon Co. 10.15 Pd. by Atty. 22.10 12-27-73 Atty. Pd. 6-22-77 25.00 Atty. Pd. 7-12-77 20.00 Page No. 1 - 10 December 7, 1973, Complaint in Equity filed returnable within twenty (20) days from date of service hereof. 11 - 22 January 24, 1974, Sheriff's Return, filed. 23 - 30 September 3, 1974, Preliminary Objections of Defendant John L. Worrilow, filed. __ 31 - 34 January 14, 1975, Amended Complaint, filed. 35'- 39 January 14, 1975, Stipulation to Filing of Amended Complaint and Withdrawal of Preliminary Objections, filed. 40 - 56 February 6, 1975, Answer of John L. Worrilow to Plaintiffs' Amended Complaint, filed. 57 - 62 April 21, 1975, Answer of Plaintiffs to Defendants' New Matter nd Counterclaim, filed. And now, April 21, 1975, service of the enclosed Answer to N. M. is hereby accepted. W. Jeffery Jamouneau, Atty. 63 - 64 May 19, 1975, Order of Court, filed. -AND NOW, May 19, 1975, it is ordered and directed that pre- trial..of the above cases be held at 9:30 a.m., June 9, 1975 in Chamb Court Room #2, in the order listed above. In partition cases, the pre-trial conference will serve as the preliminary conference under Pa. R.C.P. 1558. At pre-trial conference dates for trial will be fixed. By the Court, Clinton R. Weidner, J. July 28, 1975, Amended Subpoena Duces Tecum, filed. 65 - 66 October 22, 1975, Order of Court, filed. AND NOW, October 22, 1975, at 10:00 a.m., it is ordered and directed that pretrial conference on the above matter be held November 5, 1975, at 10:00 a.m., in Chambers, Court Room No. 2 and trial on the above matter be held at 11:00 a.m. the same date. By the Court, Clinton R. Weidner, J. 67 February 20, 1976, Order of Court, filed. AND NOW, February 20, 1976, at 2:45 p.m., pretrial on the above matter will be held on February 27, 1976, at 2:00 p.m., in Court Roos - 1 - ~~ /~-`, ro ~ o n ~ -~ ~ n Q d n 0 I ,,y>. ~ ro ~ ~ k r r ~ Y• ~ ~ a ~ ~ ~ 4~Q'' ~ fOl E ~ ~ ~ ~ ~ ~ n o ~ o K , rt r~- Z ~ ~ o ro a can n r m ~ • o ~ ~ ~ . m ~ . ~ ~ K ~ ~` ~ _ ~ J ~ m ~ 'w z K ' n ro ~, r r c , • t Francis E. Fels, Barbara N. Fels, Leroy C. Brown, Beatrice ' Brown and Lance R. Knauth, Plaintiffs ' In the Court of Common Pleas of Cumberland County, Pennsylvania Civil Action v / m~--F,~.~ ~.~..~..r ~ 9 ~3 John/Lawrence Associates, Inc. a Pennsylvania business corporation' and John L. Worrilow, Defendants In Equity COMPLAIIIT 1. Each of the plaintiffs below is an individual, resides at the address hereinafter stated and was a stockholder or owner of an interest in the defendant John/Lawrence Associates, Inc. at the time of the transaction of which they complain, owning shares of common stock in the amount indicated: Francis E. Fels and Barbara N. Fels, husband and wife 24 Mark Twain Drive Trenton, New Jersey 11,600 shares Leroy C. Brown and Beatrice Brown, husband and wif e 806 Edgemont Road Fairless Hills, Pennsylvania 8,000 shares Lance R. Knauth 400 West Barnard Street West Chester, Pennsylvania 8,000 shares The above plaintiffs bring this action as shareholders for themselves and each shareholder in the class which they represent; in the aggre- gate they own more than five (5io) per cent of the outstanding common stock of the corporate defendant: 3. Defendant John/Lawrence Associates, Inc., is a Pennsylvania business corporation organized by the filing of Articles of Incorpora- tion on October 21, 1970 and which is now defunct, previously having its last registered office and corporate place of business at 5223 East Simpson Ferry Road, Mechanicsburg, Cumberland County, Pennsylvania. • . ~ ~ 1 4. By action of the stockholders of John Lawrence Asso- ciates, Inc., defendant John L. Worrilow and Wayne E. Myers, John H. Graf and Robert E.Nye were elected as the four directors of the corporation at a shareholders' meeting held on I~iay 5, 1972; Director Nye resigned as a director and officer at a special meeting of the board of directors held on October 18, 1972; at a meeting of the board of directors held on January 22, 1973, defendant Worrilow requested the resignation of director John H. Graf as President of the Corporation, which resignation was tendered and was accepted by the remaining two members of the board of directors; though no resignation as a member of the board of directors was tendered by John H. Graf at that meeting or subsequent thereto, said John H. Graf appears to have taken no part in corporate affairs from that date to present. 5. Since January 22, 1973, the remaining members of the board of directors, defendant Worrilow and M,,,~,~, failed or refused to meet to pursue the interests of the corporation, failed or refused to elect officers of the corporation, failed or refused to call a shareholders' meeting to elect directors to the vacan- cies and intentionally and willfully neglected to pursue the in- terests of the corporation as required by law in their capacity as directors of the said corporation, and in their capacity as fiduciaries to the shareholders of the corporation. 6. However, subsequent to January 22, 1973, defendant Worrilow has illegally and improperly, without the authorization of the shareholders, conducted corporate business to his own per- sonal advantage as hereinafter will be more particularly averred, and the financial disadvantage of the corporation and the share- holders other than himself, thereby breaching the fiduciary duties which he held as a director of the corporation toward all of the shareholders thereof. -2- ~, .' • • 7. Since January 22, 1973, defendant Worrilow failed to discharge the duty of his position as director with that diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in their personal affairs, and has been guilty of gross neglect and inattention, palpable breach of trust, mis- management, malfeasance and non-feasance in exercising control, and pursuing the affairs, interests and transactions of defendant cor- poration, without proper authority, the following: (a) Returning to Pauline Anne Ehrgood, his sister, her per- sonal note or other instrument of obligation previously delivered to the corporation as payment for the purchase of forty-two thousand shares of the stock of the corporation in an amount believed to be Thirty-five thousand ($35,000.00) Dollars, thereby depriving the cor- poration of this amount in its treasury, without any consideration be- ing given by the said Pauline Anne Ehrgood. (b) Returning between February 25, 1973 and March 13, 1973, Two hundred thousand (200,000) shares of stock in John Lawrence International Trading Company, which had been organized by John/ Lawrence Associates, Inc. and which was to have been a subsidiary of defendant corporation to be operated in New York City, to said John Lawrence International Trading Company for the purpose of voiding said shares, without consideration being given therefore by said John Lawrence International Trading Company, said stock having a value of one dollar and twenty-cent ($1.20) per share, so as to deprive the defendant corporation of assets amounting to Two hundred fifty thousand ($250,000) Dollars, without any consideration being given therefore by said John Lawrence International Trading Company to the defendant corporation; it is further averred that the defendant John L. Worrilow did arrange with the said John Lawrence International Trading Company to obtain stock or other interest in said corporation in his personal name and for his own personal profit, benefit and gain and not for the profit, benefit -3- 3 •~ • - • and gain of defendant corporation, contrary to the duties imposed upon him by law. (c) Failing to consummate a sale of a piece of equipment known as a "Curtis lift tow" to a third party buyer who had of- fered Fifty Thousand ($50,000) Dollars for same, and then arrang- ing through his agent, servant and employee, Franlc Bartholomew, to purchase said lift tow from the defendant corporation for defendant Worrilow's exclusive personal use, for the sum of Twenty-five Hundred ($2,500) Dollars, thereby causing the defendant corporation a monetary loss in the amount of Forty-seven Thousand five Hundred ($47,500) Dollars. (d) Furchasing holdings in corporations which the defen- ~~: ~, ~ °, ~s 54 ~~' ~ o ~`~~° dant corporation had originally promoted and in which it was en- titled to an interest, without knowledge of the shareholders or other directors of defendant corporation and the purchase of cer- tain patents which were to be purchased by the defendant corpora- tion all to the detriment and loss of defendant corporation and for the purpose of securing personal property through the use of the information gained as a director of defendant corporation to the detriment of said corporation. (e) Furchasing shares or other interests in Silver Springs Golf Course Development which was initiated by defendant corpora- tion who paid for the original promotional work and surveys and for which it received no interest in said Silver Springs Golf Course Development, but rather the defendant John L. ~,Torrilow and former director i1ye, did obtain shares or other interests in said Silver Springs Golf Course Development, all to the detriment of the defendant corporation. (f) Appropriating to his own exclusive personal use and ;~;~ thereby depriving defendant corporation of the use of the following -4- ~ said personal property assets: • Two automobiles (1969 Cadillac convertible and 1970 Cadillac Eldorado), a truck, an aircraft, two "hovercrafts", and other personal property, and appropri- ating to his own use and depriving the corporation of the benefit of notes receiveable for Ten Thousand ($10,000) Dollars from Great Eastern Land and Cattle Co., and Five Thousand ($5,000) Dollars from Breck Electronics. (g) Failing to carry out the corporation's business so that rather than being a going concern with assets as of Decem- ber 30, 1971 in the amount of $161,427.00 and investments in the amount of $41,004.00 and property and equipment having a net value of $6,349.00, and other assets--$4,440.00, or a total assets of $213,220.00, becoming unable to meet its current expenses and though not dissolved under the business corporation laws of Pennsy- lvania, being for all purposes defunct and unable to carry on any business whatsoever, rendering the stock of the plaintiff and all other shareholders who they represent, worthless; on the aforesaid date the stockholders equity as indicated in the finan- cial report submitted by Ritter, Haayen and Keller, Certified Public Accountants, indicated stockholders' equity in the corpora- tion to be in the amount of $123,500. (h) Failing to properly elect officers of the corporation as required by the Business Corporation Law to enable the corpora- tion to carry out its business and failing to have a shareholders' meeting on March 1, 1973, as required by laws of the corporation and failing to call a stockholders' meeting upon demand having been made by a requisite number of shareholders, requiring the share- holders at their own expense to call a shareholders' meeting for the purpose of ascertaining from the defendant Worrilow the trans- actions that had occurred subsequent to the last prior shareholders' meeting which was held on May 5, 1972. -5- ~„ ~~ ~ • • 8. By reason of the aforesaid failure to discharge his duties as director and chief officer of defendant corporation, defendant John L. Worrilow, by reason of his negligence, palpable breach of trust, mismanagement, non-feasance of the corporate defendant and by reason of the aforesaid losses to the defendant corporation as set forth above, has required the plaintiffs herein to bring this suit and in connection therewith has incurred the expenses of engaging legal counsel for the benefit of the defen- dant corporation the precise amount of these expenses cannot be determined until the conclusion of this suit. 9. As a consequence of the aforesaid failure to discharge their duties as would a prudent man of his own affairs, the negli- gence, palpable breach of trust, mismanagement, and non-feasance of the defendant John L. Worrilow, the defendant corporation John/ Lawrence Associates, Inc., suffered losses in precise amounts not known to the plaintiffs at this time 10. The plaintiffs have made no effort to secure enforce- went by the defendant corporation of its rights against the indi- vidual defendant John L. Worrilow, director as aforesaid, for the reason that he has acknowledged that he was managing the corpora- tion, albeit without legal authority that he failed to call a board of directors meeting or shareholders' meeting subsequent to January 22, 1973 and any demand made on the board of directors that it bring action in the name of the corporation would have been futile. WHEREFORE the plaintiffs for the use and benefit of defendant corporation John/Lawrence Associates, Inc. and on behalf of himself and on behalf of all other stockholders of said corporation who may come in and seek relief and contribute to the expenses of this suit, prays that a decree be entered against the defendant director John L. Worrilow in such amount as the court shall find and deter- mine, plus interest and costs of suit, and a reasonable allowance -6- ~o • ~ for expenses and counsel fees incurred by the plaintiffs and such other and further equitable relief as the Court deems just and proper, -7- • • CONPi[ONWEALTH OF PENNSYLVANIA COUNTY OF DAUPHIN SS: Personally appeared before me, a notary public in and for said Commonwealth and County, Francis E. Fels, Barbara N. Fels and Lance R. Knauth, who, being duly sworn according to law, depose and say that the facts set forth in the foregoing Complaint are true and correct to the best of their knowledge, information and belief. Sworn to and subscribed before me this day of ~~~~~, 1973. r ~~~~: Notary ub is NOTARY PUBLIC My Commission Expires June 16, 1975 ~larrisburg, Pa; Dauphin County ~;:_. :' ~-.a=te. ~.-_ "'.~ `: :'` .. ~. ,. , .y. ,~;P: -x:. .. ... .. ... ?.?. r~ ~ ~ ~ . n~ao~~{ . J ~,ra~~~I r. , -: ._ _ _, x. ~. __,. , yt ~ "z - , ;.,~,,-n I' • • Francis E. Fels, Barbara N. Fels In the Court of Common Pleas of Leroy C. Brown, Beatrice Brown Cumberland County, Pennsylvania and Lance R. Knauth No. 1 October Term, 1973 -vs- Complaint in Equity John Lawrence Associates, Inc. a Pennsylvania business corporation and John L. Worrilow Robert B. Failor, Sheriff, who being duly sworn according to law, says he made diligent search and inquiry for one of the within named defendants, to wit: John Lawrence Associates, Inc., but was unable to locate them in his bailiwick. He therefore returns the Complaint in Equity, NOT FOUND" as to the within named defendant, John Lawrence Associates Inc. SAYS: he made diligent search and inquiry for tine of this within~~.: ~. named defendants, to wit: John L. Worrilow but was unable to locate him in his bailiwick. He therefore deputized the Sheriff of Lebanon County, Pennsylvania to serve the within Complaint in Equity according to law. LEBANON COUNTY RETURN: Now, December 18, 1973 at 10:30 o`clock A.M. served the within Complaint in Equity upon John L. Worrilow at the Lebanon Steel Foundry, First Avenue and East Lehman Street, Lebanon, Lebanon County, Pennsylvania by handing to him .personally a true copy of the original Complaint and made known to him the contents thereof. So answers: Claude E. Hartman, Sheriff of Lebanon County, by Warren W. Sleaf, Deputy Sheriff. Lebanon County return hereto attached. Sheriff's Costs: Docketing 10.75 Service 1,20 Lebanon Co. 10.15 22.10 Pd. by Atty. 12-27-7~ 3 So answers:! Uhf ! f~;/, ~`'~c~,s-~____-~ R BERT B. FAILOR, Sheriff Sworn and subscribed to before me this ~ day of t cx_.,,,~,ca, 19 74 , A . D . ~.c--~,,~.Q~c.l ,f'- rim..-~d ~-~,~ Prothonotary • n In The Covrt of Common Pleas of Cumberland County, Pennsylvania Francis E. Fels, Barbara N. Fels, Leroy C. Brov~s Beatrice Brown and Lance R. Knauth John L. Worrilow No. ....._.Z-----...... .---.Uchober._.Term_-_-, 19...2-- Now, .-December 10 73 ......................................... 19........, I, SHERIFF OF CUMBERLAND COUNTY, PA., do y p Lebanon -•. County to execute this Writ, hereb de utize the Sheriff of .....................•---.........-•-----•-•-•--•-•-----••--------•-••------•-• this deputation being made at the request and risk of the Plaintiff. Complaint in Equity .. . Sheriff of Cumberland County, Pa. Affidavit of Service December 18 10. 0 ~ A. Now, .--••---------•--•------------------•------........--•----•---•------••-•-•---•---, 19---7,~..--, at ------------•--•--~ 3---.. o clock -----•--•--.M. served the within ..........COMPLAI_NT--I-N--E!~,U~TY__-•------------------•--•---------------------•-----------------•---•--•----•--•--•--..........---•--•--•- upon _- ~ 0~-1N-_ L . 'wrOR ~ZI LOW at .. the___ Lebanon __S t ~ e 1__ Foundry_,___ Fi._r s t___Avenue_--and-•-East--_Lehman_-_S tr e e-t•x_•- Lebanon, Lebanon County Pennsylvania by handing to ....him__persona~l~r___•___________________ a true and made known to ......him.----•------------------- copy of the original ---•--•--.. C 4 ~? ~ ~ 11:~t .............•--•-•-- -------------------------------------------•--_-•-- the contents thereof. So answers, eri ~~ ~~ d D r ~~vE'L.~"~,. Sheriff of Lebanon County, Pa. COSTS SERVICE ------------------------ MILEAGE ...................... AFFIDAVIT .................. Sworn and subscribed before me this .. ~ ~.~.~..~day of ...D®c e [nbex---•...... 19..7 ~ ota Public 1''iv ccm. expires : April 18, 1977 Form D-4 ~a • • ~'~artc~s F . Fels , Iiaxbara i7. ~p~S, ~~~Qy ~. ~rAw~, Beat~~-Gp ~~p~rn and Dance R, Kna~uth, Plaint~f~,~ V ~n the Court of Cortmpt~ ~~,~~~ ~~' Cumberlar3:~d County, Psh~&~1.~~~~-~ Civil Actip~ *~~~~ ,~1Gaw~~~~~ 4ASspc3-ateS , Inc , 1 ~ ~-~ ~.~--~^.^"" ~~17,~ ~, P~rt~t.sy~.van,ia business cgzpozati,gn' ~~~ ,7oh~ T~. ~Ie;~~~.~.ow, Def~ndantS ; In Equity ~O~PI,AIIdT --T---_. ~, ~~,~h Af the gla~.ntiffs t~olow is an individual, ~~~~~~,~ ~ ~~~ ~~l~x'eSs hereinafter st~.tec~ and was a stockholder ~~ p~~ p ~D ~-~~~re~t ~,n thA defenda~}t Joj~n/Lawrence Associates, ln~, ~~ ~};~,~ ~~,~~ p~ ~h~ ~~'~~1s~Gt~.ori of which they Ggmplain, owning shares of ec~m~~n ~~~ck ~.n the amaupt ~.ndicatcd: ~'~~tnciS E, Fels and Barbara N, Fels, husb~pc~ and wife ~4 Ma~~ Twain Drive ~"~'sntpn., Naw JerseX 11, 6~J0 eh~~6~ ~~~,~~~ee $~'own, ~;husb~nd an~3 w~,fe ~QQ ~-rS?,~e~tlCli4t RAad F~,~,~^l~Ss H~11s, Pe~p~y~v~nia B,O~Q ~~~~~~ Land ~,. Knauth 400 t,~est $arr~ard Street West Chester, Pennsylyani,a 8,OQQ ~,~~~~~ '~~~ ~t~~v~ gla~,nta.ff s_~ br~.ng this action. as sha reholders for them~~~'~~~ ~int~ ea.oh ~h~x~~hplder in the c~aSS which they represent; in ' the ~~~ ,~~~~ t~~y own t+1c~~'e that five (5°!0) per cent of the outstand 3,n~ ~ptrbzt~e~ RCp~k ® the corporate defendant. Defendant John/I,awrer}~e t~ssociates , Inc . , is a Penn~~-~~~~~. ~~~~n~~~ ~p~~~~~~~.~~ grg~ni.~s~ ~~r the filing o~ Articles of ~.r-ora~'pt~~a-- C~~1~1 pit Qetpbe~^ 2~, 170 and y~hi.c$ i,s nqw defunct, previous~.~r hau~ng l~~ ~a~t ~~~~~~~x~d p~fice and°Corpprate place of business a~ ~~~~,, ~~6~ ~~-~p~An Fe~,ry Road, Mecl~a.~.zcSburg, Cumberland Countyq ~ennsy~v~~~-~, A TRUE COPY FRQiNi RECD 1R T~wnor-y w~l8reof, I ~,r~P unto Mtt ~Y hr°~rtt and the seal of ssid Cauri at Carlisil, Pa, phis 7 ~~ d,y of fie-- t~? D t) J~ ~ 01~._.~ pz9~~ _ Prothonotary 73 C~ • 4. ~y action of the ~S~gclch~llders of John Lawre~q~ ~~~A~ q~.~~~5, ~~~, , d;~~'gndarlt .Johc} ~,, ti~~orrilgw and Wayne E. ~iyer~, J~~~ I-~. ~~~~ ar~d Ra~a~~~ ~. Nye were elected as the four di.r~~~c~~'~ A ~~ ~~rpox~~t~gn at a share~}olderS " meeting held on May , 1~~~ ~ ~~~~~~A~ ~Z~yg x~S~,~ned ~§ a director and officer at a speG~.a~, mretin~, of the beard of directors held prI October 1~3, 7,72; ~~ ~ meting pf the beard of di~ectQrs held on January ~~, ~~73, d~~~~~~~~ Wc~~'xi,~.ew requested the resi~~ation of director Jahn t~, ~'~~~ ~~ Frs~~-dent of tY~e Cgr~or~tion, which resignation was ~p~d~~~d ~r~d wad accepted by tk~~ remaining two members Q~ t~~ ~q~~d q~ ~~~~e~or~; tl~pugh no r~si~nation as a member of the b~~~~4 ~f di.~"~~tc~x'r~ was tendered by John H. Graf at that m~~~~.~t~ ur ~u~~~quer~~ ~heret4•, said John H. Graf appears to have t~l~~~ ~q A~~~ ~.~ c;c~rpQrate affairs frPm tl~a t date to present . ,~. Since January 22, 197, the remaining members u~ ~~~ ~A~rd P~ d,~,xgctors, defendant WRrrilow and Myers, failed qr ~~~~~~~i ~~ ~R~~ ~~ guraus ~h~ ~ntexe~~~~ (;f the corporation, failed ~~ r~~~3S~d CU elect officers 4f the corporation, failed or reftt~~d ~~ ~,~~.~ a shareholders' rnee~ix~g to elect directors to the ~~c~x~-~ ~~e~ +~r~d nte~tgnaliy and w~.ll,fully neglected to pursue the ~,~ ~ere~ts cif the c~rpara~lQ~- aS rgquired by law in their c~tpaq~~y ~~ d~-rectors ~f the said cQrpo~~tign, and in their capae7.t~r ~S ~'~s~uc~~x'~,s~ ~~ the shaxehglder~ o~ tY~e corporation E, j~gcaever, subsequent to ,Jap.uary 22, 1973, defcr~d~~~ t~grx^i~.pw has ill.egal7,y and imprp~erly, without the authe~~~~t~.~~ ~ ~~ ~i~SrgholderS, conducted corporate business to his ow~1 ~e~" Anal adv~t~tage as hereinafter' will be more par~~_°:_ularly averred, ~~~ t1~e i'iCtancial disadvantage ~f the corporation and tie sh~r~T ~~~d~~~ c~l~hsr t~~rt himself, tM'creby breaching the fiduciax'y du~7.e~ wh~~h ~~ held ss a direCtgr of tYlq corporation toward X11 of the S~~rfi~~l4~.de~'s thereof . ,. 2 , 1~ C~ • 7. Si~}ce January 22, 197, defendant Worrilow failed ~A ~1~,~~ki~~'ge the duCy of his poSita,o}~ as director with that di.l~,~~~,~~a, ~ax~~ end sk}.11 which ordinazily prudent men would exercise und~~ ~i~l~~r ,~~,x~cumstances in their personal affairs, and has been ~~~.~ p~ ~~'!~~~ ~~~~ec~ ~~~ ~,r~attention, palpable breach of trust, m~,s., ~~~~~~~~~~ m~~.~~asar~~~ aid non~~~~sance in exer~isi.ng con~x'c~1, ~c~d ~~~'~u~}3~ ~~~ affairs, interests and transactions of defendant c~~~ pr~r~~~QA, w~.~hq~u~ ~r~~aer authority, the fpl],owin~; ; ~~~ ~~~urnin~ to Pauline Anne Ehr~opd, his sister, hex p~~~, A~~~~ ~Q~Q A~ gtkler instrument of obligation previously d®1.3,v~~;~~ ~~ the e~rpc~x~tipn ~.~ payment for the p~~c~ase of forty~twp th~~~~r~s~ ~k~~~:e~ o~ the stock of the corporation ~.n an amount believed ~~ ~ ?'~~r~y~~~~~ thousand (535,000.00) Dollar, thereby depriving; ~~;~ ~~~~ ~Qr~ti~?~ of t~i~ a~~L~n~ in its treas~}ry, witlZOUt any cgnsider,~~ipx1 ~a~m ~'~~ Re~~,r~i~~, be~wgen Febr~}ary 25, 1973 and March 1~, ~.~7~, ~wq hundx~d ~~t~usar~d X200, QOQ~ ,shaxes of -stock in John Lawren~ lu~~+~~r~~~~:~-na~ Tred~,n~ Company, which hs.d been organized by ,1~hn~' L~wr~n~~3 ~R~i~~i~~~S, I}~c, and which was. ~o have been a subs~,d9.a~'~ ~~' ~~~~~da~~ ~~rpar~~ign ~o be Qperat~d in New York City, to s,~~,d ~~a~~ '~~tn~~'~ri~~ International Trading Company fox- the purpose of vgir~f,~~ ~~~.~ ~~~.~~~, w}.thout consideration being given therefore by ~ai~ ,~~ ~,~~~`~~~ ~n~~rr~~t~.ana]- Trad~.ng Company, said stock having ~. valt~~ ~~~ ~~ll~x° end ~w~~~y-~~~n~ C~~-,20) per share, s~ as tv ~e~r~.v ~~~ ~~~~r~~~~~ ~grprax'a~ign of assets amopnting to Two hundred ~if~y ~~~usand ~5~3Q, QO~j A~~.1ars, w~,thout any consideration being $~.v~'~i ~l~~ref~x~ ~y skid .John Lawrence International Trading Company ~~ ~~,~ d~~~t~dan~ ~q~'pAZ~t~-a~;a it is further aye~red that the defendant ,,~o~,~ ~, FI~r~~.1t~w d~.d ar~^an~e with the said John Lawrence Intexn~tign~7, ~'~~d~,r~g ~~mpsny to obtain stock or other interest in said carFa~'~fit~ ~.~ ~~.~ ~~~~Qnal name and for his' own personal profit, benefit and ~a~n end r~~~ cad the profit, benefit ,3a ~~ • • ,end ~a~.n. 4~ defendant ~Qrpgrat}on, cQptrary tra the duti~~ ~-~~~~~d ~ap~n `him by ~.aw. (c) Failing to con~~nu~ate ~ sale of a pied ~f ~~qu~.~~~~-~ ~~ as a "~Idxtl-S lift taw" tp a th~.rd party buyer whQ ht3d Q~~ ~+~~^~d I~'~ft~ T~cauaand ($50,QQQ) Dollars for same, and ttler~ ~~'~'~~~~~° ~.k`~ ~1'~~c~u~~~1 ~~~ ~~ent~ servar}t and gm~lpyee, k'ranl: Bartl~e~.~ai1~~w, ~A p~~Gha~~ ~~id l.if~ ~pw from ~~e defendant eorpo~s,t~.or~ Apr c~e~+~nd~nt ~~7carxiloW' ~ ~~{c~.usive persan,~l use , ~ for the Burn ~ 'Tw~ra~y-fire Hundxed ($2, a0Q) llollar~, thereby causin; the d~~~t~c~~.x~ ~~~~~~~~~,~~ ~ mox~e~~r~ loss ~n ~Y}e amqunt of Forty-~sev~~ ~~~~,~~~-~, ~~v~ Hundred (~47,50Q) pgl~,azs, (d) Purchasing, holdi,p as ~.n Gpxporations whti~h the ~~~!~~~ d~t~t ,cQrparAti~Qn hid originally promoted and in which it way ~~~ ~~,~~,~,~ to ~p ~,I7texeSt, without {cnoyaled~e of the shareholcle~~ ~~' a~~h~~ ~i~~~~~r~ of d~~endat~t c©rporation and the purGh~~~r ~~ +~~~'^ ~~,~,~ ~~te~ts wh~.~h were to be purghased by the defendant, G+~rg~ar tfA~ aJ.l tc~ the detriment ~.nd ~.ps+s of defendant corpor~t~,~an; end ~~~ tk~e ~au~pose of secur,in~ personal property through the u~~ A~` ~~,~ ~.~~°~r~l~t~.pct ~~~.ned as a director of defendant cor~g~r~~~.~t~ '~~ ~he~ detx~,ment of skid cgrporat}on, (e) Pu~'ch~sip~ s~1a~es or gther interests in ~~,~,'~~ ~~~~~~ ~~~,~' +~~ur~~ la~yelopment wl~}ich wad initiated by defendant ,~o~pc~~"t~~ t~4i~ Mahe pm~d ~~' the original promotipnal worlc and ~ux~e}~~ end ~Qr Wtl~Gh It ~~,Ge~ved r1o in~srest ~n said ~i~ver ~r~rint,s wolf ~Qer~e l~e~rels~pmen~, kaut rather the defendant John I,. tdc~rrilo~a end fc~rm~r director I~~p, did obtain Shares or other interests i~ ~~~d ~~.IVer ~prin~,s Gg1f Course D~velopmept, all to the detriment o~ Abe d~~~n~da.nt cgr}~oration. (~) Appropriating tq k+}-S own exclusive perspnal l~~i~ ~i~~ ., ~~,~~~°~}~ de~iriv~.ng defendant cgrporation of tl~,e use of the ~o~.1nw~~~ A X '~~i' , Y • • s~~.d ~~x~~Anal pxotaer~~ assets; Teo aytomobiles (1969 Csdi7.~~~ Ponver~~,-take ~1~d ~.9aQ !~~dill,a~ ~].dorado) , a t~uclc, axi ~~.~'~x'~~'t, twp "hovercrafts'', aid other personal property, and appro~~~.~ ~~~,~} ~A his Awn use and depriving the corporation q~ the b~ri~~~C o~ nA~~~ x~Cei~eable fqr Ten T~ousand ($10,000) Dollard t'rAnt ~~~~~ ~astex~n Land anti Cattle ~o., and Five Thousand (~5,OA0) ~?~-~.~.~~~ ~xe~m ~reAk Electronics . (g) Failing; to carry put the corporation's busi~,~p~ ~-A ., that xa~}~er th~.n beings a ~,Qin~ concern with assets as of ~~~~p3T bar ~~, 197, i~ the ampu~~ of $161,427.00 and investments In ~h+~ ,~t~qun~ ~~ ~~+1, ~JA~. ~~ artd prPpa~ty and equipment having a n~~ ~~~.~ A~ ~fi, "1~+9, 0®, and other asses--$4,440.00, or a total s,s~e~s A~ ~1.~"~~Q, f~Q~ beAc~mifl~ unable to meet its current expense ~~ thcaugh nc~t dissglV~d Under the business corporation laws of ~'~flt~R~~^~ ~.~-~#~~,~., b~ip~ fqr all purposes. defunct and unable to cax~^~ A~ ~~~ ~~~~~~~~ why R$oevep, rendering tY~e stock of the pla~.r~t~.~i' ~~id ~~l gtlier sharehgl~iers Who th~;y represent, worthless; ~t~ ~h~ ., ~~A~~~~~d date tl~e stockhpldpx's equity as indicated in tine ~,~~~~ ~~,~~. ~e~p~t submitted by Ritter, Iiaayen and Keller , Cert. f ~~~ ~w~l~~ ~-~ ~~~~un1~~~~~ " ~ndicatpd ~tQel~holders' equity in tl~~ ~!~~'pca~~~ ~7~An ~~ be in the amouizt of $1~.3,~Q0, eb.) ~'a~-l~,ng to p~'operly elect officers of the caxp,~~~~~p~~, ~~ requ~,red by the Business Co~pors,tion Law to enable the ~vx~pA~+~~ ~~,p~ ~A carry cut its business, and failing to have a shax°~hcald~~~" ~~~~~n~ ern M~~'cl~ ]-, 1.973, as required by laws of the cca~'~aAx'~tiAt~ st1~ f~~.lin~ tp cal,l a stockholders' meeting upon demand having b~~'A m~d~ b~ a requl.si~e nt}}nber of shar~hplders, requiring the ah~~~~ Il~~~~rs ~~ their qwp gxpepsc tP c~l~ a sharehplders' meeting, fAx' C~~ A~~'~s~~~ Q~ a.se~~'t~3~n~,n~ f~gtr~ tine defendant 6Jor•ri1,oW tl~P ~~'~n~~ ., ~~~~,41'1~ tY1~~ Clad oecurre~l sul~seq~}ent ~p the last prior sha~rehAl.c1~°~~' rn~~~i~g which was held oD rlay ~ , 1972 . 5- ~7 • . ~, ~y ~~~~Q~ ~~ ~h~ a~c~r~~~~-c~ ~ailur~ tra di.seh~;x~~s his ~d~a~~A ~~-d~r~~t~~ and Chief p~f~.Cer Qf defendant corporation, de~'~~c~~p~ ,Icahn ~. Wq~'~~.1gw~ bx reason} of his negligence:, ~a~.~aah~,e bx~e~ch of gust, m~,smanagement, non-.~easance of the eorgs~~afi~ d+~~~~~~~~ and by reasgn p~ the a~presaid lasses to the def~r~dant e~~'~A~'~,t~.~~t a~ Rat i~sarth abAve, has requited the plaintiffR h~;~~in ~~ b~~.~~; this suit aid ~-r} cor~nect~.Q~. therewith has i.neurred ~~~ ,~~~~,~~~ c~~ engaging legal, counsel. for the benefit ~f ~~~ da~gn,. d~r~~ G~rp~x~~.ti~n tea px'saisa amount of t}z~s~ expenses canr~:cat ha d~~~~m~.~n~d u~~~~. ~~~ q~~~~~~~qn ~~ phis suit. '~. As a Gc~rt~~que~lGe of the ~fPx~esaid failure tta ~~~~h~~~ ~~~~.~' d~t~p~ as w+auld a p~ud~nt man of his own affairs, tk~~ ~~~~,~, ~~r~G~~ palpab],s brsaGh of gust, mismanagement, and nvnnf~aeR;n,C 4~ ~~~ d~~etida~t ,~phn L. Wprrilgw, the defendant ccax~porat~,~n ,7~a~r~~ ~~WX'~+~iG~ Ass~cia~~e, inc., su~fer~d losses in prepise amQUnt~ flQt ~~+~wr~ Ica the p7.s.~.ritiffs at this time t 1Q, The plal.ntiffs hays ~adG no effort to secure ~r~~~~~~W R1~~4~ ~!Y ~h~ ~~~r~~ant c~Q~~?gxatipp, of ~,ts rights agains ~ the nd~.~ ~~~~a~ ~~~~~dan~ ~lohn ~. WpxriiAw, d~.rector as aforesaid, ~q~ t~ ~'~~,~~?~ tl~a~ hq haR acknQWl~dged that he was managing the CQ~'par~~, tloa, ~,~.b~~.t wS.thAVt 1~~~1 authority that he failed to ~a~.l a b~a~~i A~ d~,x~~~or~ m~~~in~ or shax'ehpldex~s' meeting subsequent t4 ~~~~?~ax~ ~~~ ~,9~3 aid any demand made qn the board of director; that it ~~~.~~ aGt~.p~ i~ the name pf the cpr~oration would have been futile. GJHFRI~FgI~~ the plaint~.ffs far the use and benefit of defendanC C~a~°gQxatiq~n Jphr}/Lawrence Associates , Inc . and on behalf ~f h~.ms~e~.f and qn laeha~„~ caf a,l>, other stpckhplders of said corporation whta malt +~pmG in an,d ~Ge}~ ~:~~~~~ end cpnt~ribu~e tp the expenses pf this ~~~~~ ~x~ay~ that a decree bE entered against the defendant directAr ,~ J~hp ~, Wc~rr~.lpw ~.~ such amount as the court shall find axed ~~t~r~ ~t~,n~, p~.u~ ~nter~at and Cpsts., of suit, and a reasonable ~~,~Qw~n~~ -6~ ~~ • • • ~°~~ ~~tp~r~~~~ ~,~~ counsel. fees ~r~cUrred by the plaintif~~l ~~d ~~~~ cat~~~ ~~~ fu~tk~ar equitable rclie~ as the Court da~~~ ~~-~~ ~nc~ g~~ap~r, t j, ~. fi; `?:. .4 _7_ i ;" . ..H~.. -... a ` • ~~A~NW~,~~,'~~ QF F~NN9~I~VA~~xA 1 86{ ~~~~~~~-~,~.y apPsared befo~~ me, ~ notary publ~.e ~~ +~'~~ ~Ax ~~~.~ GcammQ~w~~~~h dud CauntX, FranG~,s ~, Fels, ~axbara N. F~~.~ aid i~ance R. Rnau~h, whc~, b~in~ duly ,~wQrrt aaapzc~in~ z© law, $+~pose and say ~t1~t ~,~ ~~,,~~ ~~t ~Q~r~h ~~ the ~o~q$q~~~ CgmpZaint ire true and correct tq ~h~- h~~~ Q~ ~h~~~ ~uQ~l~~~~~ ~.n~Qxr~at~-Q~ aid bgiia~. L ~~Q~~ ~q ~~~ ~RU-b~ca~lbad b~~Q~~ ~~ Chip ~~ day ,ac ~,..,r,c.. ,+L~~;1~9~ .~1F.u_~_.. bop Cr?~nauasin+t l::rp;,.;y Junk 1~, 397$ {.ti<r l; p.Dllr Q~ ~'d. fia~~phin Cowity Y -a ....... ~ . ~=~ C` s ~.~_ _~ l ~ _ J . A Y ~U r * • l,,~ak U`~t.),'.fi1if J.'~ ~L,r ~V ~- f.~.(~ ~ ~, •' l'.+~y.1 r ,.'1 f.fr'~. ; n ~* ;y.., . F 1 .,_a~.~,'~a,~ f+~x ia'.4.~7.. 1 t.i • lax, ~-C~7,sv ! ,. ..., a. ,.,, ;~-,f"~"~~.~.? ~]'?, .,''!t_t?.7'j' 1aLii`;2.:iC: 1.T't. Fi;t~~ ~~~" %. ". r . ,:r~+r ~ .~.a' 1... f> . - I,~gRoy ~ . Iirpwn , _~,E,~ ~ ,. i~ ~ , . a ~ «,~ ~-~:1.,., 1a1, t:c~ ).~t~:a 'a. ._ , ~ ~ .~w. 1::;x,3 ~{ .,. . . . . . , ~ . ay ... i.. "•~~ry''..t! ~~.~~:.~~..^4 i'F. .... .. ... .. .. 1., ,~' f ~.~~ll.~h-1~~.. ~A,~ C':1. _. .y._ t .., -•. i~ C~. ~.7: ). ~~_~2, .~. 1.~w ar ~~~ 1..11PJ ,` ;.~ :.. 1: ~ i <~ :. 7~ r,.. 4 :._ : ... .. __ ~ . :,_ 1:11.. i.~ ~_ t.+_~.~ ! w ~.~1 .3 t ~, ,. ~ • ~ .. c: . • ~,,<~ .~ '~ ~' ~ L ~_, . ~. ~~ .~ , r. t 7 .,. .ti t , c_'. ._ .. ~ ,. ~ i / r .. ~ . _1 ~i / / r • 7 ~ ~ ~ ~ .. ,.: 1.± ~. ` .,. 1r~. A~l~}~~i{~~` c+i~~l~ 1~ MY Gp!~af'~~,.;f~ k.x, in.'s, Jur;~ '.5, 1973 i~,ltf:li'f 1'y, ~81~pA11~ P~U~ty !' ~I ~~ C~ dec. l0;` ~~ ~ ~ • FRANCIS E. FELS, BARBARA N. IN THE COURT OF COT~INiON PLEAS OF FELS, LEROY C. BROWN, BEATRICE CUMBERLAND COUNTY, PENNSYLVANIA BROWN and LANCE R. KNAUTH, Plaintiffs ~ CIVIL ACTION v. ~ 1 October Term 1973 "' JOHN/LAWRENCE ASSOCIATES, INC.,• a Pennsylvania business cor- poration and JOHN L. WORRILOW, Defendants IN EQUITY PRELIMINARY OBJECTIONS OF DEFENDANT JOHN L. WORRILOW • Petition Raising the Defense of Nonjoinder of Necessary Parties Defendant John L. Worrilow, by his counsel, McNees, Wallace & Nurick, Esquires, petitions the Court to dismiss plaintiffs' complaint in the above-captioned action for failure to join necessary parties to the action. The said necessary parties and the respective reasons for necessity of their joinder are as set forth below: 1. Plaintiffs' complaint sets forth what purports to be a stockholder's derivative action, claiming that various losses and damages were done to the corporation by reason of acts and neglects of defendant John L. Worrilbw in his capacity as a director of the said corporation during periods of time following January 22, 1973. As the complaint avers in para- graph 4, the said corporation, John/Lawrence Associates, Inc. (hereinafter JLA) had only two directors after January 22, 1973, defendant Worrilow and one Wayne E. Myers. 2. With respect to all averments of the complaint relating to alleged failure of defendant John L. Worrilow, to pursue the interests of the corporation, to elect officers, to call a shareholders' meeting, and "intentionally and a3 ' • willfully neglecting to pursue the interests of the corporation as required by law in their capacity as directors of the said corporation, and in their capacity as fiduciaries to the shareholders of the corporation," (complaint, paragraph 5) if any responsibility or liability rests on the directors of the said corporation, it rests upon Wayne E. Myers as well as defendant John L. Worrilow. 3. The complaint avers in paragraph 7(a) that de- fendant Worrilow delivered a note or other instrument of obligation to one Pauline Anne Ehrgood, which note was in the amount of $35,000, which alleged act is alleged to have deprived the corporation of the aforesaid sum. If the alleged act did occur and if the note or other instrument of obliga- tion did reflect a f finding obligation to pay the aforesaid sum or any amount, then Pauline Anne Ehrgood 3s a necessary party to these proceedings so as to determine what obligation, if any, she has as to the corporation on account of the said note, so that the~Court might make a final determination con- . sistent with principles of law and equity. 4. The complaint avers in paragraph 7(b} that be= ~tween February 25, 1973 and March 13, 1973 defendant Worrilow delivered a certain stock certificate representing 200,000 shares of stock in a corporation identified as John Lawrence International Trading Company (hereinafter identified as JLAI), which stock certificate is alleged to have been returned to JLAI for the purpose of voiding said shares and without any consideration therefor. It is further averred that sai:.d stock had a value of $1.20 per share, resulting in a loss to JLA of assets amounting to $250,000. Defendant Worrilow avers that _ 2 a~ + • the corporation JLAI is a necessary party to these proceedings so that all claims with respect to the issuance of any stocx in that corporation to JLA, the terms of any agreement re- lating to the issuance of stock and the performance or non- performance of the promises and commitments made on behalf of JLA, and the circumstances relating to return of the said stock certificate, together with any final decree relating to issuance of a new, replacement certificate for the said 200,000 shares of stock, may all be determined by this Court in accordance with principles of law and equity. 5. Paragraph 7(c) of the complaint avers that a certain piece of equipment was purchased by one Frank Bartholomew, alleged to have been the servant of defendant Worrilow, which equipment is averred to have bee~- a corporate opportunity. De- fendant Worrilow does deny that Bartholomew was or is his servant, however, defendant Worrilow does aver that to his knowledge, information and belief Bartholomew has possession of the said piece of equipment under some claim of right and .ownership. If claims with respect to the ownership, possession and use of the aforesaid equipment are `to be adjudicated, Frdnk Bartholomew is a necessary party to these proceedings so that the Court can make its determination with respect to the interest of the corporation JLA in the said equipment in accordance with principles of law and equity. 6. Plaintiffs' complaint in paragraph 7(e) avers that defendant Worrilow purchased some interest in an enter- prise named as "Silver Springs Golf Course Development" to- gether with a former director, Robert Nye, to the detriment and deprivation of the corporation JLA. If the corporation - 3 -- o'Z ~ ~ • • should have a claim with respect to any such transaction, then Robert Nye is a necessary party to a full adjudication of .the corporation's claims with respect thereto, since, as a former director of the corporation, his obligations as between the corporation and any alleged corporate op- portunities, are the same as those obligations and duties of defendant Worrilow. 7. Defendant Worrilow avers that with respect to claims made on behalf of the corporation, that the corporation lost business opportunites, and was the victim of mismanagement, waste and breach of trust, that such averments are clearly and directly and properly attributable to the activities of John Graf, who until January 23, 1973 was the Chief Executive Officer, President and principal executive of JohnJl,awrence Associates and all of its subsidiary corporations, affiliated and related business enterprises. All the claims as set forth in the com- plaint are properly made as.against the said John Graf, par- ticularly the complaint set forth in paragraph 7(g) with regard to the apparent loss in the assets of the corporation John/Lawrence Associates. Defendant Worrilow avers that the rights of the corporation lie clearly as against its former director and Chief Executive Officer John Graf, under whose administration the events relating to all the transactions complained of in plain- tiffs' complaint occurred. Accordingly, it is averred that John Graf is an indispensable party to a fair, full and proper disposition of the derivative claims of the corporation with respect to conduct of its officers and directors. - 4 - ~~ *~ • Motion for More Specific Pleading Defendant John L. Worrilow, by his counsel, McNees, Wallace & Nurick, moves the Court to dismiss plaintiffs' complaint for failure to state specif ically the claims made in the complaint as against defendant John L. Worrilow, with respect to the following: 8. The complaint in paragraph ?(c) fails to aver the identity of the "third-party buyer, fails to aver when the alleged offer of purchase was made, whether it was made in good faith, whether the offer to purchase was legally enforceable and whether the sum of $50,000 represented the value of the aforesaid equipment. 9. Plaintiffs' complaint in paragraph 7(d) fails to identify those corporations in which defendant Worrilow is averred to have acquired holdings to the detriment of John/Lawrence Associates (JLA) and in derogation of defendant's duties as a director of JLA. 10. Plaintiffs' complaint in paragraph. 7(e) fails to identify the business entity or bGsi.ness name in which defendant is averred to have secured an interest; the complaint f fails. to aver whether the enterprise, whatever it was, presented a business opportunity to JLA, or the type of business opportunity which was presented to JLA, or what corporate rights, if any, were wrongfully appropriated by defendant Worrilow. 11. Plaintiffs' complaint in paragraph 7(f) avers that defendant appropriated to his own benefit certain specific per- sonal property "and other personal property" which fails to advise defendant of the type of property either by category or precise description, or its value. - 5 - ~~ ~~ • 12. Plaintiffs' complaint in paragraph 7(g) fails to aver with specificity what business of the corporation John/Lawrence Associates defendant Worrilow failed to carry out, fails to aver for what period~of time he may have failed to so carry out such business, fails to aver what act or neglect constituted failure to carry out the business of the corporation, fails to aver what the financial status was of the said corporation and its business affairs as of January 22, 1973, the date which is averred in the complaint (paragraph 4) as the date when Worrilow became somehow re- sponsible for the operations of this business, and the diminution in value of the corporation following that date when it was allegedly under the "control" of defendant Worrilow. 13.~ Plaintiffs' complaint in paragraph 7(h)•fails to aver what loss, financial or otherwise,. resulted from the alleged failure of defendant Worrilow to call formal directors. or stockholders' meetings on or about March 1, 1973 14. Plaintiffs' complaint avers generally in para- graph 8 that defendant Worrilow is guilty of "negligence, palpable breach of trust, mismanagement, non-feasance", but fails to aver with particularity what act or inaction he is charged with and what losses resulted to the corporation therefrom, other than as set forth in paragraph 7 of the complaint, portions of which have been objected to for lack of specificity as set forth above. WHEREFORE, defendant John L. Worrilow respectfully requests the Court to dismiss plaintiffs' complaint with - 6 - ~~ I ~ • • ~~~ leave to plead again with more particularity and specificity as to the averments referred to above. Respectfully submitted, McNEES, WALLACE & NURICK ^ ~ B ~CLc~i c~ C Y ' David E. Lehman Attorneys for Defendant John L. Worrilow .~ r s a~ ~~ ~~ ~~~ S~~l ~~1 •" ~ • _„ "~ FRANCIS E. FELS, BARBARA N. In the Court of Common Pleas FELS, LEROY C. BROWN, BEATRICE of BROWN AND LANCE R. KNAUTH, Cumberland County, Pennsylvania Plaintiffs No. 1 October Term, 1973 v Civil Action JOHN/LAWRENCE ASSOCIATES, INC. a Pennsylvania business corpora-: Lion and JOHN L. WORRILOW, Defendants In Equity AMENDED COMPLAINT 1-7(c). Paragraphs 1 through 6 and clauses (a), (b) and (c) of Paragraph 7 of the original Complaint are incorporated herein by reference as fully as though they were set forth at length as Paragraphs 1 through 7(c) respectively of this Amended Complaint. 7(d) Clause (d) of Paragraph 7 of the original Complaint is amended to read: Purchasing holdings in Arthur Miller, Jr., Associates, Inc.; Great Eastern (or Western) Land and Cattle Com- pany, Inc.; Turb-O-Jector, Inc., formerly Key Research; Silver Springs Golf Course, a partnership; Breck Electronics; Lifttow International; First National Securities Corporation; and John Lawrence International Trading Company; each of the foregoing being corporations or business entities, which the defendant-corporation had originally-promoted and to which it was entitled to an interest, without knowledge of the shareholders or other directors of defendant corporation, all to the detriment and loss of defendant corporation and for the purpose of securing personal financial gain through the use of information received as a director of defendant corpora- tion to the detriment of defendant corporation and its shareholders. <~ ~ . .~ • i 7(e). Clause (e) of Paragraph 7 of the original Complaint is incorporated herein by reference as fully as though it was set forth at length as clause (e) of Paragraph 7 of this Amended Complaint. 7(f), (g). Clauses (f) and (g) of Paragraph 7 of the original Complaint are amended to read: (f) Appropriating to his own exclusive personal use and thereby depriving defendant corporation of the use of the following said personal property assets: Two automobiles (1969 Cadillac convertible and 1970 Cadillac Eldorado), a truck, an aircraft, two "hovercrafts", office furniture, and appropriating to his own use and depriving the corporation of the benefit of notes re- ceivable for Ten Thousand ($10,000) Dollars from Great Eastern Land and Cattle Co., and for Five Thousand ($5,000) Dollars from Breck Electronics. (g) Failing to carry out the corporation's business so that rather than being a going concern with assets as of December 30, 1971 in the amount of $161,427.00 and investments in the amount of $41,004.00 and property and equipment having a net value of $6,349.00 and other assets--$4,440.00, or a total assets of $213,220.00, becoming unable to meet its current expenses and though not dissolved under the business corporation laws of Pennsylvania, being for all purposes defunct and unable to carry on any business whatsoever, rendering the stock of the plaintiff and all other shareholders who they represent, worthless; on the aforesaid date the stock- holders equity as indicated in the financial report submitted by Ritter, Haayen and Keller, Certified -2- 3 ~, ~..~. i • Public Accountants, indicated stockholders' equity in the corporation to be in the amount of $123,500. The corporation, having been formed for the purpose of in- vesting in risk-taking ventures and promoting same, required regular attention to the various promotions undertaken, which attention was not given by defendant Worrilow nor did he act to secure competent officers or employees to assure that the interests of defendant corporation would be followed and preserved, resulting in the lack of appropriate promotional activity, and subsequent failure of all of the promotions under- taken by the defendant corporation. 7(h)-10. Clause (h) of Paragraph 7 and Paragraphs 8 through 10 of the original Complaint are incorporated herein by reference as fully as though they were set forth at length as Paragraph 7(h) and Paragraphs 8 through 10 respectively of this Amended Complaint. WHEREFORE the plaintiffs for the use and benefit of defendant corporation John/Lawrence Associates, Inc. pray that a decree be entered against the defendant director John L. Worrilow in such amount as the Court shall find and determine, plus inter- est and costs of suit, and a reasonable allowance for expenses and counsel fees incurred by the plaintiffs and such other and further equitable relief as the Court deems just and proper. -3- 33 ~> , \~t ~ 'S ~ • • .. • a Pennsylvania business corpora- tion and JOHN L. WORRILOW, Defendants In Equity v Civil Action JOHN/LAWRENCE ASSOCIATES INC FRANCIS E. FELS, BARBARA N. In the Court of Common Pleas FELS, LE ROY C. BROWN, BEATRICE of BROWN AND LANCE R. KNAUTH, Cumberland County, Pennsylvania ' Plaintiffs No. 1 October Term, 1973 STIPULATION TO FILING OF AMENDED COMPLAINT AND WITHDRAWAL OF PRELIMINARY OBJECTIONS It is stipulated by and between counsel for the plaintiffs and defendant John L. Worrilow that defendant's preliminary objections shall be and are hereby withdrawn, that plaintiffs shall file and do herewith file their Amended Complaint as attached hereto, and that defendant John L. Worrilow is granted twenty days from the filing of this complaint to file a responsive pleading to the said Amended Complaint. i~iam~K rrn~st ~r. ttorney for intiffs McNEES, WAL~CE & NUR~CK _.. By ~ David E. Le man Attorneys for John L. Worrilow ~~ • • FRANCIS E. FELS, BARBARA N. : In tha Court of Common Pleas FELS, LEROY C. BROWN, BEATRICE of BROWN AND LANCE R. KNAUTH, : Cumberland County, Pennsylvania Plaintiffs No. 1 October Tema, 1973 s v Civil Action JOHN/LAWRENCE ASSOCIATES, INC. a Pennsylvania business corpora-: tion and JOII,I L. WORRILOW, Defendants s In Equity ANiEi~1DED COMPLAIi~1T 1-7(c). Paragraphs 1 through 6 and clauses (a), (b) and (c) of Paragraph 7 of the original Complaint are incorporated herein by reference as fully as though they were set forth at length as Paragraphs 1 through 7(c) respectively of this Amended Complaint. 7(d) Clause (d) of Paragraph 7 of the original Complaint is amended to reads Purchasing holdings in Arthur Miller, Jr., Associat®s, Inc.; Great Eastern (or Western) Land and Cattle Com- pany, Inc.; Turb-O-Jector, Inc., formerly~•Key Research; Silver Springs Golf Course, a partnership; Breck Electronics; Lifttow International; First National Securities Corporation; and John Lawrence International Trading Company; each of the foregoing being corporations or business entities, which the defendant-corporation had originally proz~oted and to which it was entitied to an interest, without knowledge of the shareholders or other directors of defendant corporation, all to the detriment and loss of defendant corporation and for the purpose of securing personal financial gain through the use of information received as a director of defendant corpora- tion to the detriment of d©fendant corporation and its shareholders. ~~ • ~• . . ~~ ~ s ~ . 7(s). Clause (e) of Paragraph 7 of the original Complaint is incorporated herein by refer®nce as fully as though it was set forth at length as clause (e) of Paragraph 7 of this Amended Complaint. 7(f), (g). Clauses (f) and (g) of Paragraph T of the original Complaint are amended to read: (f) Appropriating to his own exclusive personal use and thereby depriving defendant corporation of the use of the following said personal property assets: Two automobiles (1969 Cadillac convertible and 1970 Cadillac Eldorado), a truck, an aircraft, two "hovercrafts", .,. office furniture, and appropriating to his own use and depriving the corporation of the benefit of notes re- ceivable for Ten Thousand ($10,000) Dollars from Great Eastern Land and Cattle Co., and for Five Thousand ($S,000) Dollars from Brecb: Electronics. <g) Failing to carry out the corporation's business so that rather than being a going concern with assets as of December 30, 1971 in the amount of $1b1,427.00 and investments in the amount of $41,004.00 and property and equipment having a net value of $b,349.00 and other assets--$4,440.00, or a total assets of $213,220.00, becoming unable to meet its current expenses and though not dissolved under the business corporation ;laws of Peansylvania, being for all purposes defunct and unable to carry on any business whatsoever, rendering the stock of the plaintiff and all other shareholders who they represent, worthless; on the aforesaid date. the stock- holders equity as indicated in the financial report submitted by Ritter, Haayen and Kellar, Certified -2- ~~ • w , Public Accountants, indicated stockholders' equity in the corporation to be in the amount of $123,500. The corporation, having been formed for the purpose of in- vesting in risk-taking veaturea and promoting same, required regular attention to the various promotions undertaken. which attention was not given by defendant ~Torrilow nor did he act to secure competent officers or employees to assure that the interests of defendant corporation would be followed and preserved, resulting in the lack of appropriate promotional activity, and subsequent failure of all of the promotions under- taken by the defendant corporation. 7(h)-10. Clause (h) of Paragraph 7 and Paragraphs 8 through 10 of the original Complaint are incorporated herein by reference as fully as though they were set forth at length as Paragraph 7(h) and Paragraphs 8 through 10 respectively of this Amended Complaint. WHEREFORE the plaintiffs for the use and benefit of defendant corporation John/Lawrence Associates, Inc. pray that a decree be entered against the defendant director John L. Worrilow in such aaa-unt as the Oourt shall find and determine. plus inter- est and costs of suit, and a reasonable allowance for expenses and counsel fees incurred by the plaintiffs and such other and further equitable relief as the Court deems ,just and proper. i!~ ~~ -~ ast, r. ttorneq for Plaintiffs -3- 3~ 31:710 ~ 2/5/75 • FRANCIS E. FELS, BARBARA N. FELS, IN THE COURT OF COMMON PLEAS OF LEROY C. BROWN, BEATRICE BROWN CUMBERLAND COUNTY, PENNSYLVANIA and LANCE R. KNAUTH, Plaintiffs No. 1 October Term, 1973 v. CIVIL ACTION JOHN/LAWRENCE ASSOCIATES, INC., a Pennsylvania business cor- poration, and JOHN L. WORRILOW, Defendants IN EQUITY ANSWER OF JOHN L. WORRILOW TO PLAINTIFFS' AMENDED COMPLAINT 1. The identity of the Plaintiffs is admitted, and it is further admitted that each of the named Plaintiffs is a shareholder in the corporation. As to the averments of paragraph 1, after reasonable investigation, Defendant John L. Worrilow (hereinafter "Defendant") is without sufficient knowledge or information to form a belief as to the truth of such averments which are therefore deemed denied. 3. Admitted. 4. Specifically and affirmatively denied. Defendant is entirely unaware of any action of the shareholders of John/Lawrence Associates, Inc., with respect to election or designation as an officer or director of that corporation at any time on or about May 5, 1972. Defendant did learn late in 1972 from John H. Graf that he was "a director" of the said corporation, but Defendant was without any knowledge or information as to the accuracy of such information or the means by which it may have been accomplished. It is admitted that a meeting of the Board of Directors did occur on January 22, 1973, that Defendant attended that meeting, and undertook to act as a director, along with a co-director, one Wayne Myers, in demanding the resignation of John H. Graf. By way of further answer, Defendant believes and therefore avers that ~{-O • whatever may be recorded in the minutes of the corporation is entirely a "paper transaction" as it may pertain to events prior to January, 1973, and that such entries were not made contemporaneously in time with the dates that may be therein recorded. 5. Denied. It is specifically and affirmatively denied that Defendant failed or refused to pursue the interests of the corporation. Shareholders meetings were held, and the Defendant acted in good faith in an effort to try to preserve the position of the corporation and to conclude its outstanding affairs. It is denied that there was. any intentional or willful neglect by Defendant or a failure to act in his fiduciary capacity. 6. It is specifically and affirmatively denied that Defendant illegally or improperly conducted any corporate affairs to his own personal advantage, or that in any respect did he breach any fiduciary duty to the corporation or its shareholders. 7. It is specifically and affirmatively denied that Defendant failed to discharge his responsibility as a director with ordinary prudent diligence and skill, or that he has been guilty of any neglect, any inattention, any breach of trust, any mismanagement or misfeasance or nonfeasance. With respect to the specific aver- ments of paragraph 7 of the Complaint, the following answer is made: (a) It is admitted that a note was physically returned to Pauline Ehrgood; however, it is specifi- cally and affirmatively denied that any interest of the corporation was thereby damaged or impaired. If the corporation has any claim whatsoever with respect to the said note, then the corporation can pursue its .claim against Mrs. Ehrgood. Defendant is informed, - 2 - ~} 4 • believes and therefore avers that Mrs. Ehrgood has no liability to pay the said note, and the Defendant acted upon the specific advice of the respresentative of the Pennsylvania Securities Commission in returning the note to Pauline Ehrgood. Defendant similarly acted on the specific advice of one William Kollas, Esquire, then serving as counsel to the corporation. (b) It is admitted that a stock certificate was returned to John/Lawrence International Trading Company sometime in the spring of 1973. The precise number of shares and the name to .which such certificate was issued is not specifically recalled by Defendant. The affairs of John/Lawrence International were the subject of substantial dispute of other principals in the organi- zation who claimed that the president of John/Lawrence Associates, Inc., John Graf, had improperly taken assets of the corporation and otherwise failed in his promises on behalf of John/Lawrence Associates to perform services and promote the affairs of John/Lawrence International Trading Company. It is specifically denied that the stock certificate was .returned for the purpose of avoiding such certificates. It is further specifically denied that any such action was taken to advance the personal interests of Defendant. On the contrary, the Defendant invested very substantial sums of money, in excess of One Hundred Thousand Dollars ($100,000.00), directly into the affairs of John/Lawrence International in an effort to salvage the affairs of that business, which investment has been entirely lost to the Defendant. By way of further answer, it is specifically averred - 3 - ~a • • that if the corporation has any ownership interest in or claim to an ownership interest in John/Lawrence Inter- national Trading Company, that such claim can and should be prosecuted directly by the corporation against that entity and not against this Defendant. It is further specifically denied that any action by this Defendant in any respect will contribute to any financial loss to John/Lawrence Associates, Inc. (c) It is specifically and affirmatively denied that Defendant failed to consummate a sale of the rights to the "Curtis Lif-Tow". After reasonable investigation, Defendant is without any knowledge as to any offer by an outside party to purchase such rights for the sum of Fifty Thousand Dollars ($50,000.00), or any other sum. Defendant is informed, believes and therefore avers that the corporation had certain rights with respect to the said Lif-Tow, which rights of the corporation were assigned, set over and transferred to Frank Bartholomew, acting as an individual. If any interest in the cor- poration was jeopardized by such transfer, it was entirely negotiated, assigned and transferred by the corporation's then president, John Graf. It is specifically denied that any monetary loss to the corporation resulted by anything done by this Defendant. It is admitted that subsequent to the assignment of the rights by John Graf, acting on behalf of John/Lawrence Associates, Bartholomew then negotiated with .the owner of the rights to the said equipment, one Joseph Curtis, for the purchase of such rights and their future development and produc- tion of the Curtis Lif-Tow. It is denied that any financial - 4 - ~3 • • loss or detriment has been realized by the corporation as a result of anything done by this Defendant in con- nection with the Curtis Lif-Tow. (d) As to the averments of subparagraph D, De- fendant specifically and affirmatively denies that his efforts to purchase any interest in the aforesaid cor- porations was in any way adverse or detrimental to the interests of John/Lawrence Associates, Inc. At the times Defendant made investments in such corporations, he was unaware of any putative claim that he was an officer or director of John Lawrence Associates; fur- thermore, all of such investments were made upon the specif is encouragement and recommendation of the presi- dent of John/Lawrence Associates, John Graf, and were made in reliance upon the assurance that such invest- ments specifically advance the interests of the corpora- tion in promoting these various business ventures. It is .denied that any investment by Plaintiff in any of the ventures named in paragraph 7(d) was in any respect detrimental to the interests of the corporation. On the contrary, such investments furthered the corporate interests, although, in the final analysis, no profits from any of these ventures was realized, either by the corporation or by this Defendant. (e} It is admitted that Defendant invested in a partnership which had an interest in the Silver Springs Golf Course that is denied to the best of Defendant's knowledge, information and belief, that John/Lawrence Associates had any interest in or claim to participate in the said partnership, and proof thereof is demanded - 5 - ~~ • at the time of the trial. C It is denied that any such investment in the Silver Springs Golf Course was detri- mental to or adverse to the interests of the corporation. (f) It is specifically and affirmatively denied that the Defendant has appropriated for his own exclusive personal use any corporate vehicles, trucks, aircraft or other personal property. It is further denied that Defendant did anything to deprive .the corporation of "the benefit of notes receivable", and by way of further answer, it is averred that the corporation has any claim arising out of such notes receivable as alleged by Plain- tiffs, then such claim should be pursued by the corpora- tion against such entities which signed such notes. (g) After reasonable investigation, Defendant is without knowledge or information sufficient to form a belief as to the financial status of the corporation, either at December 30, 1971, or in January, 1973. How- ever, Defendant specifically denies any responsibilities whatsoever in connection with the apparent decline in the values and fortunes of the said corporation. On the contrary, Defendant avers that any losses suffered by the corporation are specifically attributable to the conduct of the corporation's business affairs by its sole executive officer, John Graf, who has exclu- sive and personal control over all of the corporation's affairs, and who failed and refused to keep Defendant advised fully as to the financial status of the cor- poration or as to the details of its various business ventures. Defendant believes, and therefore avers, that the corporation has a cause of action against its - 6 - ~~ ~ ~ former director and president, John Graf, for the loss in value and worth as recited in paragraph 7(g) of the Complaint; however, it is specifically and affirmatively denied that Defendant is in any way responsible for that decline. in value or any decline in the value of the corporation. (h) Denied as stated. It is admitted that this Defendant did not undertake to follow a special or gen- eral shareholders meeting; however, Defendant did attend a special meeting called by the shareholders, fully explained and accounted to the shareholders the all aspects of the affairs of the corporation as he understood them, and has fully cooperated both with the shareholders and the Pennsylvania Securities Commission in the in- vestigation of the various affairs of the corporation. It is specifically and affirmatively denied that any loss or deprivation occurred to the corporation as a result of Defendant's not calling a special shareholders meeting. 8. It is specifically and affirmatively denied that Defendant is guilty of any breach of trust, mismanagement, nonfeasance, for which he is answerable, either to the corporation or to Plaintiff. 9. Denied for the reasons set forth in paragraph 8 above. 10. It is admitted that Plaintiffs made no effort to require the corporation to take action against Defendant John L. Worrilow; by way of further answer, it is averred that the corporation has no claim or cause of action against John L. Worrilow, and it is further admitted that Defendant would not willingly participate in nor acquiesce in any action by the corporation brought against him. - 7 - ~~ • • NEW MATTER 11. Plaintiffs are guilty of laches in prosecuting their claims. The Complaint sets forth claimed causes of action against Defendant arising out of various apparent business transactions to which John/Lawrence Associates was a party. If any right or claim existed as between John/Lawrence Associates and the various business entities and individuals as averred in the several paragraphs of the Complaint, such information was fully known to Plaintiffs by the late spring of 1973, and certainly known to Plaintiffs by the time they filed the Complaint in this action in December, 1973. However, Plaintiffs have failed entirely to take any action in their own name or on behalf of the corporation as against any party or entity other than the Defenant, John L. Worrilow, and have thereby prejudiced any claim which the corporation may have arising out of the business transactions as against any other business entity or individual, including by way of illustration but not limitation, potential claims against Pauline Ehrgood, John/Lawrence International Trading Company, Joseph Curtis, Frank Bartholomew, Silver Springs Golf Course Development, Great Eastern Land and Cattle Company, Breck Electronics, and others. The derivative claims set forth by the Plaintiffs on behalf of the corporation are therefore barred by laches. COUNTERCLAIM By way of counterclaim and/or set off, Defendant John L. Worrilow, sets forth the following claims which he has against the corporation, John/Lawrence Associates, Inc. 12. At the specific request and instance of the corporation John/Lawrence Associates, and in connection with a land development venture by the corporation, Defendant John L. Worrilow signed as - 8 - ~~ a second guarantor certain promissory notes totalling the sum of One Hundred Twenty-Five Thousand Dollars ($125,000.00). The said promissory notes dated April 25, May 19, July 17 and September 27, 1972, were made by Arthur H. Miller, Jr., Associates, Inc., endorsed by John/Lawrence Associates, Inc., as first guarantor and John L. Worrilow as second guarantor. Copies of the said prom- issory notes are attached hereto and marked collectively as Exhibit "A" to this pleading. 13. The said real estate development venture as sponsored and promoted by the corporation failed, the corporation John/Lawrence Associates, Inc., failed and defaulted upon its guaranty of payment, and thereafter Dauphin Deposit Trust Company, lender, claimed the total sum of One Hundred Twenty-Five Thousand Dollars ($125,000.00), together with accrued interest, from Defendant John L. Worrilow, as guarantor. As a result of the breach of its contract of guarantee and endorsement, the corporation exposed John L. Worrilow to and caused him to be legally obligated to pay the entire face amount of the said note, together with accumulated interest thereon, as well as legal expenses incurred in connection with suit bought for collection, levies of execution, etc., in an amount that totalled approximately One Hundred Fifty-Six Thousand Dollars ($156,000.00). 14. Defendant John L. Worrilow in the late fall of 1972 in- vested the total sum of Fifty Thousand Dollars ($50,000.00) in a business entity known as the Great Eastern Land and Cattle Company, which business was directly promoted by John Lawrence Associates. Defendant made such investments on the specific reliance and repre- sentation by the corporation, through its president, John Graf, that the corporation would raise eventual capital totalling One Hundred Thousand Dollars ($100,000.00) to commence business activ- ities. The corporation failed to raise the required venture capital, - 9 - ~~ • • as a result of which the business activities did not commence, and Defendant's entire investment of Fifty Thousand Dollars ($50,000.00) was therefore forfeited and claimed by the promoters of the busi- ness venture. The said loss of Fifty Thousand Dollars ($50,000.00) was directly and specifically caused by the failure of the corpo- ration to properly promote the business venture, or to live up to the warranties and representations which were made by the cor- poration by its president, thereby causing a loss to Defendant in the sum of Fifty Thousand Dollars ($50,000.00). 15. In the summer of 1972, John Lawrence Associates, Inc., promoted a business venture known as Key Research, Inc. In reliance upon the promotional activities of the corporation, by its pres- ident, John Graf, Defendant personally signed an agreement subscrib- ing to purchase stock in the said business venture and to pay therefor the sum of Seventy-Three Thousand Dollars ($73,000.00). The cor- poration failed, refused and neglected to promote the said business venture. The corporation by its president and entirely without the knowledge or information of Defendant Worrilow, secretly sold the entire stock then owned by the corporation, John/Lawrence Associ- ates, to others. Defendant believes, and therefore avers, that the principal asset of the corporation at the time of such sale by John/Lawrence Associates consisted of the previously signed subscription agreement of Defendant. 16. Following the sale by John/Lawrence Associates, Inc., of all of its stock interest in the corporation, the corporation Key Research, Inc., commenced legal action against Defendant Worrilow to collect the sum of Seventy-Three Thousand Dollars ($73,000.00) upon the subscription agreement. As a direct result of the neg- ligence of the corporation by its president, John Graf, the business venture Key Research was never promoted nor established and the - 10 - ~9 Defendant was legally required to pay the sum of Seventy-Three Thousand Dollars ($73,000.00) in exchange for which he received a share in a business venture which was otherwise entirely worthless, other than for the investment put in by Defendant Worrilow. WHEREFORE, Defendant John L. Worrilow demands that he be awarded judgment in his favor and against JohnJLawrence Associates, Inc., in the total sum of Two Hundred Seventy-Nine Thousand Dollars ($279,000.00) . MCNEES, WALLACE & NU CK G`~~~~ ~/ By ~_ r David E. Le man 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108 Attorneys for Defendant, John L. Worrilow - 11 - ~O ~~~~ • i COMMQNWEALTH OF PENNSYLVANIA ) SS: COUNTY OF DAUPHIN ) JOHN L. WORRTLOW, being duly sworn according to law, deposes and says that he is one of the defendants in the above-captioned action, that the averments set forth in the foregoing Answer, New Matter and Counterclaim are true and correct to the best of his knowledge, informa- tion and belief. JOHN L. WORRILOW Sworn to and subscribed before me this 4th day of February , 1975. ? -, ~ ~i ~ v Notary NOTARY PUBLIC My Commission Expires April 2~, 1g77 f#arrisburg, Pa. Dauphin County .~ rf ~ ~ - ~- ~L~-- •N u3 v ~ !~ ~a ® ~ ,lm •~( ~/ r ~ ~~ ~_ A ~ l `.' _..e_..._...y._....,..m_~ . ~ .. ~~~~~.r.~ ................................ llate..................,~pri~. 2.5 ... ........................ 19.......'jQ No......~.~..'~_ ... . .......................................Orl„D~ nand......................................................... after date, ......S.g...........................promise 'o pay to th^ order of .....Dauphan.I)ep.os.it...Trus.t..Company ....................•..•••...•..•.....• .. or ...................... assign: Forty Thousand Dol.la rs - - - - - - - - - - - - - - - - - - - - -. , _,..T,. _DOLLARS .......................................................................................................................................... . without defalcation, with intcr>st value received, And further .. .. _.. ... __ rlo hereby authorize and empower the prothonotary or any attorney of any Court of Record of Pennsviva pia or elsc~chcrc• to appear fnr auct enter judgment against ................._ ... for the above surn, with or without ale •l:u•ation, with costs of suit, release of errors, without stay of execution, and with 15 percent added for collection fens; and .. __ ................. further agree that real, per4onal or mixed property may be sold upon any writ of exFCC t iou ;!s now ur hereafter provided by law or the Rules of Civil Procedure governing the enforcement of judgments: anal .. hereby waive t.nd release all relief from any appraisement, st~:y or exemption laws of any state now in force or hereafter to be passed. Witness .....................................hand and seal the clay and year t above wri*ten. Sign, Sealed and Pel:ve ,ed in presence of ArtY>~ur_ H er, Jr. ~, As>rtoC teS ~ InC. ~y ~.. ~. ~~~ ......................................................................................................... a. -: ADDRESS 1 ~ --'X@CU 1VE' 0119Q~-`_- g~ - ~_~._~~__ f /hi. "! :~ t t 1 + as ~R ~ ~ ~ C~ N ~ ~R1 ~'' ~ • C v G C .K.i yu q 2 ~ :J {. M V ~Hi. w,q q"".F 2 00 y Oq~ yA^ R.«°q JA p OOM~C OM Ov Gq ~ ~ 07 O N A maF7 C'm~w.P.'p¢d ac-, elgG~ ~iQ~^:.~QLi H gd+Yq V,..P o y cJ V.,; W~p...~y."-. q•~•'L7~ w d •'^'•m OA RG„Ly OC1V •+q'.~V OVC7~/a1.N CL V yQy "yR7 ci '."Q.+ Q Oq CL 7. a'Cy0 q W by Qm Nw.q ~,... ^"o/p h.~...oQ ~"'p~~p~ ~ v LL as (~ ~ d ~ w w ~ ~ U ' ~•, : ~ CH.~ G ~ Ci w „"' ~, C ,a ~" r' i b.~ and c° q«./.tC y~y..,HO.^ ~.~.owm gaayi .~ y q b qy~D ~^c~."qA?°~~ qG;w ~«VG P.~dFP. ~'O O .:O P. P,H ..gou..w ~ 7uoy ^.7 V q,,,,Q q q AV q i'~ ~;-. q'.' v'.' H,~a-+^". gCwaw OO V.'~af hq ~tV.a o .. ,~~a, 17 ",'a gmom..Ggcr^~;, m~ yq u ~ V O."'.a qG3 o~~PO:-pFi CAa CN OJ Y!' jAy~q'O ~A Hmmm C[r G",-',Cp aFJG U~•6i Gq~ V~• ~, c• pOm .o+ ~i. in7-7 .o Q W O m q OG.O VW L7 Ka0 «+~ d d 1•U [. q N°C P q F a1 •~P~ qP'":: yN~r FAq~.j .~~`Q~.u CY.V q~ P al aVi a~ a,,,a ='•~r. G. G•±, aa.04 C ~~ / a.P ~Cp qo t.m q Od L:a'n or. -^ o'er i i.. y pan-qua ~, a.y ;.. [~:1~Qq H=~G,o `o Os..^ ~`~~P.N ~HU "u~~ya. H~ mgoGC tea.. ;. tigC ca•.Y .-c c ~w :~ EXHIBIT "A" ' 1.1 .~. ,~ ^. U~ >" d ~ a8 Ha ~ la •L..~ /a . ra ~ U ~ to E ~ ~ e) E L ~~ • ~•-.- _ ~` $ S.Q.,.Q.QQ,.QQ .................................. Datc ............:.............................May...~~.o.......... 19..72.. No................ . 11,~ ...Oz1..A~marid ................................................................................................... after date, ..:.....Fie........................promise •.o •~ h ' La! ~ pay to the order of pE~U~lt~~]..DF.,~'OS.~~..TRUS'1'..C41`1.Pt1NY .............................................. .. or .......a.X.S...... assigns ~~ FiftX..Thousand- - - - - - -...-....'...'...-...-..-....-....'...'...."...'....'...'...'....'...'....'...'...'...."..'DOLLAP.S ~ ~ea. without defalcation, with interest value received, And further ....................... do hereby :authorize :and empower the prothonotary or any attorney of any ~ ~ Court of Record of Pennsylvania or elsewhere to appear for and enter judgment against ....................... for the above sum, with or without declaration, with costs of suit, release of errors, without. stay of execution, and with •a1 ~ K 15 percent added for collection fees; and .................. ..... further agree that real, personal or mined property may t~ ~ a be sold -aeon any writ of execution as now or hereafter provided by law or the Rules oP Civil Procedure govcrnin;- ~ = the enforcement of judgments; and ._ ..... ............... heresy ~~•aive •~nd release all relief from any appraiscment, stay or exemption laws of any si,ate now in force or hereafter to~bo~passed. ~ Witness .................................... hand and seal the ~daY ji~ic .' Ir first aho~e wr/itl;e~n~ j,~ 5igred, Seated and Delivered in presence of. ''~ ~ /'. ~~ ~!;-t~I-f- '~ :' .:. ~~ .._T„ ._ `~~~'~F"'~ Arthur H. Miller •..Jr.. Associates Inc. ~'~~ ................................................................................ ................................ s ~.......;.....................a............ a... ... ~"ti:' ~~-] ~-~~-_ __ a I t P I' AooRESS•su}tea--607- ExecuG~e-~-lc~us-e-r-~9-1-tis-.-•~nd-St:---~•ler~islzurg~7~~s1 ; ' C~i i Q a 1 ~ ~y^\~- A Q ~ ~9 ~ • o .+ ., ~ ~ O y w~ .~ a ~ ~, ~ •.1 ~, z -_ .. _ -_. m +~ wQam~.4 cgi~ov.ooaonm mO[i'O ~O'mAw.7 q,cm qcm AR`?.gq~C~j N^ Ap, Umu,,,,F 4 A.~+qv hO~"'?R~~~.O o ..mcm,,,~.,nN pT'gH yRQti GO C 1-. O'af, a, q ^w~ o w'7 ~~+":' a W d V •• A4O~ q,gtl yv~U .. ..wW o"'p'wc,,d~.a u,. u mqy w ..~. aiN" ¢t •+m.c7 hw ou.q au+°mm q~emiw Q..., P, Q.q '".m.m~ ma~°.°.QaE3~ om~~ a~,u9Gtc, p"O ef'~°-"ti q~+cOCQ""am tl w...~ly OUy Pal N.''~ Oar ~"_ C U V ~+m q ca RO V: ~"^n= .C •s1 lL~ROi .q Ll V ~UO'~ Gd ;,yaq Ned ~o s w mgou c~c,.a~~~•~ afoUa cfim_G.~c.n- e.w~tl •ARC. ~ °CFUi ."., ,z., 0 GO`W p~ tly k o G~ a fi~y c~ C L~s~ .Q 1 Y,.~~O.yOL ... G+'O Q f Q h Y~ O u O m P~ w O !2 GAq ~i7 m~,q..U R6. _ N _ fi~C~lt Y.~j Ci jC CH b ~Ri.. LO'O V~%~ i-.p ~ 1 --iw ~ ~q.., A fi c ~ ice, ^7 '.t~mt~'r cR'r-q ~~ ti a.- ` ~~ c a.ci~ R r.. F. ~~... r.G ` c PU u WG 'C ar~N~ G ~ Q ,y .-. 4r~ ~ G' 1. ~ `Yi h m `~ ~. x'170 C..Gp mRCt=iUO 4 a p Ld 17 F, u?w vA a.uw"~"'a cty Atl ~ _ L q^• a ,~ C~ 'e~ i 1 ~:QOO°uoV'o`~gca` u ~ a. 0,,e~ C 'C 4~~ G q0 yL^C~a~q 'v SD. .. ~' Aa+ f; O ~ C F1 r~.._-y-. .. .. e, V. + a m c .. ~.. ,~, +.y u ~~n .C a -- _.,.y EXHIBIT "A" ~3 _ ,' y. ~ ~_.._ d ~ ~ ~a a ® ~ n •t1~ = b ce ~a x ~ ~ ~~ I ~~~I iry 4~; K~•' : ,~4 3. r ;3 , 7 1~ ~ ~ ~. . _ ... $ ._?.S.,L?;).o..CO .................................. Dote...................Jttlv_:~ 7y.. ~..97~................ 19........ xo........".:~.:.'..~.". Cri DemandV .......... after date, ........W~ ....................... promise •:o pay to the order of ..Dat~h~.x7:..~7G~?.QS.~.'~...~'Z':aa.'~....C~Ompa.2],y' ........................................ .. or ..................... assit•ns .i`w~~ntY....Five...~.Q.usan.~•...AR~~,~,~5....-....-...-...-..-...-...-....-...-....- - ......._.._.. _DOLLARS ........ ~ ...T... T .. Iw.....,... ~ without defalcation, with interest value recei~•ed, And further .. „ .................... do hereby authorize and empower the prothonotary or any attorney of any ~ Court of Record of~Pennsylvania or elsewhere to appear for and enter judfiment a~a~nst ........................ for the ~ above sum, with or without declaration, with costs of suit, release of errors, without stay of execution, and wit'.i (15 percent added for collection fees; and ............................ further agree that real, personal or mixed property may he sold upon any writ of execution as i:ow or hereafter provided by law or the Rules of Civil Procedure fiovcrnir.~ the enforcement of judgments; and .......................... hereby waive and release all relie° from any appraiscment, st~.y or exemption laws of any state now in force or hereafter to be passed. Witness .....................................hand and seal th -'d<iy'a ~ar first above written. ~-- Si~ned, Scaled and Delivered in presence of ~,,-~~ "~~~~~~'~/~ (~~ ~ ~~,s~ ' ~ 1/~ y!1 ................................................................................... ..As'thur..H.~....N~17.3~~...~3r~...~ssociates .....inc. 'i::. ,. ADDRESS g~~-6p~--~~~Qa-~fous~, n ~:;~~Hb~-. --]7101 ~" .~~ • S may+f m i wG~p CPaF -.^..uO F~ ~q^++ V yi. i.X y'C^ L m CO_40.-•o~~ocG'C:''. m ~ .-. i77 ~ T. q O C -. " ` Gr. ~ a~ "' a l 1 a~a, a+ ,_, Q ~ U a, Pw a' t. ,~ _• a. L ^ O G i C ` _ F_. c- m u 4 .cl •.' C '~ P. H Cw ~. F C A !J C , v a + . .. M` y. ^.^-.`. ,. ` ~ pP T= A~^c °n ___ y -a www•-P~"G[~ V~' O.CF C,..iw C:JL G~' 4 G41 C ~y ^ ~ y i+ r0 [~)+.~ M. y~. J~ _~. ~, (`(~~~ ~ . V t v a C ~ ~~ `y w _, A -, . ' ^ F G, .w . +.. ..: . c m u G q H ,, ~~ ~ `} = A L m ~ Q O :i ~ ~Oma. y: O m OG ap .., i ~=. c,u ~ G ~£r P .. , , a, .C i.. , . '+ ~ ` .G.-~ r P,uw u •1 ~-+: N t .~ m C y.•, m c s. a~.'O P - a '~ ~ •"~ M .-V. df ~ QOM ~ A ^ N ~~.[ w y C ~ V .~ N O.^` ~ ... "' C ^ ~ e CSS ~ Q: Ti: n G .~ =.°..m ,-i. FCC .a'- '+a :C o ~ C pw ~„oG..P~C~, E^~ °ccv u~ ~ a U p ~ 1\ ~.: ~~ utcwF P ca ' o Quu q ca a uG~ A o.CFC cVCCa P.a U] \ N: ~, -wW u oaJ~ym~'cy ~..~ ~ G geoQ'u'GcC. r-..°.a O o u C e ~b 'w C'" ~ A r va A ~ a.p U d ~^"eCm F a~a.e `N w FC u ; i7 Qa e ' M Pr.' : . r a,PUO Q ~ P.w ~•+A .'a+q ut7 .a .,0 a u aA y c: i, C. ^-,~P• .+j-G ter; ua,^~a,~ :~ a, o a 0 4'm ,G ,~ ~ ~~ ~ CCCJJJ fp V! ~ (J O a+ ~ mm ~"u i wp a, t7 O ~nD OOwC m ~m+ mma+C ' ~ v ..~~ ,. ^J qA c ~.yw. 'CF~ ~ ~ ... FJ o O ~-~,.\~ ~ ~ Y . y • rr dy ~ am S C aO, C~iuEC U w _ G mopCO w~' d c,0a [.Cm GM _„d , d ~ :~ `, :~~`' ~a • O ~ ~ O m'O y~ C h G b w - aP, p.:~:P Vi7m w ... •_ m . a. P. u ~C O ~ a, 4 tihvo_ Pm.•0 ~.:qP~ '." G " . V tj b F~ -.( Y r., d Y ~ f/1 P WNh ~ A V y Ham V 4.^G^ C Gd ^y V 4 ^ (; F ... G q Y. ~1.C ~¢'C P dC C i' C F' m 'J F-~ ~ .~. d ~ y, Mm V L- ~nm . OCS V 0 ^O A'uou~ua~ . p y Q~C,^. O yak== ~`~~:.uP,oa' yY Fa ~ . 7 ~ ,cc u J ^~, ~Q r [ N dO... u0 ~P,u a Aa~i ` ~« •`. '-ayP i Hv O /~ ,,,, 1.,.1 [ ., m C C r. I c000 O u C L AL ,V, t7 q O~ - 5 o G... u " G =~ .. ti mw ~G N ~'1• m 0: . .+V of a, ^J m: Gw G-: ^.Fw at i7 a EXHIBIT "A" ~~ t~ a ,, ; , i ~ ~~ O ~ ~ ~a QN ~~ ~ ~ oe ~a x A~ ~~(~ }ii i~±!:! d ' `~.~ ~ ~ ,, , 1>, .~ • ,• ~ , C%~~ ~ --~ . ~ ,~ r ~- r ~~~ ~ ~---- Date .........:.-.,~~ ~~. / ....................... 19....E No..... ~....::.:.:.... .. s , ........................................ _~''.r... ... ................................... ~+~?.'Y%~^'~1''Gys.«..rC........... after date, ~`.:~;~r-;...............promise '.o .. r' % ~~ r. - pa:i .tu the o er o ~ ..:.. _... ...:'..,' .::....... .. . ................... '~ .... . ...................... .....!.:....-~~.. ..r.......r.'.. .:tea.. _...G...... Or 88s1g119 {}` ~ ~~' ...... .G7..+k.:..a:../l..r.~r..ca.. ......~~ .. ` ............................................................:....... DOLLARS without defalcation, with interest value 1•eceived, And further ................... do hereby authorize and empower the prothonotary or any attorney of any Court of Recurd of Pennsylvania or elsewhere to appear for and enter judfiment against ........................ for the above sum, with or without declaration, with costs of suit, release of errors, without stay of execution, and with 15 percent added for collection fees; and ........................ further aKree that real, personal or mixed property may be sold aeon any writ of execution as now or hereafter provided by law or the Rules of Civil Procedure ~overnin~ the enforcement of judgments; and ........................... hereoy w i and release all relief from any appraisement, stay or exemption laws of any state now in force or h ~ to' be passed. ~, r-.. Witness .....................................hand and seal - year f' st above writt L Si~;ncd, Sealed and Delivered m presence of ~ '~ ~ , •6 !- •. - A~ ~j~~ ........................................... ..................................................................... `" st/ ~~ ~ ~ ~ ~~~~~~~•~~~~•~ ~~~~ ~ ~ ~:Ax'i:hur•H. taller, Jr. Associates, Inc. `~"~ r R 1 y • ' 0• - • 1 ~. ~: v: ~ 4 y f ; `~ 69 tR W ~ ~ ~ M O ~ ~ ~ w a ~ ~ ~ ~~ .a M , . _. _. - - _ m~¢ q m :: t. ~ ~.V V C 7Q Mr V -~:J C C,.. w q;• - - yoaAm ::""~^~•V c' 'J _ dvgv ACw~GC=-^ vVb ~y vGV'i OVa"~~ ~y ~.. C qqr^ vFjv ~Q `c? d O C^%^( s...dp .,yR Va^. .. qy ,P. q~w"c:aad q~y~ hq~q°~ J ~ Oa ~"w c_ y M O,q, qy.9 V F^~i, .q ~ W V ~ d V A d q q.C p O O q _v u O:°.a p.q. Vw O:.h0J3 1~..m m m U~q o«es oCi~ ~~,• y H q~m G mu 7aH t0 NYp C `lhp 7~ O C V a70.y aV,V.,va.C q^ F.m V q V V 6q !%O G^ C'O k~[~nm Ha .vgoyU Q« V^ rtoUm ot~a..i%°c`"iao tl OOFa~.. ,;,CC CLCFF. ~, Oa+~;~ C.-G V ^~ A G `' ~ i G V C ~~` q C G ~ ac~'q~m~._._ c cca ~~`¢'"o a'i [ . r. E i~,•n .~. .C p V 0 .. V v^ ~+ a.... w 4. 2 ,,: a~Vr, ~+OF,u%^~Cw c3 qq c..qd,. Y:Gr. ~ e7 ,y ~m a..dgr.G~"C'c. `N hwgc =F77 ~"V^ h q~ar.'G_. of Y C ¢.CA~q.b Adz M Gq,^a'"''°^V. G~w ~ d Ha V^J Vp i+.~ Qc~Q rty D.V 00 P.~, 7..C p ad~d,Onm'O ~q'°~""~ 'O ~' Ly•°•d5,a~c~'ivc~~O .+~ pit ^.'•-yr0~ 0 ^~_+~" u>'O~'' O tiCFI~~~~ ~j L.y~ VYV p„4 n ~ @ .~. @ n VJ ~ ~..~ ~ a .9 EXHIBIT "A" ~` 5 F ~ ~ EYE FF~3~. ~, `?5 s i • . , FRANCIS E. FELS, BARBARA N. FELS, In the Court of Common Pleas LEROY C. BROWN, BEATRICE BROWN of Cumberland County, Pennsylvania and LANCE R. KNAUTH, . Plaintiffs No. 1 October Term, 1973 v JOHN/LAWRENCE ASSOCIATES, INC. Civil Action A Pennsylvania business corpora- tion and JOHN L. WORRILOW, Defendants IN EQUITY ANSWER OF PLAINTIFFS TO DEFENDANTS' NEW MATTER AND COUNTERCLAIM New Matter 11. It is specifically and affirmatively denied that plaintiffs are guilty of laches in prosecuting their claims, on behalf of the Corporation. Plaintiffs first became aware of potential claims of the Corporation against the defendant John L. Worrilow subsequent to a stockholder's meeting called by the plaintiffs and others, after the failure of the defendant John L. Worrilow to call such meeting when demanded by them in writing under date of July 2, 1973 said meeting was held on August 24, 1973. At the aforesaid meeting held on August 24, 1973, the defendant John L. Worrilow proported to explain various matters questioned by the shareholders; his offered explanations required further investigation by the plaintiffs. Further, the defendant John L. Worrilow agreed to assist the plaintiffs in negotiating with regard to the potential claim of the Corporation against John/Lawrence International Trading Company, as set forth in paragraph 7(b) of the [Amended] Complaint heretofore filed. Said negotiations continued through the Fa11 of 1973, as did the investigation by the plaintiffs and their agents. Further, the .~ 7 plaintiffs aver that they have not taken action in their own name or on behalf of the corporation against any party or entity other than the defendant John L. Worrilow because, as the defen- dant has specifically acknowledged, the other ,parties are in- solvent or were individuals employed by the defendant or relatives, or companies in which the defendant had invested substantial sums in an individual capacity, and contrary to his duty to the Corporation, John/Lawrence Associates, Inc., John L. Worrilow, or his business associates. Plaintiffs further aver that they did not have the resources to pursue through litigation or other- wise various companies or individuals with whom the defendant John L. Worrilow had dealt .subsequent to the removal of John Graf from office as president of the Corporation at his insistence; at that time he assumed. exclusively the executive functions of the Corporation. For further answer the plaintiffs aver that the defendant John L. Worrilow did not advise them of the difficulties of the Corporation through written notice or otherwise prior to August 24, 1973, as aforesaid; defendant John L. Worrilow, as the executive officer of the company, and the sole executive officer of the company, failed to call a stockholder's meeting or notify the stockholders in writing of the status of the company or other- wise communicate to them its actions which are the subject of this law suit. Subsequent to the investigation aforesaid, plaintiffs attempted to seek further explanations from the defendant John L. Worrilow as to the status of various matters both individually and through his counsel. Said efforts continued through the Fall of 1973 and were continuing until shortly before the filing of the Complaint in December, 1973. Therefore, the derivative claims set forth by the plaintiffs on behalf of the corporation are not barred by laches. -2- 5g ~. w ANSWER TO COUNTERCLAIM 12. The allegations set forth in paragraph 12 are neither admitted nor denied by the plaintiffs because they are without such knowledge or information because the means of proof are within the exclusive control of the defendant, and proof thereof is hereby demanded. 13. The allegations set forth in paragraph 13 are neither admitted nor denied by the plaintiffs because they are without such knowledge or information because the means of proof are within the exclusive control of the defendant, and proof thereof is hereby demanded. 14. The allegations set forth in paragraph 14 are neither admitted nor denied by the plaintiffs because they are without such knowledge or information because the means of proof are within the exclusive control of the defendant, and proof thereof is hereby demanded. 15. It is admitted that in the .summer of 1972, John Lawrence Associates, Inc. promoted a business venture known as Key Research, Inc. The remaining allegations contained in this paragraph are neither admitted nor denied by the plaintiffs be- cause they are without such knowledge or information because the means of proof are within the exclusive control of the defendant, and proof there of is hereby demanded. 16. The allegations set forth in paragraph 16 are neither admitted nor denied by the plaintiffs because they are without such knowledge or information because the means of proof are within the exclusive control of the defendant, and proof thereof is hereby demanded. -3- S-9 ~ ~ ._' WHEREFORE plaintiffs demand that judgment be entered on counterclaim in their favor and in favor of the Corporation John/Lawrence Associates, Inc. and against defendant John L. Worrilow. -4- ~Q COMMONWEALTH OF PENNSYLVANIA SS: COUNTY OF DAUPHIN Personally appeared before me, a notary public in and for said Commonwealth and County, the undersigned, who, being duly sworn according to law, depose and say that the facts set forth in the foregoing Answer to Counterclaim are true and correct to the best of their knowledge, information and belief. ~LC~iJ 21 ~G~C Sworn to and subscribed before me this /'~~ day o f ~,(,,~,, 19 7 5 . otary Pub is ~~ ~ ~~~ ~ • FRANCES E. FELS, et al VS JOHN/LAWRENCE ASSOCIATES, INC. ; and JOHN WORRILOW NO. 1 OCTOBER TERM, 1973 RE: PRE-TRIALS ORDER OF COURT AND NOW, May 19, 1975, it is ordered and directed that pre-trial of the above cases be held at 9:3Q a.m., June 9, 1975 in Chambers of Court Roorn #2, in the order listed above. In partition cases, the pre-trial conference will serve as the preliminary conferance under Pa. R.C.P. 1558. At pre-trial conference dates for trial will be fixed. By the Court, J. Richard C. Snelbaker, Esquire F. Lee Shipman, Esquire E. Robert Elicker, II, Esquire Edward W. Harker, Esquire Robert C. I~eYrick, Esquire John B. Fowler, III, Esquire Henry F. Coyne, Esquire Shumaker, Williams & Clark, Esquire Nauman, Smith, Shissler & Hall, Esquire 1 William H. Nast, Jr., Esquire ~~~avid E. Lehman, Esquire ~3 • MARY LOU PLOWMAN VS JOHN W. PLOWMAN, JR. JOSEPH F. FURBER and RITA C. FURBER, husband and wife VS ROBERT M. ELLENBERGER and LORNA J. ELLENBERGER, husband and wife JOHN L. DENSHAM VS ELAINE L. DENSHAM GEORGE KROSNAR VS SCHMIDT KROSNAR McNAUGHTON GARRETT CO., J. DONALD SCHMIDT and THOMAS A. GARRETT JAMES UTLEY VS TOWNSHIP`:.' OF EAST PENNSBORO and HERLUF T. LARSEN and CHARLOTTE E. LARSEN DONALD L. McELRATH VS WILLIAM O. WILEY IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - EQUITY NO. 1 OCTOBER TERM, 1974 NO. 16 JUNE TERM, 1974 NO. 3 OCTOBER TERM, 1974 NO. 5 MARCH TERM, 1973 NO. 12 OCTOBER TERM, 1974 NO. 15 JUNE TERM, 1973 ~~ ., ~ ~ ~ i ,~ ~ ~~ _~ ~~ COURT OF COMMON f LEAS TWELFTH JUDICIAL DISTRICT DAUPHIN COUNTY, PENNSYLVANIA JOHN C. DOVVLING February 20, 1976 JUDGE _ ~~~ William H. Nast, jr. , Esquire 414 North Third Street Harrisburg, Pennsylvania 17101 COURT HOUSE HARRISBURG David E. Lehman, Esquire I00 Pine Street Harrisburg, Pennsylvania 17101 Re: Francis E . Fels , et al . v. john Lawrence Associates~Inc. , et al. Gentlemen: The above case has been specially assigned to me. I am scheduling apost-trial conference for counsel at the courthouse i~ Carlisle on Friday, February 27~,..~~g76 at 2 o'clock p.m. V ~~ 6 ~, s cc: judge Clinton R. Weidner Ms . Bernice Duke JC D: pk ~~ y yours , \ ,i! N C . DOV4'LIi1G FRANCIS E. FELS, BARBARA N. FELS,: IN THE COURT OF COMMON PLEAS OF LEROY C. BROWN, BEATRICE BROWN AND LANCE R. KNAUTH, CUMBERLAND COUNTY, PENNSYLVANIA Plaintiffs N0. 1 OCTOBER TERM, 1973 VS. CIVIL ACTION JOHN/LAWRENCE ASSOCIATES, INC., EQUITY a Pennsylvania business corpor- ation, and JOHN L. WORRILOW, Defendants . ORDER OF COURT AND NOW, October 22, 1975, at 10:00 a.m., it is ordered and directed that pretrial conference on the above matter be held November 5, 1975, at 10:00 a.m., in Chambers, Court Room No. 2 and trial on the above matter be held at 11:00 a.m. the same date. By the Court, ~~ J. William ~ljast, Esquire ^' t ~ {_y~ „ f~ _~ ,. ~',._-~.~,~,~ „~ ~._ ~,J~_i F David Lehman, Esquire ~~~ • ~ _! - - ~. ___. nle ~~ ~' d /~Ylr~ ~~ tr .; ~`, ~ '.. * .. (_ .. C ~? mot} .~_ ..„ -t ,.a ~ _.. s ~R .. FRANCIS E. FELS, BARBARA N. FELS, LEROY C. BROWN, BEATRICE BROWN AND LANCE R. KNAUTH, . Plaintiffs VS. - JOHN/LAWRENCE ASSOCIATES, INC., a Pennsylvania business corpora- tion, and JOHN L. WORRILOW, Defendants ORDER OF COURT IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION NO. 1 OCTOBER TERM, 1973 EQUITY AND NOW, February 20, 1976, at 2:45 p.m., pretiral on the above matter will beheld on February 27, 1976, at 2:00 p.m., in Court Room No. 3, Court House, Carlisle, Pennsylvania, before The Honorable John C. Dowling, Judge, Specially Presiding. By the Court, ~i~G~.(Nif 1 J. William Nast, Esquire David ~,ehman, Esquire nle ~7 . - ,~ . ,. a z . _ _ --~--: t7O C~ r.~ r. ~ - --~ . ~- '~ a' , ~i ~.+~, .. J.J 5.'7 i ~ J ~t r:--~ ~ ,~ t1 `T7 ';: G:: ~ [ 7 ~'' ~'.s t~, ~t'r1 ... .. .. w ~o.M ~~ ~ ~ "'C