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Home My WebLink About08-5290J MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, Plaintiff PENNSYLVANIA V. NO. QO -l?d Civil COMMUNITY FINANCIAL, INC. CIVIL ACTION and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. Shareholder Derivative Suit Defendants. NOTICE TO DEFEND YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this complaint and notice are served, by entering a written appearance personally or by attorney and filing in writing with the Court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the Court without further notice for any money claimed in the Complaint or for any other claim or relief requested by the plaintiff. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. _'R DIN COUNTY LAWYER REFERRAL SERVICE G? 13 North Front Street arrisburg, PA 17101 (717) 232-7536 0 MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, Plaintiff PENNSYLVANIA V. NO. Civil COMMUNITY FINANCIAL, INC. CIVIL ACTION and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. Shareholder Derivative Lawsuit Defendants. COMPLAINT AND NOW comes the Plaintiff Matthew P. Amos, representing himself, and files this shareholder derivative lawsuit against defendants alleging as follows: 1. Matthew P. Amos (hereinafter "plaintiff") is a 49 year old Investment Advisor Representative with a residence at 2503 Hoffer Street, Harrisburg, Pennsylvania 17103. 2. At all times relevant herein, plaintiff has been a shareholder in Community Financial, Inc. (hereinafter "CFI"), a Pennsylvania corporation whose principal place of business is at 3907 Market Street, Camp Hill, PA 17077, in Cumberland County, Pennsylvania. 3. Plaintiff invested $82,000 into CFI in 1989 and presently owns 25700 shares of CFI common stock. See Exhibit A (shareholder list). 4. At all times relevant herein, Lowell R. Gates has been Chairman of the Board of CFI and, as an attorney licensed in Pennsylvania, has provided legal guidance to CFI. 5. By notice dated June 27, 2008, plaintiff was informed of CFI's planned merger with Franklin Financial Corporation. See Exhibit B. 6. On August 8, 2008, plaintiff received merger proposal from CFI Chairman Lowell R. Gates, who indicated on the cover that he authored and was involved in the formulation of the proposal. See Exhibit C (cover page). 7. Because of questions surrounding the proposal, plaintiff has sought to obtain information from CFI concerning the proposal using the tools available by Pennsylvania law, namely 15 Pa.C.S. § 1508 on the following dates: June 30, 2008; August 12, 2008; August 22, 2008; and August 28, 2008, as well as agent authorization letters. See Exhibit D. 8. Each of these requests were either denied outright or accepted with very limited information provided, as presumably dictated by Chairman Gates. See Exhibit E (CFI responses). 9. Recognizing that CFI is typically unresponsive to shareholders (see Helm v. CFI, et al., No. 07-2122 (Cumberland County CCP)(J. Ebert)), plaintiff's daughter purchased stock from Franklin Financial Corporation in an effort to obtain answers concerning the transaction from that entity. 10. Plaintiff's daughter made a request from 15 Pa.C.S. §1508 to obtain information from Franklin Financial, which was similarly rejected. 2 11. Counsel for Franklin Financial indicated that it was acting in concert with and coordinating efforts to deny plaintiff information relating to the proposed merger. See Exhibit F (Letter from Franklin Financial counsel). 12. Because the merger is scheduled to be put to a vote on September 8, 2008, CFI's strategy in responding to demands for answers has been to use stall tactics and wait it out. Facts Reladnie to Apparent Self-DeaUnky, Waste of Assets and Fraud 13. Although some information has been provided, defendants have failed to provide information relating to apparent self-dealing evident in the proposal. 14. Buried on page 1-45 of the merger proposal is a reference to the establishment of a trust "to hold certain contingent assets and to facilitate certain post- closing actions of the parties...." See Exhibit G 15. Precisely what the trust represents is not made clear anywhere in the document and plaintiff's attempts to obtain answers using the tools available by Pennsylvania Corporations Law, namely 15 Pa.C.S. § 1508, have been effectively stonewalled as set forth above. 16. "Contingent Assets" is defined in the proposal mysteriously as "$120,000 off balance sheet receivable ....for the year ending December 31, 2007." See p. 1-45. See Exhibit G 17. It is believed and therefore averred that the $120,000 is a personal loan to Chairman Lowell R. Gates. 3 18. According to the merger document, the "trust" will terminate in ten years if the $120,000 is not paid back, effectively causing shareholders to absorb the expense of that personal loan to Chairman Lowell R. Gates. See Exhibit G 19. On page 28 of the merger proposal, See Exhibit G Mr. Gates and his cronies at CFI utilizing remarkable gall attempt to present this liability to shareholders as an asset by suggesting shareholders "may receive additional cash" in the presumably unlikely event that Chairman Gates actually pays back his personal loan taken from company assets. 20. In order for shareholders to receive their due, the "beneficiary of such trust" (read Chairman Lowell R. Gates) must die "and there [must be] sufficient funds remaining in the trust." Merger proposal p. 28 (emphasis in original). See Exhibit G 21. Interestingly, in another section of the merger proposal, the writer (read Chairman Lowell R. Gates) is not optimistic that any money would be paid back to shareholders, where he writes that "[b]ased upon the timing of any payments from the trust and the likelihood that no distributions may be made, it recommended that no value is assigned to the beneficial interest at the time of the grant." Merger proposal p. 36 (emphasis added). See Exhibit G 22. This merger was proposed because CFI through waste was unable to maintain $1 million of capitalization as was required by the Pennsylvania Department of Banking through wasteful spending. 4 23. The full extent and nature of such wasteful spending is not fully known because defendants have refused requests for that information made pursuant to 15 Pa.C.S. § 1508, as set forth above. 24. It is believed and therefore averred that the edifice that currently houses the offices of CFI is owned by Chairman Gates and through a "sweetheart deal" he has derived considerable rental income from CFI. Count 1: AMOS V. CFI and CHAIRMAN GATES, Breach of Fiduciary Duty Violation of 15 Pa.C.S. §512 25. Paragraphs one (1) through twenty-four (24) are incorporated herein by reference as if set forth in full. 26. Pennsylvania law reads in relevant part that "[a] director of a domestic corporation shall stand in a fiduciary relation to the corporation and shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances." 15 Pa. C. S. §512. 27. By engaging in self-dealing as set forth above, Chairman Gates has breached his fiduciary duty by engaging in a transaction to benefit himself to the detriment of CFI and its shareholders. 5 WHEREFORE, Plaintiff Matthew P. Amos prays that judgment be entered in his favor and against defendant Chairman Gates, that the Court direct the defendant return any money derived from his breach of fiduciary duty, and that the court grant any other relief it deems just and proper. Count 2: AMOS V. CFI Waste of Corporate Assets 28. Paragraphs one (1) through twenty-seven (27) are incorporated herein by reference as if set forth in full. 29. Defendants have consistently allowed corporate assets to dwindle below the $1 million required by the Department of Banking. 30. Through mismanagement of corporate assets, the extent of which is not fully known because of defendants' refusal to provide information, but includes and is not limited to paying exorbitant rent to Chairman Gates for office space, defendant corporation has wasted corporate assets. WHEREFORE, Plaintiff Matthew P. Amos prays that judgment be entered in his favor and against defendant CFI, that the Court direct the defendant return any wasted corporate assets, and that the court grant any other relief it deems just and proper. Count 3: AMOS V. CFI and CHAIRMAN GATES, Fraud or Fundamental Unfairness 31. Paragraphs one (1) through thirty (30) are incorporated herein by reference as if set forth in full. 6 32. Defendants have engaged in fraud and/or fundamental unfairness by misleading shareholders and failing to disclose the facts of the underlying merger transaction as set forth above. WHEREFORE, Plaintiff Matthew P. Amos prays that judgment be entered in his favor and against defendants CFI and Chairman Gates and that the Court award compensatory and punitive damages, that the Court enjoin the planned merger with Franklin Financial, and that the court grant any other relief it deems just and proper. atthew P. Amos MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff September 4, 2008 7 MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS Plaintiff V. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. Civil COMMUNITY FINANCIAL, INC.; : SUSAN A. RUSSELL, PRESIDENT: and CHIEF EXECUTIVE OFFICER;: LOWEL R. GATES, CHAIRMAN of the BOARD, JOHN B. LAMPI, CORPORTATE COUNSEL, SAIDIS, FLOWER & LINDSAY Defendants. CIVIL ACTION - EQUITY VERIFICATION I verify that the statements made in the foregoing Complaint are true and correct to the best of my knowledge, information and belief. I understand that any false statements herein are made subject to the penalties of 18 Pa.C.S. §4904 relating to unworn falsification to authorities. Date Ma ew P. Amos Plaintiff 8 EXHIBIT A ?,m,nt8lwrwaM.r w 1Ma10r Fir t_t4wne MkL In Last Name iAddresa Mew IMP 13 of Sbsras Emil 1 N. Cressm an } 1382 Ciew%ld Avenue Betlhiahant PA I 180151 1 rJQ P.vbert ;A. Abei !2023.MounteO Pine Orivs Meolhanioebu PA 174861 110 T40- ant MS-Olo w chrlsw* IW. !P. A. I i Addww Amos Amos 1610 K. i on Cirde 2603 7r-w er tree! 12503 6adW 3700 Satwrrb 9each HWrMbtgg Harr°ab ' FL PA PA 1329V, IAG8 17103 1710..'' 260 25700 1500 Kerudth Kimberl i R. ! : Art" :5925 S ns 222 Arthur-TnwWw 113 W1d Rose Lane Msclwac W W Medwsicabura PA PA 11050 17066 100 . 51 Ernest IJ. Campo nova 1011 Cent Drive PA 17053 1250 Jan ,B_ caslner 1 Mountaindale Cmm MWAIVAR A 17053 025 5W4 .K. Doub._- .2567 Lititz Pike, P.O. Oax 5125 Lax= W PA 17WO tOQ Hedtw ill. I Dunphy 517 Reno Avenue Now Cumberland PA 17070 1900. 4alaias Rosanna F M , Jr. EI1s 517 Reno Avenue 11 Walnut Strew Now Cumberland amp HM -PA PA 17010 17011 721 1000 cfo Roman a . M EINr 390 Market Street HN A 17011 2500 Diwld L lah ut 208S.F Avenue ai M1e HIM PA 17112 1000 Ooh' 7cnalh A. P. EMU Farrel 124 Redwood Strset 25 well, Mnd Drive HwrWx _n - Lem PA PA 171 17043 250 39QQ Jean E. FIN 1913 Hemlock Drive Kant OH 1250 Kevin M. Finn after MiddillOown A 1 7w 1600 John Dwi!a on Gaistle< G. E. i Fisdwr - :d4rir 2531 Lartbord Street l 4 W*buM Abb*V Av~ 27 MarnesaW Odw 1 Phftdmbhie COMM ? 1 PA PA PA 19140 17011 177611 1 100 1 The hob is" Lowell Lmdon Dortakl 0. R FL G. G Gain - Ganes AM N m 5979 Devgghkv Heights Road 1230 8tosrom Terrell $51 Newel! Lane 1440 S. York St ent 250 LMW Creek Road Nkdrariesbu Lan PA A PA PA PA 17112 17007 17006 17M 17907 250 500 76800 3750 2750 Stuart A. H atradvdh 6348 Pwvmboro Drive PA 17060 12750 W Mann T. H dmdvch _ 6318 Pennrboee Drive MOCIMOPAMM A 17060 1250 Mark F_ F isbrunor 1310 brave ModwiesW PA 17ow 700 Cr P&?pgs A. A. J --'_ F l lokh 5itir ' 21 Meedpw Drive 3n s. Caner Sbast P. 0. Box 25 807 Lancelot Avenue Cwnp HO Palm Medw k sbr PA PA PA 1 1 1 17036 100 1000 1500, Thomas A. F blmos 314 MounWn View road SK PPIPMOM t7257 250 NAM__. G. F bJran IWO Roodwd Lane L ancarstw PA 17601 2800 Nl , T. 203 W. GmwwiW Boulevard Falls Church VA 22040 125 Roimw: N. snick - 80 Fooxrolt Drive C HE PA 17011 250 Andrew W K dw 171 t Beckley Drive Now Curnberlond PA 17070 -ism Rapwd . 0. K nelt. Jr. 170 Dew Road A N York A 1 200 Kwwalh W. L ebo 18 M1an Court Dover DE 19904 200 Susan J. M cCorkel 1405 2lrrrrnermarn Road Canes PA I 17013 1500 Pnhrela Marilyn A. 'Fk>ek` 0079 Snit Road C 31 Round RWe Road larence NWdwmkmW w PA 1 14039 17055 1 SO 375 Harald E 914 Thornton Drive k ledlardallm PA 17085 1250 Janet C:. P.O. IN= 444 MT I 39027 100 jeffm 5. 373 Wort Meadow Drive MsCf1w11efbu PA IIM I 250 R 142 Wrwd Delve Cam F111 PA 17011 500 ft bW 1 VA 23109 500 WWm J. 417 Trd Road F wn and In et A Louis M. la 4kiil on 222 Ofty Lame HwrWmjL_ PA 71121 730 Carallm LT R Ab an 1 Gurpowder Road Mechanlo"m PA 17090 100 Susannah an 3517 FWtavR Me C arnp HM PA 17011 2000 W. &uww R ill aan 1 A 17080 2900 Susan A R mwd 2808 Laud Lem PM PA 17011 2128 Robert Brace W. A. s S chwdt mNh 370 Hornpion Puce B 1162 Chadidok Cards F luAkn kenmrlstotirn SC' PA 200'10 17030 1250 6250 (isrerd' l s oft- 4101 Green Court 507 Park HE Drive PA 17110 1 200 1250 J Thomas D_ M. S T brr.r obin 106 HOw Avwrur S t 740 &w Tepawy os P himlesbum hoenic PA AZ 172U 0as 22M 1200 Pollen M. ,Tf =W 1441 Hrmrnz Road L areeadw PA 17001 27501 avid 8. W 2416 Paton Road PA 1 TI12 100 Donald !L l W altem 3754 EMUM Clyde PA 17101 150 Midraol Choi" JaiWb-h R. I W_ H. W W Ift armer eber -0 5315 East Ttirvb Road 22 Old Slonrltwuoo Road C 404 Holly Ave" r ulde Pant PA PA NJ 17086 17013 2 7 9W 600 Cain PJ*hwd H J. l 2k Zi iiirdmann odor 3 Gkwww ron Court 0 2 Hoftr 9lreot 11 A PA 19 17103 100 EXHIBIT B 10 C41 eot & I6yes? ? e 0 K e June 27, 2008 COMMUNITY TRUST Mr. & Mrs. Matthew P. Amos 2503 Hoffer Street Harrisburg, PA 17103 Re: Community Financial. Inc. Dear Mr. & Mrs. Amos: We are pleased to inform you that Community Financial, Inc. and Community Trust Company have entered into a merger agreement with Franklin Financial Services Corporation and Farmers and Merchants Trust Company of Chambersburg ("F & M Trust Company"), whereby you will receive cash for your shares of Community Financial, Inc. A copy of the press release announcing this transaction is enclosed for your review. The Board has taken this action after a careful review of the company's strategic options and has decided that becoming a part of the F & M Trust family will be in the long-term best interests of our stockholders, employees and customers. F & M is a rapidly growing independent community bank with an outstanding Investment and Trust Services Department, which will offer our customers superior service and a wider array of products and services. This transaction will also give our stockholders a means of liquidating their investment in the company without the costs of brokerage fees and services. We will be inailing to you in uue course a proxy statement for a special meeting of the stockholders, which will describe in detail this transaction. Our stockholders must approve this transaction before it can be consummated. Please hold any questions that you may have until you have had an opportunity to review the proxy statement. Thank you. Best Regards, Susan A. Russell President & CEO Enclosure 3907 Market Street Camp Hill, PA 17011 Telephone 717.731.9604 888.442.9604 Fax 717.737.7834 www.communitytrustco.com FOR IMMEDIATE RELEASE Franklin Contact: William E. Snell, Jr. (717) 261-3512 Community Contact: Susan A. Russell (717) 731-9604 FRANKLIN FINANCIAL SERVICES CORPORATION TO ACQUIRE COMMUNITY FINANCIAL, INC. CHAMBERSBURG, PENNSYLVANIA (June 26, 2008) - Franklin Financial Services Corporation ("Franklin") (OTCBB: FRAF), holding company of Farmers and Merchants Trust Company of Chambersburg, and Community Financial, Inc. ("Community"), have announced the execution of an agreement and plan of merger under which Community will merge with and into Franklin. Community is the holding company of Community Trust Company, a Pennsylvania trust company headquartered in Camp Hill, Pennsylvania. The joint announcement was made today by William E. Snell, Jr., President and Chief Executive Officer of Franklin, and Susan A. Russell, President and Chief Executive Officer of Community. Under the terms of the agreement, which has been unanimously approved by each company's Board of Directors, stockholders of Community will receive cash for each share of Community common stock they own in an amount to be determined pursuant to the application of the formula provided in the agreement. The total amount to be paid by Franklin in connection wit'n the transaction is $1.13 million. In connection with the holding company merger, Community Trust Company will merge with and into Farmers and Merchants Trust Company. "We are pleased to welcome the employees and customers of Community to the F&M Trust family," said Mr. Snell. "The addition of Community Trust Company to the F&M Trust firanchise will add an additional $70 million in assets under management, bringing F&M Trust's total assets under management and with third-party brokers to almost $700 million. This 6941613 transaction will enhance the presence of our Investment and Trust Services Group on the West Shore and presents for us an exciting opportunity for future growth. We are delighted that Susan Russell will be joining us as a Vice President and Relationship Manager in our new Camp Hill office. Community customers should know that we will continue to administer their accounts from that office." Community's President and Chief Executive Officer, Susan A. Russell, said "F&M Trust is a rapidly growing independent community bank with local decision making. Our merger provides the greatest benefit and opportunity for our shareholders, customers, employees and the communities we serve. We look forward to becoming part of the F&M Trust family, an opportunity that will allow us to offer to our customers the greater depth and breadth of products and services available from a significantly larger investment and trust services group, as well as F&M Trust's traditional banking products and services, in a culture that supports our continued commitment to quality customer service." The merger is subject to customary closing conditions including receipt of regulatory approvals and the approval of Community's stockholders. Franklin anticipates that the transaction will close during the fourth quarter of 2008 and is expected to be accretive to earnings in 2009. Franklin is represented in the transaction by its legal counsel, Rhoads & Sinon LLP. Saidis Flower & Lindsay acted as Community's legal counsel and Boenning & Scattergood, Inc. served as Community's financial advisor. About Franklin With approximately $840 million in assets, Franklin Financial Services Corporation is the bank holding company for F&M Trust, headquartered in Chambersburg, Franklin County and operating 24 community banking offices throughout Franklin, Cumberland, Fulton and Huntingdon Counties. Franklin's common stock is quoted on the NASD Over-the-Counter -2- Bulletin Board under the symbol "FRAF." For more information about Franklin and F&M Trust, visit its website at www.fmtrustonline.com. About Community Headquartered in Camp Hill, Cumberland County, Community Financial, Inc. is the holding company for Community Trust Company, which offers fiduciary and investment services for its customers through its office located in Camp Hill, Pennsylvania. Additional information is available on Community's website at www.communitytrusteo.com. This news release contains forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements as to the proposed benefits of the merger between Franklin and Community and include future financial and operating results, cost savings, enhanced revenues and the accretion/dilution to reported earnings that may be realized from the merger, as well as other statements of expectations regarding the merger and any other statements regarding future results or expectations. Actual results may differ materially from the results and expectations discussed in this release since such results and expectations involve significant risks and uncertainties. Factors that might cause such differences include, but are not limited to the following: (1) competitive pressures among financial institutions increasing significantly; (2) economic conditions, either nationally or locally in areas in which Franklin Financial Services Corporation and Community Financial, Inc. conduct their operations, being less favorable than expected; (3) the cost and effort to integrate aspects of the operations of the companies being more difficult than expected; (4) expected cost savings from the acquisition not being fully realized or not realized within the expected time frame; (5) legislation or regulatory changes which adversely affect the ability of the combined company to conduct its current or future operations; (6) the shareholders of Community may fail to approve the transaction and (7) other risks detailed from time to time in Franklin's SEC filings including forms 10-Q and 10-K (copies of which are available from Franklin without charge in hard copy or online at www.sec.gov.) Franklin disclaims any obligation to update any such facts or to publicly announce the result of any revisions to any of the forward looking statements included herein to reflect future events or developments. Additional Information About this Transaction Community Financial, Inc. will be preparing a proxy statement concerning the merger to be distributed to Community Financial, Inc. stockholders. COMMUNITY FINANCIAL, INC. STOCKHOLDERS ARE URGED TO READ THIS PROXY STATEMENT BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. -3- The directors and executive officers of Community Financial, Inc. are participants in the solicitation of proxies in favor of the merger from the stockholders of Community Financial, Inc. Information regarding the interests of such persons in the merger will be included in the proxy statement when it becomes available. -4- EXHIBIT C ??e4t & I?yeB? ro4b 0? .e e COMMUNITY August 8, 2008 TRUST MERGER PROPOSAL - YOUR VOTE IS VERY BeORTANT To the Stockholders of Community Financial, Inc.: This proxy statement relates to the proposed merger of Franklin Financial Services Corporation ("Franklin') and Community Financial, Inc. ("CFI") and the related merger of Community Trust Company ("Community Trust') with and into Farmers and Merchants Trust Company of Chambersburg ("F&M Trust"). This document is being distributed by CFI to you in connection with a special meeting of the stockholders that has been called to vote on the merger. This document contains important information about the merger and you should read it carefully. As a result of the merger, each share of CFI common stock held by you will be converted into the right to receive cash. Based upon the book value per share of CFI common stock as of June 30, 2008, and if the Effective Date of the Merger had occurred on July 1, 2008, you would have received $2.79 per share. The exact amount of cash per share that you will receive will be determined after the holders of outstanding Series A Capital Notes (the "Capital Notes') have converted the Capital Notes into shares of CFI common stock. This conversion is based upon the book value per share of CFI common stock on the month-end day prior to the effective date of the merger. Furthermore, the book value per share for the six months ended June 30, 2008 is not necessarily indicative of the results to be expected for the full year or the month-end period prior to the effective date of merger. There is also a potential distribution of cash to you, on a pro rata basis, from an Adjustment Account after the effective date of the merger. The cash you receive will be generally recognized as a gain or loss for income tax purposes. For a more complete description of the taut consequences associated with the merger, see "Terms of the Merger - Certain Federal Income Tax Consequences." You have "dissenters' rights" as described in this document, see "Dissenters' Rights of CFI Stockholders" and Exhibit 3, to this document. Sincerely, Susan A. Russell President and Chief Executive Officer Lowell R. Gates Chairman of the Board Neither the Securities and Exchange Commission, any state securities commission, the Pennsylvania Department of Banking nor any federal banking supervisory agency has approved or disapproved this proxy statement, or determined if this proxy statement is accurate or inadequate. Any representation to the contrary is a criminal offense. For a description of the Risk Factors associated with the merger, See "Risk Factors." This Proxy Statement is dated August 8, 2008, and was first mailed to CFI stockholders on or about August 8, 2008. EXHIBIT D 12 JUN 3 0 2008 VERIFIED DEMAND FOR INSPECTION OF CORPORATE RECORDS PUSUANT TO SECTION 1508 OF BCL TO: John B. Lampi, Esq. Saidis Flower & Lindsay 26 West High Street Carlisle, PA 17013 eoiftvo, Pursuant to 15 Pa.C.S. 1508(b), I, Matthew P. Amos, as a shareholder of Community Financial, Inc. hereby demand that I be permitted to inspect and to make copies of or extracts from Community Financial's share registered, books and records of Account, and records of the proceedings of the directors. I hereby state that my reason for making this demand is in order to inform myself of significant information relating to matters of corporate financial condition and governance so that I may properly exercise my rights and protect my interests as a corporate shareholder. I further hereby state that this Verified Demand is made subject to the penalties of 18 Pa.C.S. 4904. I hereby am specifically requesting all Community Financial, Inc. and its wholly owned subsidiaries records that pertain to Franklin Financial Services Corporation acquirition of Community Financial, Inc. Please have the said requirements prepared no later than the close of business on Monday, August 1, 2008. Please forward copies of the requested documents to the following address: Matthew P. Amos 2503 Hoffer Street Harrisburg, PA 17103 In the event that I do not receive them by U. S. Postal service by the above stated date I will stop by Community Financial, Inc. corporate headquarters on August 2, 2008 to acquire them. Date: C' Matthew P. Amos, Shareholder 112008 S , A?. VERIFIED DEMAND FOR INSPECTION OF CORPORATE RECORDS PURSUANT TO SECTION 1508 OF BCL TO: Susan A. Russell C: John B. Lampi, Esq. President & CEO Saidis Flower & Lindsay 3907 Market Street 26 West High Street Camp Hill, PA 17011 Carlisle, PA 17013 ty.. Pursuant to 15 Pa.C.S. 1508(b), I, Matthew P. Amos, as a shareholder of Comb Financial, Inc. hereby demand that I be permitted to inspect and to make copies of or extracts from Community Financial's share registered, books and records of Account, and records of the proceedings of the directors. I hereby state that my reason for making this demand is in order to inform myself of significant information relating to matters of corporate financial condition and governance so that I may properly exercise my rights and protect my interests as a corporate shareholder. I further hereby state that this Verified Demand is made subject to the penalties of 18 Pa.C.S. 4904. I hereby am specifically requesting all Community Financial, Inc. and its wholly owned subsidiaries records that pertain to Franklin Financial Services Corporation acquisition of Community Financial, Inc. Please have the said requirements prepared no later than the close of business on Friday, August 29, 2008. Please forward copies of the requested documents to the following address: Matthew P. Amos 2503 Hoffer Street Harrisburg, PA 17103 In the event that I do not receive them by U.S. Postal Service by the above stated date, I will stop by Community Financial, Inc. corporate headquarters on September 5, 2008 to acquire them. Date: Matthew P. Amos, Shareholder AUG s z zoos August 22, 2008 Susan A. Russell President & CEO Community Trust Company 3907 Market Street - Camp Hill„ PA 17011 -- RE: Verified Demand for Inspection of Corporate Records Pursuant to Section 1508 (b) of the Business Corporate Law of 1988 Dear Ms. Russell, On July 2, 2008, I interviewed Mr. William Snell, President and Chief Executive Officer and Mr. Mark Hollar, Senior Vice President and Chief Financial Officer, Comtroller and Treasure at Franklin Financial Services Corporation (FFSC) corporate offices as well as had a lengthy. conversation with Mr. Chad Hall of Boenning & Scattergood, Inc.(BS). Based on those conversations and the information provided in the Community Financial, Inc. (CFI) proxy dated August 8, 2008, the following documents need to be available for inspection and copying pursuant to CFI shareholder's demands "as a shareholder(s) of Community Financial, Inc. to inspect records that pertain to Franklin Financial Services Corporation acquisition of Community Financial, Inc." The following is a list, but may not be an totally inclusive list of all document that will be requested and made available for inspection and coping on "August 27, 2008" "between the hours of 9AM and 3PM at " CFI offices at 3907 Market Street Camp Hill PA: 1. All documents, including corporate board meeting minutes, that pertain to the consideration and hiring of BS. and other financial advisors. 2. All documents provided to BS Inc. for the purpose of rendering a fairness opinion on the value of CFI, Inc. (i.e. financial projections, stock price data, information from recognized sources) 3. Any and all financial analysis, including but not limited to the application of financial valuation methods or logic prepared by BS pursuant to the issuance of their fairness opinion for CFI. This includes any and all communications between and/or by BS and CFI with regards to this transaction. 4. All documents that pertain to the distribution of the offering to sell CFI, including an itemized breakdown of the anticipated sales proceeds. This includes but is not limited to total estimated shares to be sold and their value, legal expenses for all law firms involved, and any other items not specified in the distributed proxy statement. 'AUG 2 2 200 Y 5. All documents that pertain to potential suitors that were distributed by BS relative to the sale of CFI. 6. All documents provided to Franklin Financial. This includes but is not limited to appraisals of all real estate owned by CFI, regulatory documents (i.e. call reports, MOU's and other Pennsylvania Department of Banking (PDB) regulator communications), internal financial statements, annual reports, and related communications to regulators. 7. All copies of trust documents and other legal documents relating to the structure of the transaction 8. Copy of all documents that relate to FFSC indemnification of CFI directors and officers. 9. Copies of all past or pending litigation against CFI or its wholly owned subsidiaries. In the unlikely event that these documents will not be available for inspection, and copying please inform us by close of business on Monday August 25, 2008. Sincerely, Ma w P. Amos cc: John B. Lampi, Esquire AUG38200 t1I TO SECTION 1508 OF BCL TO: Susan A. Russell C: John B. Lampi, Esq. President & CEO Saidis Flower & Lindsay 3907 Market Street 26 West High Street Camp Hill, PA 17011 Carlisle, PA 17013 Pursuant to 15 Pa.C.S. 1508(b), I, Matthew P. Amos as a shareholder of Community Financial, Inc. hereby demand that I be permitted to inspect and to make copies of or extracts from Community Financud's share registered, books and records of Account, and records of the proceedings of the directors. I hereby state that my reason for making this demand is in order to inform myself of significant information relating to matters of corporate financial edition and governance so that I may properly exercise my rights and protect my interests as a corporate shareholder. I further hereby state that this Verified Demand is made subject to the penalties of 18 Pa.C.S. 4904. I hereby am specifically requesting all Community Financial, Inc. (CFPAnd its wholly owned subsidiaries records that pertain to Franklin Financial Services Corporation (FFSC) acquisition of Community Financial, Inc.: All documents provided to Boenning & Scattergood, Inc. (BS) for the purpose of rendering a fairness opinion on the value of CFI, Inc. (i.e. financial projections, stock price data, information from recognized sources) All communications between and/or by BS and CFI with regards to this transaction. All documents that pertain to the distribution of the offering to sell CFI, including an itemized breakdown of the anticipated sales proceeds. This includes but is not limited to total estimated legal expenses for all law firms involved, and any other items not specified in the distributed proxy statement. Copy of all documents that relate to FFSC indemnification of CFI directors and officers. Please have the said requirements prepared no later than the close of business on Wednesday, September 3, 2008. Please forward copies of the requested documents to the following address: Matthew P. Amos 2503 Hoffer Street Harrisburg, PA 17103 AUG s 8 200 In the event that I do not receive them by U.S. Postal Service by the above stated date, I will stop by Community Financial, Inc. corporate headquarters on September 5, 2008 to acquire them. Date: atthew P. Amos, Shareholder August 26, 2008 FIL E COPT Susan A. Russell President Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 RE: Inspection of Corporate Records (15 Pa.C.S. §1508) Dear Ms. Russell: Thank you for agreeing to make corporate records available to me or my authorized agent for inspection and copying pursuant to 15 Pa.C.S. § 1508. Please consider this written notice of my intent to designate an agent to inspect and make copies of corporate records on my behalf. I attach a Verified Designation of Agent for Inspection of Corporate Records for your information. If you have any questions or need additional information, please do not hesitate to contact me. Thank you. Very truly yours, f Matthew P. Amos Attachment Verified Desismadon of Agent for Insuection of Corporate Records To: Susan A. Russell President Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 From: Matthew P. Amos 2503 Hoffer Street Harrisburg, PA 17103 I have provided a written verified demand to review corporate records pursuant to 15 Pa.C.S. § 1508(b). Please accept this document as authorization for my agent to inspect corporate records on my behalf. My agent for the purposes of reviewing corporate records is as follows: Mike S. Signor, CPA /ABZ SF & Company 1027 Mumma Road Lemoyne, PA 17043 Subject to the penalties and provisions of 18 Pa.C.S. §4904, relating to unworn falsification to authorities, I verify that the agent whose name and address is set forth a'u:; ; c hac been designated by me pursuant to 15 Pa.C.S. § 1508 to act on my behalf in reviewing corporate records. (Signature of shareholder) (Date) August 26, 2008 ., Y Susan A. Russell President Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 RE: Inspection of Corporate Records (15 Pa.C.S. § 1508) Dear Ms. Russell: Thank you for agreeing to make corporate records available to me or my authorized agent. for inspection and copying pursuant to 15 Pa.C.S. §1508. Please consider this written notice of my intent to designate an agent to inspect and make copies of corporate records on my behalf. I attach a Verified Designation of Agent for Inspection of Corporate Records for your information. If you have any questions or need additional information, please do not hesitate to contact me. Thank you. Very trul yours, ?f Matthew P. Amos Verified Desisnation of Anent for Inspection of Corporate Records To: Susan A. Russell President Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 From: Matthew P. Amos 2503 Hoffer Street Harrisburg, PA 17103 I have provided a written verified demand to review corporate records pursuant to 15 Pa.C.S. §1508(b). Please accept this document as authorization for my agent to inspect corporate records on my behalf. My agent for the purposes of reviewing corporate records is as follows: Paul A. Adams, Esq. Shumaker & Williams 3425 Simpson Ferry Rd Camp Hill, PA 17011 Subject to the penalties and provisions of 18 Pa.C.S. §4904, relating to unworn falsification to authorities, I verify that the agent whose name and address is set forth above has been designated by me pursuant to 15 Pa.C.S. § 1508 to act on my behalf in reviewing corporate records. (Signature (Date) PROFEIONAL FWAN(IAL ADMSORSS M OMAJ W AU? 7q Ud=n Roo Suite K '(a p W PA 170ll 1'W= M7) 761-4646 %e7 7300749 wwN4rofin Aimearn 9A August 26, 2008 Susan A. Russell President Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 RE: Inspection of Corporate Records (15 Pa.C.S. §1508) Dear Ms. Russell: Thank you for agreeing to make corporate records available to me or my authorized agent for inspection and copying pursuant to 15 Pa.C.S. §1508. Please consider this written notice of my intent to designate an agent to inspect and make copies of corporate records on my behalf. I attach a Verified Designation of Agent for Inspection of Corporate Records for your information. If you have any questions or need additional information, please do not hesitate to contact me. Thank you. Very truly yours, ew P. Trios President, CCO Rev. 08/01/07 Verified Desimiation of Agent for Inspection of Corporate Records To: Susan A. Russell President Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 From: Matthew P. Amos President, CCO Professional Financial Advisors, Inc. 704 Lisburn Road Suite 102 Camp Hill PA 17011 I have provided a written verified demand to review corporate records pursuant to 15 Pa.C.S. § 1508(b). Please accept this document as authorization for my agent to inspect corporate records on my behalf. My agent for the purposes of reviewing corporate records is as follows: Paul A. Adams, Esq. Shumaker & Williams 3425 Simpson Ferry Rd Camp Hill, PA 17011 Subject to the penalties and provisions of 18 Pa.C.S. §4904, relating to unsworn falsification to authorities, I verify that the agent whose name and address is set forth above has been designated by me pursuant to 15 Pa.C.S. § 1508 to act on my behalf in reviewing corporate records. (Signature of P fficer) (Date) PROFESSIONAL PFA ?. PC 104 Usb n Pkx4 Sn be 102, QmV E1kPA 17011 Phone; M?) 7614646 Fkc WWWPUf i UUW.C= August 26, 2008 Susan A. Russell President Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 RE: Inspection of Corporate Records (15 Pa.C.S. §1508) Dear Ms. Russell: Thank you for agreeing to make corporate records available to me or my authorized agent for inspection and copying pursuant to 15 Pa.C.S. § 1508. Please consider this written notice of my intent to designate an agent to inspect and make copies of corporate records on my behalf. I attach a Verified Designation of Agent for Inspection of Corporate Records for your information. If you have any questions or need additional information, please do not hesitate to contact me. Thank you. Very truly ours, Matthew P. Amos President, CCO Rev. 08/01/07 Attachment Verified Designation of Agent for Inspection of Corporate Records To: Susan A. Russell President Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 From: Matthew P. Amos President, CCO Professional Financial Advisors, Inc. 704 Lisburn Road Suite 102 Camp Hill PA 17011 I have provided a written verified demand to review corporate records pursuant to 15 Pa.C.S. § 1508(b). Please accept this document as authorization for my agent to inspect corporate records on my behalf My agent for the purposes of reviewing corporate records is as follows: Mike S. Signor, CPA /ABZ SF & Company 1027 Mumma Road Lemoyne, PA 17043 Subject to the penalties and provisions of 18 Pa.C.S. §4904, relating to unworn falsification to authorities, I verify that the agent whose name and address is set forth above has been designated by me pursuant to 15 Pa.C.S. § 1508 to act on my behalf in reviewing corporate records. (Signatur of Officer) 2? o (Date) EXHIBIT E 13 LAW OFFICES JOHN E. SLID )BERT C. SAIDLS ?NfES D. FLOWER, JR CAROL J. LINDSAY JOHN B. LAMPI MICHAEL L. SOLOMON GEORGE F. DOUGLAS, III DEAN E. REYNOSA THOMAS E. FLOWER MARYLOU MATAS SAIDIS, FLOWER & LINDSAY A PROFESSIONAL CORPORATION 26 WEST HIGH STREET CARLISLE, PENNSYLVANIA 17013 TELEPHONE: (717) 243.6222 - FACSIMILE: (717) 243-6486 EMAIL: attomey®sfl-law.com www.sfl-law.com July 29, 2008 Matthew P. Amos _ ..:_ .,1111J4LLNi Amoi 2503 Hoffer Street Harrisburg, PA 17103 Dear Mr. and Mrs. Amos: CAMP HILL OFFICE: nog MARm STREET CAMP HILL, PA 17011 TELEPHONE: (717)737-340t: FACSBGLF- (717)737-3407 REPLY TO CARLISLE I am in receipt of a form of demand for inspection of corporate records with respect to Community Financial, Inc. and its subsidiaries. The delivery of this form of demand by you was not in compliance with the Pennsylvania Business Corporation Law. Community Financial, Inc., will be mailing to its stockholders on or about August 8, 2008, 4 proxy statement which will provide detailed information on the proposed merger with Franklin Financial Services Corporation. The office of Community Financial, Inc. and Community Trust Company will not be open for business on August 2, 2008. Sincerely, khn B. L p1, I JBUj ld cc: Susan A. Russell, President and Chief Executive Officer, Community Financial, Inc. LINDSAY into ?_ Corporate documents for inspection by shareholders - August 27, 1008 1) Community Financial Inc. Executive Session Board Minutes 08/21/07 Community Financial Inc. Executive Session Board Minutes 09/06/07 Boenning & Scattergood August 2007 booklet Boenning & Scattergood September 4, 2007 letter and attachment Danielson Capital September 6, 2007 letter Boenning & Scattergood September 7, 2007 booklet Boenning & Scattergood September 7, 2007 Engagement letter 2) Boenning & Scattergood Offering Memorandum Boenning & Scattergood Overview of potential buyers Boenning & Scattergood Process Review 3) Boenning & Scattergood Fairness Opinion 4) N/A 5) Boenning & Scattergood Offering Memorandum 6) FDIC Call Reports 09/30/05 - 06/30/08 3907 Market Street Real Estate appraisal 7) Proxy Statement 8) Proxy Statement 9) Spreadsheet litigation e41 ert & 1n1vest ro? ros Oe tp n y COMMUNITY TRUST August 29, 2008 Matthew P. Amos 2503 Hofer Street Harrisburg, PA 17103 Re: Verified Demand for Inspection of Corporate Records Pursuant to Section 1508 (b) of the Business Corporate Law of 1988 Dear Mr. Amos: On August 27, 2008, Community Financial, Inc. made available to you, Christine Amos, Patricia Helm, Curt Zimmermann, David Englehart, Richard Zlogar, Jeffrey Nickum and Mike S. Signor, CPA, for inspection and copying here at our office at 3907 Market Street, Camp Hill, PA, corporate records pertaining to your shareholder demand for inspection of corporate records that pertain to Franklin Financial Services Corporation's acquisition of Community Financial, Inc., made in your August 12, 2008 notice, as further defined by your letter dated August 22, 2008. Our offices were made available for your use on the 27th during the hours of 9AM to 3 PM and you were here over two hours inspecting and copying the requested information. We now are in receipt of your notice containing certain demands dated August 27, 2008 and identical notice dated August 28, 2008 both containing demands. These demands essentially reiterate your original August 12, 2008 notice. Consequently, we do not know of any corporate records that we would make available to you for inspection and copying pursuant to these latter notices that we did not already make available to you for inspection and copying on August 27, 2008. By your letter dated August 26, 2008, however, you designated Mike S. Signor, CPA and Paul A. Adams, Esquire as agents to act on your behalf in connection with your August 12, 2008 demand for inspection. In order that we may better understand what additional corporate records you now may be demanding to inspect that you may not have included in your prior demand, we ask that you have one or both of your agents contact the company's legal counsel, John Lampi, at 243-6222. We believe that a discussion between your agents and Mr. Lampi will be able to resolve any 3907 Market Street Camp Hill, PA 17011 Telephone 717.731.9604 888.442.9604 Fax 717.737.7834 www.communitytrustco.com Matthew P. Amos August 29, 2008 Page 2 of 2 misunderstandings about what corporate records you have demanded to inspect and what corporate records the company is to make available for that purpose. Sincerely, Susan A. Russell President & CEO Cc: John B. Lampi, Esquire EXHIBIT F 14 Ili r? ? I LTA ,N RH0 ADS 1-1-1111 -1, LLP Dean H. Dusinberre ph (717) 231-6618 fx (717) 231-6676 ddusinberre@rhoads-sinon.com FtLENO3809/103 August 14, 2008 Re: Franklin Financial Services Corporation Mathew P. Amos, Custodian for Carly Ann Amos UGMA 2503 Hoffer Street Harrisburg, FA Dear Mr. Amos: We are writing on behalf of our client, Franklin Financial Services Corporation, in connection with the Verified Demand For Inspection of Corporate Records you delivered to the Corporation on August 11, 2008. We also know that you concurrently delivered a similar Verified Demand For Inspection of Corporate Records to Community Financial, Inc. It is the policy of Franklin Financial Services Corporation to require strict compliance with the statutory requirements for demands for inspection of corporate records in order to assure that the Corporation does not unfairly discriminate between any one demand and any other. For the following reasons, we regret to inform you that we have advised the Corporation that your Demand does not strictly comply with the statutory requirements. If, however, you would like to resubmit a Demand that is in compliance with the statutory requirements, we have been instructed by the Corporation to inform you that the Corporation will be pleased to make available to you for inspection properly requested books and records. Section 1508(b) of the Pennsylvania Business Corporation Law of 1988, as amended, provides that a shareholder has the right, upon written verified demand stating the purpose thereof, to examine for any proper purpose the share register, books and records of account and records of the proceedings of the incorporators, shareholders and directors, provided that the purpose is reasonably related to the interest of the person as a stockholder. The courts have recognized, however, that this right should not be used to gratify curiosity or for speculative purposes and should be in good faith and for a specific purpose. See, Steinberg v. American Bantam Car Co., 76 F. Supp. 426 (D.C. 1948), appeal dismissed 173 F.2d 179. You requested in your Demand "all ... records that pertain to acquisition of Community Financial, Inc." and stated therein that the purpose of your Demand is to "inform myself of significant information relating to matters of corporate financial condition and governance so that I may properly exercise my rights and protect my interests as a corporate shareholder." 700106 1 Rhoads & Sinon LLP • Attorneys at Law • Twelfth Floor • One South Market Square • P.O. Box 1146 Harrisburg, PA 17108-1146 • ph (717) 233-5731 • fx (717) 232-1459 • www.rhoads-sinon.com August 14, 2008 Page 2 We believe that this statement of purposes is inadequately vague and not sufficiently specific because you have not specifically stated what interest or right as a shareholder of Franklin Financial Services Corporation you are seeking to protect. As you should know, although shareholders of Community Financial, Inc. are entitled to vote on the merger between Community Financial, Inc. and Franklin Financial Services Corporation, shareholders of Franklin Financial Services Corporation do not have a right to vote on the merger. Because you have not specifically stated what interest or right as a shareholder of Franklin Financial Services Corporation you are seeking to protect, and because you have concurrently delivered a similar Demand to Community Financial, Inc., it appears that your request actually is related to your interest as a shareholder of Community Financial, Inc. and not as a shareholder of Franklin Financial Services Corporation. Finally, you requested to inspect "all ... records that pertain to acquisition of Community Financial, Inc.," whereas the statute provides that a shareholder has the right to inspect only the share register, books and records of account and records of the proceedings of the incorporators, shareholders and directors. Again, your request does not identify specific books and records or records of the proceedings of the incorporators, shareholders and directors that would be reasonably related to a specifically identified interest you may have as a shareholder of Franklin Financial Services Corporation. cc: William E. Snell, Jr., President & CEO Very truly yours, EXHIBIT G 15 evkt & 1 JI ,eBt n' COMMUNITY August 8, 2008 TRUST MERGER PROPOSAL - YOUR VOTE IS VERY EMPORTANT To the Stockholders of Community Financial, Inc.: This proxy statement relates to the proposed merger of Franklin Financial Services Corporation ("Franklin') and Community Financial, Inc. ("CFI") and the related merger of Community Trust Company ("Community Trust') with and into Farmers and Merchants Trust Company of Chambersburg ("F&M Tru it'j. This document is being distributed by CFI to you in connection with a special meeting of the stockholders that has been called to vote on the merger. This document contains important information about the merger and you should read it carefully. As a result of the merger, each share of CFI common stock held by you will be converted into the right to receive cash. Based upon the book value per share of CFI common stock as of June 30, 2008, and if the Effective Date of the Merger had occurred on July 1, 2008, you would have received $2.79 per share. The exact amount of cash per share that you will receive will be determined after the holders of outstanding Series A Capital Notes (the "Capital Notes") have converted the Capital Notes into shares of CFI common stock. This conversion is based upon the book value per share of CFI common stock on the month-end day prior to the effective date of the merger. Furthermore, the book value per share for the six months ended June 30, 2008 is not necessarily indicative of the results to be expected for the full year or the month-end period prior to the effective date of merger. There is also a potential distribution of cash to you, on a pro rata basis, from an Adjustment Account after the effective date of the merger. The cash you receive will be generally recognized as a gain or loss for income tax purposes. For a more complete description of the tax consequences associated with the merger, see "Terms of the Merger - Certain Federal Income Tax Consequences." You have "dissenters' rights" as described in this document, see "Dissenters' Rights of CFI Stockholders" and Exhibit 3, to this document. Sincerely, Susan A. Russell Lowell R. Gates President and Chief Chairman of the Board Executive Officer Neither the Securities and Exchange Commission, any state securities commission, the Pennsylvania Department of Banking nor any federal banking supervisory agency has approved or disapproved this proxy statement, or determined if this proxy statement is accurate or inadequate. Any representation to the contrary is a criminal offense. For a description of the Risk Factors associated with the merger, See "Risk Factors." This Proxy Statement is dated August 8, 2008, and was first mailed to CFI stockholders on or about August 8, 2008. as the surviving company (and corporate fiduciary) in the Subsidiary Merger. Franklin and F&M Trust will continue to be governed by their respective articles of incorporation and bylaws as in effect immediately prior to their respective mergers and be managed by their respective directors and officers. Calculation of Cask Consideration to be Paid to CFI Stockholders Each share of CFI common stock that a CFI stockholder holds on the Effective Date will be converted into cash. Each of the holders of the Capital Notes has given the company a written notice of his/her intent to convert to CFI common stock. The number of shares to be issued subject to the conversion of the Capital Notes will be based on the book value per share of CFI common stock on the month-end day prior to the Effective Date of the Merger. See, also, Note 4 to CFI's 2007 annual report at Exhibit 4 to this document. The holders of Capital Notes must give notice of their intent to convert their Capital Notes into CFI common stock within 10 days of the Effective Date. Based upon the book value per share of CFI common stock as of June 30, 2008, and if the Effective Date of the Merger was July 1, 2008, the pro forma cash amount to be distributed for each share of CFI common stock outstanding (including the shares issued as a result of the conversion of the Capital Notes into common stock) would have been $2.79. However, the book value per share for the six months ended June 30, 2008 is not necessarily indicative of the results to be expected for the full year or the month-end period prior to the Effective Date of the Merger. If Community Trust has a net loss from continuing operations for. the period from July 1, 2008 to the Effective Date of the Merger, the cash consideration per CFI share will, in all probability, be less than the above June 30 pro forma number, and, conversely, if Community Trust has net income from continuing operations during this same time period, the cash consideration per share could be greater than the above June 30 pro forma number. F thermore, CFI stockholders may receive additimaal cash for their shares, on a pro rata basis, from an ment Account to be funded from a trust if the beneficiary of such trust dies within 10 years of the Effective d there are sufficient fiords remaining in the mist. The trustee is directed to remit up to $120,000 after the f the beneficiary to Community Trust or its successor, if such funds remain in the trust. The Plan of Merger hes an "Adjustment Account" at Section 4.12, which provides that Community Trust shall, prior to the ve Date, assign its right, title and interest in and to the trust proceeds to a newly established liquidating trust. Each holder of CFI common stock shall be granted a non-transferable beneficial interest in the liquidating trust in proportion to such stockholder's overall ownership interest in CFI at the time of the grant. The liquidating trust will be administered by F&M Trust, as trustee, for a period of 10 years from the Effective Date; after which time period, this account will terminate and former CFI stockholders will not be entitled to any further cash distributions. However, if proceeds are received by the liquidating must prior to its termination on the 106 anniversary of the Effective Date, such proceeds shall be distributed to former CFI stockholders as beneficial interest holders in the liquidating trust and the trust shall proceed to terminate. As promptly as reasonably practicable following the Effective Date (and in any case not later than five days thereafter), Franklin's Exchange Agent (which will probably be F&M Trust) will mail or deliver to each CFI stockholder who was a accord holder immediately prior to the Effective Date, a form of letter of transmittal which shall contain instructions for use in effecting the surrender of your CFI stock certificates for the cash payment. The letter of transmittal shall specify that delivery of the CFI stock certificates shall be effected and risk of loss and title to these stock certificates shall pass only upon proper delivery of such certificates to the Exchange Agent. No interest shall be paid for any cash delivered. Any CFI shares and any cash for the payment of such shams that remain unclaimed as of the first anniversary of the Effective Date may, to the extent permitted by law, be delivered by the Exchange Agent to Franklin. In such event, a holder of CFI stock certificates who has not exchanged them for cash, without interest, must look exclusively to Franklin. The Exchange Agent and Franklin shall not be liable to a holder of a CFI stock certificate for any cash delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. Effecdve Date The merger of CFI and Franklin will take effect when all conditions, including stockholder and regulatory approvals, have been fulfilled or waived, or as soon as practicable thereafter as CFI and Franklin may mutually select. Regulatory approvals can not be waived. Simultaneously with the effective date of the CFI and Franklin merger, the Subsidiary Merger will also become effective. We currently expect to close the transactions during the 28 CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following discussion addresses the material United States federal income tax consequences of the merger of CFI and Franklin to a CFI stockholder who holds shares of CFI common stock as a capital asset. This discussion is based upon the Internal Revenue Code of 1986, as amended, Treasury regulations promulgated under the Internal Revenue Code, judicial authorities, published positions of the Internal Revenue Service and other applicable authorities, all as in effect on the date of this discussion and all of which are subject to change (possibly with retroactive effect) and to differing interpretations. This discussion does not address all aspects of United States federal income taxation that may be relevant to CFI stockholders in light of their particular circumstances and does not address aspects of United States federal income taxation that may be applicable to CFI stockholders subject to special treatment under the Internal Revenue Code (including banks, tax-exempt organizations, insurance companies, dealers in securities, traders in securities that elect to use a mark-to-market method of accounting, investors in pass-through entities, CFI stockholders who hold shares of CFI common stock as part of a hedge, straddle or conversion transaction, CF1 stockholders who acquired their shares of CFI common stock pursuant to the exercise of employee stock options or otherwise as compensation, and CFI stockholders who are not "United States persons" as defined in section 7701(ax30) of the internal Revenue Code). In addition, the discussion does not address any aspect of state, local or foreign taxation. No assurance can be given that the Internal Revenue Service would not assert, or that a court would not sustain, a position contrary to any of the tax aspects set forth below. CFI stockholder are mled to consult their to advisors with respect to the parlicalu United States federal, state, local and foreign to consequences of the Plan of Merger to them. The merger of CFI with and into Franklin shall not constitute a reorganization under Section 368(a) of the Internal Revenue Code. The discussion below sets forth the material United State income tax consequences of the merger of CFI and Franklin to CF1 stockholders. Cash Received At EfJ`ecdvc Date Cash received by a CFI stockholder for a share of CFI common stock generally will be treated as received in redemption of the share, and gain or loss generally will be recognized based on the difference between the amount of cash received for the share and the proration of the stockholder's aggregate adjusted tax basis of the shares of CFI common stock surrendered that is allocable to the share. The gain or loss generally will be long-term capital gain or loss if the holding period for the shares of CFI common stock is more than one year. However, the cash received may be treated as a dividend under certain circumstances. See "Possible treatment of cash as a dividend" below. Cash Received From Adjusdaent Account explained above, prior to the Effective Date a liquidating trust will be established, certain contingent assets *-A hefarm of a $120,000 contingent receivable will be assigned to the trust, and beneficial interests in the trust will be distributed to the CFI stockholders on a pro rata basis. Based upon the timing of any payments from the trust and the likelihood that no distributions may be made, it is recommended that no value is assigned to the beneficial interests at the time of the gram. Accordingly, cash received by a CFI stockholder as a beneficial interest holder in the liquidating trust established pursuant to Section 4.12 of the Plan of Merger generally will be treated as ordinary income to the beneficial holder. Backup Withholding A CFI stockholder receiving cash for a share may be subject to backup withholding at a rate of 28% if the stockholder is a non-corporate United States person and (1) fails to provide an accurate taxpayer identification number, (2) has been notified by the Internal Revenue Service that he/she has failed to report all interest or dividends required to be shown on his/her federal income tax returns; or (3) in certain circumstances, fails to comply with applicable certification requirements. Amounts withheld under the backup withholding rules will be allowed as a refund or credit against a stockholder's United States federal income tax liability provided that the stockholder furnishes the required information to the Internal Revenue Service. 36 (c) Intention regarding Future Employment. Franklin shall use its reasonable best efforts to inform the employees of Community at least thirty (30) days prior to the Effective Date of the lcehbood of such employees having continued employment with F&M Trust following the Effective Date. Section 4.12. - Adjustment Account. (a) Establishment of Trust. Prior to the Closing, Community shall establish pursuant to a written instrument a trust under Pennsylvania law, which will be administered by F&M Trust as trustee (the "Trust"), and the purpose of which is to hold certain contingent assets of Community Trust and to facilitate certain post-closing actions of the parties hereto, as more fully described in this Section 4.12. (b) Assigment of Right to Contin Bent Assets. Promptly after the establishment of the Trust, and prior to the Closing, Community shall cause Community Trust to assign all of Community Trust's right, title and interest in the Contingent Assets (as defined below) to the Trust. Following such assignment, and prior to closing, the Trust shall grant to the shareholders of Community beneficial interests in the Trust on a pro rata basis based upon each such shareholder's overall equity ownership interest in Community as of the time of such grant (the "Beneficial Interests'). (c) Definition of "Contingent Assets". For purposes of this Section 4.12, "Contingent Assets" shall mean the X120,000 off balance sheet receivable described in note 11 of the consolidated financial statements of Community as of and for the year ending December 31, 2007. (d) Payments Related to Contingent Assets. Promptly upon receipt by a party hereto, or any Subsidiary of a party hereto, of any payment related to the Contingent Assets, such party shall, or shall cause its Subsidiary to, as applicable, forward such payment to the Trust. The Trust shall promptly acknowledge its receipt of any payment related to the Contingent Assets in a writing delivered to Franklin in accordance with the notice provisions set forth in Section 7.06(x). (e) Terms of Trust Instrument. The trust instrument identified in Section 4.12(a) shall expressly provide that (i) the Beneficial Interests will be granted pro-rata to shareholders of Community as a part of the consideration for the Merger, (ii) the Beneficial Interests will not be transferable except by operation of law or by will, and no form or certificate will be used to represent the Beneficial Interests; (iii) the Beneficial Interests will not have voting or dividend rights and will not bear a stated rate of interest; (iv) the Trust will have the limited purpose described in subsections (a) and (b) hereof and will not engage in any ongoing trade or business; and (v) the Trust will terminate upon the earlier of the completion of its stated purpose or its tenth anniversary. (f) Effect of Termination of Trust upon Tenth Anniversary. The trust instrument shall further provide that in the event that payment on the Contingent Assets has not t AG been received by either the Trust or F&M Trust by the tenth anniversary of the establishment of the Trust, then the Trust shall promptly assign all of its right, title and interest in the Contingent Assets to, F&M Trust, and the Trust shall proceed to promptly terminate its existence. Immediately upon such assignment, all of F&M Trust's obligations arising hereunder with respect to the Contingent Assets shall become null and void, and F&M Trust shall have no further obligation or responsibility to the Trust or any beneficiaries thereof. (g) Limited Obfiggon of Franklin. It is expressly acknowledged and agreed that Franklin's obligation hereunder is limited to paying over to the Trust any fiords actually received by Franklin or F&M Trust within tenth years of the establishment of the Trust and specifically related to the Contingent Assets. Further, it is agreed and underooM that thz Beneficial Interests will not represent an equity or ownership interest in Franklin or any Affiliate of Franklin, and any amount ultimately paid pursuant to the Beneficial interests will not depend upon the operating results of Franklin or F&M Trust as the surviving entities. Section 4.13 - Certain Releases. Franklin agrees to take commercially reasonable action, immediately after the Effective Date, to cause the holder of the mortgage with respect to the premises located at 3907 Market Street, Camp Hill, PA, to releage i Dwelt and i.irdL I Gates, as individuals, from their obligations on their respective commercial guarantees with respect to mortgage. ARTICLE V CONDITIONS Section 5.01 -Conditions to Commnity's Obligati onus under this A Bement. The obligations of Community hereunder shall be subject to satisfaction at or prior to the Closing Date of each of the following conditions, unless waived by Community pursuant to Section 7.03 hereof: (a) Coraorate Proceedmg. All action required to be taken by, or on the part of; Franklin and F&M Trust to authorize the execution, delivery and performance of this Agreement and the Subsidiary Plan of Merger, respectively, and the consummation of the transactions contemplated by this Agreement and the Subsidiary Plan of Meager, shall have been duly and validly taken, by Franklin and F&M Trust; and Community shall have received certified copies of the resolutions evidencing such authorizations; (b) Covenants. The obligations and covenants of Franklin required by this Agreement to be performed by Franklin at or prior to the Closing Date shall have been duly performed and complied with in all respects, except where the failure to perform or comply with any obligation or covenant would not, either individually or in the aggregate, result in a Material Adverse Effect with respect to Franklin; (c) Representations and Warranties. The representations and warranties of Franklin set forth in this Agreement s1W1 be true and correct, as of the date of this Agreement, and as of the Closing Date as though made on and as of the Closing Date, except as to any 1-46 Deferred Tag Liabilities: Depreciation expense ( 2.6071 L_- 5 011 Net deferred tax asset 497,034 349,434 4 Valuation allowance ( 497.03 349A Note 9. Related Party Transaction The Corporation used services provided by a law firm which is owned by an officer of The Corporation. Professional fees for services rendered by this firm avert S 14,301 and S 5,722 in 2007 and 2006, respectively. Note 10. Concentrations of Risk Approximately 26% of the Corporation's fee income was derived from two customers for the year ended December 31, 2007. Appra dmately 25% of the Corporation's fee income was derived from two customers for the year ended December 31, 2006. i? 11. Contingencies and Regulatory Matters The Corporation is subject to claims and lawsuits in the ordinary course of business. Two such .,v matters were concluded during 2007. The matter of Magaro et al versus Community Trust Company was sa led in June 2007 with the execution of a confidential settlement agreement amongst all parties. There was no financial impact to the corporation and the Corporation was reimbursed for all its defense costs. An additional matter was resolved concerning the confirmation of a formal account filed on behalf of a trust, by Community Trust Company serving as trustee. The iatemated parties related to the trust agreed upon a settlement concerning claims made through the execution of a confidential Stipulation whose records were se aM by the Court. Community Trust Company paid S 175,000 to the trust as part of the ferias of this Stipulation and maintains an off-balance she ct receivable of S 120,000 which represents a remainder interest payable to the Corporation upon the death of the beneficiary. As part of its ongoing oversight of Community Trust Cody (Community the Pennsylvania Department of Banking (Department) issued a revised Memorandum of Understanding (MOU) dated January 22, 2004 and updated March 27, 2006 and November 6, 2007 due to Community's operating performance noted in its prior examinations of Cammtmity. The MOU requires that Community maintain regulatory capital, as defined by the Department, of at least S 1 million at the time it files its quarterly call reports. Management continues to work with the Department to address the remaining issue of the MOU concerning a capital plan that will satisfy the Department -9f- 4-13 `?_ ?-,. MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS Plaintiff V. COMMUNITY FINANCIAL, INC. and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. Defendants. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. Sd qd Civil CIVIL ACTION Shareholder Derivative Lawsuit MOTION FOR PRELIMINARY INJUNCTION AND NOW comes the Plaintiff Matthew P. Amos, representing himself, and moves for a preliminary injunction to stop immediately the planned merger of Community Financial, Inc., and Franklin Financial Services Corporation scheduled for September 8, 2008. Respectfully submitted, atthew P. Amos MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 September 4, 2008 MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, Plaintiff PENNSYLVANIA V. NO. Civil COMMUNITY FINANCIAL, INC. CIVIL ACTION and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. Shareholder Derivative Lawsuit Defendants. CERTIFICATE OF SERVICE Undersigned plaintiff has served the attached motion for preliminary injunction by causing two copies of it, one for each defendant, to be hand-delivered at the corporate offices of Community Financial, Inc., at 3907 Market Street in Camp Hill, Pennsylvania along with a copy of the complaint on this date. MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff 2 C m1 ?._ =:Tl MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS Plaintiff V. COMMUNITY FINANCIAL, INC. and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. Defendants. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. Civil CIVIL ACTION Shareholder Derivative Lawsuit MOTION TO MAINTAIN A DERIVATIVE LAWSUIT PURSUANT TO PA.R.C.P. NO. 1506(b) AND NOW comes the Plaintiff Matthew P. Amos, representing himself, and moves to maintain a derivative lawsuit in accordance with Pa.R.C.P. No. 1506(b) because there is a strong prima facie case in favor of the claim asserted on behalf of the corporation and without the action serious injustice will result. Respectfully submitted, atthew P. Amos MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 September 4, 2008 MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, Plaintiff PENNSYLVANIA V. NO. Civil COMMUNITY FINANCIAL, INC. CIVIL ACTION and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. Shareholder Derivative Lawsuit Defendants. CERTIFICATE OF SERVICE Undersigned plaintiff has served the attached motion to maintain a derivative lawsuit by causing two copies of it, one for each defendant, to be hand-delivered at the corporate offices of Community Financial, Inc., at 3907 Market Street in Camp Hill, Pennsylvania along with a copy of the complaint on this date. MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff 2 ?"1 ^a ? t :? i `? . c? ,'? ; `? ?,? ' - t , e ?' ?7 ' ? t 1. f ?rT""' w"' w i !', ?? -.v„ ,?? j • MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF PLAINTIFF CUMBERLAND COUNTY, PENNSYLVANIA V. COMMUNITY FINANCIAL, INC., AND LOWEL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., : DEFENDANTS : NO. 08-5290 CIVIL IN RE: MOTION TO PRELIMINARY INJUNCTION ORDER OF COURT AND NOW, this 8t' day of September, 2008, upon consideration of Plaintiff's Motion for Preliminary Injunction, and it appearing to the Court that the Plaintiff's Motion for Preliminary Injunction and the Complaint filed in the case do not establish that immediate and irreparable injury will be sustained, IT IS HEREBY ORDERED AND DIRECTED that the Motion for Preliminary Injunction is DENIED. Matthew P. Amos Pro Se Immunity Financial, Inc. 3907 market Street Camp Hill, PA 17011 'John B. Lampi, Esquire 26 West High Street Carlisle, PA 17013 bas c . crn yes m?i? By the Court, M. L. Ebert, Jr., J. ;,t ' .?, f ,-. 0 MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF PLAINTIFF CUMBERLAND COUNTY, PENNSYLVANIA V. COMMUNITY FINANCIAL, INC., AND LOWEL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., : DEFENDANTS : NO. 08-5290 CIVIL IN RE: MOTION TO MAINTAIN A DERIVATIVE LAWSUIT ORDER OF COURT AND NOW, this 8th day of September, 2008, upon consideration of Plaintiffs Motion to Maintain a Derivative Lawsuit pursuant to Pa.R.C.P. 1506 (b), IT IS HEREBY( ORDERED AND DIRECTED that: 1. A rule is issued upon Defendant and to show cause why the relief requested should not be granted; 2. The Answer shall filed on or before October 1, 2008; 3. The Prothonotary's Office shall forward said answer to this Court. 4. If no answer to the Rule to Show cause is filed by the required date, the relief requested by Petitioner shall be granted upon the Court's receipt of a Motion requesting Rule be made Absolute. If the Defendant files an answer to this Rule to Show Cause, the Court will determine if a hearing, status conference or further Order of Court is required. By the Court, N`??AAV M. L. Ebert, Jr., J. Z'J r AO , "% (Matthew P. Amos Pro Se .Community Financial, Inc. 3907 market Street Camp Hill, PA 17011 ,,-/John B. Lampi, Esquire 26 West High Street Carlisle, PA 17013 bas 12 cyp 1 VS rnw l?cl? PRAECIPE FOR LISTING CASE FOR ARGUMENT (Must be typewritten in duplicate) TO THE PROTHONOTARY OF CUMBERLAND COUNTY: (List the within matter for the next Argument Court.) CAPTION OF CASE (entire caption must be stated in full) MATTHEW P. AMOS Plaintiff VS. COMMUNITY FINANCIAL, INC. and LOWELL R. GATES CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. No. 08-5290 Term 1. State matter to be argued (i.e. plaintiff's motion for new trial, defendant's demurrer to complain, etc.): Motion for preliminary injunction 2. Identify all counsel who will argue cases: (a.) for plaintiffs Matthew P. Amos, 2503 Hoffer Street Harrisburg, PA 17103 (Name and Address) (b.) for Defendants: John B Lampi Esa Saidis Flower & Lindsay26 West High Street Carlisle, PA 17013 (Name and Address) 3. I will notify all parties in writing within two days that this case has been listed for argument. Yes 4. Argument Court Date: As soon as vossible Date: b a Signature Matthew P. Amos Print your name PLAT?,1Tr-FV;C Attorney for r-4) r . , ate` MATTHEW P. AMOS, PLAINTIFF VS. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., DEFENDANTS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PA NO. 08-5290 CIVIL ANSWER TO RULE TO SHOW CAUSE DIRECTED TO DEFENDANTS COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF COMMUNITY FINANICIAL, INC., AND REQUEST TO DISMISS PLAINTIFF'S MOTION TO MAINTAIN A DERIVATIVE LAWSUIT PURSUANT TO PA.R.C.P. NO. 1506 (B) AND NOW come Defendants Community Financial, Inc., and Lowell R. Gates, Chairman of the Board of Community Financial, Inc., (hereinafter Defendants) by and through their legal counsel, James D. Flower, Jr., Esquire, and Dean E. Reynosa, Esquire, and the law firm of Saidis, Flower & Lindsay, and hereby respectfully represent as follows: Unnumbered Paragraph. Denied. The averments stated in this paragraph state legal conclusions to which no response is required. New Matter 1) Plaintiff Matthew P. Amos filed a Shareholder Derivative Lawsuit on or about September 4, 2008. 2) Plaintiff contemporaneously filed a Motion to Maintain a Derivative Lawsuit Pursuant to Pa.R.A.P. No. 1506 (b). 3) Plaintiff's Motion to Maintain a Derivative Lawsuit is not set forth in numbered paragraphs as is required by Pa.R.C.P. No. 208.2 (a) (2). 4) The Court entered an Order dated September 8, 2008, issuing a Rule to Show Cause why Plaintiff's Motion to Maintain a Derivative Lawsuit should not be granted. 14 5) The Court directed that any response to the Rule to Show Cause must be filed not later than October 1, 2008. 6) Many facts upon which Plaintiff's Complaint is premised are patently false. 7) Plaintiff alleges that Defendant Gates owns the property on which Defendant CFI's headquarters are situated. Plaintiff's Complaint at 124. 8) A simple review of the Tax Assessment Database posted online by the Cumberland County Tax Assessment Office reveals that Defendant Gates does not own the property. To the contrary, Community Realty, Inc., a wholly- owned subsidiary of Defendant CFI, is the owner of the property. See httt)://taxdb.ccr)a.net/details.asp?id=10-21-0277-142.&dbselect=l (the tax assessment database printout dated September 16, 2008 is attached hereto and incorporated herein as Exhibit A). 9) Moreover, the deed and mortgage clearly show that the property is owned by Community Realty, Inc, a wholly owned subsidiary of Defendant CFI. See deed and mortgage which are both attached hereto and incorporated herein as Exhibits B and C respectively. 10) Plaintiff further alleges that as a result of Defendant Gates' alleged ownership of the land, Defendant Gates has received considerable rental income from Defendant CFI. Plaintiff's Complaint at 124. 11) Defendant CFI has not paid any rental income to Defendant Gates for purposes of its occupation of its corporate headquarters. See Affidavits of Lowell R. Gates, Esquire, and Susan A. Russell attached hereto and incorporated herein as Exhibits D and E respectively. 12) To the contrary, Community Trust Company is obligated by a lease agreement dated December 31, 2007, with Community Realty, Inc., for purposes of Defendant CFI's occupation of its corporate headquarters. See Lease Agreement dated December 31, 2007, attached hereto and incorporated' herein as Exhibit F. 13) The December 31, 2007, lease between Community Trust Company and Community Reality, Inc., was a renewal of a prior lease executed between the parties. Id. 14) Defendant Gates and his wife did act as guarantors for the mortgage executed by Community Realty, Inc., but they do not possess an ownership interest in the property and they do not receive any rental income from Defendant CFI. See Affidavit of Defendant Lowell R. Gates attached hereto as Exhibit D. 15) Citing to the merger agreement, Plaintiff further alleges that Defendant Gates is the recipient of a $120,000.00 personal loan that he does not have to repay to Defendant CFI. Plaintiff's Complaint at 1116 -18. 16) Defendant Gates is not the recipient of a personal loan from Defendant CFI that he is not required to pay back. See Affidavit of Defendant Gates attached hereto as Exhibit D. 17) The references to a trust in the merger agreement refer to the creation of a trust post merger by Franklin Financial Services Corporation in order to hold a contingent receivable in the amount of $120,000.00 of potential proceeds from an established trust, the record of which has been sealed. See Note 11 of Defendant CFI's Annual Financial Report for the year ending December 31, 2007 which is attached hereto and incorporated herein as 'Exhibit G and Affidavit of Susan Russell attached as Exhibit E. 18) The $120,000.00 relates to a potential remainder interest in an established trust, the record of which has been sealed. See Note 11 of Defendant CFI's Annual Financial Report for the year ending December 31, 2007 which is attached hereto as Exhibit G. 19) Defendant CFI is not at liberty to disclose the substance of the trust or the stipulation concerning its terms as a result of a February 1, 2008, Order of Court issued by Judge Todd A. Hoover of the Court of Common Pleas of Dauphin County sealing the record. 20) Plaintiff also suggests that Defendant CFI has not been responsive to his many requests for access to various records concerning an impending merger between Defendant CFI and Franklin Financial Services Corporation. Plaintiff's Complaint at 1$ 6 - 8. 21) Plaintiff and his representatives were provided access to the information that he requested at Defendant CFI's headquarters. 22) On August 27, 2008, Plaintiff, one of his representatives and several other shareholders were present at Defendant CFI's headquarters and they spent several hours reviewing the documents provided by Defendant CFI. See August 29, 2008, letter of Susan A. Russell attached to Plaintiff's Complaint as Exhibit E and attached hereto and incorporated herein as Exhibit H; see also Affidavit of Susan A. Russell attached hereto as Exhibit E. 23) Susan A. Russell serves as President and CEO of Defendant CFI. See Affidavit of Susan Russell attached hereto as Exhibit E. 24) After having spent several hours reviewing documents at Defendant CFI's headquarters, Plaintiff served another request for information again seeking the same information that he had previously requested. Id. 25) In her August 29, 2008, letter, Ms. Russell requested that Plaintiff, or his representatives, contact John B. Lampi, Esquire, Defendant CFI's counsel, to discuss his request for any additional information that he did not include in his prior demands. Id. 26) Neither Plaintiff nor his representatives contacted Attorney Lampi to discuss his request for additional information as recommended by Ms. Russell in her August 29, 2008, letter. See Affidavit of John Lampi, Esquire attached hereto and incorporated herein as Exhibit I. 27) Pa.R.C.P. No. 1506 requires a plaintiff to plead specific items for a properly pled shareholder derivative action complaint. 28) Pa.R.C.P. No. 1506 (a)(2) requires any shareholder seeking to pursue a derivative action aver that efforts have been made to secure enforcement by the corporation of the perceived corporate right. 29) In the alternative, if efforts have not been made to seek corporate enforcement, a shareholder derivative complaint shall set forth why such efforts have not been made. 30) The Complaint filed by the Plaintiff in this matter fails to state what if any effort he made to secure corporate enforcement. 31) Plaintiff's Complaint is also devoid of any allegations that efforts to secure corporate enforcement would be futile. 32) "[I]n order to excuse demand under Pennsylvania law, the plaintiff must allege that a majority of the board of directors engaged in acts that are fraudulent; not that they merely exercised erroneous business judgment." Garber v. Low, 11 F.3d 1197, 1203 (3rd Cir. 1993) (interpreting Pennsylvania corporate law and the underlying Rule of Civil Procedure). 33) Plaintiff's complaint does not meet the pleading requirements dictated by the Pennsylvania Rules of Civil Procedure. 34) Furthermore, a shareholder who is otherwise not eligible to maintain a derivative lawsuit may file a motion seeking court approval to maintain such action if the plaintiff alleges in his complaint "that there is a strong prima facie case in favor of the claim asserted on behalf of the corporation and that without the action serious injustice will result." Pa.R.C.P. No. 1506 (b). 35) Plaintiff's Complaint fails to make such an allegation; however, his single sentence motion makes such an allegation. 36) Plaintiff's Complaint does not set forth a strong prima facie case. 37) Serious injustice will not result should the Court deny Plaintiff's request to maintain this action. 38) Additionally, although Plaintiff has requested that the Court enjoin the proposed merger between Defendant CFI and Franklin Financial, Plaintiff actually voted in favor of the proposed merger. See Susan A. Russell's Affidavit which is attached hereto as Exhibit E. WHEREFORE, Defendants request that this Honorable Court deny Plaintiff's request to maintain this shareholder derivative action and also dismiss the Plaintiff's shareholder derivative complaint with prejudice since certain facts upon which his Complaint is premised are patently false. Respectfully submitted, Saidis, Flower & Lindsay ji mes D. Flower, Jr., Esq. upreme Court I.D. 27742 Dean E. Reynosa, Esq. Supreme Court I.D. 80440 26 W. High Street Carlisle, PA 17013 (717) 243-6222 telephone (717) 243-6486 fax E xhibit A TaxDB Result Details Page 1 of I Detailed Results for Parcel 10-21-0277-142. in the 2004 Tax Assessment Database DistrictNo 10 Parcel ID 10-21-0277-142. Mapsuffix HouseNo 3907 Direction Street MARKET STREET Ownerl COMMUNITY REALTY INC C/O PropType CO PropDesc LivArea CurLandVal 102000 CurImpVal 297580 CurTotVal 399580 CurPrefVal Acreage 1.02 ,C]GrnStat TaxEx 1 SaleAmt 1 SaleMo 12 SaleDa 27 SaleCe 20 SaleYr 01 DeedBkPage 00249-03869 YearBlt 1920 HF File Date HF_Approval_Status httn-//taxrih ccna.netldetai1s.asn?id=10-21-0277-142.&dbsefeet=l 9/16/20OR Exhibit B ?b Parcel No.: 10-21-0277-142 VVV Address: 3907 Market Street, Camp Hill, Cumberland County, Pennsylvania 17011 qullg0 DEED ro -J THIS DEED is made the 1 st day of July, in the year of our Lord two thousand (2000). .? c, `, 3 c.? BETWEEN COMMUNITY TRUST COMPANY, aPennsylvania trust corporation, 3907 Wkef : Street, Camp 191, Cumberland County, Pennsylvania, Party of the First Part, GRANTOR, (_-1 'J AND COMMUNITY REALTY, INC., a Pennsylvania corporation, now of 3907 Market Street, Camp Hill, Cumberland County, Pennsylvania, Party of the Second Part, GRANTEE. WITNESSETH, that said party of the first part, for and in consideration of the sum of ONE AND 00/100 ($1.00) DOLLAR, lawful money ofthe United States of America, well and truly paid by the said party of the second part to the said parry of the first part, at or before the sealing and delivery of these presents, the receipt whereof is hereby acknowledged, has hereby granted, bargained, sold, aliened, enfeoffed, released, conveyed and confirmed, and by these presents does grant, bargain, sell, alien, enfeoff, release, convey and confirm unto the said party of the second part, its hems and assigns. ALL THAT CERTAIN piece or parcel of land situated in the Township of Hampdon, County of Cumberland and Commonwealth of Pennsylvania, and lying on the south side of Carlisle Pike, more particularly bounded and designated as the tract of land containing 1.02 acres of land on a certain survey made John C. Brilhart, Registered Surveyor, on August 5, 1968, as follows, to wit: BEGINNING at a point in the center of Carlisle Pike, said point being located and referenced at a distance of eight hundred five and fifty one-hundredths (805.50) feet measured along the center line of said Carlisle Pike in an eastwardly direction from Orr's Bridge Road; thence South twelve (12) degrees fifty-five (55) minutes thirty-five (35) seconds East, along the line of lands now or formerly of Anna M. Culpepper and Wayne P. Hottyman Estate, a distance of two hundred ninety-seven and nine one-hundredths (297.09) feet to an iron pin at lands now or formerly of James A- Shoop; thence along the line of lands now or formerly of James A. Shopp, Thomas A. Kinney and Robert C. Herman, North seventy-eight (78) degrees fifty-one (51) minutes forty (40) seconds East, a distance of one hundred fifty-one and ninety-three one-hundredths (151.93) feet to a steel post; thence along the line of lands now or formerly of Robert F. Wallet and Lawrence S. Corman, North thirteen (13) degrees fifteen (15) minutes West, a distance of two hundred ninety-four and thirty-four one- hundredths (294.34) feet to a point in the center of Carlisle Pike aforesaid; thence along the center line of said Carlisle Pike, South seventy-nine (79) degrees fifty -six (56) minutes West, a distance of BOOK 249' "AGE3869 one hundred fifty and thirty-eight one-hundredths (150.38) feet to a point in the same, the point and place of BEGINNING. See sub-division plan in Plan Book 20, Page 31. CONTAINING one and two one-hundredths (1.02) acres of land, and being improved with a two and one-half story brick dwelling house and detached brick garage building. BEING the same premises which Eduard Von Jess and Elsie Von Jess, husband and wife, by their Deed dated October 28, 1999, and recorded in the Office of the Recorder of Deeds in and for Cumberland County on October 29, 1999 in Deed/Record Book 210, Page 648, granted and conveyed unto Community Trust Company, Grantors herein. TOGETHER with all and singular the buildings and improvements, ways, streets, alleys, driveways, passages, waters, watercourses, rights, liberties, privileges, hereditaments and appurtenances, whatsoever unto the hereby granted premises belonging, or in any wise appertaining, and the reversions and remainders, rents, issues, and profits thereof, and all the estate, right, title, interest, property, claim, and demand whatsoever of the said Grantor, as well at law as in equity, of, in, and to the same. TO HAVE AND TO HOLD, the said lot or piece of ground above described, with all and singular the buildings and improvements thereon erected, hereditaments and premises hereby granted, or mentioned and intended so to be, with the appurtenances, unto the said Grantee, its heirs and assigns, to and for the only proper use and behoof of the said Grantee, its heirs and assigns forever. AND the said Grantor, for itself, its successors and assigns, does covenant, promise and agree, to and with the said Grantee, its heirs and assigns, by these presents, that it, the said Grantor, and its successors and assigns, all and singular the hereditaments and premises hereby granted or mentioned and intended so to be, with the appurtenances, unto the said Grantee, its heirs and assigns, against it, the said Grantor and its successors and assigns, and against all and every person and persons whomsoever lawfully claiming or to claim the same or any part thereof, by, from or under him, her, them or any of them, shall and will, Subject as aforesaid, SPECIALLY WARRANT and forever DEFEND. IN WITNESS WHEREOF, the said party of the first part by and through its duly appointed officers has hereunto set its hand and seal, the day and year first 18pve written. ATTEST: COMMUNITY TRUST COMPANY By: BRUCE . HOLRAN By: LO ELL R. Secretary i eent (Corporate Seal) Bock 249 PAC: 3670 i ,• COMMONWEALTH OF PENNSYLVANIA : SS: COUNTY OF CUMBERLAND On this, the 1st day of July, 2000, before me, a Notary Public, the undersigned officer, personally appeared Lowell R. Gates who acknowledged himself to be the President of Community Trust Company, a Pennsylvania trust corporation, and that he as such President, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as President. IN WITNESS WHEREOF, I hereunto set my hand and official NOTARY/PUBLIC MY COMMIurny FXPTA L Hsi MY Cow n?bn Nov. io. CERTIFICATE OF RESIDENCE I hereby certify that the present residence ofthe Grantee herein is as follows: (RETURN DEED TO:) Community Realty, Inc. 3907 Market Street Camp Hill, PA 17011 COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND SS: N Attorney for Grantee j RECORDED in the Office for Recording ofDeeds, etc., in and for said County, in Deed Book No. Page WITNESS my hand and official seal this day of 1 recciled 2001. ,,r1 . .. ?,. y Recorder of Deeds of Deeds BQQK 249 PACE387i 1serONMAtte?Nfr" ?e1?wi??NIA NIN1111 or pWWWJAL TAM 0 ". ttlflte7 NAMlsfeltea: M 81268t03 Cempfote.adt eeeNen and me in dupY iswMtorrf amsidePoil . or by floe orwl P REALTY TRANSFER TAX STATRNNNT OF VALUE S" Revw" for Mdlttdlftrtt wbh Recorder d Deeds when 1( An Pd vabslaosd a tax e.. NOon Is claiwd. A 5---' 1 of Who N /.t `/--J `u I h sot set fw& in the dtled, (Z} when 1M deed Nod 0 the t wdw b whofiy exempt from tax A 6WK1 r1 IMwwwv Air rwr UM .w. • - • -... --- --- TtMpMes Nawbsn NOeMAlbert N. Peterlin, Esquire Am. red. ( 717 1 731-9600 S~ Ad*oo Or slob MP Cog@ t n 13 Mumma Road. Suite 100 Lemoyne PA 17043 s TRANSFER DATA Do" al A P- *I a' Community Trust Company ommumty Realty, Inc. et Street Addrop 3907 Market Street - p hill PA 17011 zip G"in camp Hill PA 17011 1t ^Mnvv UnrA hAlt1 oast Amoy 3907 Market Street 2 ?1-142 Sidled Cumberland } Cumbe land Valley ? I 1 F-0 2. Cho* Appropriate Bete 1106- far 6rearpN- C7abned ? VA.I or Ini twe succession Pin- of 9-d-0 me ? Transfer to ln&wW DwolopmerM Agency. ? To r too that. (Attach comtplere copy d frostogromnow ltlw-Nyhrg al bensfidarioo.) Tro wFer belwom priedpal and agent. (Attach assrp" copy of agency/maw parry agreement.) ? Traders to the Cammonwealtb, the UAW Stall and (Mromoatd9hs by sib, dedcotion, eor?detteiallon or In lien of condseeiatian. pf condo -0, or in lieu of condemnation, wad copy of raohAlon.) ? Transfer from mortgagor to a holder of a mortgage In dafauh. Mortgage look Number , }age Number ? Corrodivo or confirmatory deed. [Attach co tpiste copy of As prier died being cornered or asnRnaed.) ? Statutory aorper-A consolidation, merger or division. (AMacb copy of ankles.) ? Ober (Meats o"plain exemption claimed, l **or than Ii"ed above.) ilrtder poaa>tloe of law. l dsokors ghat I Mw oxataMed this ftateasoM, irridfsg aesorspaayrtg , sod N 1110 heel srE wy IatewfedN mad fislisf.11 le few. auwet awd otmplsM. 11211,716 J DOWMnNrATfON MAY RBNLT MI TI l I rS MUM To mean Till DIID. 0 0 Exhibit C WHEN RECORDED MAIL TO: COMMERCE BANKIHARRISBURG N.A. 100 SENATE AVENUE CAMP HILL, PA 17011 SPACE ABOVE THIS LINE 1S FOR RECORDER'S USE ONLY MORTGAGE THIS MORTGAGE dated November 17, 2003, is made and executed between Community Realty, Inc., whose address is 3907 Market Street, Camp Hill, PA 17011 (referred to below as "Grantor") and COMMERCE BANK/HARRISBURG N.A., whose address is 100 SENATE AVENUE, CAMP HILL, PA 17011 (referred to below as "Lender"). GRANT OF MORTGAGE. For valuable consideration, Grantor grants, bargains, sells, convoys, assigns, transfers, releases, confirms and mortgages to Lender all of Grantor's right, title, and interest in and to the following described real property, together with all existing or subsequently erected or affixed buildings, improvements and fixtures; all streets, lanes, alleys, passages, and ways; all easements, rights of way, all liberties, privileges, tenements, hered(taments, and appurtenances thereunto belonging or anywise made appurtenant hereafter, and the reversions and remainders with respect thereto; all water, water rights, watercourses and ditch rights (including stock In utilities with ditch or irrigation rights); and all other rights, royalties, and profits relating to the real property, including without limitation all minerals, oil, gas, geothermal and similar matters, (the "Real Property") located in Cumberland County, Commonwealth of Pennsylvania: See Exhibit "A", which is attached to this Mortgage and made a part of this Mortgage as if fully set forth herein. The Real Property or its address is commonly known as 3907 Market Street, Camp Hill, PA 17011. Grantor presently assigns to Lender all of Grantor's right, title, and Interest in and to all present and future leases of the Property and all Rents from the Property. In addition, Grantor grants to Lender a Uniform Commercial Code security interest in the Personal' Property and Rents. THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE RENTS AND' PERSONAL PROPERTY, IS GIVEN TO'SECURE (A) PAYMENT OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF 8350,000.00, THE RELATED DOCUMENTS, AND THIS MORTGAGE. THIS MORTGAGE IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS: PAYMENT AND PERFORMANCE. Except as otherwise provided in this Mortgage, Grantor shall pay to Lender all amounts secured by this Mortgage as they become due and shall strictly perform all of Grantor's obligations under this Mortgage. POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor's possession and use of the Property shall be governed by the following provisions: Possession and Use. Until the occurrence of an Event of Default, Grantor may (1) remain in possession and control of the Property; (2) use, operate or manage the Property; and (3) collect the Rents from the Property. Duty to Maintain. Grantor shall maintain the Property In tenantable condition and promptly perform all repairs, replacements, and maintenance necessary to preserve its value. Compliance with Environmental Laws. Grantor represents and warrants to Lender that: (1) During the.period of Grantor's ownership of the Property, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from the Property; (2) Grantor has no knowledge of, or reason to believe that there has been, except as. previously disclosed to and acknowledged by Lender in writing, la) any breach or violation of any Environmental Laws, (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about.or from the Property by any prior owners or occupants of the Property, or (c) any actual or threatened) litigation or claims of any kind.by any person relating to such matters; and (3) Except as previously disclosed to and acknowledged by Lender In writing, (a) neither Grantor nor any tenant, contractor, agent or other authorized user of the Property shall use, generate, manufacture, store, treat, dispose of or release any-Hazardous Substance on, under, about or from the Property; and (b) any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations and ordinances, including without 1)mhation all Environmental Laws. Grantor authorizes Lender and its agents to enter upon the Property to make such inspections and tests, at Grantor's expense, as Lender may deem appropriate to determine compliance of the Property with this section of the Mortgage. Any Inspections or tests made by Lender shall be for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Grantor or to any other person. The representations and warranties contained herein are based on Grantor's due diligence in investigating the Property for Hazardous Substances. Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any such laws; and (2) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Mortgage or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release occurring prior to Grantor's ownership or interest in the Property, whether or not the same was or should have been known to Grantor. The provisions of this sectlari of the Mortgage, including the obligation to indemnify, shall survive the payment of the Indebtedness and the satisfaction and reconveyance of the lien of this Mortgage and sheil not be affected by Lender's acquisition of any interest in the Property, whether by foreclosure or otherwise. MbRTGAGE (Continued) Page 2 Nuisance, Waste. Grantor shall not cause, conduct or permit any nuisance nor commit, permit, or suffer any stripping of or waste on or to the Property or any portion of the Property. Without limiting the generality of the foregoing, Grantor will not remove, or grant to any other party the right to remove, any timber, minerals (including oil and gas), coal, clay, scoria, soil, gravel or rock products without Lender's prior written consent. Removal of Improvements. Grantor shall not demolish or remove any Improvements from the Real Property without Lender's prior written consent. As a condition to the removal of any improvements, Lender may require Grantor to make arrangements satisfactory to Lender to replace such Improvements with Improvements of at least equal value, Lender's Right to Enter. Lender and Lender's agents and representatives may enter upon the Real Property at all reasonable times to attend to Lender's interests and to inspect the Real Property for purposes of Grantor's compliance with the terms and conditions of this Mortgage. Compliance with Governmental Requirements. Grantor shall promptly comply with all laws, ordinances, and regulations, now or hereafter in effect, of-all governmental authorities applicable to the use or occupancy of the Property, Including without limitation, the Americans With Disabilities Act. Grantor may contest In good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Grantor has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's Interests in the Property are not jeopardized. Lender may require Grantor to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest. Duty to Protect. Grantor agrees neither to abandon or leave unattended the Property. Grantor shall do all other acts, in addition to those acts set forth above in this section, which from the character and use of the Property are reasonably necessary to protect and preserve the Property. DUE ON SALE - CONSENT BY LENDER. Lender may, at Lender's option, declare immediately due and payable all sums secured by this Mortgage upon the sale or transfer, without Lender's prior written consent, of all or any part of the Real Property, or any interest in the Real Property. A "sale or transfer" means the conveyance of Real Property or any right, title or interest in the Real Property; whether legal, beneficial or equitable; whether voluntary or involuntary; whether by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold Interest with a term greater than three (3) years, lease-option contract, or by sole, assignment, or transfer of any beneficial interest in or to any land trust holding title to the Real Property, or by any other method of conveyance of an interest In the Real Property. If any Grantor is a corporation, partnership or limited liability company, transfer also includes any change in ownership of more then twenty-five percent (25%) of the voting stock, partnership interests or limited liability company interests, as the case may be, of such Grantor. However, this option shall not be exercised by Lender if such exercise is prohibited by federal law or by Pennsylvania law. TAXES AND LIENS. The following provisions relating to the taxes and liens on the Property are part of this Mortgage: Payment. Grantor shall pay when due (and in all events prior to delinquency) all taxes, payroll taxes, special taxes, assessments, water charges and sewer service charges levied against or on account of the Property, and shall pay when due all claims for work done on or for .services rendered or material furnished to the Property. Grantor shall maintain the Property free of any liens having priority over or equal to the interest of Lender under this Mortgage, except for the Existing Indebtedness referred to in this Mortgage or those liens specifically agreed to in writing by Lender, and except for the lien of taxes and assessments not due as further specified in the Right to Contest paragraph. Right to Contest. Grantor may withhold payment of any tax, assessment, or claim in connection with a good faith dispute over the obligation to pay, so long as Lender's interest in the Property is not jeopardized. If a lien arises or is filed as a result of nonpayment, Grantor shall within fifteen 115) days after the lien arises or, if a lien is filed, within fifteen (15) days after Grantor has notice of the filing, secure the discharge of the lien, or if requested by Lender, deposit with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender in an amount sufficient to discharge the lien plus any costs and attorneys' fees, or other charges that could accrue as a result of a foreclosure or sale under the lien. In any contest, Grantor shall defend itself and Lender and shall satisfy any adverse judgment before enforcement against the Property. Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. Evidence of Payment. Grantor shall upon demand furnish to Lender satisfactory evidence of payment of the taxes or assessments and shall authorize the appropriate governmental official to deliver to Lender at any time a written statement of the taxes and assessments against the Property. Notice of Construction. Grantor shall notify Lender at least fifteen 0 5) days before any work is commenced, any services are furnished, or any materials are supplied to the Property, if any mechanic's lien, materialmen's lien, or other lien could be asserted on account of the work, services, or materials. Grantor will upon request of Lender furnish to Lender advance assurances satisfactory to Lender that Grantor can and will pay the cost of such improvements. PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the Property are a part of this Mortgage: Maintenance of Insurance. Grantor shall procure and maintain policies of fire insurance with standard extended coverage endorsements on a replacement basis for the full insurable value covering all Improvements on the Real Property in an amount sufficient to avoid application of any coinsurance clause, and with a standard mortgagee clause In favor of Lender. Grantor shall also procure and maintain comprehensive general liability insurance in such coverage amounts as Lender may request with Lender being named as additional insureds in such liability insurance policies. Additionally, Grantor shall maintain such other insurance, including but not limited to hazard, business interruption and boiler insurance as Lender may require. Policies shall be written by such insurance companies and in such form as may be reasonably acceptable to Lender. Grantor shall deliver to Lender certificates of coverage from each insurer containing a stipulation that coverage will not be cancelled or diminished without a minimum of ten (101 days' prior written notice to Lender and not containing any disclaimer of the Insurer's liability for failure to give such notice. Each insurance policy also shall include an endorsement providing that coverage In favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. Should the Real Property be located in an area designated by the Director of the Federal Emergency Management Agency as a special flood hazard area, Grantor agrees to obtain and maintain Federal Flood Insurance, if available, within 45 days after notice is given by Lender that the Property is located in a special flood hazard area, for the full unpaid principal balance of the loan and any prior liens on the property securing the loan, up to the maximum policy limits set under the National Flood Insurance Program, or as otherwise required by Lender, and to maintain such Insurance for the term of the loan. Application of Proceeds. Grantor shall promptly notify Lender of any loss or damage to the Property. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. Whether or not Lender's security is impaired, Lender may, at Lender's election, receive and retain the proceeds of any insurance and apply the proceeds to the reduction of the Indebtedness, payment of any lien MORTGAGE ' (Continued) Page 3 affecting the Property, or the restoration and repair of the Property. If Lender elects to apply the proceeds to restoration and repair, Grantor shall repair or replace the damaged or destroyed Improvements in a manner satisfactory to Lender. Lender shall, upon satisfactory proof of such expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration if Grantor is not in default under this Mortgage. Any proceeds which have not been disbursed within 180 days after their receipt and which Lender has not committed to the repair or restoration of the Property shall be used first to pay any amount owing to Lender under this Mortgage, than to pay accrued Interest, and the remainder, if any, shall be applied to the principal balance of the Indebtedness. If Lender holds any proceeds after payment in full of the indebtedness, such proceeds shall be paid to Grantor as Grantor's interests may appear. Compliance with Existing Indebtedness. During the period in which any Existing Indebtedness described below is in effect, compliance with the insurance provisions contained in the instrument evidencing such Existing Indebtedness shall constitute compliance with the insurance provisions under this Mortgage, to the extent compliance with the terms of this Mortgage would constitute a duplication of insurance requirement. If any proceeds from the insurance become payable on loss, the provisions in this Mortgage for division of proceeds shall apply only to that portion of the proceeds not payable to the holder of the Existing Indebtedness. Grantor's Report an Insurance. Upon request of Lender, however not more than once a year, Grantor shall furnish to Lander a report on each existing policy of insurance showing: (1) the name of the insurer; i2) the risks insured; 13) the amount of the policy; (4) the property insured, the then current replacement value of such property, and the manner of determining that value; and (61 the expiration date of the policy. Grantor shall, upon request of Lender, have an independent appraiser satisfactory to Lender determine the cash value replacement cost of the Property. LENDER'S EXPENDITURES. If any action or proceeding Is commenced that would materially affect Lender's interest in the Property or if Grantor fails to comply with any provision of this Mortgage or any Related Documents, including but not limited to Grantor's failure to comply with any obligation to maintain Existing Indebtedness in good standing as required below, or to discharge or pay when due any amounts Grantor is required to discharge or pay under this Mortgage or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Property and paying all costs for insuring, maintaining and preserving the Property. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness arid, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (11 the term of any applicable insurance policy; or (2) the remaining term of the Note; or IC) be treated as a balloon payment which will be due and payable at the Note's maturity. The Mortgage also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default. Grantor's obligation to Lender for all such expenses shall survive the entry of any mortgage foreclosure judgment. WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of the Property are a part of this Mortgage: Title. Grantor warrants that: (a) Grantor holds good and marketable title of record to the Property in fee simple, free and clear of all liens and encumbrances other than those set forth in the Real Property description or in the Existing Indebtedness section below or in any title insurance policy, title report, or final title opinion issued in favor of, and accepted by, Lender in connection with this Mortgage, and (b) Grantor has. -the full right, power, and authority to execute and deliver this Mortgage to Lender. Defense of `Title. Subject to the exception in the paragraph above, Grantor warrants and will forever defend the title to the Property against the lawful claims of all persons. In the event any action or proceeding is commenced that questions Grantor's title or the interest of Lender under this -'.Mortgage, Grantor shall defend the action at Grantor's expense. Grantor may be the nominal party in such proceeding, but Lender shall be entitled to participate in the proceeding and to be represented in the proceeding by counsel of Lender's own choice, and Grantor will deliver, or cause to be delivered, to Lender such Instruments as Lender may request from time to time to permit such participation. Compliance With Laws. Grantor warrants that the Property and Grantor's use of the Property complies with all existing applicable laws, ordinances, and regulations of governmental authorities. Survival of Representations and Warranties. All representations, warranties, and agreements made by Grantor in this Mortgage shall survive the execution and delivery of this Mortgage, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor's Indebtedness shall be paid in full. EXISTING INDEBTEDNESS. The following provisions concerning Existing Indebtedness are a part of this Mortgage: Existing Lien. The lien of this Mortgage securing the Indebtedness may be secondary and inferior to an existing lien. Grantor expressly covenants and agrees to pay, or see to the payment of, the Existing Indebtedness and to prevent any default an such indebtedness, any default under the Instruments evidencing such indebtedness, or any default under any security documents for such indebtedness. No Modification. Grantor shall not enter into any agreement with the holder of any mortgage or other security agreement which has priority over this-Mortgage by which that agreement is modified, amended, extended, or renewed without the prior written consent of Lender. Grantor shall neither request nor accept any future advances under any such security agreement without the prior written consent of Lender. CONDEMNATION. The following provisions relating to condemnation proceedings are a part of this Mortgage: Proceedings. If any proceeding In condemnation is filed, Grantor shall promptly notify Lander in writing, and Grantor shall promptly take such steps as may be necessary to defend the action and obtain the award. Grantor may be the nominal party in such proceeding,. but Lander shall be entitled to participate in the proceeding and to be represented in the proceeding by counsel of its own choice, and Grantor will deliver or cause to be delivered to Lender such instruments and documentation as may be requested by Lander from time to time to permit such participation. Application of Net Proceeds. If all or any part of the Property is condemned by eminent domain proceedings or by any proceeding or purchase in lieu of condemnation, Lender may at its election require that all or any portion of the net proceeds of the award be applied to the Indebtedness or the repair or restoration of the Property. The net proceeds of the award shall mean the award after payment of all actual costs, expenses, and attorneys' fees incurred by Lender in connection with the condemnation. IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following provisions relating to governmental taxes, fees and charges are a part of this Mortgage: MORTGAGE (CdntinuW) Page 4 Current Taxes, Fees and Charges. Upon request by Lender, Grantor shell execute such documents in addition to this Mortgage and take whatever other action is requested by Lender to perfect and continue Lender's lion on the Real Property. Grantor shall reimburse Lender for all taxes, as described below, together with all expenses incurred in recording, perfecting or continuing this Mortgage, including without limitation all taxes, fees, documentary stamps, and other charges for recording or registering this Mortgage. Taxes. The following shall constitute taxes to which this section applies: (1) a specific tax upon this type of Mortgage or upon all or any part of the Indebtedness secured by this Mortgage; (2) a specific tax on Grantor which Grantor is authorized or required to deduct from payments on the Indebtedness secured by this type of Mortgage; (3) a tax on this type of Mortgage chargeable against the Lender or the holder of the Note; and 14) a specific tax on all or any portion of the Indebtedness or on payments of principal and interest made by Grantor. Subsequent Taxes. If any tax to which this section applies is enacted subsequent to the date of this Mortgage, this event shall have the same effect as an Event of Default, and Lender may exercise any or all of its available remedies for an Event of !Default as provided below unless Grantor either (1) pays the tax before it becomes delinquent, or (2) contests the tax as provided above in the Taxes and Liens section and-deposits with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender. SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to this Mortgage as a security agreement are a part of this Mortgage: Security Agreement. This instrument shall constitute a Security Agreement to the extent any of the Property constitutes fixtures, and Lender shall have all of the rights of a secured party under the Uniform Commercial Code as amended from time to time. Security Interest. Upon request by Lender, Grantor. shall execute financing statements and take whatever other action Is requested by Lender to perfect and continue Lender's security interest in the Rents and Personal Property. In addition to recording this Mortgage in the real property records, Lender may, at any time and without further authorization from Grantor, file executed counterparts, copies or reproductions of this Mortgage as a financing statement. Grantor shall reimburse Lender for all expenses incurred in perfecting or continuing this security interest. Upon default, Grantor shall not remove, sever or detach the Personal Property from the Property. Upon default, Grantor shall assemble any Personal Property not affixed to the Property in a manner and at a place reasonably convenient to Grantor and Lender and make it available to Lender within three 13) days after receipt of written demand from Lender to the extent permitted by applicable law. Addresses. The mailing addresses of Grantor (debtor) and Lender (secured party) from which information concerning the security interest granted by this Mortgage may be obtained (each as required by the Uniform Commercial Code) are as stated on the first page of this Mortgage. FURTHER ASSURANCES; ADDITIONAL AUTHORIZATIONS. The following provisions relating to further assurances and additional authorizations are a part of this Mortgage: Further Assurances. At any, time, and from time to time, upon request of Lender, Grantor will make, execute and deliver, or will cause to be made, executed or delivered, to Lender or to Lender's designee, and when requested by Lender, cause to be tiled, recorded, refiled, or rerecorded, as the case may be, at such times and in such offices and places as Lender may deem appropriate, any and all such mortgages, deeds of trust, security deeds, security agreements, financing statements, continuation statements, instruments of further assurance, certificates, and other documents as may, in the sole opinion of Lender, be necessary or desirable in order to effectuate, complete, perfect, continue, or, preserve (1) Grantor's obligations under the Note, this Mortgage, and the Related Documents, and (2) the liens and security interests created by this Mortgage as first and prior liens on the Property, whether now owned or hereafter acquired by Grantor. Unless prohibited by law or Lender agrees to the contrary in writing, Grantor shall reimburse Lender for all costs and expenses incurred in connection with the matters referred to in this paragraph. Additional Authorizations. If Grantor fails to do any of the things referred to in the preceding paragraph, Lender may do so for and in the name of Grantor and at Grantor's expense. For such purposes, Grantor hereby irrevocably authorizes Lender to make, execute, deliver, file, record.and do all other things as. may be necessary or desirable, in Lender's sole opinion, to accomplish the matters referred to in the preceding paragraph. It is understood that nothing set forth herein shall require Lender to take any such actions. FULL PERFORMANCE. If Grantor pays all the Indebtedness when due, and otherwise performs all the obligations imposed upon Grantor under this Mortgage, Lender shall execute and deliver to Grantor a suitable satisfaction of this Mortgage and suitable statements of termination of any financing statement on file evidencing Lender's security interest in the Rents and the Personal Property. Grantor will pay, if permitted by applicable law, any reasonable termination fee as determined by Lender from time to time. EVENTS OF DEFAULT. Each of the following, at Lender's option, shall constitute an Event of Default under this Mortgage: Payment Default. Grantor. fails to make any payment when due under the Indebtedness. Default on Other Payments. Failure of Grantor within the time required by this Mortgage to make any payment for taxes or insurance, or any other payment necessary to prevent filing of or to effect discharge of any lien. Other Defaults. Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Mortgage or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Grantor. Default in Favor of Third Parties. Should Grantor default under any loan, extension of credit, security agireement, purchase or sales agreement, or any other agreement, in favor of any other creditor or parson that may materially affect any of Grantor's property or Grantor's ability to repay the Indebtedness or Grantor's ability to perform Grantor's obligations under this Mortgage or any related document. False Statements. Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor's behalf under this Mortgage or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at anytime thereafter. Defective Colleteralization. This Mortgage or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. Insolvency. The dissolution or termination of Grantor's existence as a going business, the Insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement S MQRTGAgE (Continued) Page 5 of any proceeding under any bankruptcy or insolvency laws by or against Grantor. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against any property securing the Indebtedness. This includes a garnishment of any of Grantor's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Grantor as-to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender manias or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Existing Indebtedness. The payment of any installment of principal or any interest on the Existing Indebtedness is not made within the time required by the promissory note evidencing such indebtedness, or a default occurs under the instrument securing such indebtedness and is not cured during any applicable grace period in such instrument, or any suit or other action is commenced to foreclose any existing lien on the Property.... Breach of Other Agreement. Any breach by Grantor under the terms of any other agreement between Grantor and Lender that is not remedied within any grace period provided therein, including without limitation any agreement concerning any indebtedness or other obligation of Grantor to Lender, whether existing now or later. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies. or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Adverse Change. A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. Insecurity. Lender in good faith believes itself insecure. Right to Cure. If such a failure is curable and if Grantor has not been given a notice of a breach of the same ;provision of this Mortgage within the preceding twelve (12) months, it may be cured (and no Event of Default will have occurred) if Grantor, after Lender sends written notice demanding cure of such failure: (a) cures the failure within fifteen (15) days; or (b) if the cure requires more than fifteen (15) days, immediately initiates steps sufficient to cure the failure and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default and at any time thereafter, Lender, at Lender's option, may exercise any one at more of the following rights and remedies, in addition to any other rights or remedies provided by law: Accelerate indebtedness. Lender shall have the right at its option, after giving such notices as required by applicable law, to declare the entire.lhdebtedness immediately due and payable. UCC Remedies. With respect to all or any part of the Personal Property, Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code. Collect Rents. Lender shall have the right, without notice to Grantor, to take possession of the Property and, with or without taking possession of the Property, to collect the Rents, including amounts peat due and unpaid, and apply the net proceeds, over and above Lender's costa, against the Indebtedness. In furtherance of this right, Lender may require any tenant or other user of the Property to make payments of rent or use fees directly to Lender. If the Rents are collected by Lender, then Grantor irrevocably authorizes Lender to endorse instruments received in payment thereof in the name of Grantor and to negotiate the same and collect the proceeds. Payments by tenants or other users to Lender in response to Lander's demand shall satisfy the obligations for which the payments are made, whether or not any proper grounds for the demand existed. Lender may exercise Its rights under this subparagraph either in person, by agent, or through a receiver. Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Property, with the power to protect and preserve the Property, to operate the Property preceding foreclosure or safe, and to icollect the Rents from the Property and apply the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted by law. Lender's right to the appointment of a receiver shall exist whether or not the apparent value of the Property exceeds the indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver. Judicial Foreclosure. Lender may obtain a judicial decree foreclosing Grantor's interest in all or any part of the Property. Possession of the Property. For the purpose of procuring possession of the Property, Grantor hereby authorizes and empowers any attorney of any court of record In the Commonwealth of Pennsylvania or elsewhere, as attorney for Lender and all persons claiming under or through Lander, to sign an agreement for entering in any competent court an amicable action in ejectment for possession of the Property and to appear for and confess judgment against Grantor, and against all persons claiming under or through Grantor, for the recovery by Lender of possession of the Property, without any stay of execution, for which this Mortgage, or a copy of this Mortgage verified by affidavit, shall be a sufficient warrant; and thereupon a writ of possession may be issued forthwith, without any prior writ or proceeding whatsoever. Nonjudicial Sale. If permitted by applicable law, Lender may foreclose Grantor's interest in all or In any part of the Personal Property or the Real Property by non-judicial sale. Deficiency Judgment. Lender may obtain a judgment for any deficiency remaining in the Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this section. Tenancy at Sufferance. If Grantor remains In possession of the Property after the Property is sold as provided above or Lender otherwise becomes entitled to possession. of the .Property upon default of Grantor, Grantor shall become a tenant at sufferance of Lender or the purchaser of the Property and shall, at Lender's option, either (1) pay a reasonable rental for the use of the Property, or (2) vacate the Property immediately upon the demand of Lander. Other Remedies. Lender shall have all other rights and remedies provided in this Mortgage or the Note or available at law or in equity. Sale of the Property. To the extent permitted by applicable law, Grantor hereby waives any and all right to have the Property marshalled. In exercising its rights and remedies, Lender shall be free to sell ail or any part of the Property together or separately, in one sale or by MORTGAGE (Untinueti) Page 6 separate sales. Lander shall be entitled to bid at any public sale on all or any portion of the Property. Notice of Sale. Lander-shall give. Grantor: reasonable notice of the time and place of any public sale of the Personal Property or of the time after which any private.sale or other iritended disposition of the Personal Property is to be made. Unless otherwise required by applicable law, reasonable notice shall mean notice given at least ten (90) days before the time of the sale or disposition. Any sale of the Personal Property may be made in conjunction with any sale of the Real Property. Election of Remedies. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Mortgage, after Grantor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies. Nothing under this Mortgage or otherwise shall be construed so as to limit or restrict the rights and remedies available to Lander following an Event of Default, or In any way to limit or restrict the rights and ability of Lender to proceed directly against Grantor and/or against any other co-maker, guarantor, surety or endorser and/or to proceed against any other collateral directly or indirectly securing the indebtedness. Attomeys' Fees; Expenses. If Lender institutes any suit or action to enforce any of the terms of this Mortgage, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys' fees at trial and upon any appeal. Whether or not any court action is involved, and to the extent not prohibited by law, all reasonable expenses Lender incurs that in Lender's opinion are necessary at any time for the protection of its interest or the enforcement of its rights shall become a part of the indebtedness payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by this paragraph Include, without limitation, however subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or, injunctioni, appeals, and any anticipated post-judgment collection services, the cost of searching records, obtaining title reports (including foreclosure reports), surveyors' reports, and appraisal fees and title insurance, to the extent permitted by applicable law. Grantor also will pay any court costs, in addition to all other sums provided by law. NOTICES. Unless otherwise provided by applicable law, any notice required to be given under this Mortgage shall be .given In writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Mortgage. All copies of notices of foreclosure from the holder of any lien which has priority over this Mortgage shall be sent to Lander's address, as shown near the beginning of this Mortgagee. Any party may change its address for notices under this Mortgage by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Unless otherwise provided by applicable law, if there is more than one Grantor, any notice given by Lender to any Grantor Is deemed to be notice given to all Grantors. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Mortgage: Amendments. This Mortgage, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the;-matters set forth in this Mortgage. No alteration of or amendment to this Mortgage shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Annual Reports. If the Property is used for purposes other than Grantor's residence, Grantor shall furnish to Lander, upon request, a certified statement of net operating income received from the Property during Grantor's previous fiscal year in such form and detail as Lender shall require. "Net operating income" shall mean all cash receipts from the Property less all cash expenditures made in connection with the operation of the Property. Caption Headings. Caption headings in this Mortgage are for convenience purposes only and are not to be used to Interpret or define the provisions of this Mortgage. Governing Law. This Mortgage will he governed by, construed and enforced in accordance with federal law and the laws of the Commonwealth of Pennsylvania. This Mortgage has been accepted by Lender in the Commonwealth of Pennsylvania. No Waiver by Lender. Lander shall not be deemed to have waived any rights under this Mortgage unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Mortgage shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Mortgage. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Mortgage, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Severability. If a court of competent jurisdiction finds any provision of this Mortgage to be illegal, Invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Mortgage. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Mortgage shall not affect the legality, validity or enforceability of any other provision of this Mortgage. Merger. There shall be no merger of the interest or estate created by this Mortgage with any other interest or estate in the Property at any time held by or for the benefit of Lender in any capacity, without the written consent of Lender. Successor Interests. The terms of this Mortgage shall be binding upon Grantor, and upon Grantor's heirs, personal representatives, successors, and assigns, and shall be enforceable by Lander and its successors and assigns. Time is of the Essence. Time is of the essence in the performance of this Mortgage. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Mortgage. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Mortgage shall have the meanings attributed to such terms in the Uniform Commercial Code: Borrower. The word "Borrower" means Community Realty, Inc. and includes all co-signers and co-makers signing the Note. Default. The word "Default" means the Default set forth in this Mortgage in the section titled "Default". MORTGAGE (Continued) Page 7 Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, Including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, at seq. i"CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, at seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, at seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto. Event of Default. The words "Event of Default" mean any of the events of default set forth in this Mortgage in the events of default section of this Mortgage. Existing Indebtedness. The words "Existing Indebtedness" mean the indebtedness described in the Existing Liens provision of this Mortgage. Grantor. The word "Grantor" means Community Realty, Inc.. Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Indebtedness. Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos. Improvements. The word "improvements" means all existing and future improvements, buildings, structures, mobile homes affixed on the Real Property, facilities, additions, replacements and other construction on the Reel Property. Indebtedness. The word "Indebtedness" means all principal, interest, and other amounts, costs and expenses ;payable under the Note or Related Documents, together with all renewals of, extensions of, modifications of, consolidations of and substitutions for the Note or Related Documents and any amounts expended or advanced by Lender to discharge Grantor's obligations or expenses incurred by Lender to enforce Grantor's obligations under this Mortgage, together with interest on such amounts as provided in this Mortgage. Lender. The word "Lender" means COMMERCE BANK/HARRISBURG N.A., lts successors and assigns. Mortgage. The word "Mortgage" means this Mortgage between Grantor and Lander. Note. The word "Note" means the promissory note dated November 17, 2003, in the original principal amount of $350,000.00 from Grantor to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement. The maturity date of this Mortgage is None. NOTICE TO GRANTOR, THE NOTE CONTAINS A VARIABLE. INTEREST RATE. Personal Property. The words "Personal Property" mean all equipment, fixtures, and other articles of personal property now or hereafter 6wned by Grantor, and now or hereafter attached or aff ixed to the Real Property; together with all accessions, parts, and additions to, all replacements oft and all substitutions for, any of such property; and together with all proceeds (including without limitation all insurance proceeds and refunds of premiums) from any sale or other disposition of the Property. Property:= The word ".Property" means collectively the Real Property and the Personal Property. Real-Property. The words "Real Property" mean the real property, interests and rights, as further described in this Mortgage. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreerents; •gueranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the indebtedness. Rents. The Word "Rents" means all present and future rents, revenues, Income, issues, royalties, profits, and other benefits derived from the Property. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND GRANTOR AGREES TO ITS TERMS. THIS MORTGAGE 1S GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS MORTGAGE IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. GRANTOR: COMMUNITY REALTY, INC. ey: :... (Seal} By::r : :: :.'; (seal} / Susan A. Russell, President of Community Realty, ,Secretary of Community Inc. Realty, Inc. f? t. u i f"t P_ (L MORTGAGE (Continued) Page 8 CERTIFICATE OF RESIDENCE I hereby certify, that the precise address of the mortgagee, COMMERCE BANKIHARRISBURG N.A., herein is as follows: COMMERCIAL MORTGAGE DEPARTMENT, 100 SENATE AVENUE, CAMP HILL, P 7011 A y VA t for Mortgogoo CORPORATE ACKNOWLEDGMENT COMMONWEALTH OF PENNSYLVANIA ) SS COUNTY OF 1/, Im ( .'4 & ) n this, the t day of 20 L9 before me?I C !c`- H. a"•h 4 n , the undersigned Notary Public, personally appeared Susan A. Russell, President: Nicholas E. Dunphy, Jr., Secretary'df'Community Realty, Inc., who acknowledged themselves to be the President; Secretary of Community Realty, Inc., of a corporation, and that they as such Pmeldent; Secretary of Community Realty, Inc., being authorized to do so, executed the fore oing instrument for the purposes therein contained by signing the name of the corporation by themselves as President; Secretary of Communi ealty, Inc.. In witness whereof. I hereunto set my hand and official seal. Notary Pu lic in an or t _ Victoria M. Flankln, Notary Public Lemoyne Boro, Cumblefland County My Commission Expl" Aug. 27, 2006 I W[Il II,D WbS. Vim. l.1i70.001 GV.• 1WI,s! fnr?dJ SgWSa.a Yw. ,MJ1, ZOO. N MShY II,NYb. • I11 Land Description ALL THAT CERTAIN piece or parcel of land situated in the Township of Hampden, County of Cumberland and Commonwealth ofPennsylvania, and lying on the south side of Carlisle Pike, more particularly bounded and deaignated as the tract of land containing 1.02 acres ofland on a certain survey made John C. Brilhart, Registered Surveyor, on August S, 1968, as follows, to wit: BEGINNING at a point in the center of Carlisle pike, said point being located and referenced at a distance of eight hundred five and fifty one-hundredths (805,50) feet measured along the center line of said Carlisle Pike in an eastwardly direction from Ores Bridge Road; thence South twelve. (12) degrees fifty-five (55) mites thirty-five (35) seconds East, along the line of lands now or formerly of Anna M. Culpepper and Wayne P. Hottyman Estate, a distance of two hundred ninety-seven and nine one-hundredths (297.09) feet to an iron pin at lands now or formerly of James A. Shoop; thence along the line of lands now or formerly of James A. Sbopp, Thomas A. Kinney and Robert C. Herman, North seventy-eight (78). degrees fifty-orte (51) minutes forty (40) seconds East, s distance oforic hundred fifty-one and ninety-three one-hundredths (151.93) feet to a steel post; thence along the line of lands now or formerly of Robert P. Wallet and Lawrence S. Cor man, North thirteen (13) degrees fifteen (15) minutes West, a distance of two hundred ninety-four and thirty-four one- hundredths (294.34) feet to a point in the center of Carlisle Pike aforesaid; thence along the center line of said Carlisle Pike, South seventy-nine (79) degrees fifty -six (56) minutes West, a distance of Qne hundred fifty and thirty-eight one-bundredths (150.38) feet to a point in the same, the point and place of BEGINNING. See sub-division plan in Plan Book 20, Page 31. CONTAINING one and two one-hundredths (1.02) acres of land, and being improved with a two and one-half story brick dwelling house and detached brick garage building. Exhibit D MATTHEW P. AMOS, PLAINTIFF VS. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., DEFENDANTS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PA NO. 08-5290 CIVIL AFFIDAVIT OF LOWELL R. GATES, ESQUIRE 1) I, Lowell R. Gates, Esquire, serve as Chairman of the Board of Directors for Defendant Community Financial, Inc. 2) 1 affirm that I do not own the property on which Defendant CFI's headquarters is situated; specifically that address is 3907 Market Street, Camp Hill, PA 17011. 3) 1 affirm that to my knowledge, the property on which Defendant CFI's headquarters is situated is owned by Community Realty, Inc. 4) 1 affirm that my wife and I acted as guarantors for the mortgage for Community Realty, Inc., but that we do not possess an ownership interest in the property. 5) 1 affirm that I have never received any rental income from Defendant CFI or any other entity on account of Defendant CFI's occupation of its corporate headquarters at 3907 Market Street, Camp Hill, PA 17011. 6) 1 affirm that I am not the recipient of a $12"00.00 loan from Defendant CFI that I do not have to rep Dated: Lowell F. Gates Chair an of the Board of Directors Com unity Financial, Inc. I ?-N Sworn to and subscribed to before me on this Day of SeD"'?''?, 200 . Notary Public COMMONWEALTH F PENNSYLVANIA Notarial Seal Vtloria M. RanW, Notary Public M!??elon?, Pumberiand County Aug. 27, 2010 Member, Pennsylvania Association of Notaries Manufactur®d by JULIUS Bt.i31 "fW,1N NYC 100'13 PRODUCT MO. lift-2 Exhibit E MATTHEW P. AMOS, PLAINTIFF VS. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., DEFENDANTS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PA NO. 08-5290 CIVIL AFFIDAVIT OF SUSAN A. RUSSELL 1) I, Susan A. Russell, serve as President and Chief Executive Officer of Defendant Community Financial, Inc. 2) 1 affirm that the property on which Defendant CFI's headquarters is situated, 3907 Market Street, Camp Hill, PA 17011, is owned by Community Realty, Inc., and not by Defendant Lowell R. Gates. 3) 1 affirm that Defendant CFI has not paid any rental income to Defendant Gates. 4) 1 affirm that Community Trust Company is obligated by a lease agreement with Community Realty, Inc., to make monthly rental payments to Community Realty, Inc., on account of Defendant CFI's occupation of 3907 Market Street, Camp Hill, PA, for its corporate headquarters. 5) 1 affirm that on August 27, 2008, Plaintiff Matthew P. Amos spent over two hours at Defendant CFI's headquarters reviewing and copying documents provided in response to his several requests for inspection of corporate records. 6) 1 affirm that after Plaintiff Matthew P. Amos reviewed records at Defendant CFI's headquarters, he served another request for inspection of corporate records and I sent a letter to him requesting that he contact Defendant CFI's corporate counsel to discuss what additional documentation he wished to review. 7) 1 affirm that Defendant Lowell R. Gates is not a recipient of a $120,000.00 loan that he does not have to pay back to Defendant CFI. 8) 1 affirm that the $120,000.00 referred to by Plaintiff in his Complaint relates to a trust created in the settlement of an action the record of which has been sealed. 9) 1 affirm that at a special meeting of Defendant CFI's stockholders on September 9, 2008, Plaintiff Matthew Amos voted in favor of Defendant CFI's proposed merger with Franklin Financial. Dated: ode 4- Susan A. Russell President and CEO Community Financial, Inc. -2 Ir\ Sworn to and subscribed to before me on this 14 Day of c 2008. ry Public COMMONWEALTH OF PENNSYLVANIA Notarial Seal Yvonne Sersch, Notary Public Camp Hill Boro, Cumberland County My Commission Expires Feb. 1, 2012 Member, Pennsylvania Association of Notaries Exhibit F Commercial Lease 3907 Market Street, Camp Hill, Pennsylvania THIS COMMERCIAL LEASE AGREEMENT (hereinafter referred to as "this Lease") is entered into this 31st day of December, 2007, to be effective the I` day of October, 2007, by and between COMMUNITY REALTY, INC., a Pennsylvania business corporation with its offices at 3907 Market Street, Camp Hill, Hampden Township, Cumberland County, Pennsylvania (the "Landlord"); AND COMMUNITY TRUST COMPANY, a Pennsylvania regulated trust company, with its offices at 3907 Market Street, Camp Hill, Hampden Township, Cumberland County, Pennsylvania 17011 (the Tenant"). THIS NEW COMMERCIAL LEASE replaces and supersedes the prior Commercial Lease dated January 26, 2006 from Landlord to Tenant. NOW, THEREFORE, in consideration of the premises, the mutual terms, covenants and conditions herein contained, and the rent reserved to be paid by Tenant to Landlord, the parties hereto, intending to be legally bound, do hereby agree and covenant as follows: 1. PREMISES. Landlord leases to Tenant and Tenant leases from Landlord the building known as 3907 Market Street, Hampden Township, Camp Hill, Cumberland County, Pennsylvania 17011 (the `Building"), and surrounding real estate, parking and sidewalks (the "Premises") where the Building is located. 2 TERM. The term of this Lease shall be for a period of five (5) years (the "Initial Term") and shall commence on October 1, 2007 (the "Commencement Date"), and shall expire at 12:00 midnight on September 30, 2012 (the "Termination Date"). After the expiration of the Initial Term, this Lease shall renew itself from year to year each time for one (1) additional calendar year period, unless either party notifies the other in writing on or before the 30`x' day of June in the year in which expiration of this lease agreement is desired. 3. POSSESSION. Possession of the Premises shall be delivered to Tenant upon the Commencement Date. 4. USE. The Premises shall be used by Tenant for its trust company operations and related financial services. 5. RENTAL RATE. Lessee shall pay to Lessor the sum of TWENTY NINE THOUSAND FIVE HUNDRED SIXTY-SIX AND 08/100 ($29,566.08) DOLLARS as requests for assistance in such compliance. Landlord warrants that upon tender of possession the Premises is in compliance with all pertinent governmental and regulatory ordinances and codes. Tenant has examined and knows the condition of the Premises, and acknowledges that no representations as to the condition and repair thereof have been made by the Landlord or its agents prior to or at the execution of the Lease that are not herein expressed, and accepts the Premises in an "as is" condition without warranty as to their suitability for any particular use. 12. MAINTENANCE. Tenant, at its cost, shall maintain the Building and Premises and any fixtures, machinery or equipment therein. Landlord shall not have any responsibility to maintain the Premises. The term "maintain" as used in this Lease shall include repairs, redecorating, repainting and cleaning, including the roof and exterior of the Premises. 13. STRUCTURAL ALTERATIONS. Tenant shall not make any structural or exterior alterations to the Premises without Landlord's prior written consent. 14. NON-STRUCTURAL ALTERATIONS AND FIXTURES. Tenant at its cost after obtaining Landlord's written consent may make nonstructural alterations to the interior of the Building and may place and attach such equipment, machinery and fixtures therein as Tenant requires in order to conduct its business in the Building. In making any alterations, etc., Tenant shall comply with the following: A. Unless waived in writing by Landlord, Tenant shall submit reasonably detailed plans and specifications of the proposed alterations or placing of fixtures, machinery or equipment to Landlord at least fifteen (15) days prior to the date Tenant intends to commence the alterations or fxturing. B. The alterations and fixturing, etc., shall be approved by all appropriate government agencies, and all applicable permits and authorizations shall be obtained before commencement of the work. Any alterations made shall remain on and be surrendered with the Building on expiration or termination of the term, except that Landlord may elect to require Tenant at Tenant's cost to remove any alterations that Tenant has made to the Building, and Tenant shall restore the Building to as good condition as existed at the commencement of the Term. Landlord shall provide Tenant with a complete list of items Tenant must remove no less than sixty (60) days before the end of the lease Term or any renewal period. 15. MECHANICS' LIENS. Tenant will not permit any mechanics' claim or lien to be placed upon the Premises or any building or improvement constituting a part thereof during the Term, and in case of the filing of any such claim or lien, Tenant will promptly discharge same or procure a lien release bond by a good and sufficient surety corporation in an amount equal to one and one-half times the amount of the claim or lien. If default in discharge thereof or procuring of a bond shall continue for thirty (30) days after written notice from Landlord to the Tenant, the Landlord shall have the right and privilege at Landlord's option of paying the same or any portion thereof without inquiry as to the validity thereof, and any amounts so paid 3 including expenses and interest shall be deemed additional rental due and payable by Tenant to Landlord. 16. UTILITIES AND SERVICES. Tenant shall make arrangements for and pay for all utilities and services furnished to or used by Tenant, including without limitation, gas, electricity, water, telephone service, heat, air-conditioning, sewerage and trash collection, and for all connection charges. Tenant shall be responsible for the normal repair of any breakdown or damage to any equipment located on the Premises necessary to furnish said utilities or services, subject to Landlords responsibility set forth in paragraph 12. 17. INDEIVINITY AND EXCULPATION; INSURANCE. A. Exculpation of Landlord. Landlord shall not be liable to Tenant for any damage to Tenant or Tenant's property from any cause, including any defective condition of any part of the Premises, excepting that caused by Landlord's willful acts or negligence and whether or not such condition existed prior to the date of this Lease. Tenant waives all claims against Landlord for damage to person or property arising for any reason, except that Landlord shall be liable to Tenant for damage to Tenant resulting from the willful or grossly negligent acts or omissions of Landlord or its authorized representatives. B. Indemni . Tenant shall hold Landlord harmless from all damages arising out of any damage to any person or property occurring in, on, or about the Premises, except that Landlord shall be liable to Tenant for damage resulting from the willful acts or omissions of Landlord or its authorized representatives. Landlord shall hold Tenant harmless from all damages arising out of any such damage. A party's obligation under this paragraph to indemnify and hold the other party harmless shall be limited to the sum that exceeds the amount of insurance proceeds, if any, received by the party being indemnified. C. Public Liability and Property Damage Insurance. Tenant at its cost shall maintain public liability and property damage insurance and products liability insurance with liability limits of not less than One Million Dollars ($1,000,000.00) per person, Three Million Dollars ($3,000,000.00) aggregate, and property damage limits of not less than Four Hundred Thousand Dollars ($400,000.00) per occurrence, with an aggregate coverage of Four Hundred Thousand Dollars ($400,000.00) insuring against all liability of Tenant and its authorized representatives arising out of and in connection with Tenant's use or occupancy of the Premises. All public insurance, and property damage insurance shall insure performance by Tenant of the indemnity provision of subparagraph B above. Both parties shall be named as co-insureds, and the policy shall contain a cross-liability endorsement. D. Tenant's Fire Insurance. Tenant at its cost shall maintain on all its personal property, Tenant's improvements, and alterations, in, on, or about the Premises, a policy of standard fire and extended coverage insurance, with vandalism and malicious 4 mischief endorsement, to the extent of at least one hundred percent (100%) of their value. The proceeds from any such policy shall be used by Tenant for the replacement of personal property or the restoration of Tenant's improvements or alterations. E. Plate Glass Insurance. Tenant at its cost shall maintain full coverage plate glass insurance on the Premises. Both parties shall be named as co-insured. F. Fire Insurance on Building and Other Improvements. Landlord, at Tenant's expense, shall maintain on the building and other improvements that are a part of the Premises a policy of standard fire and extended coverage insurance (including plate glass insurance, sprinkler leakage, collapse and vandalism and malicious mischief, also known as "All Risks of Physical Loss" coverage), to the extent of at least frill replacement value. The insurance policy shall be issued in the names of Landlord and Tenant as their interests appear and shall contain a standard mortgagee endorsement in favor of the holder of any mortgage having a lien against the Premises. G. Business interruption Insurance. Tenant at its cost shall maintain business interruption insurance to insure that the montlily rent will be paid to Landlord for a period of up to one (1) year if the Premises are destroyed or rendered inaccessible or unusable by a risk insured against by a policy of standard fire and extended coverage insurance, with vandalism an malicious mischief endorsements. H. Workmen's Compensation Insurance. Tenant at its cost shall maintain legally required limits of Workmen's Compensation Insurance on all persons which it employs and employer liability coverage as required by law. 1. Waiver of Subrogation. The parties release each other., and their respective authorized representatives, from any claims for damage to any person or to the Premises and to the fixtures, personal property, Tenant's improvements, and alterations of either Landlord or Tenant in or on the Premises that are caused by or result from risks insured against under any insurance policies carried by the parties and in force at the time of any such damage. Each party shall cause each insurance policy obtained by it to provide that the insurance company waives all right of recovery by way of subrogation against either party in connection. with any damage covered by any policy. Neither party shall be liable to the other for any damage caused by fire or any of the risks insured against under any insurance policy required by this Lease. J. Other Insurance Matters. All insurance required under this Lease shall: (i) Be issued by insurance companies authorized to do business in the Commonwealth of Pennsylvania, with a financial rating of at least an "A+" status as rated in most recent edition of Best's Insurance Reports. (ii) Contain an endorsement requiring thirty (30) days written notice from the insurance company to both parties before cancellation or change in the coverage, scope, or amount of any policy. (iii) Each policy, together with evidence of payment of premiums, shall be deposited with the Landlord at the commencement of the term, and on renewal of the policy not less than twenty (20) days before the expiration of the term of the policy. (iv) Contain a provision that no act or omission of Tenant shall affect the obligation of the insurer to pay the full amount of any loss sustained with respect to any policy upon which Landlord is a named insured. 18. FIRE OR OTHER CASUALTY. A. If the premises are partially damaged by fire or other casualty, the damages shall be repaired by and at the expense of Landlord, and the rent, until such repairs shall be made, shall be apportioned from the date of such fire or other casualty according to the part of the Premises which is usable by Tenant, which such percentage shall be agreed upon by Landlord and Tenant and shall be based, in part, upon the affect of the fire damage on Tenant's business operation. Landlord agrees to repair such damage within a reasonable period of time after receipt from Tenant of written notice of such damage, except that Tenant agrees to repair and replace its own furniture, furnishings, and equipment. B. If the Premises are totally damaged or are rendered wholly untenantable by fire or other casualty and if Landlord shall decide not to restore or not to rebuild the same, or if the Building shall be so damaged that Landlord shall decide to demolish it or to rebuild it, then or in any such events landlord shall, within thirty (30) days after such fire or other casualty, give Tenant written notice of such decision, and thereupon the Tenn of this Lease shall expire by lapse of time upon the third day after such notice is given, and Tenant shall vacate the Premises and surrender the same to Landlord. Upon the termination of this Lease under the conditions hereinbefore provided, Tenant's liability for rent shall cease as of the day following the casualty. C. The restoration shall be accomplished as follows: (i) Landlord shall complete the restoration within one hundred eighty (180) days after final plans and specifications and working drawings have been approved by the appropriate government bodies and all required permits have been obtained (subject to a reasonable extension for delays resulting from causes beyond Landlord's reasonable control). (ii) Landlord shall retain a licensed contractor that is bondable. The contractor shall be required to carry public liability and property damage insurance, standard fire and extended coverage insurance, with 6 vandalism and malicious mischief endorsements, during the period of construction. Such insurance s hall contain waiver of subrogation clauses in favor of the Landlord. D. Abatement of Rent. In case of destruction, there shall be an abatement or reduction of rent as provided in Paragraph 18(a), above, and a total release of liability for rent payments as provided in Paragraph 18(b) until the Premises is restored as provided above. 19. CONDEMNATION. A. Definitions. (i) "Condemnation" means (a) the exercise of any governmental power, whether by legal proceedings or otherwise, by a condemner and (b) a voluntary sale or transfer by Landlord to any condemner, in lieu of condemnation, under threat of condemnation. or while legal proceedings for condemnation are pending. (ii) "Date of taking" means the date the condemner has the right to possession of the property being condemned. (iii) "Award" means all compensation, sums, or anything of value awarded, paid, or received on a total or partial condemnation. (iv) "Condemner" means any public or quasi-public authority, or private corporation or individual, having the power of condemnation. B. Parties' Rights and obligations to be Governed by Lease. If, during the term, there is any taking of all or any part of the Premises or any interest in this Lease by condemnation, the rights and obligations of the parties shall be determined pursuant to this paragraph. C. Total Taking. If the Premises are totally taken by condemnation, this Lease shall terminate on the date of taking. D. Partial Taking. (i) Effect on Lease. If any portion of the Premises is taken by condemnation, this Lease shall remain in effect, except that Tenant can elect to terminate this Lease if the remaining portion of the building or other improvements or the parking area that are a part of the Premises is rendered unsuitable for Tenant's continued use of the Premises. If Tenant elects to terminate this Lease, Tenant must exercise its right to terminate pursuant to tlus paragraph by giving notice to Landlord within thirty (30) days after the nature and the extent of the taking have been determined. If Tenant elects to terminate this Lease as provided in this paragraph Tenant also shall notify Landlord of the date of termination, which date shall not be earlier than thirty (30) days nor later than ninety (90) days after Tenant has notified Landlord of its election to terminate; except that this Lease shall terminate on the date of taking if the date of taking falls on a date before the date of termination as designated by Tenant. If Tenant does not terminate this Lease within the thirty (30) day period, this Lease shall continue 7 in fiill force and effect, except that the monthly rent shall be reduced pursuant to this paragraph. (ii) Effect on Rent. If any portion of the Premises is taken by condemnation and this Lease remains in full force and effect, on the date of taking the monthly rent shall be reduced by an amount that is in the same ratio to monthly rent as the value of the area of the portion of the Premises taken bears to the total value of the Premises immediately before the date of taking. (iii) Restoration of Premises. If there is a Partial taking of the Premises and this Lease remains in full force and effect, Landlord at its cost shall accomplish all necessary restoration. Rent shall be abated or reduced during the period f rom the date of taking until the completion of restoration, but all other obligations of Tenant under this Lease shall remain in full force and effect. The abatement or reduction of rent shall be based on the extent to which the restoration interferes with Tenant's use of the Premises. E. Award Distribution. The entire award shall belong to and be paid to Landlord except that Tenant shall receive from the award the following: (i) A sum attributable to Tenant's improvements or alterations made to the Premises by Tenant in accordance with this Lease, which Tenant's improvements or alterations Tenant has the right to remove from the Premises pursuant to the provisions of this Lease but elects not to remove; and, (ii) A sum attributable to that portion of the award constituting Tenant's relocation costs if included in the award; and, (iii) Any special damages which by their nature are awardable only to the Tenant and would not, under any circumstances nor under any provision of this Lease be awardable to Landlord. 20. ASSIGNMENT AND SUBLETTING. Tenant shall not assign or sublet all or any part of this Lease or the Premises, without the consent of Landlord, which shall not be unreasonably withheld, provided, however, that any relative increase in traffic, or change of use which would affect the character of the shopping center or the traffic patterns thereof, among other things, shall be deemed the reasonable basis for objecting to an assignment or subletting. Any assignment by operation of law, attachment or assignment for the benefit of creditors, shall, at Landlord's option, be inoperative. Notwithstanding any subletting or assigning, Tenant shall remain obligated to Landlord for the full and faithful performance of all terms and conditions of this Lease. An assignment within the meaning of this paragraph shall. be deemed to include one or more sales or transfers, by operation of law or otherwise, or creation of new stock, by which an aggregate of more than fifty percent (50%) of Tenant's stock shall be vested in a party or parties who are non-stockholders as of the date hereof. 21. TRANSFER BY LANDLORD. The interest of the Landlord herein may be assigned in whole and also in one or more parts. In the case of any such assignment, the Landlord shall advise the Tenant of the name or names of the assignee or assignees, and Landlord shall have no liability hereunder from and after the effective date of any such assignment, except for obligations which may have theretofore accrued. 22. LIMITATION UPON LANDLORD'S LIABILITY. Neither Landlord nor any principal of Landlord, whether disclosed or undisclosed, shall have any personal liability with respect to any of the provisions of this Lease or the Premises, and if Landlord is in breach or default with respect to Landlord's obligations under this Lease or otherwise, Tenant shall look solely to the equity of Landlord in the Premises for the satisfaction of Tenant's remedies. 23. QUIET ENJOYMENT. Landlord covenants to allow Tenant quietly and peaceably to enjoy possession of the Premises free from interference or interruption of Landlord or any other person claiming under or through Landlord, and Landlord represents to Tenant that it has a sufficient ownership interest in the Premises to enter into and carry out the provisions of this Lease. 24. ACCESS TO PREMISES. Tenant will allow Landlord reasonable access to the Premises for the purpose of examining or exhibiting the same, or for any other proper purpose, and will allow to have placed upon the Premises, at any time, "For Sale" signs and during the last nine (9) months of the Term of this Lease, "To Rent" signs, and will not interfere with the same. 25. NON-LIABILITY OF LANDLORD. Landlord shall not be liable for any damage occasioned by failure of the Premises to be in repair, nor for any damage done or occasioned by or from plumbing, gas, water, sprinkler, steam or other pipes or sewerage, or the bursting, leaking or running of any tank, washstand, water closet or waste pipe in, above, upon or about the Premises or improvements constituting a part thereof, nor for any damage occasioned by water, snow or ice being upon or coming through the roof skylights, trap door or otherwise. 26. BANKRUPTCY OR INSOLVENCY. If any transfer of Tenant's interest in the Premises created by this Lease shall be made under execution or similar legal process, or if a petition is filed by or against Tenant to adjudicate Tenant a bankrupt or insolvent under any Federal or State law, or if a receiver or trustee shall be appointed for Tenant's business or property and such appointment is not vacated witl-dn thirty (30) days, or if a petition or answer is filed by or against Tenant under any provision of Federal or State law seeking a reorganization of Tenant or an arrangement with its creditors, or if Tenant makes an assignment or deed of trust for the benefit of its creditors, or if in any other manner Tenant's interest under this Lease shall pass to another by operation of law, then, in any of said events, Tenant shall be deemed to have committed a material breach of this Lease and. an Event of Default, and Landlord may at its option, exercise its remedies under this Lease without prior notice or opportunity to cure. 27. NOTICES. All notices or other communications pursuant hereto to any party shall be in writing and shall be deemed given when delivered personally or deposited in the 9 United States mail, postage prepaid, return receipt requested, addressed to the parties at the addresses set out below, or at such other address as provided for by a notice complying with this paragraph: If to Landlord: Community Realty, Inc. Attn: Susan A. Russell, President 3907 Market Street Camp Hill, PA 17011 If to Tenant: Community Trust Company Attn: Susan A. Russell, President 3907 Market Street Camp Hill, PA 17011 28. DEFAULT. A. Tenant's Default. The occurrence of any of the following shall constitute an Event of Default by Tenant: (i) Failure to pay rent or any other sum of money (including deposits) when due, if the failure continues for five (5) days after notice has been given to Tenant. (ii) Abandonment and vacation of the Premises (failure to occupy and operate the Premises for thirty (30) consecutive days shall be deemed an abandonment and vacation). (iii) Failure to perform any other provision of this Lease if the failure to perform is not cured within thirty (30) days after notice has been given to Tenant. If the default cannot reasonably be cured within thirty (30) days, Tenant shall not be in default of this Lease if Tenant commences to cure the default within the thirty (30) day period and diligently and in good faith continues to cure the default; provided, however, that Landlord's interest in the Premises are not prejudiced in the interim. (iv) Notices given under this paragraph shall specify the alleged default, and shall demand that Tenant perform the provisions of this Lease or pay the rent that is in arrears, as the case may be, within the applicable period of time. No such notice shall be deemed a forfeiture or a termination of this Lease unless Landlord so elects in the notice. B. Landlord's Remedies. Upon the occurrence of an Event of Default by the Tenant, in. addition to any other rights or remedies that Landlord may have under this Lease or at law or in equity, Tenant covenants and agrees that Landlord shall have the following rights: (i) To accelerate the whole or any part of the rent for the entire unexpired balance of the term of this Lease, as well as all other charges, payments, costs and expenses herein agreed to be paid by Tenant, and any rent or other charges, payments, costs and 10 expenses if so accelerated shall, in addition to any and all installments of rent already due and payable and in arrears, and/or any other charge or payment herein reserved, included or agreed to be treated or collected as rent and/or any other charge, expense or cost herein agreed to be paid by Tenant which may be due and payable and in arrears, be deemed due and payable as if, by the terms and provisions of this Lease, such accelerated rent and other charges, payments, costs and expenses were on that date payable in advance. (ii) To enter the Premises and without further demand or notice proceed to distress and sale of the goods, chattels and personal property there found, to levy the rent and/or other charges herein payable as rent, and Tenant shall pay all costs and officers, commissions, including watclurnen's wages and sums chargeable to Landlord, and further including the five percent chargeable by the Act of Assembly as commissions to the constable or other person making the levy and in such case all costs, officers' commissions and other charges shall immediately attach and become part of the claim of Landlord for rent, and any tender of rent without said costs, commissions and charges made, after the issuance of a warrant of distress, shall not be sufficient to satisfy the claim of Landlord. (iii) To re-enter the Premises and remove all persons and all or any property therefrom, either by summary dispossess proceedings or by any suitable action or proceeding at law, or by force or otherwise, without being liable to indictment, prosecution or damages therefor, and repossess and enjoy the Premises, together with all additions, alterations and improvements. Upon recovering possession of the Premises by reason of or based upon or arising out of a default on the part of Tenant, Landlord may, at Landlord's option, either terminate this Lease or make such alterations and repairs as may be necessary in order to relet and/or operate the Premises or any part or parts thereof, either in Landlord's name or otherwise, for a tenn or terms which may at Landlord's option be less than or exceed the period which would otherwise have constituted the balance of the term of this Lease and other terms and conditions as the market will bear to such person or persons as may in Landlord's discretion seem best; upon each such reletting all rents received by Landlord from such reletting shall be applied: first, to the payment of any costs and expenses of such resetting, including brokerage fees and attorney's fees and all costs of such alterations and repairs; second, to the payment of rent due and unpaid hereunder; and third, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; acid the residue, if any, shall be held by Landlord and applied in payment of future rent as it may become due and payable hereunder. If such rentals received from such reletting during any month shall be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of the Premises or the making of alterations and/or improvements thereto or the reletting thereof shall be construed as an election on the part of Landlord to terminate this Lease unless written notice of such intention be given to Tenant. Excepting a lack of due diligence Landlord shall in no event be liable in any way whatsoever for failure to relet the Premises or, in the event that the Premises or any part or parts thereof are relet, for failure to collect the rent thereof under such reletting. Tenant, for Tenant and Tenant's successors and assigns, hereby irrevocably constitutes and appoints Landlord as their agent to collect the rents due and to become due under all subleases of the Premises or any parts thereof without in any way affecting Tenant's 11 obligation to pay any unpaid balance of rent due or to become due hereunder. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach. (iv) To cure any default by Tenant at Tenant's cost. If Landlord at any time, by reason of Tenant's default, pays any sum or does any act that requires the payment of any sum, the sum paid by Landlord shall be due immediately from Tenant to Landlord at the time the sum is paid, and if paid at a later date shall bear interest at the rate of fifteen percent (15.0%) per annum from the date the sum is paid by Landlord until landlord is reimbursed by Tenant. The stun, together with interest on it, shall be additional rent. (v) To tenninate this Lease and the term hereby created without any right on the part of Tenant to waive the forfeiture by payment of any sum due, other than rent or by other performance of any condition, tern or covenant broken, whereupon Landlord shall be entitled to recover, in addition to any and all sums and damages for violation. of Tenant's obligations hereunder in existence at the time of such termination, as well as all other charges, payments, costs and expenses herein agreed to be paid by Tenant, all discounted at the rate of nine percent (9.0%) per annum to their then present worth, less the fair rental value of the Premises for the remainder of said term, also discounted at the rate of nine percent (9.0%) per annum to its then present worth, all of which amount shall be immediately due and payable from Tenant to Landlord. (vi) If Tenant shall. default in the payment of the rent herein reserved or in the payment of any other sums due hereunder by Tenant, Tenant hereby authorizes and empowers any prothonotary or attorney of any court of record to appear for Tenant in any and all actions which may be brought for said rent and/or said other sums; and/or to sign for Tenant an agreement for entering in any competent court ail amicable action or actions for the recovery of said suits or in said amicable action or actions to confess judgment against Tenant for all or any part of said rental and/or said other sums, including but not limited to the amounts due from Tenant to Landlord under subparagraphs (i) (iii), (iv), and/or (v) of the Paragraph; and for interest and costs, together with any attorney's commission for collection of six (6.0%) percent. Such authority shall not be exhausted by one exercise thereof, but judgment may be confessed as aforesaid from time to time as often as any of said rental and/or others sum shall fall due or be in arrears, and such powers may be exercised as well after the expiration of the initial term of this Lease and/or during any extended or renewal term of this Lease and/or after the expiration of any extended or renewal term of this Lease. (vii) When this Lease and the term or any extension or renewal thereof shall have been terminated on account of any default by Tenant hereunder, and also when the term hereby created or any extension or renewal thereof shall have expired, it shall be lawful for any attorney of any court of record to appear as attorney for Tenant as well as for all persons claiming by, through or under Tenant, and to sign an agreement for entering in any competent court an amicable act on in ejectment against Tenant and all persons claiming by, through or under Tenant and therein confess judgment for the recovery by Landlord of possession of the Premises, for which this Lease shall be his sufficient warrant; thereupon, if Landlord so desires, an appropriate writ of possession may issue forthwith, without any prior writ or proceeding 12 whatsoever, and provided that if for any reason after such action shall have been commenced it shall be determined that possession of the Premises remain in or be restored to Tenant, Landlord shall have the right for the same default and upon any subsequent default or defaults, or upon the ternlination of this Lease or Tenant's right of possession as hereinbefore set forth, to bring one or more further amicable action or actions has hereinbefore set forth, to bring one or more further amicable action or actions as hereinbefore set forth to recover possession of the Premises and confess judgment for the recovery of possession of the Premises as hereinbefore provided. (viii) In any amicable action of ejectment and/or for rent and/or other sums brought hereon, Landlord shall first cause to be filed in such action an affidavit made by Landlord or someone acting for Landlord, setting forth the facts necessary to authorize the entry of judgment, of which facts such affidavit shall be prima facie evidence, and if a true copy of this Lease (and of the truth of the copy such affidavit shall be sufficient evidence) shall be fled in such suit, action or actions, it shall not be necessary to file the original as a warrant of attorney, any rule of Court, custom or practice to the contrary notwithstanding. (ix) No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy herein or by law provided but each shall be cumulative and in addition to every other right or remedy given herein or now or hereafter existing at law or in equity or by statute. (x) Tenant hereby waives and releases all errors and defects which may intervene in the Landlord's exercise of any of its remedies hereunder, including the summary remedies; Tenant further waives the right of inquisition on any real estate leveled on and Tenant voluntarily condemns the same and consents to an immediate execution upon any judgment obtained by Landlord; Tenant also waives and releases all relief from any and all appraisements, stay or exemption law of any state now in force or hereafter enacted; Tenant waives any notice to quit required by any law now in force or hereafter enacted, and Tenant waives its right to trial by jury. 29. SIGNS. Tenant at its costs may place, construct and maintain on the Premises a sign advertising its business at the Premises, consistent with the existing signs and with prior written approval of Landlord. 30. SUBORDINATION AND CERTIFICATES. If a lender to Landlord requires that this Lease be subordinate to any encumbrance recorded after the date of this Lease affecting the Premises, this Lease shall be subordinate to that encumbrance, if Landlord first obtains from the lender a written agreement that provides substantially the following: "As long as Tenant performs its obligations under this Lease, no foreclosure of, deed given in lieu of foreclosure of, or sale under the encumbrance, shall affect Tenant's rights under this Lease." Tenant shall attorn to any purchaser at any foreclosure sale, or to any grantee or 13 transferee designated in any deed given in lieu of foreclosure. Tenant shall execute the written agreement and any other documents requested by the lender to accomplish the purpose of this paragraph, and upon failure to do, hereby irrevocably constitutes Landlord as its attorney-in- fact to execute said documents in its name. Landlord and Tenant shall, without charge at the request of the other, from time to time execute certificates to any mortgagee, assignee or purchaser of Landlord and Tenant: A. That this Lease is unmodified and in full force and effect {or, if there has been modification or default, that the same is in full force and effect as modified and stating the modification or default}. B. The dates, if any, to which the rent and other charges, if any, hereunder have been paid in advance. C. Whether Landlord or Tenant is or is not, as the case may be, in default in the performance of any covenant, condition or agreement on Landlord's or Tenant's part to be performed. D. Such other pertinent information with respect to this Lease as Landlord or Tenant may reasonably request of the other party. 31. WAIVER. No delay or omission in the exercise of any right or remedy of Landlord on any default by Tenant shall impair such a right or remedy or be construed as a waiver. The receipt and acceptance by Landlord of delinquent rent shall not constitute a waiver of any other default. It shall constitute only a waiver of timely payment for the particular rent payment involved. Any waiver by Landlord of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provision of this Lease. 32. ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord of a lesser amount than any payment of rent or other sum herein stipulated shall be deemed to be other than on account of the earliest stipulated rent or other sum then due and payable, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy provided in this Lease, at law or in equity. 33. SURRENDER OF PREMISES. Upon the expiration or earlier termination of this Lease for any reason, all fixtures, equipment, improvements and appurtenances attached to or built into the Premises in such a manner as to become part of the freehold, whether or not by or at the expense of Tenant, shall become and remain a part of and be surrendered with the Premises, except that Landlord may elect to require Tenant, at Tenant's expense, to remove any or all of such fixtures, equipment, improvements and appurtenances, and Tenant shall restore the Premises to as good condition as existed on the Commencement Date subject to the 14 conditions and terms set forth in Paragraph 14 above. Any furniture, furnishings and other articles of movable personal property owned by Tenant and located in the Premises, shall be and shall remain the property of Tenant and may be removed by it any time during the terns of this Lease so long as Tenant is not in default of any of its obligations under this Lease, and the same have not become a part of the freehold; provided that if any of Tenant's property is removed, Tenant shall repair or pay the cost of repairing any damage to the Premises resulting from such removal. Landlord can elect to retain or depose of in any maiuier any alterations or Tenant's :fixtures or personal property that Tenant does not move from the Premises on expiration or termination of the term as allowed or required by this Lease by giving at least thirty (30) days' notice to Tenant. Title to any such alterations or Tenant's fixtures or personal property that Landlord elects to retain or dispose of on expiration of the thirty (30) day period shall vest in Landlord. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord's retention or disposition of any such alterations or Tenant's fixtures or personal property. Tenant shall be liable to Landlord for Landlord's costs for storing, removing, and disposing of any alterations or Tenant's fixtures or personal property, and for Landlord's costs for repairing any damage to the Premises occasioned by such removals. If Tenant fails to surrender the Premises to Landlord upon the expiration or tenmination of the term as required by this paragraph, Tenant shall hold Landlord harmless from all damages resulting from Tenant's failure to surrender the Premises, including, without limitation, claims made by a succeeding tenant. 34. HOLDING OVER. If Tenant, with Landlord's consent, remains in possession of the Premises after expiration or termination of the term, or after the date in any notice given by Landlord to Tenant terminating this Lease, such possession by Tenant shall be deemed to be a month-to-month tenancy tern-iinable on thirty (30) days' notice given. at any time by either party. All provisions of this Lease except those pertaining to term, shall apply to the month-to- month tenancy. 35. TIME IS OF THE ESSENCE. Time is of the essence of each provision of this Lease. Tenant hereby waives notice to quit the Premises, at the expiration of the term of this Lease or any earlier tenmination, and this Lease shall constitute sufficient notice to quit without any obligation upon Landlord to provide Tenant with any additional notice thereof. 36. REAL ESTATE BROKERS. Each party represents that it has not had dealings with any real estate broker, finder, or other person, with respect to this Lease. Each party shall hold harmless the other party from all damages resulting from any claims that may be asserted against the other party by any broker, finder, or other person, with whom the other party has or purportedly has dealt, except the above-named broker. Landlord shall, pay any commissions or fees that are payable to the above-named broker or finder with respect to this Lease. 1.5 37. GOVERNING LAW. The construction of this Lease and the rights and remedies of the parties hereto, shall be governed by the law of the Commonwealth of Pennsylvania. 38. AMENDMENTS. ADDITIONS AND CHANGES. No modification, amendment, change or addition to this Lease shall be binding on the parties unless reduced to writing and signed by their authorized representatives. 39. ENTIRE AGREEMENT. This Lease contains the entire understanding between the parties and supersedes any prior written or oral agreements between them respecting the within subject. There are no representations, agreements, arrangements, or understandings oral or written, between and among the parties hereto relating to the subject matter of this Lease which are not Fully expressed herein. 40. SEVERABILITY. If any term or provision or portion thereof of this Lease, or application thereof to any person or circumstance be held invalid, the remainder of said term or Provision and/or of this Lease shall not be affected thereby. To this end, the parties hereto agree that the terms and provisions of this Lease are severable. 41. CONSTRUCTION. Wherever the context so requires, the feminine gender shall be substituted for the masculine, the masculine for the feminine or the neuter for either; the singular shall be substituted for the plural and vice versa. Paragraph headings are for convenience only and do not constitute a part of this Lease. The terms "Landlord" and "Tenant" shall mean and include where required by the context, all agents, employees, contractor, successors and assigns of Landlord and Tenant, except where expressly otherwise provided. 42. LEGALLY BINDING. Except as herein otherwise specified, this Lease shall legally benefit and bind the parties hereto and their respective successors and assigns. 43. COUNTERPARTS. This Lease may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto with intent to be legally bound hereby have hereunto set their hands and seals the day and year first above written. ATTEST: By: Icholas E. Dunphy, Jr., Secretary LANDLORD: COMMUNITY REALTY, INC. Ci By: Susan A. Russell, resident 16 WITNESS: Nicholas E. Dunphy, Jr., Secretary TENANT: COMMUNITY TRUST COMPANY By: Susan A. Russell, President 17 E xhibit G EXHIBIT 4 . COMMUNITY FINANCIAL, INC. ANNUAL FINANCIAL REPORT December 31, 2007 4-I TST u D L F A 9 T Note 8 Income Taxes (Continued) The Corporation has federal net operating loss carryforwards of approximately $ 1.5 million as of December 31, 2007, which begin to expire beginning in 2020. Due to recurring losses from operations and uncertainty in utilizing the net operating loss can yforwards, management has recorded a valuation allowance for the total deferred tax asset Deferred taxes include the following components at December 31: 2007 2006 Deferred Tax Assets: Net operating loss carryfwwards $ 499,641 $ 354,44.5 i Deferred Tax Liabilities: 2 607 5 0 1 Depreciation expense 497,034 349,434 Net defected tax asset Valuation allowance 49 034 349 434 i Note 9. Related Party Transaction j. r The Corporation used secvicea provided by a law firm which is owned by an officer of the Corporation. Professional fees for services rendered by this firm were $14,301 and $ 5,722 in 2007 and 2006, respectively. ' Note 10. Concentrations of Risk i Approximately 26% of the Corporation's fee income was derived from two customers for the year ended December 31, 2007. Approximately 25% of the Corporation's fee income was I' . derived from two customers for the year ended December 31, 2006. Note 11. Contingencies and Regulatory Matters The Corporation is s*wt to claims and lawsuits in the ordinary course of business. Two such matters were concluded during 2007. i The matter of Maguo et al versus Community Trust Company was settled in June 2007 with the execution of a confidential settlement agreement amongst all parties. There was no financial impact to the Corporation and the Corporation was reimbursed for all its defense costs. An additional matter was resolved concerning the confirmation of a formal account filed on behalf of a trust, by Community Trust Company serving as trustee. The interested parties related to the trust agreed upon a settlement concerning claims made through the execution of a confidential Stipulation whose records were sealed by the Court Community Trust Company paid $ 175,000 to the trust as part of the terms of this Stipulation and maintains an off-balance ? sheet receivable of $ 120,000 which represents a remainder interest payable to the Corporation { upon the death of the beneficiary. As part of its ongoing oversight of Community Trust Company (Community), the Pennsylvania Department of Banking (Department) issued a revised Memorandum of Understanding (MOLT) dated January 22, 2004 and updated March 27, 2006 and November 6, 2007 due to Community's operating performance noted in its prior examinations of Community. The MOU requires that Community maintain regulatory capital, as defined by the Department, of at least $ I million at the time it files its quarterly call reports. Management continues to work with the Department to address the remaining issue of the MOU concerning a capital plan that will satisfy the Department _9f_ 413 Exhibit H ,:???Crl & Ih" oti r •? n r :n COMMUNITY TRUST August 29, 2008 Matthew P. Amos 2503 Hofer Street Harrisburg, PA 17103 Re: Verified Demand for Inspection of Corporate Records Pursuant to Section 1508 (b) of the Business Corporate Law of 1988 Dear Mr. Amos: On Aug-List 27, 2008, Comirittnity Financial., Inc. made available to you, Christine Amos. Patricia Helm, Curt Zimmermaim, David Englehart, Richard Zlogar, Jeffrey Nickum and Mike S. Signor. CPA, for inspection and copying here at our office at 3907 Market Street, Camp Hill, PA, corporate records pertaining to your shareholder demand for inspection of corporate records that pertain to Frartidin Financial Services Corporation's acquisition of Community Financial, Inc., trade in your August 12, 2008 notice, as further defined by your letter dated August 22, 2008. Our offices were made available for your use on the 27 h during the hours of 9AM to 3 PM and you were here over two hours inspecting and copying the requested in.-formation. We now are in receipt of your notice containing certain demands dated August 27, 2008 and identical notice dated August 28, 2008 both containing demands. These demands essentially reiterate your original August 12, 2008 notice. Consequently, we do not know of any corporate records that we would make available to you for inspection and copying pursuant to these latter notices that we did not already make available to you for inspection and copying on August 27, 2008. By your letter dated August 26, 2008, however. you designated Mike S. Signor, CPA and Paul A. Adams, Esquire as agents to act on your behalf in com3ection with your August 12, 2008 demand for inspection. In order that we may better understand what additional corporate records you now may be demanding to inspect that you may not have included in your prior demand, we ask that you have one or both of your agents contact the company's legal counsel, John Lampi, at 243-6222. We believe that a discussion between your agents and Mr. Lampi will be able to resolve any --l- rI-ifll PA 17n] 1 Trlenhone 717.731.9604 888.442.9604 Fax 717.737.7834 www.communitytrustco.can Matthew P. Amos August 29, 2008 Page 2 of 2 misunderstandings about what corporate records you have demanded to inspect and what corporate records the company is to mace available for that purpose. Sincerely. . Susan A. Russell President & CEO Cc: John B. Lampi. Esquire CERTIFICATE OF SERVICE AND NOW, October 1, 2008, I, James D. Flower Jr., Esquire, hereby certify that I did serve a true and correct copy of the foregoing DEFENDANTS' ANSWER TO RULE TO SHOW CAUSE DIRECTED TO DEFENDANTS COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF COMMUNITY FINANICIAL, INC., AND REQUEST TO DISMISS PLAINTIFF'S MOTION TO MAINTAIN A DERIVATIVE LAWSUIT PURSUANT TO PA.R.C.P. NO. 1506 (B) upon all parties of record by depositing, or causing to be deposited, same in the U.S. mail, postage prepaid, at Carlisle, Pennsylvania, addressed as follows: BY First-Class Mail: Matthew P. Amos, pro se 2503 Hoffer Street Harrisburg, PA 17103 By. a es I w r, Jr., Es ? 6V ! - 30 9UJI m ivi „ ,, - si°i!. MATTHEW P. AMOS, PLAINTIFF VS. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., DEFENDANTS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PA NO. 08-5290 CIVIL DEFENDANTS COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF COMMUNITY FINANICIAL, INC., ANSWER TO PLAINTIFF'S COMPLAINT AND NOW come Defendants Community Financial, Inc., and Lowell R. Gates, Chairman of the Board of Community Financial, Inc., (hereinafter Defendants) by and through their legal counsel, James D. Flower, Jr., Esquire, and Dean E. Reynosa, Esquire, and the law firm of Saidis, Flower & Lindsay, and hereby respectfully represent as follows: 1. Admitted upon information and belief. 2. Admitted. 3. Admitted in part and denied in part. It is admitted that Plaintiff currently holds, directly or indirectly, 25,700 shares of Defendant CFI common stock. It is denied that Plaintiff ever purchased any stock directly from Defendant CFI. In 1998, Plaintiff held, directly or indirectly, stock of Community Trust Company which reorganized in 2001 into a holding company system pursuant to which Plaintiff exchanged his Community Trust Company shares for Defendant CFI shares. 4. Admitted in part and denied in part. The averments of this paragraph are denied to the extent that Plaintiff does not temporally define "At all times relevant herein." It is denied that Defendant Gates has been the Chairman of the Board at all times relevant to the Complaint. Defendant Gates has been the Chairman of the Board of Defendant CFI since April 19, 2001. It is denied that Defendant Gates has provided ongoing legal guidance to Defendant CFI. It is admitted that Defendants Gates' law firm Gates, Halbruner & Hatch, P.C., or its predecessor, has, from time to time, been engaged by Defendant CFI for specific matters. 5. Admitted that Exhibit B to Plaintiff's Complaint was sent to all Defendant CFI's shareholders including the Plaintiff. After reasonable investigation, Defendants are without knowledge or information sufficient to form a belief as when Plaintiff actually received the notice. 6. Admitted in part and denied in part. After reasonable investigation, Defendants are without knowledge or information sufficient to form a belief as to when Plaintiff received the merger proposal. It is admitted that the merger proposal was sent to all of Defendant CFI's shareholders, including Plaintiff, under cover of letter dated August 8, 2008. It is denied that Defendant Lowell R. Gates was solely responsible for the authorship and formulation of the merger proposal. The text of the merger proposal was originally drafted by special counsel John B. Lampi, Esquire. Defendant CFI's five member Board of Directors reviewed and approved the language of the merger proposal as drafted by Attorney Lampi. 7. Admitted in part and denied in part. It is admitted that Plaintiff has served notices for request for information pursuant to 15 Pa.C.S.A. § 1508 on the dates noted. 8. Denied. It is denied that Plaintiff's requests for information were denied or that Plaintiff was provided very little information. In all of Plaintiff's requests, he requested substantially the same information relating to the Franklin Financial Services Corporation acquisition of Community Financial, Inc. See Notices attached to Plaintiff's Complaint at Exhibit D. Plaintiff and his representatives were provided access to those records that were requested with the exception of those documents which Defendant CFI was obligated not to disclose because Defendant CFI was under confidentiality agreements with third parties, or the requested information implicated matters involving Reports of Examination from the Pennsylvania Department of Banking which reports, under law, cannot be disclosed, or the information sought was not germane to the transaction involving Franklin Financial Services Corporation. 9. Denied. It is denied that Defendant CFI is typically unresponsive to shareholder requests for information. Specifically, on August 27, 2008, Plaintiff, one of his representatives and several other shareholders spent over two hours at Defendant CFI's headquarters reviewing and copying documents provided by Defendant CFI in response to Plaintiff's several requests for inspection of corporate records. See Affidavit of Susan A. Russell attached hereto and incorporated herein as Exhibit A. After spending over two hours reviewing records, Plaintiff served yet another request for inspection of corporate records on the exact same day that he had reviewed records at Defendant CFI's headquarters. Ms. Russell responded by requesting that Plaintiff have one of his agents contact Defendant CFI's counsel to discuss any additional records that he would like to inspect. Neither Plaintiff nor any of his agents contacted Defendant CFI's counsel. See Affidavit of John B. Lampi, Esquire, attached hereto and incorporated herein as Exhibit B. It is admitted that Defendant CFI was a party to the referenced lawsuit, Helm v. CFI, et al., (Cumberland County - No. 07-2122) that was filed by Patricia Helm, Plaintiff's mother. 10. Denied. After reasonable investigation, Defendants are without knowledge or information sufficient to form a belief as to the truth of these averments and they are therefore denied. 11. Denied. The letter from Franklin Financial's attorney is a written document which speaks for itself. To the extent a response is required, it is denied that the letter states that Franklin Financial is "acting in concert with and coordinating efforts to deny plaintiff information relating to the proposed merger." 12. Denied. The averments stated in this paragraph state a legal conclusion to which no response is required. Facts related to apparent Self-Dealina Waste of Assets and Fraud 13. Denied. It is denied that only some information has been provided. To the contrary, even after Plaintiff made an additional demand after having had access to Defendant CFI's records, Defendant CFI's president informed Plaintiff to have one or both of his agents contact Defendant CFI's counsel and identify what additional information he was seeking. Neither Plaintiff nor his representatives contacted Defendant CFI's counsel for any additional information. See Affidavit of John Lampi, Esquire, attached hereto as Exhibit B. It is denied that the Defendants have engaged in any self-dealing and it is further denied that the proposal suggests any level of self-dealing. 14. Denied. The merger proposal is a written document that speaks for itself. 15. Denied. It is denied that the Defendants have stonewalled any attempt by the Plaintiff to obtain any relevant information that he is entitled to review. The references to a trust in the merger agreement refer to the creation of a trust post-merger by Franklin Financial Services Corporation in order hold a contingent receivable in the amount of $120,000.00 of potential proceeds from an established trust, the record of which has been sealed. See Note 11 of Defendant CFI's Annual Financial Report for the year ending December 31, 2007 which is attached hereto and incorporated herein as Exhibit C. 16. Denied. The merger proposal is a written document that speaks for itself 17. Denied. It is denied that the $120,000.00 amount referred to by the merger agreement and by Plaintiff is a personal loan to Defendant Gates. To the contrary, the $120,000.00 relates to a potential remainder interest in an established trust, the record of which has been sealed. See Note 11 of Defendant CFI's Annual Financial Report for the year ending December 31, 2007 which is attached hereto as Exhibit C. 18. Denied. The merger proposal is a written document that speaks for itself. To the extent that a response is required, it is denied that this trust involves a personal loan to Defendant Gates. 19. Denied. The merger proposal is a written document that speaks for itself. To the extent that a response is required, it is denied that this trust involves a personal loan to Defendant Gates. 20. Denied. The merger proposal is a written document that speaks for itself. To the extent that a response is required, it is denied that this trust involves a personal loan to Defendant Gates. 21. Denied. The merger proposal is a written document that speaks for itself. It is denied that Defendant Gates had the sole responsibility for the authorship of the merger proposal. The language of the proposal, which was drafted by John B. Lampi, Esquire, was approved by the five members of Defendant CFI's Board of Directors. 22. Denied. It is denied that Defendant CFI committed any waste. 23. Denied. The averments in this paragraph state legal conclusions to which no response is required. It is denied that Defendants have refused any of Plaintiff's valid requests for information to which they were able to respond. 24. Denied. To the extent that Plaintiff assigns the term 'edifice' to Defendant CFI's headquarters, it is denied that the property on which Defendant CFI's headquarters are located is owned by Defendant Gates. To the contrary, Defendant CFI's headquarters are owned by Community Realty, Inc., a wholly- owned subsidiary of Defendant CFI. See Deed attached hereto and incorporated herein by reference as Exhibit D. It is further denied that Defendant Gates has received any rental income from Defendant CFI for the corporate headquarters at 3907 Market Street, Camp Hill, Pennsylvania. See Affidavit of Lowell R. Gates attached hereto and incorporated herein as Exhibit E. Count 1: Amos v. CFI and Chairman Gates Breach of fiduciary duty Violation of 15 Pa.C.S. § 512 25. Defendant Community Financial hereby incorporates its responses in paragraphs 1 through 24 as if fully set forth at length herein. 26. Admitted in part and denied in part. It is admitted that this paragraph contains an accurate quotation of 15 Pa.C.S.A. § 512 (a). It is denied that the quoted section has any relevance to this action. 27. Denied. It is specifically denied that Defendant Gates engaged in any self-dealing or that he breached any fiduciary duty since he has not engaged in either transaction as they did not occur. WHEREFORE, Defendants respectfully requests that Plaintiff's Complaint be dismissed. Count 2: Plaintiff v. Community Financial, Inc. Waste of Corporate Assets 28. Defendant Community Financial hereby incorporates its responses in paragraphs 1 through 27 as if fully set forth at length herein. 29. Denied. To the extent that corporate assets have from time to time been below one million dollars, it is denied that it is because Defendant CFI has allowed them to dwindle. 30. Denied. The averments stated in this paragraph state legal conclusions to which no response is required. To the extent that a response is required, it is denied that Defendant Gates owns the land on which Defendant CFI's headquarters are located. It is further denied that Defendants have refused to respond to any valid request for information to which they are able to respond. Wherefore, Defendants respectfully request that Plaintiff's Complaint be dismissed with prejudice. Count 3: Plaintiff v. Community Financial, Inc., and Chairman Gates Fraud or Fundamental Unfairness 31. Defendant Community Financial hereby incorporates its responses in paragraphs 1 through 30 as if fully set forth at length herein. 32. Denied. Defendants have not engaged in fraud or fundamental unfairness and have not misled the shareholders or failed to disclose facts concerning the merger with Franklin Financial. Wherefore, Defendants respectfully requests that Plaintiff's Complaint be dismissed with prejudice. Respectfully submitted, Saidis, Flower & Lindsay Im e s D. o Jr, sq. preme Court I. D. 27742 Dean E. Reynosa, Esq. Supreme Court I.D. 80440 26 W. High Street Carlisle, PA 17013 (717) 243-6222 telephone (717) 243-6486 fax Exhibit A MATTHEW P. AMOS, IN THE COURT OF COMMON PLEAS PLAINTIFF OF CUMBERLAND COUNTY, PA VS. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., DEFENDANTS NO. 08-5290 CIVIL AFFIDAVIT OF SUSAN A. RUSSELL 1) I, Susan A. Russell, serve as President and Chief Executive Officer of Defendant Community Financial, Inc. 2) 1 affirm that the property on which Defendant CFI's headquarters is situated, 3907 Market Street, Camp Hill, PA 17011, is owned by Community Realty, Inc., and not by Defendant Lowell R. Gates. 3) 1 affirm that Defendant CFI has not paid any rental income to Defendant Gates. 4) 1 affirm that Community Trust Company is obligated by a lease agreement with Community Realty, Inc., to make monthly rental payments to Community Realty, Inc., on account of Defendant CFI's occupation of 3907 Market Street, Camp Hill, PA, for its corporate headquarters. 5) 1 affirm that on August 27, 2008, Plaintiff Matthew P. Amos spent over two hours at Defendant CFI's headquarters reviewing and copying documents provided in response to his several requests for inspection of corporate records. 6) 1 affirm that after Plaintiff Matthew P. Amos reviewed records at Defendant CFI's headquarters, he served another request for inspection of corporate records and I sent a letter to him requesting that he contact Defendant CFI's corporate counsel to discuss what additional documentation he wished to review. 7) 1 affirm that Defendant Lowell R. Gates is not a recipient of a $120,000.00 loan that he does not have to pay back to Defendant CFI. 8) 1 affirm that the $120,000.00 referred to by Plaintiff in his Complaint relates to a trust created in the settlement of an action the record of which has been sealed. 9) 1 affirm that at a special meeting of Defendant CFI's stockholders on September 9, 2008, Plaintiff Matthew Amos voted in favor of Defendant CFI's proposed merger with Franklin Financial. °!°d Dated: Susan A. Russell President and CEO Community Financial, Inc. Sworn to and subscribed to before me on this Day of , 2008. 1?y Public COMMONWEALTH OF PENNSYLVANIA Notarial Seal vonne Sersch, Notary Public FCY,MjpHill Boro, Cumberland County mmission Expires Feb. 1, 2012 Member, Pennsylvania Association of Notaries Exhibit B MATTHEW P. AMOS, Plaintiff vs. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF COMMUNITY FINANCIAL, INC., Defendants IN THE COURT OF COMMON PLEAS OF CUMMBERLAND COUNTY, PA NO. 08-5290 CIVIL AFFIDAVIT OF JOHN B. LAMPI, ESQUIRE 1) I, John B. Lampi, Esquire, and the firm of Saidis, Flower & Lindsay, serve as special counsel to Defendant, Community Financial, Inc., with respect to its merger transaction with Franklin Financial Services Corporation. 2) I affirm that neither the Plaintiff in this matter, Matthe P. Amos nor any of his designated agents contacted me in response to san sell's Letter of August 29, 2008, concerning Plaintiff's reque fora iti al information related to his request for inspection of corpora records r? Dated: September 22, 2008 B. Lampi, Esquire Sworn to and subscribed to before me on this 22nd d of September, 2008 C:2?a?A (3 P Notary Public [(I edia? & REPA, Mmy pW* Commission ha 1 m 2011 ?., .., . E xhibit C EXHIBIT 4 COMMUNITY FINANCIAL, INC. ANNUAL FINANCIAL REPORT December 31, 2007 4-1 TRUST c I 1 I` Note 8 Income Taxes (Continued) The Corporation has federal net operating loss carryforwards of approximately $ 1.5 million as of December 31, 2007, which begin to expire beginning in 2020. Due to recurring losses from operations and uncertainty in utilizing the net operating loss carryforwards, management has recorded a valuation allowance for the total deferred tax asset. Deferred taxes include the following components at December 31: 2007 2006 Note 9. Note 10. Note 11. Deferred Tax Assets: Net operating loss carryforwards $499,641 $ 354,445 Deferred Tax Liabilities: 2 -60J7 L 5 0 Depreciation expense -- 034 497 349,434 Net deferred tax asset Valuation allowance , 49 034 4 349.43 Related Party Transaction The Corporation used services provided by a law firm which is owned by an officer of the Corporation. Professional fees for services rendered by this firm were $14,301 and $ 5,722 in 2007 and 2006, respectively. Concentrations of Risk Approximately 26% of the Corporation's fee income was derived from two customers for the year ended December 31, 2007. Approximately 25% of the Corporation's fee income was derived from two customers for the year ended December 31, 2006. Contingencies and Regulatory Matters The Corporation is subject to claims and lawsuits in the ordinary course of business. Two such matters were concluded during 2007. The matter of Magaro et al versus Community Trust Company was settled in June 2007 with the execution of a confidential settlement agreement amongst all parties. There was no financial impact to the Corporation and the Corporation was reimbursed for all its defense costs. An additional matter was resolved concerning the confamation of a formal account filed on behalf of a trust, by Community Trust Company serving as trustee. The interested patties related to the trust agreed upon a settlement concerning claims made through the execution of a confidential Stipulation whose records were sealed by the Court Community Trust Company paid S 175,000 to the trust as part of the terms of this Stipulation and maintains an off-balance sheet receivable of $ 120,000 which represents a remainder interest payable to the Corporation upon the death of the beneficiary. As part of its ongoing oversight of Community Trust Company (Community), the Pennsylvania Department of Banking (Department) issued a revised Memorandum of Understanding (mom dated January 22, 2004 and updated March 27, 2006 and November 6, 2007 due to Community's operating performance noted in its prior examinations of Community. The MOU requires that Community maintain regulatory capital, as defined by the Department, of at least $ ] million at the time it files its quarterly call reports- Manage ment continues to work with the Departnrmt to address the remaining issue of the MOU concerning a capital plan that will satisfy the Department. -11- 4-13 Exhibit D Parcel No.: 10-21-0277-142 Address: 3907 Market Street, Camp Hill, Cumberland County, Pennsylvania 17011 ggll/ o DEED i ;c.r C"7 ?a . N 'r- THIS DEED is made the I st day of July, in the year of our Lord two thousand (2000). ca G t:tr , ?. BETWEEN COMMUNITY TRUST COMPANY, aPennsylvania trust corporation, 39071kef '711 Street, Camp Hill, Cumberland County, Pennsylvania, Party of the First Part, GRANTOR, c.-s CIO j AND COMMUNITY REAL'L'Y, INC., a Pennsylvania corporation, now of 3907 Market Street, Camp ill, Cumberland County, Pennsylvania, Party of the Second Part, GRANTEE. WITNESSETH, that said party of the first part, for and in consideration of the sum of ONE AND 00/100 ($1.00) DOLLAR, lawful money of the United States of America„ well and truly paid by the said party of the second part to the said party of the first pan, at or before the sealing and delivery of these presents, the receipt whereof is hereby acknowledged, has hereby granted, bargained, sold, aliened, enfeoffed, released, conveyed and confirmed, and by these presents does grant, bargain, sell, alien, enfeofF, release, convey and confirm unto the said party of the second part, its heirs and assigns. ALL THAT CERTAIN piece or parcel of land situated in the Township of Hampden, County of Cumberland and Commonwealth of Pennsylvania, and lying on the south side of Carlisle Pike, more particularly bounded and designated as the tract of land containing 1.02 acres of land on a certain survey made John C. Brilhart, Registered Surveyor, on August 5, 1968, as follows, to wit: BEGINNING at a point in the center of Carlisle Pike, said point being located and referenced at a distance of eight hundred five and fifty one-hundredths (805.50) feet measured along the center line of said Carlisle Pike in an eastwardly direction from Orr's Bridge Road; thence South twelve (12) degrees fifty-five (55) minutes thirty-five (35) seconds Fast, along the line oflands now or formerly of Anna M. Culpepper and Wayne P. Hottyman Estate, a distance of two hundred ninety-seven and nine one-hundredths (297.09) feet to an iron pin at lands now or formerly of James A. Shoop; thence along the line of lands now or formerly of James A. Shopp, Thomas A. Kinney and Robert C. Herman, North seventy-eight (78) degrees fifty-one (51) minutes forty (40) seconds East, a distance of one hundred fifty-one and ninety-three one-hundredths (151.93) feet to a steel post; thence along the line of lands now or formerly of Robert F. Wallet and Lawrence S. Corman, North thirteen (13) degrees fifteen (15) minutes West, a distance of two hundred ninety-four and thirty-four one- hundredths (294.34) feet to a point in the center of Carlisle Pike aforesaid; thence along the center line of said Carlisle Pike, South seventy-nine (79) degrees fifty -six (56) minutes West, a distance of eux 249 rAGE3869 one hundred fifty and thirty-eight one-hundredths (150.38) feet to a point in the same, the point and place of BEGINNING. See sub-division plan in Plan Book 20, Page 31. CONTAINING one and two one-hundredths (1.02) acres of land, and being improved with a two and one-half story brick dwelling house and detached brick garage building. BEING the same premises which Eduard Von Jess and Elsie Von Jess, husband and wife, by their Deed dated October 28, 1999, and recorded in the Office of the Recorder of Deeds in and for Cumberland County on October 29, 1999 in Deed/Record Book 210, Page 648, granted and conveyed unto Community Trust Company, Grantors herein. TOGETHER with all and singular the buildings and improvements, ways, streets, alleys, driveways, passages, waters, watercourses, rights, liberties, privileges, hereditaments and appurtenances, whatsoever unto the hereby granted premises belonging, or in any wise appertaining, and the reversions and remainders, rents, issues, and profits thereof, and all the estate, right, title, interest, property, claim, and demand whatsoever of the said Grantor, as well at law as in equity, of, in, and to the same. TO HAVE AND TO HOLD, the said lot or piece of ground above described, with all and singular the buildings and improvements thereon erected, hereditaments and premises hereby granted, or mentioned and intended so to be, with the appurtenances, unto the said Grantee, its heirs and assigns, to and for the only proper use and behoof of the said Grantee, its heirs and assigns forever. AND the said Grantor, for itself, its successors and assigns, does covenant, promise and agree, to and with the said Grantee, its heirs and assigns, by these presents, that it, the said Grantor, and its successors and assigns, all and singular the hereditaments and premises hereby granted or mentioned and intended so to be, with the appurtenances, unto the said Grantee, its heirs and assigns, against it, the said Grantor and its successors and assigns, and against all and every person and persons whomsoever lawfully claiming or to claim the same or any part thereof, by, from or under him, her, them or any of them, shall and will, Subject as aforesaid, SPECIALLY WARRANT and forever DEFEND. IN WITNESS WHEREOF, the said party ofthe first part by and through its duly appointed officers has hereunto set its hand and seal, the day and year first 1Mpve written. ATTEST: COMM"M TRUST COMPANY By: BRUCE . HOLRAN By: LO ELL R. Secretary P ident (Corporate Seal) Boox 249 Pg: 3670 COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND SS: On this, the 1 st day of July, 2000, before me, a Notary Public, the undersigned officer, personally appeared Lowell R. Gates who acknowledged himself to be the President of Community Trust Company, a Pennsylvania trust corporation, and that he as such President, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as President. ' IN WITNESS WHEREOF, 1 hereunto set my hand and official NOTAR MY COl CERTIFICATE OF RESIDENCE My CommMdM Eq*as Nov. 10, I hereby certify that the present residence ofthe Grantee herein is as follows: (RETURN DEED TO:) Community Realty, Inc. 3 907 Market Street Camp Hill, PA 17011 COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND SS: N ezt?o ___1 Attorney for Grantee RECORDED in the Office for Recording ofDeeds, etc., in and for said County, in Deed Book No. , Page WITNESS my hand and official seal this day of r(?c. ,,,r.1 cd cool. ?.. l;. i:.y f A Recorder of Deeds .'I '.;r of Deeds soox 249 PACE38A AALA . COMMONIVIIALTH OF MIMti{TtVANIA mllMRTMM a AI NW &M TAM W". 20M HANIMM, FA 171294W Complete ends eeeNon and file in avislic-ld is wMMrM eensidrKaNen, or by glfi, or REALTY TRANSFER TAX .,- -A STATEMENT OF VALUE 2 W &w Rwmm for Mdtnm lew Iam Malmo" 11-Z2 - 6 j l w1h Recorder of Deeds when All ::121, vai alwasderaNon is nor set forth in the deed, M who do deed s tax omeWfarr ls daGeed. A Slaof Vine Is not ngaird IF dlo tremhr U vAolly exeerpt front tox A - CORRUMNDENT - All Mains may be dlrechd to the foEowiaa PmeA: ?el ow" Nweier. NOeNAlbert N. Peterlin, Esquire AmO Code 1717 ) 731-9600 i n I,; mamma Road_ Suite 100 Lemoyne PA 17043 s TRANSFER DATA SoUGF1 Community Trust Company otximumty Realty, Inc. et Street 3907 Market Street C= -ebw at. 17011 amp I.1ill PA zip Camp Hill PA 17011 F?eopERTr LOCATION 3907 Market Street Cumberland -142 arty 2. Ckeck ApNreprh/e Mn Mbw for fxea¢tioe CWnwd ? vm or Intestob wwesion Nwmkd ? Transfer to Industrial Development Agency. ? Trawler to a trust. (Attach complete copy of trust agreement W MiFying all berrafidarbeJ Tronatir between priedpal and agent. (AMaeh oompiNe copy of agoKy1d1aw party agreemaM.) ? Trawlers to the Cormsanweakb, the Unked States and Instrrnmee?alkies by sift, dedication, eondommotion or In lieu of condemnaMon. pf condemnation or in lieu of condemnation, am ad copy of mololon.) ? Transfer from mortgagor to o holder of a mortgage •io defask. Mortgage look Number , Page Number ? Corrwive or confirmatory dad. (Attach complete oopy of the prior deed being corrected or confirmed.) ? gtafutory co rim of conalid-Non, morger or dlWsio t. (A11ach copy of aOCIOL) ? Other O%m mpk& exemption claimed, iF other than listed dew.) kiss of low.1 doold" Nat I N Is 6"...tt1 - acrd wa 11111 DM. Nils ftaNasse/, Maledlmg aesewpestldrtg ief ismas en, and h dw had of ary lawwlodp I/ MAY R11=11 IN 4 owsm .- veeeeaa O%W wt.7e Manufactured try JULIUS 13LU if , INN- NYC 10013 PRODUCT NO. 118626 Exhibit E MATTHEW P. AMOS, PLAINTIFF VS. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF : COMMUNITY FINANCIAL, INC., DEFENDANTS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PA NO. 08-5290 CIVIL AFFIDAVIT OF LOWELL R. GATES, ESQUIRE 1) I, Lowell R. Gates, Esquire, serve as Chairman of the Board of Directors for Defendant Community Financial, Inc. 2) 1 affirm that I do not own the property on which Defendant CFI's headquarters is situated; specifically that address is 3907 Market Street, Camp Hill, PA 17011. 3) 1 affirm that to my knowledge, the property on which Defendant CFI's headquarters is situated is owned by Community Realty, Inc. 4) 1 affirm that my wife and I acted as guarantors for the mortgage for Community Realty, Inc., but that we do not possess an ownership interest in the property. 5) 1 affirm that I have never received any rental income from Defendant CFI or any other entity on account of Defendant CFI's occupation of its corporate headquarters at 3907 Market Street, Camp Hill, PA 17011. 6) 1 affirm that I am not the recipient of a $120, O,bO loan from Defendant CFI that I do not have to repay. S Dated: Lowell Gates Chair n of the Board of Directors Com pity Financial, Inc. Sworn to and subscribed to before me on this Day of ?-?10< , 200P. 1 ?X?- Notary Public COMMONWEALTH OF PENNSYLVANIA Notarial Seal Victoria M. Rankin, Notary Pudic Womnleysburg Boo, Cumberland County My Commission E?ires Aug. 27, 2010 Member, Pennsylvania Association of Notaries VERIFICATION I, Susan A. Russell, President and CEO of Defendant Community Financial, Inc., hereby verify that the statements made in the foregoing Answer are true and correct to the best of my information, knowledge and belief. I understand that false statements herein are made subject to the penalties of 18 Pa. C.S. Section 4904, relating to unsworn falsification to authorities. Dated: September .??, 2008 G Susan A. Russell President and CEO Community Financial, Inc. VERIFICATION I, Lowell R. Gates, Chairman of the Board of Directors of Community Financial, Inc., hereby verify that the statements made in the foregoing Answer are true and correct to the best of my information, knowledge and belief. I understand that false statements herein are made subject to the penalties of 18 Pa. C.S. Section 4904, relating to unsworn falsification to authorities. /, Dated: September, 2008 Lowell R /Gates Chairm of the Board of Directors Comm pity Financial, Inc. 9 CERTIFICATE OF SERVICE 2008, I James D. Flower, Jr., Esquire, hereby AND NOW, October 1, of the foregoing DEFENDANTS' certify that I did serve a true and correct copy n all arties of record by depositing, or causing to be deposited, ANSWER upo p he U.S. mail, postage prepaid, at Carlisle, Pennsylvania, addressed as same in t follows: B First-Class Mail: Matthew P. Amos, pro se 2503 Hoffer Street Harrisburg, PA 17103 By' Ja es D. Flower, Jr., sq. n l?..AJ ?.., ChM! ..../ 9z :? Wd I - ij0 8 O1 SHERIFF'S RETURN - REGULAR F • ty CASE NO: 2008-05290 P COMMONWEALTH OF PENNSYLVANIA: COUNTY OF CUMBERLAND AMOS MATTHEW P VS COMMUNITY FINANCIAL INC ET AL KENNETH GOSSERT , Sheriff or Deputy Sheriff of Cumberland County,Pennsylvania, who being duly sworn according to law, says, the within COMPLAINT & NOTICE was served upon COMMUNITY FINANCIAL INC the DEFENDANT , at 1123:00 HOURS, on the 12th day of September, 2008 at 3907 MARKET STREET CAMP HILL, PA 17011 by handing to SUSAN A RUSSELL, PRESIDENT, ADULT IN CHARGE a true and attested copy of COMPLAINT & NOTICE together with and at the same time directing Her attention to the contents thereof. Sheriff's Costs: Docketing 18.00 Service 15.00 Postage .59 Surcharge 10.00 .00 to joblt yr (?, 43.59 So Answers: s R. Thomas Kline 09/19/2008 MATTHEW AMOS Sworn and Subscibed to By: before me this day of A.D. CASE NO: 2008-05290 P SHERIFF'S RETURN - REGULAR COMMONWEALTH OF PENNSYLVANIA: COUNTY OF CUMBERLAND AMOS MATTHEW P VS COMMUNITY FINANCIAL INC ET AL KENNETH GOSSERT , Sheriff or Deputy Sheriff of Cumberland County,Pennsylvania, who being duly sworn according to law, says, the within COMPLAINT & NOTICE was served upon GATES LOWELL R the DEFENDANT at 1945:00 HOURS, on the 18th day of September, 2008 at 551 HARVEST LANE MECHANICSBURG, PA 17055 by handing to LOWELL GATES a true and attested copy of COMPLAINT & NOTICE together with and at the same time directing His attention to the contents thereof. Sheriff's Costs: Docketing Service Affidavit Surcharge j b16-316 k ?- So Answers: 6.00 2 4 . 0 0? .00 10.00 R. Thomas Kline .00 -40.00 09/19/2008 MATTHEW AMOS Sworn and Subscibed to By: before me this day of A.D. 0 0 MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS Plaintiff V. COMMUNITY FINANCIAL, INC. and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. Defendants. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-5290 Civil CIVIL ACTION Shareholder Derivative Lawsuit ANSWER TO NEW MATTER AND ADDITIONAL NEW MATTER AND NOW comes the Plaintiff Matthew P. Amos, representing himself, and responds to defendants' new matter as follows: 1. Admitted. 2. Admitted. 3. Denied as stated. Because of the brevity of the motion to maintain a derivative lawsuit, separate numbered paragraphs were not necessary and would have been absurd. 4. Admitted. 5. Admitted. 0 • • 6. Denied as stated. The critical fact upon which the Complaint is premised is not false. In fact, it is undeniably true. That fact is that shareholders who paid $20 per share are receiving less than one dollar per share for their investment. In that ten year period, a million dollars of capitalization was raised twice and recently the company had more than $70,468,753.00 million in assets under management that generated $699,373.00 in fee income. Therefore, the failure of the company to at least break even is baffling. The fact that the company has lost money raises serious questions about fraud, waste, and breach of fiduciary duties that this litigation is intended to address. 7. Admitted. 8. Admitted that Community Realty, Inc., technically owns the property but, as defendants admit in paragraph 14 of the new matter, Defendant Gates and his wife acted as guarantors under the mortgage. Despite the convoluted ownership structure, there can be no doubt under those circumstances that Defendant Gates has found a way to profit from the arrangement. It is believed and assumed that Defendant Gates had an economic incentive to assume the risk involved in guaranteeing that mortgage. Nobody would believe that Defendant Gates would take that action or any other action out of a sense of charity. Therefore, the remainder of the averment is denied. 9. See response to paragraph 8. 10. Admitted. 0 • 11. After reasonable investigation, plaintiff is without knowledge or information sufficient to form a belief as to the truth of the averment. It is therefore denied. The plaintiff looks forward to the opportunity to discuss the situation with Defendant Gates in the context of a deposition. 12. See response to paragraphs 8 and 9. 13. After reasonable investigation, plaintiff is without knowledge or information sufficient to form a belief as to the truth of the averment. It is therefore denied. The plaintiff looks forward to the opportunity to discuss the situation with Defendant Gates in the context of a deposition. 14. After reasonable investigation, plaintiff is without knowledge or information sufficient to form a belief as to the truth of the averment. It is therefore denied. The plaintiff looks forward to the opportunity to discuss the situation with Defendant Gates in the context of a deposition. It is noted that defendants assert that Defendant Gates has not received any "rental" income from the arrangement. It is not clear whether Defendant Gates benefited economically in any other way. 15. Admitted. 16. After reasonable investigation, plaintiff is without knowledge or information sufficient to form a belief as to the truth of the averment. It is therefore denied. The plaintiff looks forward to the opportunity to discuss the situation with Defendant Gates in the context of a deposition. 17. After reasonable investigation, plaintiff is without knowledge or information sufficient to form a belief as to the truth of the averment. It is 2 • • therefore denied. The plaintiff looks forward to the opportunity to discuss the situation with Defendant Gates in the context of a deposition. 18. After reasonable investigation, plaintiff is without knowledge or information sufficient to form a belief as to the truth of the averment. It is therefore denied. The plaintiff looks forward to the opportunity to discuss the situation with Defendant Gates in the context of a deposition. 19. After reasonable investigation, plaintiff is without knowledge or information sufficient to form a belief as to the truth of the averment. It is therefore denied. The plaintiff looks forward to the opportunity to discuss the situation with Defendant Gates in the context of a deposition. 20. Admitted. 21. Denied as stated. Although some information has been provided, not all requested information has been provided. Specifically, certain financial records that would explain specifically where approximately $2 million in capitalization has gone have not been provided. Defendants are extremely selective in what information is provided to plaintiff on behalf of shareholders. The plaintiff and his accountant would be willing to sign a confidentiality agreement to review the entire record. 22. Admitted. 23. Admitted. 24. Denied. Plaintiff submitted another request to review information that clearly was not provided to him during his first review of the information. 25. Admitted. 3 • • 26. Admitted. 27. Admitted. 28. Admitted. 29. Admitted. 30. Denied. The complaint in this case summarizes the actions taken leading up to the present derivative lawsuit. In addition, plaintiff has issued a demand that has been rejected by the defendants. 31. Admitted that plaintiff has not alleged that efforts to secure corporate enforcement would be futile because as set forth in the previous paragraph, plaintiff has sought corporate enforcement. 32. Admitted that defendants set forth an accurate quotation of a federal court opinion that is merely instructive and non-precedential. In addition, the case cited has received negative treatment. However, it is denied that the plaintiff has tried to have the demand requirement of a derivative action excused. 33. Denied. Plaintiff has met the pleading requirements of the Pennsylvania Rules of Civil Procedure. 34. Denied as states because plaintiff is eligible to bring this shareholder derivative action. 35. Admitted in part; denied in part. It is denied that in his complaint, plaintiff failed to make a strong prima facie case in favor of his claims. It is admitted that he made that allegation in his motion. By way of further answer, plaintiff is not being represented in this case by a lawyer. As 4 • • such, plaintiff begs the Court's pardon to the extent that any technical requirement is not met and asks the Court's indulgence to construe liberally the requirements of the rules with respect to him. 36. Denied. Plaintiff has set forth a strong prima facie case to the extent he has demonstrated that Community Financial, Inc. (CFI), has not only inexplicably failed to make money, it has actually lost money - well in excess of $ 2 million. 37. Denied. Serious injustice will result if an answer is not obtained regarding why CFI has failed to make money and has lost money to the point that shareholders who invested $20 per share are reaping less than a dollar per share as a result of CFI's merger with Franklin Financial. 38. Admitted that plaintiff sought to enjoin the vote on the merger that occurred on September 9, 2008. It is further admitted that, upon reflection, plaintiff decided that transferring ownership to management that might actually be capable of managing this business properly would be better than allowing the present management to continue to destroy the business. Plaintiff realized that defendants' failure to maintain capitalization as required by the Pennsylvania Department of Banking necessitated that Franklin Financial Services begin running the company. NEW MATTER 39. On September 27, 2008, plaintiff as well as other CFI shareholders issued a demand on CFI to initiate a lawsuit against board members, officers, and corporate legal counsel. That demand is attached as Exhibit A. 5 0 40. By letter dated October 15, 2008 Exhibit B, plaintiff was informed that the CFI board members, having met and discussed the aforementioned demand, decided that the demand had "no merit" and that no further action would be taken. WHEREFORE, plaintiff requests that the court allow this derivative action to proceed to determine where corporate assets have gone as a result of apparent fraud, waste, and breaches of fiduciary duty. MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 October 20, 2008 Respectfully submitted, Matthew P. Amos 6 MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS Plaintiff V. COMMUNITY FINANCIAL, INC. and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-5290 Civil CIVIL ACTION Shareholder Derivative Lawsuit Defendants. CERTIFICATE OF SERVICE Undersigned plaintiff has served the attached motion answer to new matter and new matter by causing two copies of it, one for each defendant, to be hand-delivered at the corporate offices of Community Financial, Inc., at 3907 Market Street in Camp Hill, Pennsylvania along with a copy of the complaint on this date. October 20, 2008 !ll/ MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff 7 EXHIBIT A 11 September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: • As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. § 1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, Charlotte Spitz • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: • As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. 0 0 Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, L .11 a osep H. Westcott • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: n As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law,15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, Bruce G. `Holran • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: • As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998., the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, 144 Joj-e? Carole Fowler • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: 0 As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, Ronald L. gh+- • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: 0 As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. § 1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, Ronald N. Hughm . September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: 0 As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. § 1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. 0 0 Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, /'#? * °1 Louis A Robinson C] September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, Jeffrey S. Nickum • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: • As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. § 1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, %` Matthew P. Amos • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation. was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. § 1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. 0 0 Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, Curt H. Zimmermann • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, 4 1 yv? David L. Englehart September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: 0 As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. 0 • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, 444X&1111?r? Christine A. Amos 0 September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: U As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law,15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, Donald A. Erney -90-M'4Q a lt--?4 • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: 0 As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law, 15 Pa.C.S. § 1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. • • Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, 1 17 YO ?? . Patricia A. Helm • September 27, 2008 Susan A. Russell President & CEO Community Financial, Inc. 3907 Market Street Camp Hill„ PA 17011 RE: Demand Notice Dear Ms. Russell: .7 As a shareholder of Community Financial, Inc. (CFI), I request that CFI initiate a lawsuit against all CFI board members, officers, and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud, and legal malpractice. Board members have consistently favored their own interests over CFI corporate interests. At least one board member leased property to the corporation, acted as legal counsel and board member simultaneously, and had CFI use a line of credit to favor the interests of an outside banking institution on which he served as a board member. You showed bad faith, when acting on bad advice of corporate counsel, you refused to provide a shareholder with certain share register information to which she was entitled. In doing so, you forced CFI to pay legal fees to the law firm of the corporate counsel who benefitted from his own terrible legal advice. That legal advice constituted malpractice for which CFI is being forced to pay counsel fees to opposing counsel. Repeatedly, since 1998, the capitalization requirements of the Pennsylvania Department of Banking were used to induce shareholders to invest more and more money, only to have their investment frittered away. The way CFI officials spent money can only be regarded as corporate waste. Then, during the recent period of merger, we received proxy materials with blank spaces, with reference to a mysterious $120,000 no interest loan purported to be a trust for the benefit of a board member, and with reference to "intercompany receivables" as a means to mislead shareholders into believing that the corporation was more viable than it was. These actions constituted securities fraud and bad faith. Failure to maintain capitalization constituted negligence and the use of "intercompany receivables" and the line of credit to mislead shareholders regarding the viability of their investment constitute negligent misrepresentation. We have tried to understand many of the poor decisions using the tools available under the Pennsylvania Corporations Law,15 Pa.C.S. §1508. However, our efforts in this regard have been repeatedly stymied by your refusal to provide any information or by the limitations you placed on information actually provided. 0 Serious injustice will result if these claims are not brought in a court of law immediately. I request a response to this demand by October 15, 2008. If you fail to respond by that date, I will take all necessary legal action to preserve the rights and interests of CFI shareholders who have been wronged by the deceptive and illicit practices of the board, officers and corporate legal counsel of CFI as set forth above. Thank you for your attention to this matter and I look forward to your response. Sincerely, Charlotte Spitz 0 0 EXHIBIT B 0 0 ??ent & f n Vest S v' K COMMUNITY TRUST October 15, 2008 Jeffrey S. Nickum 323 West Meadow Drive Mechanicsburg, PA 17055 Re: Demand Notice Dear Mr. Nickum: We are in receipt of your letter dated September 27, 2008 referencing a "Demand Notice" and requesting that CFI initiate a lawsuit against all CFI board members, officers and corporate legal counsel for breach offiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud and legal malpractice. It is acknowledged that this is the same letter that was originally sent to the company by Matthew P. Amos and that Mr. Amos has been soliciting shareholders to send his letter to the company under their signature. Therefore, it is to "your" letter we offer the following response. The Board of Directors of Community Financial, Inc. held a special meeting to discuss your letter and have instructed me to inform you that the board has determined that there is no merit to the allegations made in your letter. All the claims stated in your correspondence are without merit and many of these claims are the same claims alleged in the current litigation initiated before the Cumberland County Court of Common Pleas, in the civil matter of Matthew P. Amos v. Community Financial, Inc. et al. Those matters are now before the Court and will be argued on October 22, 2008. Sincerely, Susan A. Russell President & CEO Cc: John B. Lampi, Esquire 3907 Market Street Camp Hill, PA 17011 Telephone • le ttt & inveVt a? ?QO COMMUNITY TRUST October 15, 2008 Matthew P. Amos 2503 Hofer Street Harrisburg, PA 17103 Re: Demand Notice Dear Mr. Amos: We are in receipt of your letter dated September 27, 2008 referencing a "Demand Notice" and requesting that CFI initiate a lawsuit against all CFI board members, officers and corporate legal counsel for breach of fiduciary duty, self-dealing, negligence, negligent misrepresentation, bad faith, corporate waste, securities fraud and legal malpractice. The Board of Directors of Community Financial, Inc. held a special meeting to discuss your letter and have instructed me to inform you that the board has determined that there is no merit to the allegations made in your letter. All the claims stated in your correspondence are without merit and many of these claims are the same claims alleged in the current litigation you initiated before the Cumberland County Court of Common Pleas, in the civil matter of Matthew P. Amos v. Community Financial, Inc. et al. Those matters are now before the Court and will be argued on October 22, 2008. Sincerely, Susan A. Russell President & CEO Cc: John B. Lampi, Esquire 3907 Market Street Camp Hill, PA 17011 Telephone 717.731 -7 "`' ?w..? r:? -s? --- _?? _....? r?, r ?.. .-: t, . ?? ?? ? ti? c? ??:r? .. ?? -nom ?:- MATTHEW P. AMOS, IN THE COURT OF COMMON PLEAS PLAINTIFF OF CUMBERLAND COUNTY, PA VS. NO. 08-5290 CIVIL COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., DEFENDANTS DEFENDANTS' MOTION TO STRIKE PLAINTIFF'S ADDITIONAL NEW MATTER And now come Defendants Community Financial, Inc., and Lowell R. Gates, Chairman of the Board of Community Financial, Inc., (hereinafter Defendants) by and through their legal counsel, James D. Flower, Jr., Esquire, and Dean E. Reynosa, Esquire, and the law firm of Saidis, Flower & Lindsay, and hereby respectfully represent as follows: 1) ' Plaintiff Matthew P. Amos filed a Shareholder Derivative Lawsuit on or about September 4, 2008. 2) Plaintiff contemporaneously filed a Motion to Maintain a Derivative Lawsuit Pursuant to Pa.R.A.P. No. 1506 (b). 3) The Honorable M.L. Ebert entered an Order dated September 8, 2008, issuing a Rule to Show Cause as to why Plaintiff's Motion to Maintain a Derivative Lawsuit should not be granted. 4) In compliance with the Rule to Show Cause, on October 1, 2008, Defendants filed an Answer with New Matter in response to Plaintiff's Motion to Maintain a Derivative Lawsuit. 5) On or about October 20, 2008, Plaintiff filed an Answer to New Matter and Additional New Matter. 6) A party cannot plead additional new matter in response to new matter. Pa.R.C.P. No. 1017. 7) The rules provide that one may file a reply to new matter, to a counterclaim or to a cross-claim. Pa.R.C.P. No. 1017 (a)(2). 8) The rules do not permit the filing of additional new matter. Campbell v. Deardorff, 51 Pa. D. & C.2d 452 (C.P. Adams County 1971). WHEREFORE, Defendants requests that this Honorable Court strike Plaintiff's Additional New Matter filed on October 20, 2008. Respectfully submitted, Saidis, Flower & Lindsay Date: l b ?? !a es'10: Flower, Jr., Esq. Supreme Court I.D. 27742 Dean E. Reynosa, Esq. Supreme Court I.D. 80440 26 W. High Street Carlisle, PA 17013 (717) 243-6222 telephone (717) 243-6486 fax CERTIFICATE OF SERVICE AND NOW, November -L-, 2008, I, Dean E. Reynosa, Esquire, hereby certify that I did serve a true and correct copy of the foregoing DEFENDANTS' MOTION TO STRIKE PLAINTIFF'S ADDITIONAL NEW MATTER upon all parties of record by depositing, or causing to be deposited, same in the U.S. mail, postage prepaid, at Carlisle, Pennsylvania, addressed as follows: By First-Class Mail: Matthew P. Amos, pro se 2503 Hoffer Street Harrisburg, PA 17103 By: an E. Reynosa, Esq. €-_. r-_,; % + .. .._, _ ,-.. __, ? ?., MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, Plaintiff PENNSYLVANIA V. NO. 08-5290 Civil COMMUNITY FINANCIAL, INC. and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. CIVIL ACTION Shareholder Derivative Lawsuit Defendants. PLAINTIFF'S RESPONSE TO DEFENDANTS' MOTION TO STRIKE ADDITIONAL NEW MATTER AND NOW comes the Plaintiff Matthew P. Amos, representing himself, and responds to defendants' motion to strike plaintiff's additional new matter as follows: 1. Admitted. 2. Admitted. 3. Admitted. 4. Admitted. 5. Admitted. 6. Denied. Pa.R.C.P. 1017 permits a "reply" if a pleading contains "new matter." Plaintiff has chosen to "reply" to defendants' new matter by inserting new matter of his own. There is nothing in Rule 1017 or any other 0 rule prohibiting "new matter" in response to "new matter." In fact, Rule 1017(a)(3) contemplates additional new matter. It states a pleading that is specifically allowed is "a counter-reply if the reply to a counterclaim or cross- claim contains new matter." Emphasis added. 7. Admitted. 8. Denied. In Campbell v. Deardorff, 51 Pa. D. & C. 2d 452, 455-456 (C.P. Adams County 1971), the only case cited by the defendants, the Court refused to strike new matter under similar circumstances. In so refusing to strike the new matter, the Court reasoned that if it were "to sustain the motion to strike, . .. the only purpose would be to delay the proceedings further and require plaintiff to "improperly" plead his defense or run the risk of not pleading it at all. Under such circumstances, we feel obliged to exercise our authority under Pa. R. C. P. 126 and disregard plaintiffs error in procedure." 9. In Campbell, the Court of Common Pleas of Adams County in 1971 opined in that new matter should not be raised in response to new matter, but nevertheless permitted it. In doing so, that court erred in its analysis but did not err in its conclusion. That court's faulty legal analysis is of no precedential value to this honorable court and should be of extremely limited persuasive value. Instead, this Court should follow the same reasoning as the Adams County court to reach its conclusion and likewise refuse to strike plaintiff's additional new matter. That is what justice requires. 10. The rules shall be liberally construed to secure the just, speedy and inexpensive determination of every action or proceeding to which they are applicable. The court at every stage of any action or proceeding may disregard any error or defect of procedure which does not affect the substantial rights of the parties. Pa.R.C.P. 126. 11. Pleadings filed by a pro se litigant should generally be construed liberally for conformance with the rules. See, e.g., Commonwealth v. Garrison, 303 Pa.Super. 555, 557, 450 A.2d 65, 66 (1982) (pro se PCHA petitions should be read liberally); Ibn-Sadiika v. Riester, 380 Pa.Super 397, 402, 551 A.2d 1112, 1115 (Pa. Super. 1988) ("...we elect to take a more liberal approach to appellant's inartful pleading, in light of its pro se nature.") 12. In plaintiff's new matter, he merely wishes to make clear that he has made a demand of the corporation that was rejected by the defendants, thus necessitating this derivative lawsuit. This was made in response to defendants' allegation that he had failed to do so. See Plaintiff's Additional New Matter. 13. Alternatively, the Court could construe the pro se plaintiff s new matter as an amendment to the original pleading pursuant to Pa.R.C.P. 1033, and in so doing grant leave of the same. Rule 1033 reads in pertinent part that an "amended pleading may aver transactions or occurrences which have happened before or after the filing of the original pleading, even though they give rise to a new cause of action or defense. An amendment may be made to conform the pleading to the evidence offered or admitted." 14. A note to Rule 1028 requires that the defense of statute of frauds or statute of limitations can only be asserted as new matter. In fact, Rule 1030 requires a 2 myriad of defenses to be pled as new matter. Rule 1030 reads, in pertinent part, that "the defenses of accord and satisfaction, arbitration and award, consent, discharge in bankruptcy, duress, estoppel, failure of consideration, fair comment, fraud, illegality, immunity from suit, impossibility of performance, justification, laches, license, payment, privilege, release, res judicata, statute of frauds, statute of limitations, truth and waiver shall be pleaded in a responsive pleading under the heading "New Matter". A party may set forth as new matter any other material facts which are not merely denials of the averments of the preceding pleading." Emphasis added. 15. To interpret the rules as defendants do, an opposing party could not raise statute of frauds, statute of limitations, or any of the other myriad of aforementioned defenses to oppose new matter, because, according to defendants' erroneous interpretation of the rules, one cannot respond to new matter with new matter. Therefore, those defenses would be waived - an outcome that would be manifestly unjust. 16. If defendants fail to respond to plaintiff's properly pleaded new matter, plaintiff shall move for a default pursuant to Pa.R.C.P. 1037. 17. Defendants' highly-technical application of the rules against a pro se litigant should be seen by the Court as an attempt to engage in a procedural battle rather than respond to plaintiff's legitimate factual and legal issues raised in this matter. 3 WHEREFORE, plaintiff respectfully requests that the Court deny defendants' motion to strike the additional new matter. Respectfully submitted, _tz Matthew P. Amos MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 November 18, 2008 4 MATTHEW P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, Plaintiff PENNSYLVANIA v. NO. 08-5290 Civil COMMUNITY FINANCIAL, INC. CIVIL ACTION and LOWEL R. GATES, CHAIRMAN of the BOARD of COMMUNITY FINANCIAL, INC. Shareholder Derivative Lawsuit Defendants. CERTIFICATE OF SERVICE Undersigned plaintiff has served the attached plaintiff's response to motion to strike by causing two copies of it, one for each defendant, to be hand-delivered to the office of James D. Flower, Jr., at Saidis, Flower & Lindsay, P.C., 26 West High Street, Carlisle, PA 17013 on this date. 4AH P. AMOS Representing Self 2503 Hoffer Street Harrisburg, PA 17103 (717) 236-3228 Plaintiff November 18, 2008 5 (?5 co MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF PLAINTIFF CUMBERLAND COUNTY, PENNSYLVANIA V. : COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., : DEFENDANTS : NO. 08-5290 CIVIL ORDER OF COURT AND NOW, this 5th day of January 2009, upon consideration of Defendant's Motion to Strike Plaintiff's Additional New Matter, and the Plaintiff's Response thereto, IT IS HEREBY ORDERED AND DIRECTED that the Defendant's Motion to Strike Plaintiff's Additional New Matter is GRANTED. Accordingly, paragraphs 39 and 40 of the Plaintiff's Answer to New Matter are stricken and the Defendants are not obligated to file any response to these two paragraphs. By the Court, M. L. Ebert, Jr., J. ? Matthew P. Amos PPrro Se -Community Financial, Inc. 3907 Market Street Camp Hill, PA 17011 ?James Flower, Jr., Esquire 26 West High Street Carlisle, PA 17013 bas m?tL?c? 06P1'99 j`1a? l_ ? -- r 6622 MATTHEW P. AMOS, PLAINTIFF VS. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., DEFENDANTS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PA NO. 08-5290 CIVIL MOTION TO QUASH SUBPOENAS ISSUED TO FRANKLIN FINANCIAL SERVICES CORPORATION AND THE PENNSYLVANIA DEPARTMENT OF BANKING OR IN THE ALTERNATIVE FOR A PROTECTIVE ORDER AND NOW COME Defendants Community Financial, Inc., and Lowell R. Gates, Chairman of the Board of Community Financial, Inc., (hereinafter Defendants) by and through their legal counsel, James D. Flower, Jr., Esquire, and Dean E. Reynosa, Esquire, and the law firm of Saidis, Flower & Lindsay, and hereby respectfully represent as follows: 1. On or about February 10, 2009, Plaintiff Matthew P. Amos provided copies to Defendants of two subpoenas that he purported to serve in the above captioned matter on Franklin Financial Services Corporation and the Pennsylvania Department of Banking: Facsimile transmission from Plaintiff to John B. Lampi, Esq., dated February 10, 2009, concerning the two subpoenas at issue is attached hereto and incorporated herein as Exhibit A. 2. On the cover sheet to the facsimile transmission, there is a notation that provides "Please find attached subpoena [sic] that have been delivered.... Matthew P. Amos." See Exhibit A. 3. On or about September 4, 2008, Plaintiff filed a derivative suit in this matter. 4. Plaintiff also contemporaneously filed a Motion to Maintain a Derivative Lawsuit in this matter. 5. On September 8, 2008, the Honorable M.L. Ebert issued a Rule directing Defendants to show cause why Plaintiff's Motion to Maintain Derivative Suit should not be granted. 6. Defendants filed an Answer to Plaintiff's Complaint. 7. Defendants filed an Answer with New Matter to the Rule to Show Cause concerning Plaintiff's Motion to Maintain a Derivative Lawsuit. 8. As part of the relief sought in their response to the Rule to Show Cause, Defendants requested that this Honorable Court deny Plaintiff's Motion to Maintain a Derivative Lawsuit and to dismiss Plaintiff's shareholder derivative lawsuit with prejudice. 9. Plaintiff had also filed a Motion for Preliminary Injunction and a praecipe requesting argument concerning his motion for a preliminary injunction. 10. By order dated September 8, 2008, the Honorable M.L. Ebert denied Plaintiff's request for a preliminary injunction without argument. 11. Argument was held on October 22, 2008, before the Honorable J. Wesley Oler, Jr., and the Honorable M. L. Ebert at which the Defendants argued against Plaintiff's Motion to Maintain Derivative Lawsuit. 12. Defendants further argued that Plaintiff's Shareholder Derivative Complaint should be dismissed with prejudice. 13. The Court has not yet issued a ruling concerning Plaintiff's Motion to Maintain Derivative Lawsuit. 14. Defendant Community Financial, Inc., (hereinafter "Defendant CFI") has since merged with Franklin Financial Services Corporation.' MOTION TO QUASH SUBPOENAS FOR FAILURE TO COMPLY WITH RULES OF CIVIL PROCEDURE 15. Rule 4009.21 of the Pennsylvania Rules of Civil Procedure, Pa.R.C.P. No. 4009.21, requires that a party provide twenty (20) days notice to all other parties before serving a subpoena on a non-party seeking the production of documents. 16. Rule 4009.22 further provides that a party can serve such a subpoena on a non-party only if the party seeking to serve the subpoena has filed a certificate of record setting forth that: (a) twenty (20) days notice was provided to all parties of the intent to serve a subpoena on a non-party; (b) a copy of the notice provided to all of the parties is attached to the certificate; (c) no objections were raised to the proposed subpoena; and (d) the subpoena to be served is identical to the one provided in the original notice. Pa.R.C.P. No. 4009.22 (a). 17. By facsimile dated February 10, 2009, Plaintiff advised that he "delivered" subpoenas on Franklin Financial Services Corporation and the Pennsylvania Department of Banking. See Exhibit A. ' As a result of the merger, the caption of this+action will have to be amended to identify Franklin Financial Services Corporation as the Defendant since it acquired Defendant CFI. A motion will be made, if necessary, upon the Court's ruling on Plaintiff's Motion to Maintain this derivative action. 18. The Pennsylvania Department of Banking is not a party to this lawsuit. 19. Plaintiff did not provide the required twenty (20) days notice to Defendants stating his intention to issue a subpoena to the Pennsylvania Department of Banking. 20. Rule 4009.21 (c) provides that after service of the required notice, "Any party may object to the subpoena by filing of record written objections and serving a copy of the objections upon every other party to the action." Pa.R.C.P. No. 4009.21 (c). 21. Defendants never had the opportunity to state their objections to the proposed subpoenas since Plaintiff did not comply with the notice requirements. 22. Franklin Financial Services Corporation is not presently a named party to this litigation. 23. Even if Franklin Financial Services Corporation were a named party to this litigation, the proper method to seek documents from another party would be to submit a Request for Production of Documents. See Pa.R.C.P. No. 4009.11. 24. The Rules of Civil Procedure provide a process which allows for the opportunity for an opposing party to object to discovery requests. See Pa.R.C.P. No. 4009.12. 25. By Plaintiff serving a defective subpoena on Franklin Financial Services Corporation he seeks to divest the Defendants and Franklin Financial Services Corporation of their opportunity to set forth valid objections to the Plaintiff's discovery demands. 26. Moreover, as to both subpoenas, it does not appear that Plaintiff has filed a certificate prior to his service of both subpoenas as is required by Pa.R.C.P. No. 4009.22. 27. As a result of Plaintiff's failure to comply with the Rules of Civil Procedure, both subpoenas are null and void. Wherefore, Defendants respectfully request that this Honorable Court quash the subpoenas issued by Plaintiff and served on Franklin Financial Services Corporation and the Pennsylvania Department of Banking since Plaintiff did not comply with the Rules of Civil Procedure. MOTION TO QUASH SUBPOENAS AS PREMATURE 28. As noted supra, Defendants have requested that this Honorable Court deny Plaintiff's request to Maintain Derivative Action. 29. The parties are still awaiting a decision from the Court concerning whether Plaintiff is even entitled to maintain this shareholder derivative action. 30. Plaintiff's issuance and service of subpoenas on Franklin Financial Services Corporation and the Pennsylvania Department of Banking is premature since this Court could deny his ability to maintain this action. 31. If Plaintiff is precluded from maintaining the shareholder derivative action, there would be no need to engage in the expense of gathering information and documents in response to Plaintiff's discovery requests. Wherefore, Defendants respectfully request that this Honorable Court quash the subpoenas issued by Plaintiff and served on Franklin Financial Services Corporation and the Pennsylvania Department of Banking since the Court could deny Plaintiff's Motion to Maintain a Shareholder Derivative Action. MOTION FOR A PROTECTIVE ORDER 32. Should this Court deny Defendants' request to quash the subpoenas issued by Plaintiff and directed to Franklin Financial Services Corporation and the Pennsylvania Department of Banking, Defendants believe that a protective order is necessary. 33. Plaintiff has attached a list of items to his subpoena directed at Franklin Financial Services Corporation identifying various items that he is seeking. See Exhibit A. 34. It is noted that at least four of the items were previously requested by Plaintiff pursuant to his multiple requests for inspection of corporate records as a shareholder of Defendant CFI. 35. The four items almost mirror those requested by Plaintiff in a letter he sent to the President and CEO of Community Trust Company dated August 22, 2008. See Plaintiff's August 22, 2008, letter which is attached hereto and incorporated herein as Exhibit B and was originally attached to Plaintiff's Complaint as Exhibit D. 36. Plaintiff and his representatives were provided access to Defendant CFI's records and copied documents provided in response to his multiple requests to inspect corporate records: 37. To require Defendants to again respond to Plaintiff's repeated demands would be unreasonable, burdensome, duplicative and excessive especially since Plaintiff has already been given the opportunity to copy those records he again seeks by his subpoena. 38. As to Plaintiff's requests, several of them implicate matters involving Reports of Examination from the Pennsylvania Department of Banking and disclosure of such reports is prohibited by law. 39. Additionally, several of Plaintiff's requests concern information which Defendant CFI is obligated by confidentiality agreements not to disclose. 40. As to the subpoena issued by Plaintiff to the Pennsylvania Department of Banking, it is overly broad and unduly burdensome. 41. The subpoena issued to the Pennsylvania Department of Banking is not limited in time or limited to any particular event. 42. The subpoena issued to the Pennsylvania Department of Banking simply requests all information concerning the Department's supervision and regulation of Community Trust Company. 43. Moreover, as noted supra, Plaintiff's requests of the Pennsylvania Department of Banking implicates information that is protected from disclosure. See 71 P.S. § 733-302. Wherefore, Defendants request that this Honorable Court grant a protective order and preclude Plaintiff's repetitive requests for information. Defendants further request that this Honorable Court grant a protective order and preclude Plaintiff's overly broad and burdensome requests concerning the Pennsylvania Department of Banking. Finally, Defendants request a protective order precluding disclosure of information that is confidential and protected by law from disclosure. Respectfully submitted, Saidis, Flower & Lindsay Date: Ames D. we Jr., Esq. SbpreTMe Court I.D. 27742 Dean E. Reynosa, Esq. Supreme Court I.D. 80440 26 W. High Street Carlisle, PA 17013 (717) 243-6222 telephone (717) 243-6486 fax 02=10-'09 14:44 FROM- T-091 P001 F-001 S MEMOFAX DATE: 02/10/2009 # of Pages: 4 TO: John B. Lampi, Esq. Fax #: 717-243-6486 FROM: Matthew P. Amos SUBJECT: SUBPOENA (including Dear John: Please find attached subpoena that have been delivered. Thank you for your attention to this matter. Matthew P. Amos. 'Note: If you experience problems receiving this fax, please contact Kim Swope at (717) 761-4646 ext. 7 The information contained in this facsimile communication is confidential and intended only for the use of the person to whom it addressed. Such information may be privileged and exempt from disclosure under applicable law. If the reader of this communication is not the intended recipient, or the employee or agent responsible for its delivery to the intended recipient, you hereby notified that the reproduction, distribution or disclosure of any part of this communication, other than to the intended reci is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone and return the original communication to us at our mailing address listed above by United States first class mail. Rev. 071'26/08 02-10-'09 14:44 FROM- COMMONIVEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND MATTHEW P- AMOS PLAINTIFF VS. File No. 08-5290 CIVIL COMMUNITY FINANCIAL, INC., AND LOWEL.L. R. GATES, CHAIRMAN OF THE BOARD COMMUNIT'Y' FINANCIAL, INC., DEFENDANTS SUBPOENA TO PRODUCE DOCUMENTS OR THINGS FOR DISCOVERY PURSUANT TO RULE 4009.22 REGE?VED FEB - X009 I 'ARTMENT F SANKINt LEGAL S CTION i TO: Pennsylvania Department of Banking- (Name of Person or Entity) Within twenty (20) days after service of this subpoena, you are ordered by the court to produce the following documents or things: at 2503 Hoffer Street Harrisburg PA 17103 (Address) You may deliver or mail legible copies of the documents or produce things requested by this subpoena, together with the certificate of compliance, to the party making this request at the address li: above. You have the right to seek in advance the reasonable cost of preparing the copies or producing things sought. If you fail to produce the documents or things required by this subpoena within twenty (20) da after its service, the party serving this subpoena may seek a court order compelling you to comply with THIS SUBPOENA WAS ISSUED AT THE REQUEST OF THE FOLLOWING PERSON: NAME: Matthew P. Amos ADDRESS: 2503 Hoffer Street Harrisburg, PA 17103 TELEPHONE: 717-236-3228 BY TfM COURT: A/ &V Prothonotary, Civil Division Date: W U _ Seal of a Court T-091 P002 I F-001 Deputy 02-10-'09 14:45 FROM- T-091 P003 F-001 e COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND C0V FEB 1 0 MATTHEW P. AMOS PLAINTIFF VS. File No. 08-5290 COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD COMMUNITY FINANCIAL, INC., DEFENDANTS SUBPOENA TO PRODUCE DOCUMENTS OR THINGS FOR DISCOVER'Y' PURSUANT TO RULE 4009.22 TO: FRANKLIN FINANCIAL SERVICES CORPORATION (Name of Person or Entity) Within twenty (20) days after service of this subpoena, you are ordered by the court to produce the following documents or things: Please See Exhibit A that is attached. at 2503 Hoffer Street Harrisburg PA 17103 (Address) ------------ You may deliver or mail legible copies of the documents or produce things requested by this subpoena, together with the certificate of compliance, to the party making this request at the address lisb above. You have the right to seek in advance the reasonable cost of preparing the copies or producing tl things sought. If you fail to. produce the documents or things required by this subpoena within twenty (20) day after its service, the party serving this subpoena may seek a coup order compelling you to comply with i THIS SUBPOENA WAS ISSUED AT THE REQUEST OF T14E FOLLOWING PERSON: NAME: Matthew P. Amos _ ADDRESS: 2503 Hoffer Street _ Harrisburg, PA 17103 TELEPHONE: 717-236-3228 BY THE COURT: Prothonotary, Civil Division Date: WAA? Sea of a Court 02-10-'09 14:45 FROM- T-091 P004 F-001 9 EXHIBIT A 1. All Community Financial, Inc. (C)FI) and its wholly owned subsidiaries , share registered, books and records of account, and records of the proceedings of the directors and all records that pertain to the Pennsylvania Department of Banking regulation and supervision of CFT's subsidiary Community Trust Company. 2. All documents provided to Boenning & Scattergood, Inc. (BS) for the purpose of rendering a fairness opinion on the value of CFI, Inc. (i.e. financial projections, stock price data, information from recognized sources) 3. All communications between and/or by BS and CFI with regards to this transaction. 4. All communications between and/or by Franklin Financial Services Company (FFSC) and C.FI with regards to this transaction. 5. All documents that pertain to the distribution of the offering to sell CFI, including an itemized breakdown of the anticipated sales proceeds. This includes but is not limited to total estimated legal expenses for all law firms involved, and any other items not specified in the distributed proxy statement. 6. Copy of all documents that relate to Franklin Financial Services Company indemnification of former CFl directors and officers. 7. Copy of the legal agreement for the non-negotiable Series A Capital Notes which included change of control provisions that was ratified by CFI's Board of directors in 2005. AUG E 2 2008 August 22, 2008 Susan A. Russell President & CEO' Community Trust Company 3907 Market Street Camp Hill„ PA 17011 - - -- ?? RE: Verified Demand for Inspection of Corporate Records Pursuant to Section 1508 (b) of the Business Corporate Law of 1988 Dear Ms. Russell, On July 2, 2008, I interviewed Mr. William Snell, President and Chief Executive Officer and Mr. Mark Hollar, Senior Vice President and Chief Financial Officer, Comtroller and Treasure at Franklin Financial Services Corporation (FFSC) corporate offices as well as had a lengthy, conversation with Mr. Chad Hall of Boenning & Scattergood, Inc.(BS). Based on those conversations and the information provided in the Community Financial, Inc. (CFI) proxy dated August 8, 2008, the following documents need to be available for inspection and copying pursuant to CFI shareholder's demands "as a shareholder(s) of Community Financial, Inc. to inspect records that pertain to Franklin Financial Services Corporation acquisition of Community Financial, Inc." The following is a list, but may not be an totally inclusive list of all document that will be requested and made available for inspection and coping on "August 27, 2008" "between the hours of 9AM and 3PM at " CFI offices at 3907 Market Street Camp Hill PA: 1. All documents, including corporate board meeting minutes, that pertain to the consideration and hiring of BS. and other financial advisors. '_. All documents provided to BS Inc. for the purpose of rendering a fairness opinion on the value of CFI, Inc. (i.e. financial projections, stock price data, information from recognized sources) 3. Any and all financial analysis, including but not limited to the application of financial valuation methods or logic prepared by BS pursuant to the issuance of their fairness opinion for CFI. This includes any and all communications between and/or by BS and CFI with regards to this transaction. 4. All documents that pertain to the distribution of the offering to sell CFI, including an itemized breakdown of the anticipated sales proceeds. This includes but is not limited to total estimated shares to be sold and their value, legal expenses for all law fans involved, and any other items not specified in the distributed proxy statement. M 'AUG I 111 1 5. All documents that pertain to potential suitors that were distributed by BS relative to the sale of CFI. 6. All documents provided to Franklin Financial. This includes but is not limited to appraisals of all real estate owned by CFI, regulatory documents (i.e. call reports, MOU's and other Pennsylvania Department of Banking (PDB) regulator communications), internal financial statements, annual reports, and related communications to regulators. 7. All copies of trust documents and other legal documents relating to the structure of the transaction 8. Copy of all documents that relate to FFSC indemnification of CFI directors and officers. 9. Copies of all past or pending litigation against CFI or its wholly owned subsidiaries. In the unlikely event that these documents will not be available for inspection, and copying please inform us by close of business on Monday August 25, 2008. Sincerely, Mat w P. Amos cc: John B. Lampi, Esquire CERTIFICATE OF SERVICE AND NOW, February, 2009, I, James D. Flower, Jr., Esquire, hereby certify that I did serve a true and correct copy of the foregoing MOTION TO QUASH SUBPOENAS ISSUED TO FRANKLIN FINANCIAL SERVICES CORPORATION AND THE PENNSYLVANIA DEPARTMENT OF BANKING OR IN THE ALTERNATIVE FOR A PROTECTIVE ORDER upon all parties of record by depositing, or causing to be deposited, same in the U.S. mail, postage prepaid, at Carlisle, Pennsylvania, addressed as follows: By First-Class Mail: Matthew P. Amos, pro se 2503 Hoffer Street Harrisburg, PA 17103 By: t. meynvsa csq. ,? ?.:' ' <,;? , .., ?? ?: ? ti, ,?_m ' K:.. ??? -,,, f, .-3 ?_`., - Robert C. Lopez, Deputy Chief Counsel I.D. No. 80163 Office of General Counsel Commonwealth of Pennsylvania Department of Banking 17 N. Second Street, Suite 1300 Harrisburg, PA 17101 Phone: (717) 787-1471 Fax: (717) 783-8427 MATTHEW P. AMOS, Plaintiff, V. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN: OF THE BOARD OF COMMUNITY FINANCIAL, INC., Defendants. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY NO. 08-5290 CIVIL MOTION TO QUASH SUBPOENA OR, IN THE ALTERNATIVE, FOR A PROTECTIVE ORDER The Commonwealth of Pennsylvania Department of Banking (the "Department") hereby files this Motion To Quash Subpoena Or, In The Alternative, For A Protective Order in response to the subpoena issued by Matthew P. Amos (the "Plaintiff'), in the above captioned matter, and in support thereof, avers as follows: Prior Rulings 1. The Honorable M. L. Ebert, Jr. has previously ruled upon the Plaintiff's Motion for Preliminary Injunction and the Motion to Strike Additional New Matter filed by Community Financial, Inc., and Lowell R. Gates (the "Defendants"). Background 2. From October 5, 1998 to November 29, 2008, the Department was the regulator for a trust company called Community Trust Company. 3. Defendant, Community Financial, Inc., was the holding company for Community Trust Company. 4. On November 29, 2008, Community Trust Company merged with another institution regulated by the Department called Farmers and Merchants Trust Company of Chambersburg. 5. As part of the merger of Community Trust Company and Farmers and Merchants Trust Company, Community Financial, Inc., was acquired by Franklin Financial Services Corporation. 6. Franklin Financial Services Corporation ("Franklin Financial") is the holding company for Farmers and Merchants Trust Company of Chambersburg. 7. On February 9, 2009, Plaintiff served on the Department a subpoena pursuant to Pennsylvania Rule of Civil Procedure 4009.22 (the "Department Subpoena"). See Subpoena to the Commonwealth of Pennsylvania Department of Banking attached hereto as Exhibit "A." 8. The Department Subpoena requires the production of all documents in the Department's possession concerning the Department's regulation and supervision of Community Trust Company. 9: The Department has also learned that the Plaintiff has served a subpoena upon Franklin Financial Services Corporation (the "Franklin Subpoena"), seeking, inter alia, information and documents which may relate to the Department's regulation of 2 Community Trust Company.' See Plaintiffs subpoena to Franklin Financial Services Corporation attached hereto and marked as Exhibit "B." Plaintiff Failed to Follow Pennsylvania Rules of Civil Procedure 4009.21 and 4009.22 10. The Plaintiff's service of the Department Subpoena, as well as the Franklin Subpoena, was procedurally defective because Plaintiff failed to follow the procedures for service of a non-party subpoena as set forth in Pennsylvania Rules of Civil Procedure 4009.21 and 4009.22. 11. As a result, the Defendants did not receive the required twenty days advance notice and have an opportunity to review or object to the Department Subpoena and Franklin Subpoena before the subpoenas were served. 12. Defendants have filed with the Court a Motion to Quash Subpoenas Issued To Franklin Financial Services Corporation and the Pennsylvania Department of Banking or in the Alternative For A Protective Order, partly based upon the Plaintiff's failure to follow the Pennsylvania Rules of Civil Procedure regarding the service of subpoenas upon non-parties. 13. It is clear from the Defendants' motion that objections to the Plaintiff's subpoenas would have been raised had the Defendants been provided the opportunity to object pursuant to Pennsylvania Rule of Civil Procedure 4009.21. 14.. Therefore, the Department respectfully requests that the Court grant the relief requested in the Defendants' motion and an order be entered quashing the Department Subpoena and the Franklin Subpoena. ' As discussed more fully below, the Department objects to the Franklin Subpoena to the extent it seeks to compel the production of documents that Franklin Financial may be prohibited from producing under state law. 3 The Plaintiff Has Not Yet Been Granted Standine to Continue This Lawsuit 15. On September 4, 2008, Plaintiff filed a Motion for Preliminary Injunction and a Motion to Maintain a Derivative Action Lawsuit pursuant to Pennsylvania Rules of Civil Procedure No. 1506(b). 16. The Motion for Preliminary Injunction was denied by the Court on September 8, 2008. 17. On October 1, 2008, Defendants filed an Answer to Rule to Show Cause and Request to Dismiss Plaintiff's Motion to Maintain a Derivative Lawsuit and an Answer to Plaintiff's Complaint. 18. There has been no ruling on the Plaintiff's Motion to Maintain Derivative Action and the opposition thereto filed by the Defendants. 19. Plaintiff should not be allowed to commence discovery before the Court rules on Plaintiff's Motion to Maintain a Derivative Action Lawsuit. 20. As a result, the Department respectfully requests that the Department Subpoena, in addition to the Franklin Subpoena, be quashed as premature because the Plaintiff may ultimately not have standing to pursue this litigation. The Department Subpoena is Overbroad 21. Regarding the substance of the Department Subpoena, Plaintiff seeks production of all documents pertaining to Community Trust Company in the Department's possession covering the entire period during which the Department regulated and supervised the company. 22. Pennsylvania Rule of Civil Procedure 4003.1(a) states that a party may discover documents relevant to the subject matter involved in the pending action. 4 23. Pennsylvania Rule of Civil Procedure 4011 bars any discovery that would cause unreasonable oppression or burden that is beyond the scope of discovery permitted in Rules 4003.1 through 4003.6 or would require an unreasonable investigation by the party against whom discovery is sought. 24. While subpoenas may be used for discovery, subpoenas should not be used to require the production of documents merely for a fishing expedition. See American Car Foundry Company v. Alexandria Water Company, 221 Pa. 529, 536, 70 A. 867, 869 (1908) (holding that a subpoena duces tecum which required the production of all papers concerning the contested issue is not specific enough). 25. Additionally, subpoenas may be issued to review information in files, but are too broad if not limited to the reasonably expected relevant materials discoverable in the files. Commonwealth v. Mejia-Arias, 734 A.2d 870, 876 (Pa. Super. Ct. 1999) (stating in a criminal context that a defendant was not "entitled to wholesale inspection of investigatory files" of the Office of Attorney General through a subpoena). 26. The Department Subpoena is not in any way limited in scope by a time- frame or by specific subject matter. 27. Therefore, the Department respectfully requests that the Department Subpoena be quashed as unreasonable because it is overly broad and unduly burdensome. Alternative Request for Protective Order 28. In addition to the Department's request to have the Department Subpoena quashed for the reasons stated above, the Department seeks a Protective Order (i) to the extent that the Department Subpoena is not quashed and would require the production of documents and information that are privileged or otherwise protected from disclosure under state and/or federal law, including, 71 P.S. § 733-302; and, (ii) to the extent that the 5 Franklin Subpoena is not quashed and would require the production of information and documentation that is the property of the Department. The Confidentiality of Department Documents and the Department Subpoena 29. Unlike many third parties who are served with subpoenas, the Department is bound by a statute restricting the disclosure of any information or documents in the Department's possession. 30. Title 71 P.S. § 733-302 ("Section 302") governs the confidentiality and disclosure of documents in the Department's possession and provides as follows: (2) Neither the secretary nor any deputy, examiner, clerk, or other employe [sic] of the department, shall publish or divulge to anyone any information contained in or ascertained from any examination or investigation made by the department, or any letter, report, or statement sent to the department, or any other paper or document in the custody of the department, except when the publication or divulgement of such information is made by the department pursuant to the provisions of this act, or when the production of such information is required by subpoena or other legal process of a court of competent jurisdiction, or when it is used in deciding whether to prosecute or in prosecutions or other court actions instituted by or on behalf of or at the request of the department, or when referring for investigation to any Federal, State or local law enforcement or any Federal or State financial regulatory agency, including banking, insurance and securities regulatory agencies, or when the department provides information to any Federal or State financial regulatory agency, including banking, insurance and securities regulatory agencies, when the information pertains to an enforcement concern. The information shall be provided as may be necessary or appropriate, as determined in the discretion of the secretary. 71 P.S. § 733-302.A(2) (emphasis added). 31. Department personnel can be dismissed for violations of Section 302 and are subject to a criminal penalty for knowing and willful violations. 71 P.S. § 733-302.B. 32. Section 302 does provide several specific exceptions whereby the Secretary of Banking has the discretion to release information that would otherwise be barred from release by Section 302. 6 33. One of the disclosure exceptions is in response to the service of a subpoena; however, even when responding to subpoenas, Section 302 provides the Department with certain mechanisms to protect any released information from disclosure to the general public. See 71 P.S. § 733-302.A.(2), (3), (4), (6) and (7). 34. Among the protections provided by Section 302 is the ability of the Department to condition the production of documents upon the entry of a protective order and the ability to invoke any and all privileges afforded to federal financial institution regulators under federal statute, regulation or common law. 71 P.S. § 733.302.A.(2), (4), (6) and (7). 35. The special protections afforded by Section 302 are in addition to any rights and/or privileges available to any other subpoenaed party, including, but not limited to, the attorney-client privilege, work product privilege and the deliberative process privilege. 71 P.S. § 733-302.A.(3). 36. Pennsylvania Rule of Civil Procedure 4012 provides the Court with the authority to protect a party and witness from unreasonable annoyance, oppression, burden and expense, and to issue a protective order prohibiting discovery. See Stenger v. Lehigh Valley Hop. Center, 554 A.2d 954 (Pa. Super. 1989). 37. Therefore, regarding the Department Subpoena, in the event that it is not quashed, the Department respectfully requests that the Court enter a protective order requiring that: (a) all parties to the above captioned litigation and the Department execute a joint stipulated protective order that would protect the confidentiality of any documents turned over by the Department; 7 (b) the proposed stipulated protective order shall provide for the sealing of any documents that the parties intend to file with the Court or submit to the Court in a trial or hearing; and, (c) the Department shall not be required to turn over any documents or information protected by any applicable rights or privileges available to the Department under state and/or federal law. Protective Order Regarding the Franklin Subpoena 38. The Department objects to the subpoena served upon Franklin Financial to the extent that Franklin Financial may have in its possession information that is confidential and the property of the Department pursuant to the Department of Banking Code, 71 P.S. § 733-1 et seq.2 39. Title 71 P.S. § 733-404.A. specifically states that any Reports of Examination issued by the Department are the sole property of the Department and may not be disclosed. 40. Therefore, in the event that the Franklin Subpoena is not quashed, the Department requests that the Court enter an order protecting from production documents that may be in the possession of Franklin Financial that are protected from disclosure under 71 P.S. § 733-404.A. Correspondence with Plaintiff 41. On February 17, 2009, counsel for the Department sent via United States First Class Mail and United States Express Mail a letter to Plaintiff advising Plaintiff of the Department's objections to the Department Subpoena and requesting that the Plaintiff 2 At the time bf this filing this motion, the Department is unaware what, if any, regulatory information Franklin Financial may have in its possession from the Department. 8 advise the Department by February 23, 2009, whether or not Plaintiff will withdraw the Department Subpoena. 42. No response was received from Plaintiff. WHEREFORE, the Commonwealth of Pennsylvania Department of Banking respectfully requests that the Court: (a) enter an Order quashing the Department Subpoena, (b) to the extent that the Department Subpoena is not quashed, a Protective Order requiring the execution of a confidentiality stipulation and order among the parties and protecting the information and documents in the Department's possession that are protected from disclosure by applicable state and federal law; and, (c) to the extent the Franklin Subpoena is not quashed, an order protecting from producing documents that may be in the possession of Franklin Financial Services Corporation that are protected from disclosure under state law. Respectfully submitted: Ro z, Deputy of Counsel Office General Counsel ?2 Commonwealth of Pennsylvania Department of Banking 17 N. Second Street, Suite 1300 Harrisburg, PA 17101 Phone: (717) 787-1471 Fax: (717) 783-8427 9 Exhibit "A" COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND MATTHEW P. AMOS PLAINTIFF VS. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN OF THE BOARD COMMUNITY FINANCIAL, INC., DEFENDANTS File No. 08-5290 CIVIL SUBPOENA TO PRODUCE DOCUMENTS OR THINGS FOR DISCOVERY PURSUANT TO RULE 4009.22 RECEIVED FEB - 2009 DEPARTMENT OF BANKING LEGAL SECTION TO: Pennsylvania Department of Banking (Name of Person or Entity) Within twenty (20) days after service of this subpoena, you are ordered by the court to produce the following documents or things: All records that pertain to the Pennsylvania Department of Banking regulation and supervision of Community Financial Inc's subsidiary Community Trust Company. at 2503 Hoffer Street Harrisburg PA 17103 (Address) You may deliver or mail legible copies of the documents or produce things requested by this subpoena, together with the certificate of compliance, to the party making this request at the address listed above. You have the right to seek in advance the reasonable cost of preparing the copies or producing the things sought. If you fail to produce the documents or things required by this subpoena within twenty (20) days after its service, the party serving this subpoena may seek a court order compelling you to comply with it. THIS SUBPOENA WAS ISSUED AT THE REQUEST OF THE FOLLOWING PERSON: NAME: Matthew P. Amos ADDRESS: 2503 Hoffer Street Harrisburg, PA 17103 TELEPHONE: 717-236-3228 Date: C Sea of t fie Court BY THE COURT: lfl 4", M/1 Prothonotary, Civil Division ti. /_'_ , Deput Exhibit "B" 717-737-3407 SAIDIS SHUFF FLOWER i , COMMONWEALTH OF PENNSYLVANIA COUNTY OF CU'hMP LAND MATTHEW P. AMOS PL.AII`R'IpF 'VS_ COMMUNITY FINANCIAL., INC., AND LOWFLU R_ GATES, CHAIRMAN OF TIIE HOAR COMMUNITY FINANCIAL, INC., DEFENDANTS 248 P12 FEB 24 '09 09:53 bba. IVIE U' t i FEB 1 0 2001 File No. 08-5290 SUBPOENA TO PRODUCE DOCUMENTS OR THINGS FOR DISCO'VZRY PURSUANT TO RULE 4009.22 TO: I&AN'IC'I,__N IFINANCIAL SERVICES CORP08A I'ION--_ .. _. __ (Namt of Person or Entity) Within twenty (?A) days after strvire of this subpoena', you arr: nrdared by the court to produce the following documents or things: P1 se Sec Exhibit A that is MWM. _ ... .? _.. _ at 2503 Hoffer Smcrt HareisburR PA 17103 (Address) You may deliver' or mail legible copies of the documents or produce things requested by this subpoena, together with the certificate of compliance, to the party making this request at the address lists above. You have the right to seek in advance the reasonable cost of preparing the copies or producing tb things sought, If you fail to, produce the documents or things required by this subpoena within twenty (20) days after its aerviee, the party sra'ving this subpoena may seek a court order compelling you to comply with I THIS SUBPOENA WAS ISSULU AT THE REQUEST OF M. POT.InW1'N'C PERSON: NANM. Uggifiew P. Amos ADDILESS: 2503 Hoffer Strce garrisbum, PA 17103 TELLPHONP! 717-236-3228 _. __ .., BY TILL COUItr: Al 7 Prothonotary, Civil 517V-is ' ion i f i r Date: Sea ofAe Court 717-737-3407 SAIDIS SHUFF FLOWER 02, 'lU Lea ITT, J:hor 4 EXHIBIT A 248 P13 FEB 24 109 09:53 T 1410 1'W0/1 i 1- V141 AI 1. All Community Financial. Inc. (CF1) and its wholly owned subsidiaries . share registered, books and records of account, and records of the proceedings of the directors and all records that p"in to the Pennsylvania Department of Thanking regulation and supervision of CFI's subsidiary Community Trust Company. 2. All docurnesxts provided to Boenning & Scattergood, Inc. (BS) for the purpose of rendering a fairness opinion on the value of CFI, Inc. (i.e. financial projections, stock price data, information from recognized sources) 3. All corranunications between and/or by BS au?d CF1 with regards to this M inaction. 4. All communications between and/or by Franklin Financial Services Company (FFSC) and CFI with regards to this transaction. 5. All documcaxts that pertain to the distribution of the offering to sell CPI, including an iternized breakdown of the anticipated sales proceeds. This ixuludes but is not limited to total estimated legal expenses for all law firms involved, and any other items not specified in the distributed proxy statement_ 6. Copy of all documents that relate to Franklin Financial Services Company indemnification of former CF1 directors and officers. 7. Copy of the legal agreement for the non-negotiable Series A Cipital Notes which included change of control provisions that was ratified by CK's Board of directors in 7045. a Robert C. Lopez, Deputy Chief Counsel I.D. No. 80163 Office of General Counsel Commonwealth of Pennsylvania Department of Banking 17 N. Second Street, Suite 1300 Harrisburg, PA 17101 Phone: (717) 787-1471 Fax: (717) 783-8427 MATTHEW P. AMOS, Plaintiff, V. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN : OF THE BOARD OF COMMUNITY FINANCIAL, INC., Defendants. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY NO. 08-5290 CIVIL CERTIFICATE OF SERVICE I, Robert C. Lopez, Esquire, hereby certify that on February 26, 2009, I did serve or caused to be served a true and correct copy of the Commonwealth of Pennsylvania Department of Banking's Motion to Quash Subpoena Or, In The Alternative, For A Protective Order upon the following parties via United States First Class Mail postage prepaid. Matthew P. Amos, Pro se 2503 Hoffer Street Harrisburg, PA 17103 Plaintiff James D. Flower, Jr., Esquire Dean E. Reynosa, Esquire Saidis Flower & Lindsay 26 West High Street Carlisle, PA 17013 Counsel for Community Financial, Inc. and Lowel R. Gates By: ;bT C. L ez, Dy C of Counsel Y_? ^? _) ?? .-? -.? -? r... _, . -? ? .? ?_-- f C?'? - ?\ 1 ; r., n J MATTHEW P. AMOS IN THE COURT OF COMMON PLEAS OF PLAINTIFF CUMBERLAND COUNTY, PENNSYLVANIA V. COMMUNITY FINANCIAL, INC., AND LOWEL R. GATES, CHAIRMAN OF THE BOARD OF: COMMUNITY FINANCIAL, INC., : DEFENDANTS : NO. 08-5290 CIVIL ORDER OF COURT AND NOW, this 9th day of March, 2009, upon consideration of Defendants' Motion to Quash Subpoenas Issued to Franklin Financial Services Corporation and the Pennsylvania Department of Banking or in the Alternative for a Protective Order, And the Court noting that the Plaintiff's Motion to Maintain Derivative Law Suit in the above captioned matter having been denied and his complaint dismissed; IT IS HEREBY ORDERED AND DIRECTED that the Defendants' Motion is GRANTED. Plaintiffs subpoenas issued to Franklin Financial Services Corporation and the Pennsylvania Department of Banking are hereby QUASHED. Franklin Financial Services Corporation and the Pennsylvania Department of Banking are not obligated to respond to Plaintiff's subpoena in the above captioned matter. By the Court, M. L. Ebert, Jr., J. I f M Wd 6 -- SVW 6001 2OU40- u /James D. Flower, Jr., Esquire Dean E. Reynosa, Esquire Attorneys for Defendants Aafthew P. Amos, Pro Se Plaintiff 3??o?oQ MATTHEW P. AMOS, Plaintiff, V. COMMUNITY FINANCIAL, INC., AND LOWELL R. GATES, CHAIRMAN: OF THE BOARD OF COMMUNITY FINANCIAL, INC., Defendants. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY NO. 08-5290 CIVIL ORDER A AND NOW, on this q ! day of , 2009, upon consideration of the Commonwealth of Pennsylvania Department of Banking's Motion to Quash Subpoena Or, In The Alternative, For A Protective Order (the "Motion"), the Motion is GRANTED and it is hereby ORDERED and DECREED that the subpoena served by the Plaintiff upon the Commonwealth of Pennsylvania Department of Banking on February 9, 2009, is hereby quashed and the Commonwealth of Pennsylvania Department of Banking is not required to respond. BY THE COURT: J. Copies to: Matthew P. Amos, Pro se 2503 Hoffer Street Harrisburg, PA 17103 Plaintiff 01 :h Wd 6- 8VW 6082 MWONO UOW 3Hi 3O 3??D-03 James D. Flower, Jr., Esquire Dean E. Reynosa, Esquire Saidis Flower & Lindsay 26 West High Street Carlisle, PA 17013 Counsel for Community Financial, Inc. and Lowell R. Gates ,//Robert C. Lopez, Deputy Chief Counsel Office of General Counsel Pennsylvania Department of Banking 17 N. Second Street, Suite 1300 Harrisburg, PA 17101 Counsel for Commonwealth of Pennsylvania Dept. of Banking P tc,' /r1,a.&L 3/1010? 16- 2 MATTHEW P. AMOS, IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff NO. 08-5290 CIVIL V. COMMUNITY FINANCIAL, INC. CIVIL ACTION and LOWELL R. GATES, Defendants Shareholder Derivative Action IN RE: MOTION TO MAINTAIN A DERIVATIVE LAWSUIT BEFORE OLER, J., AND EBERT, J. ORDER OF COURT AND NOW, this 91h day of March, 2009, upon consideration of Plaintiff's Motion to Maintain Derivative Lawsuit, IT IS HEREBY ORDERED AND DIRECTED that the Plaintiff's Motion to Maintain Derivative Lawsuit is DENIED and his Complaint is DISMISSED. By the Court, ? Matthew P. Amos Plaintiff Pro Se 2503 Hoffer Street Harrisburg, PA 17103 ?James D. Flower, Jr., Esquire Dean E. Reynosa, Esquire Attorneys for Defendants Saidis, Flower & Lindsay 26 West High Street Carlisle, PA 17103 1 3 lo?o? M. L. Ebert, Jr., 01 • q Wd 6 -- QVW 6002 kdViO NU 1 Uid 3H1 3U MATTHEW P. AMOS, Plaintiff IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-5290 CIVIL V. COMMUNITY FINANCIAL, INC. and LOWELL R. GATES, Defendants CIVIL ACTION Shareholder Derivative Action IN RE: MOTION TO MAINTAIN A DERIVATIVE LAWSUIT BEFORE OLER, J., AND EBERT, J. OPINION and ORDER OF COURT EBERT, J., March 9, 2009 - STATEMENT OF FACTS Plaintiff Matthew P. Amos is a shareholder of Community Financial, Inc. (CFI). Plaintiff has brought this derivative action against Defendants CFI and Lowell R. Gates, Chairman of the Board of CFI, pursuant to Pa.R.C.P. 1506, to forestall a merger between CFI and Franklin Financial. Plaintiff claims as a result of corporate mismanagement, self dealing and fraud, he must pursue this stockholder's derivative action in order to determine the reasons why the value of the shares of stock in CFI have decreased significantly. The Plaintiff is a shareholder in CFI and currently owns 25,700 shares which he initially purchased for $82,000.00 in 1989. The current dispute was precipitated by what Plaintiff perceives as efforts to prevent him from obtaining corporate information that he argues he and other shareholders are entitled to under 15 Pa. C.S. §1508 and this Court's decision in Helm v. CFI, No. 07-2122 (Cumberland County CCP, J. Ebert). In July and August 2008, Plaintiff exchanged correspondence with Susan A. Russell ("Russell"), President and Chief Executive 2 Officer of CFI, to arrange for an inspection of CFI's corporate documents, pursuant to 15 Pa. C.S. § 1508. On August 12, 2008, Plaintiff sent Russell a Verified Demand for Inspection of Corporate Documents. Russell notified Plaintiff by letter on August 20, 2008, that the requested records would be made available for Plaintiff's inspection and copying at CFI's offices between 9 a.m. and 3 p.m. on Wednesday, August 27, 2008. On August 27, 2008, Plaintiff went to CFI's offices during this scheduled time and inspected the documents. One day after inspecting the documents, Plaintiff sent Russell another Verified Demand for Inspection of Corporate Documents which was substantially similar to his previous requests. On September 4, 2008, Plaintiff filed this shareholder derivative action. Plaintiff began this action by filing a "MOTION TO MAINTAIN A DERIVATIVE LAWSUIT PURSUANT TO PA.R.C.P. NO. 1506(b)." Plaintiff's entire Motion consists of the following: AND NOW comes the Plaintiff Matthew P. Amos, representing himself, and moves to maintain a derivative lawsuit in accordance with Pa.R.C.P. No. 1506(b) because there is a strong prima facie case in favor of the claim asserted on behalf of the corporation and without the action serious injustice will result. Respectfully submitted, Matthew P. Amos On the same day, Defendant filed a "COMPLAINT" requesting that CFI and chairman Lowell Gates pay compensatory damages, punitive damages, and be enjoined from merging with Franklin Financial. The issue to be decided in this case is whether Plaintiff has set forth sufficient facts in his Motion and Complaint to meet the requirements of Pa.R.C.P. 1506, such that he can maintain a shareholder derivative action against CFI. DISCUSSION A shareholder derivative suit permits an individual shareholder to bring suit to enforce a corporate cause of action against the corporation's officers, directors, and third parties. Garber v. Lego, 11 F.3d 1197, 1200-01 (3d Cir. 1993). In a shareholder derivative action, the corporation has the first opportunity to bring a lawsuit, because the corporation is the directly injured party. Therefore, the cause of action stated in the complaint first belongs to the corporation, through its officers and directors. Kistler v. Faller, 8 Pa. D. & C. 2d 682, 684-85 (Cumberland Cty, 1956). Providing the corporation with the first opportunity to address the alleged wrong is consistent with the principle that the decision to litigate or refrain from litigating the claim is a decision concerning the corporation's management and is therefore the responsibility of the corporation's directors. Garber v. Lego, 11 F.3d 1197 at 1201 (3rd Cir. 1993); Blasband v. Rales, 971 F.2d 1034, 1048 (3d Cir. 1992). The shareholder derivative action is a powerful tool that, if left unrestrained, can undermine the basic principle of corporate governance that the board of directors should make the corporation's decisions. Daily Income Fund, Inc. v. Foz, 464 U.S. 523, 531 (1984). In addressing this case, under Pennsylvania law, two prerequisites must be met before a shareholder can bring a shareholder derivative action against a corporation in which he or she holds an interest. Rule 1506 (a) (1), (2) requires a plaintiff in shareholder derivative action to allege two specific items in his complaint. A plaintiff is required to allege that (1) he or she is a stockholder or owner of an interest in the corporation and (2) the specific efforts that the plaintiff made to secure enforcement by the corporation or the reasons for not making such efforts. It is clear from the record that the Plaintiff is a shareholder of CFI. Therefore, to determine if 4 Plaintiff can maintain his shareholder derivative action against CFI, this Court must determine whether he has met the second requirement contained in Rule 1506, (a) (2). To maintain his shareholder derivative action against CFI, Plaintiff must have alleged in his Complaint that he either sought corporate enforcement or that such efforts would have been futile. Requiring pre-suit demand assures that the corporation, through its directors and officers, will have the opportunity to utilize sound business judgment in deciding whether and how to address any claims asserted on its behalf. Rule 1506(2) does not state what specific efforts must be pleaded in order to satisfy this pre-suit demand requirement. However, the cases hold that to recover a shareholder must demonstrate that he has left nothing undone which he might have done to prevail on the corporation to bring such action. Burdon v. Erskine, 401 A.2d 369, 371 (Pa. Super. Ct. 1979). On the other hand, if no efforts were made by the shareholder, then in order to excuse the pre-suit demand requirement, the plaintiff must set forth sufficient facts to establish why demand would be futile. Garber v. Lego, 11 F.3d 1197 at 1203 (3rd Cir. 1993). A. Pre-suit Demand Requirement. Plaintiff alleges that he has made several "demands" upon CFI: (1) a "Verified Demand" letter dated June 30, 2008, sent to CFI's corporate counsel, (2) a "Verified Demand" letter dated August 12, 2008 and sent to CFI president Russell and CFI's counsel, (3) a "Verified Demand" letter dated August 22, 2008 to CFI president Russell, and (4) a "Verified Demand" letter dated August 28, 2008, to CFI president Russell and CFI's counsel. An examination of these letters reveal that they can be best described as requests for information under the provisions of 15 Pa.C.S.A. § 1508. CFI responded to the first letter on July 29, 2008, informing Plaintiff that his letter did not comply with Pennsylvania Business Corporation Law. In response to Plaintiff's next letter, CFI provided Plaintiff with the opportunity to inspect the documents that he requested. Clearly, none of these "verified demand" letters requested that the corporation or any of its board of directors or officers take legal action on behalf of the corporation to prevent or correct what the Plaintiff described in his complaint as breach of fiduciary duty, waste of corporate assets, or fraud or fundamental unfairness. It is clear from the pleadings that the board of directors of CFI consists of 5 members. The Plaintiff has not alleged in his complaint that he ever attempted to have any member of the governing body of Community Financial Inc. pursue the lawsuit he now asks this Court to approve as a shareholder derivative suit. In short, nothing in the record establishes anything which would satisfy the pre-suit demand requirement. B. Futility of Pre-suit Demand. In order to excuse the pre-suit demand requirement the plaintiff must then allege more than the fact that the board of directors merely exercised erroneous business judgment. Rather, it must be alleged that a majority of the board of directors engaged in fraudulent acts. Id.; Kelly v. Thomas, 83 A. 307, 309 (Pa. 1912). Allegations of corporate waste without alleging fraudulent acts or self-dealing in the Complaint are not sufficient to maintain a shareholder derivative action. Garber, 11 F.3d at 1206. In the instant case, Plaintiff has generally claimed that share value in CFI has declined because of corporate waste, and that one member of the board of directors, Chairman, Lowell Gates, engaged in "fraud and/or fundamental unfairness" which was harmful to CFI. Plaintiff's claims appear to consist of mere speculation. His complaint uses terms like "mysteriously," "interestingly" and "utilizing remarkable gall." Plaintiff even recites in his brief that "he conjectured that there was a no interest loan in the form of a trust to Gates as well as a 6 sweetheart real estate deal from which Gates benefited." The complaint contains no factual averments in support of these "conjectured claims." Traditionally, Pennsylvania Courts have been aggressive in enforcing demand requirements. Plaintiffs must state with particularity averments that show self dealing, bias, bad faith or corrupt motive. Furthermore these averments must allege that a majority of the directors of a corporation or insiders have depleted or misappropriated corporate assets for their own personal gain. Tyler v. O'Neil, 994 F. Sup. 603 (E.D. PA 1998). Stated otherwise, in order to excuse demand under Pennsylvania law, a Plaintiff must allege that a majority of the board of directors engaged in acts that are fraudulent and not that they merely exercised erroneous business judgment. Id. at 12. The sine qua non of actual fraud is the showing of a deception. In Tyler v. O'Neil, a case involving a corporation with only two shareholders, fraud was averred with particularity. The averments clearly showed that majority shareholder O'Neil, who controlled 90% of the stock, had made false representations. O'Neil represented himself to be the company's sole owner in loan applications, in income tax returns and in bankruptcy court filings. He falsely indicated that the corporation was purchasing real estate and building a new facility when in fact, O'Neil and his wife were taking title to both the property and the building. These claims were pled with sufficient particularity to even support claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et. seq. Given the close hold nature of the corporation, and the past fraudulent conduct of O'Neil and his wife, it was obvious that asking the corporation to institute suit would have been futile. This is not the situation presented in the case at bar. Plaintiff has clearly not shown that a majority of the board of directors of CFI have engaged in acts that are fraudulent. While there is 7 no question that it appears that the value of Plaintiff's shares in CFI has declined, given the business climate in the United States at this time, such an averment does not establish fraud. Therefore, Plaintiff s motion to maintain his shareholder derivative action must be denied and his Complaint dismissed. Accordingly, the following order shall be entered: ORDER OF COURT AND NOW, this 9th day of March, 2009, upon consideration of Plaintiff s Motion to Maintain Derivative Lawsuit, IT IS HEREBY ORDERED AND DIRECTED that the Plaintiffs Motion to Maintain Derivative Lawsuit is DENIED and his Complaint is DISMISSED. By the Court, '*?' -?' 4 M. L. Ebert, Jr., % J. Matthew P. Amos Plaintiff Pro Se 2503 Hoffer Street Harrisburg, PA 17103 James D. Flower, Jr., Esquire Dean E. Reynosa, Esquire Attorneys for Defendants Saidis, Flower & Lindsay 26 West High Street Carlisle, PA 17103 8