The URL can be used to link to this page

Home My WebLink About02-2985IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff, KMAN & KMAN FINANCIAL GROUP, Defendant. CaseNo: O~ '- ~ Civil Action Law - Law 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. Lawyers Reference Service Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 800-990-9108 {L0252446.1} IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff, V. KMAN & KMAN FINANCIAL GROUP, Defendant. : Case No: : Civil Action Law - Law NOTICIA Le han demandado a usted en la corte. Si usted quiere defenderse de estas demandas expuestas en las paginas siguientes, usted tiene viente (20) dias de plazo al partir de la fecha de la demanda y la notificacion. Usted debe presentar una apariencia escrita o en persona o por abogado y archivar en la corte en forma escrita sus defensas o sus objeciones a las demandas en contra de su persona. Sea avisado que si usted no se defiende, la corte tomara medidas y puede entrar una orden contra usted sin previo aviso o notificacion y por cualquier queja o alivio que es pedido en la peticion de demanda. Usted puede perder dinero o sus propiedades o otros derechos importantes para usted. LLEVE ESTA DEMANDA A UN ABODAGO IMMEDIATAMENTE. SI NO TIENE ABOGADO O SI NO TIENE EL DINERO SUFICIENTE DE PAGAR TAL SERVICIO, VAYA EN PERSONA O LLAME POR TELEFONO A LA OFICINA CUYA DIRECCION SE ENCUENTRA ESCRITA ABA JO PARA AVERIGUAR DONDE SE PUEDE CONSEGUIR ASISTENCIA LEGAL. Lawyers Reference Service Cumberland County Bar Association Carlisle, PA 17013 800-990-9108 {L0252446.1} 1N THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff, KMAN & KMAN FINANCIAL GROUP, Defendant. Case No: Civil Action Law - Law COMPLAINT AND NOW, comes the Plaintiff, LrRL Financial Group, by and through its attorneys, Eckert Seamans Cherin& Mellott, LLP, and makes the following Complaint against the Defendant, Kman& Kman Financial Group, and in support thereof avers as follows: 1. The Plaintiff, U.R.L. Inc., a Pennsylvania business corporation d/b/a URL Financial Group (hereinafter "URL"), which holds a Certificate of Qualification issued by the Pennsylvania Insurance Department and has a principal place of business located at 5320 Jaycee Avenue, Harrisburg, Dauphin County, Pennsylvania. 2. The Defendant, Kman & Kman Financial Group (hereinafter "Kman"), is a Pennsylvania company which holds its Certificate of Qualification issued by the Pennsylvania Insurance Department and has a principal place of business located at 1018 Dogwood Lane, Enola, Cumberland County, Pennsylvania. 3. Defendant, Kman has an office in Cumberland County and regularly conducts business there. 4. Venue lies in Cumberland County pursuant to PA. R. Civ. P. 2179. Fact Annlicable to All Counts 5. Pursuant to its Certificate of Qualification issued by the Pennsylvania Insurance Department, Kman obtained an appointment to sell insurance from National Western Life Insurance Company (hereinafter '~qational Western Life") on or about December 2, 1999. 6. National Western Life has been licensed to write insurance policies in Pennsylvania by thc Pennsylvania Insurance Department since 1979 and has a mailing address at 850 East Anderson Lane, Austin, Texas. 7. The appointment between Kman and National Western Life is a contractual agreement which was agreed to as evidenced by Mr. Kman's signature. A copy of the General Agent Contract and Schedule of Commissions is attached hereto Exhibit "A". 8. Kenneth M. Clemens, Executive Vice-President of URL as a general agent rccrnited Mr. Kman to sell National Western Life products based on Mr. Kman's representations made in the Agent Data Sheet where Mr. Kman indicated that he had appointments with Life USA, WRL, Nationwide, American Scandia, MML, Pioneer, CRL, CSD, John Elden plus "many others" in thc last five years. As part of the licensing agreement, Mr. Kman filled out and signed an agent data sheet. A copy of the Agent Data Sheet is attached hereto as Exhibit "B". 9. Based on Mr. Kman's representations, in the agent data sheet, he was granted an appointment to sell National Western Life products. See Exhibit "B". 10. Based on the statements made by Mr. Kman on the agent data sheet, the recruiting agent, Kenneth M. Clemens, certified that Mr. Kman had a trustworthy character. 11. As part of the contracting and licensing document, Mr. Kman signed a General Agent Contract and Schedule of Commissions. See Exhibit "A". 12. Under paragraph eight of the General Agent Contract, Kman was to be paid on commission based on premiums to and received by National Western Life in accordance to the schedule of commissions which are listed as part of the contract. See Exhibit "A". 13. Under paragraph twenty of the General Agent Contract, Kman agreed repay commissions to National Western Life if premiums were returned to the policy-holder. See Exhibit "A". 14. On October 25, 2000, Kman sold a National Western Life fixed rate annuity under policy # 0100956114 to Gloria Osborne for which he was paid $7,393.98 in commission by National Western Life. A copy of the account statement reflecting commissions paid to Kman is attached hereto as Exhibit "C". 15. On February 27, 2001, Kman sold two National Western Life fixed rate annuities under policy #'s 0100953487 and 0100963403 to Suzanne E. Troy for which he was paid $9,708.98 in commission by National Western Life. See Exhibit "C". 16. National Western Life fixed rate annuities have a "free look" period during which a policy holder may return the policy for a full retired of the premium. 17. During the fi'ce look period, Gloria Osborne and Suzanne E. Troy returned their respective fixed rate annuities to National Western Life for a full refund of the premiums paid. 18. Consequently, pursuant to paragraph twenty of the General Agent Contract, National Western Life demanded a refund of the unearned commission and notified Kman of its outstanding debt by a letter dated July 27, 2001. A copy of the July 27, 2001 letter is attached hereto as Exhibit "D". 19. Under paragraph twenty of the General Agent Contract, Kman agreed to pay National Western Life court costs and reasonable attorneys fees for collection of the debt. See Exhibit 20. On September 4, 2001, National Western Life terminated through a letter notified that it was terminating the General Agent Contract with Kman as a result of Kman's outstanding debt. A copy of the September 4, 2001 letter is attached hereto as Exhibit "E". 21. As a result of a Regional Agency Manager Contract between URL and National Western Life, URL became responsible for Kman's outstanding debt to National Western Life and in fact paid National Western Life Kman's unearned commissions. 22. Thereafter, on November 16, 2001, National Western Life assigned its right to collect the unearned commissions fi.om Kman to URL. A copy of the November 16, 2001 assignment fi.om National Western Life to URL is attached hereto as Exhibit "F". 23. As a result of accruing interest, Kman currently has an outstanding balance with URL in the amount of $17,815.56 24. Sometime prior to January 23, 2002, URL notified Kman of its intention to collect the unearned commissions it was owed. A copy of the email transmission from URL to Kman is attached hereto as Exhibit "G". 25. On February 26, 2002 URL through its undersigned counsel notified Kman of its outstanding debt and attempted to collect this debt without resorting to legal action. 26. Kman did not comply with any request to return the unearned commissions Count I - Breach of Contract 27. Paragraphs 1 through 27 of URL's Complaint are incorporated herein by reference. 28. By executing the General Agent Contract, Kman agreed to all terms and provisions of the contract including returning unearned commissions for all policies in which National Western Life returned premiums during the free look period. 29. By not refunding the unearned commissions for $17,815.56, Kman breached its contract with National Western Life. 30. Under URL's Regional Agency Manager Contract with National Western Life, URL became responsible for Kman's outstanding debt to National Western Life and in fact paid National Western Life Kman's unearned commissions. 31. Under the November 16, 2001 assignment, URL is entitled to collect the unearned commissions fi.om Kman. See Exhibit "F". 32. To date, Kman has not refunded the unearned commissions to URL under its General Agent Contract, of which URL is a beneficiary as a result of the November 16, 2001 assignment. WltEREFORE, Plaintiff, URL, demands judgment against Defendant, Kman, in the amount of $17,815.56, together with interest and costs and attorney's fees which amount is within the limits requiring reference to a Board of Arbitrators under Cumberland County Rules. Count II - Unjust Enrichment 33. Paragraphs 1 through 33 of URL's Complaint are incorporated herein by reference. 34. URL refunded Kman's unearned commissions for $17,815.56 to National Western Life as referenced above. 35. Kman has been unjustly enriched at the expense of URL in the amount of $17,815.56, which represents the unearned commissions for which National Western Life had to refund premiums for the fixed rate annuities returned during the flee look period. WttEREFORE, Plaintiff, URL, demands judgment against Defendant, Kman, in the amount of $17,815.56, together with interest costs and attorney's fees which is within the limits requiring reference to a Board of Arbitrators under Cumberland County Rules. Respectfully submitted, ECKERT SEAMANS CHERIN & MELLOTT, LLC Supreme Ct. I.D. #81916 One South Market Square Building 213 Market Street Harrisburg, PA 17101 (717) 237-6000 Attorneys for Plaintiff, URL Financial Group Dated: June ~3~3,2002 ATTORNEY VERIFICATION I, Ron S. Chima, Esquire, on behalf of URL Financial Group, hereby verify and state that the facts set forth in the foregoing document 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.A. Section 4904 relating to unswom verification to authorities. Date: Ron S~h¥~ire ~ J50E, AGENCY DEPT PAGE 09 ~1/25/2002 12:56 512-7. 8506 AGENCY DEPT PACE 10 CONFIDENCE FI. EX.4~ Non. Q~u~eCI Yellr 1 Ye~rB ~.10 Thelllf~r O-7O 71-80 13.00'/, P. O0% I P. O0'/. . ~ 0.00~ 10.00~ 2.00~ 0.00'/, 1'0.0C~ ~ 0~/25/2802 1~:56 512-7; 2506 AGENCY DEPT PI~E 0~/25/2009 1~:58 512-7~ ~506 AGE]',ICY DEPT PAGE 12 NATIONAl,' BENEFACTOR 8ELECT policy Form 01-1109-96 and All State Variation. Thereof Y~ 4,00% 4.00~ 0~/25/2082 12:56 512-71 J506 AGENCY DEPT PA6E 13 NATIONAL ° ~FF_,STBRN GENERAL AGENT CONTRACT BENEFACTOR SELECT' FIVE Polloy F~rm 01-1109-96 and All State Variations Thereof Y~ l~t ¥~.'* ~d Year ~n:l-7~ Year Senior ~ ~ - Ma~,~lng EAST ANDE~JiON ~ · 'AI~'"i'IN, TEXAS 7r~J~-lGo2 0~/25/2002 ~2:§G 512-7. B50G AGENCY ~PT P/~4~ ~4 NATIONAL* ~_,ST~ ~I~M~NT 7'0 GffJV~ AG~IVT' CONT~ Arthur W. Ptoksdng~g Senk~ Vk~e Predde~- O~/25Z20B2 12:56 512-7 3506 AGID',C¥ DEPT PAGE 15 NATIONAL~ AMKM)MF. NT TO GI~NIiP. AL AGI~NT CONTRACT MONEYSHIELD 2 ~ l~t Ymfr. Non,,Qudlled l~ue ~ 'P~ A 10.oo~ .. 0.0o% PIInB 1~ Y~r ~ O-88 1 O. Oo% - 8.0O% 06-70 ~m 10.00% · r1-78 &70~ ' 7.70% Rm'~ew.l o.oo~ o.~ 0~/25/2002 12:56 512-7i 3506 AGENCY DEPT PAGE 04 "' ;~'W-9 I Request. for Taxpayer I mvo~.~,?~ ~,AMO6 C:M. No. '~?.~x L'am W-O ~w. %MIt i 12:56 512-7} 850G AGE]~CY DEPT P~GE 82 H H 0~ UHH I r~ ~o 0 d H 0 U o u~ NATIONAL \ DONNA L RICHARDSON, FLMI, ACS, AI.4A, Sll-4F Aa~sr cotcrvaCnNG ,~ uc~usma ~'~ September 4, 2001 P.O. Box 45 ~5~>-'. URL Enol~ PA 17025-0045 RE: Agent Account #68383 De~Mr. Kman: It is with regret that we notify you that your contract with National Western Life will be terminated fifteen days from the date of this letter because your production has not been sufficient to cover your debit commission balance. In accordance with your contract, you should make arrangements to repay any monies you may owe to National Western Life. For information concerning your account, please contact the Commission Department. The Department's toll-free number is (800) 760-3434, extension 369. Your contract further provides that you return all National Western Life materials immediately. They should be shipped to the attention of the Supply Department, National Western Life, 850 E. Anderson Lane, Austin, TX 78752-1602. We wish you much success in your future endeavors. Donna L. Richardson, FLMI, ACS, AIAA, SILAF cc: #53028 URL, Inc. 850 EAST ANDERSON LANE · AUSTIN, TEXAS 78752-1602 TEL. 512-719-2369 * WATS 800-531-5442 · FAX 512-719-8506 AGENT DIRECT WATS 800-760-3434 EXT. 369 ° E-MAIL: dragency~onr.com NATIONAL WESTERN LIFE INSURANCE COMPANY July 27, 2001 Mr. Michael J. Kman, Jr. P O Box 45 Enola, PA 17025-0045 RE: Agent Account #68383 DearMr. Kman: While reviewing your production records, I noticed that National Western Life has not recently received new applications from you. We want to continue our association with you, for we appreciate having an opportunity to be of service to you and to your clients. There is a deficit balance in your commission account, and your commission earnings at this time do not appear to be sufficient to repay the balance. As of this date, the balance due this Company from you is $17,530.52. We would like to see your balance repaid by commissions on new business. However, if you do not anticipate placing new applications with National Weatem within the next momh, please clear up your account balance by sending me your check or money order for $17,530.52. Your payment should be made payable to National Western Life and mailed to my personal attention at the address shown on this stationery. If it is inconvenient for you to send the entire $17,530.52 today, please contact me today. I shall be happy to discuss a repayment plan with you. Please send us your new applications, remit payment in full, or contact me within the next thirty (30) days so that we can continue your appointment to represent National Western Life. We look forward to heating from you soon. Best regards, % Donna L. Richardson, FLMI, ACS, AIAA, SILA-F cc Lura Rogers #53028 URL 850 FAST ANDERSON LANE, AUSTIN, TEXAS 78752-1602 TEL 512-719-2369 · WATS 800-531-5442 · FAX 512-719-8506 AGENT DIRECT WATS 800-760-3434 EXT. 369 · E-MAIL: dragency~onr.com WHEREAS, URL, Inc., ("Agent") entered into a Regional Agency Manager Contract dated September 7, 1994, ("Contract") with National Western Life Insurance Company ("NWL"), and WHEREAS, the Contract authorizes Agent to contract sub-agents and requires supervision of such sub-agents, subject to approval of and appointment by NWL of such sub-agents, and WHEREAS, Michael Kman, Jr., ("sub-agent") was contracted by NWL, at the request of Agent, on November 29, 1999, and WHEREAS, Sub-agent's contract was terminated effective September 19, 2001, and WHEREAS, Sub-agent became indebted to NWL while under the appointment and supervision of Agent and remained indebted to NWL on the date his/her contract was terminated in the amount of $17,815.56. NOW, THEREFORE, FOR VALUE RECEIVED, NWL, acting herein by and through its duly authorized officers, does hereby transfer and assign to Agent all its right, title and interest in and to any and all sums of money now due or to become due to it from Sub-agent under Sub-agent's contract, and any and all amendments and/or addenda thereto, and NWL hereby authorizes Agent at his/her own expense to take all steps necessary to collect such sums of money. DATED this 16th day of November, 2001. NATIONAL WESTERN LIFE INSURANCE COMPANY Assistant Vice President Good morning Mike: I regret that you may have perceived our discussion yesterday regarding your debit balance with URL Financial Group as threatening in nature. It is simply my intention that you seriously consider the consequences of the actions I will be forced to take should you decide not to accept my offer for repayment. Understand that I take no pleasure in negatively affecting the careers of the financial services professionals it is normally my pleasure to serve. For the record, my offer for repayment remains valid until 5:00pm EST on Wednesday, January 23, 2002 and is as follows: Current debt of $17,815.56 will be discounted 10% as a gesture of good will. New balance = $16,034.00. 25% payment of new balance( $4,008.50 ) due Feb~ary 1, 2002. New balance = $12,025.50 1/12 of new balance( $1,002.12 ) due the first of ea~ch month beginning March1, 2002 until the balance of the debt is zero. ' ' I am flexible in determining how monthly balance is paid ( either cash or commission debit from new business ). if I do not respond by 5pm EST on Wednesday, January 23, 2002, then I will accept this as an official rejection of my offer and I will proceed as follows: Contact counsel for URL Financial Group and instruct{them to initiate legal proceedings against you. =' ? -' Contact Dun & Bradstreet Receivable Managem~ni services and instruct them to begin collection proceedings and notify creditors. File complaint with the Pennsylvania Insurance department and request a hearing and investigation regarding you, your business, clients, counsel, and potential improprieties and conflicts of interest. File a complaint with the Securities and Exchange Commission and request a hearing and investigation regarding you, your business, clients counsel, and potential improprieties and conflicts of interest. Mike, please do not misinterpret this Communication as hostile in nature. If you choose to reject my offer for repayment, I will respect that. Howeyer, p!e, ase respect the actions that I will, in turn, be forced to take against you. It is my hope that we,ca~ put emot OhS aside and make prudent business decisions to resolve this matter. Sincerely, I(enneth 9ff. C[emens Executive Vice President URL Financial Group Email: kenc@urlfinancial.com Phone 717-540-5690 Ext 107 Fax 717-540-5628 Visit our web site at: http://www, udfinancial, com IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, : Plaintiff : : V. .. KMAN & KMAN FINANCIAL GROUP, : Defendant : CIVIL ACTION - LAW NO. 02-2985 IMPORTANT NOTICE To: Michael J. Kman, Jr P.O. Box 45 Enola, PA 17025-0045 Date of Notice: July 22, 2002 Date: July 22, 2002 YOU ARE IN DEFAULT BECAUSE YOU HAVE FAILED TO TAKE ACTION REQUIRED OF YOU IN THIS CASE. UNLESS YOU ACT WITHIN TEN DAYS FROM THE DATE OF THIS NOTICE, A JUDGEMENT MAY BE ENTERED AGAINST YOU WITHOUT A HEARING AND YOU MAY LOSE YOUR PROPERTY OR OTHER IMPORTANT RIGHTS. YOU SHOULD TAKE THIS NOTICE TO A LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE FOLLOWING OFFICE TO FIND OUT WHERE YOU CAN GET LEGAL HELP: Lawyers Reference Service Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 n S.-~l~una, Esquire I.D. No. 81916 Eckert Seamans Cherin & Mellot 213 Market Street, 8~ Floor Harrisburg, PA 17101 (717) 237-6000 Attorneys for Plaintiff {L0253418.1 } IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, : Plaintiff : : V. KMAN & KMAN FINANCIAL GROUP, : Defendant : To: Date of Notice: Michael J. Kman, Jr P.O. Box 45 Enola, PA 17025-0045 July 22, 2002 CIVIL ACTION - LAW NO. 02-2985 Fecha Del Aviso: USTED ESTA EN REBELDIA PORQUE HA FALLADO DE TOMAR LA ACCION REQUERIDA EN ESTE CASO. A MENOS QUE USTED TOME ACCION DENTRO DE LOS PROXIMOS DIEZ (10) DIAS DE LA FECHA DE ESTE AVISO, SE PUEDE DICTAR UN FALLO EN CONTRA SUYA SIN LLEVARSE A CABO UNA VISTA y USTED PUEDE PERDER SU PROPIEDAD y OTROS DERECHOS IMPORTANTES. USTED DEBE LLEVAR ESTE DOCUMENTO INMEDIATAMENTE A SU ABOGADO. SI USTED NO TIENE UN ABOGADO O NO PUEDE PAGAR UNO, VAYA O LLAME LA OFICINA ABA JO INDICADA PARA QUE LE INFORMEN DONDE PUEDE CONSEQUIR AYUDA LEGAL. Lawyers Reference Service Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 (800) 990-9108 Date: July 22, 2002 · ima, g'[quire I.D. No. 81916 Eckert Seamans Cherin & Melior 213 Market Street, 8~ Floor Harrisburg, PA 17101 (717) 237-6000 Attorneys for Plaintiff {L0253418.1} CERTIFICATE OF SERVIC~ I hereby certify that a tree and correct copy of the foregoing Ten Day Notice was served on the following person of record by deposit in the United States mail, first class postage prepaid, this 14th day of November, 2001. Date: July 22, 2002 Michael J. Kraan, Jr. Kman & Kman Financial Group P.O. Box 45 Enola, PA 17025-0045 n S. Chima, Esquire I.D. No. 81916 Eckert Seamans Cherin & Mellot 213 Market Street, 8~ Floor Harrisburg, PA 17101 (717) 237-6000 Attorneys for Plaimiff {L0253418.1} SHERIFF'S RETURN - CASE NO: 2002-02985 P COMMONWEALTH OF PENNSYLVANIA: COUNTY OF CUMBERLAND URL FINANCIAL GROUP VS KMAN & KMAiq FINANCIAL GROUP REGULAR BRYAN WARD , Sheriff or Deputy Sheriff of Cumberland County, Pennsylvania, who being duly sworn according to law, says, the within COMPLAINT & NOTICE was served upon KMAN & KMAN FINANCIAL GROUP the DEFENDANT , at 1925:00 HOURS, at 1018 DOGWOOD LANE on the 25th day of June , 2002 ENOLA, PA 17025 MIKE KMAN, BUSINESS OWNER by handing to 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 18.00 Service 10.35 Affidavit .00 Surcharge 10.00 .00 38.35 Sworn and Subscribed to before me this [-- day of ~ A.D. · P~othonot ary So Answers: R. Thomas Kline 06/26/2002 ECKERT SEAMANS CHERIN MELLOTT By: Deputy Sheriff IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff Vo KMAN & KMAN FINANCIAL GROUP, Defendant Vo NATIONAL WESTERN LIFE, Additional Defendant NO. 02-2985 CIVIL TERM CIVIL ACTION - LAW NOTICE You have been sued in court. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this complaint and notice are served, by entering a written appearance personally or by attorney and filing in writing with the court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the court without further notice for any money claimed in the complaint or for any other claim or relief requested by the plaintiff. You may lose money or property or other fights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. Cumberland County Bar Association Lawyer Referral Service 2 Liberty Avenue Carlisle, PA 17013 (717) 249-3166 20. The conduct of the Additional Defendant NWL was done with specific knowledge of the importance of the misrepresentation to the clients' decision to purchase an annuity policy and such conduct was done with the intent that Defendant Kman and its clients would be deceived. WHEREFORE, Kman & Kman Financial Group requests that this Court grant judgment for it and against Additional Defendant, together with punitive damages, costs, Counsel fees, and such other relief as this Court deems appropriate, the total of which exceeds the limits for compulsory arbitration under the Local Rules for the Cumberland County Court of Common Pleas. Respectfully submitted, HANFT & KNIGHT, P.C. Gregory H. Knight, Esquire Attorney I.D. No. 30622 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013 (717) 249-5373 Attorney for Defendant F:\U~er Foldcr~Finn Doc~\Gendoc~2002\ 1471-5$oinder. wpd IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff KMAN & KMAN FINANCIAL GROUP, Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW AFFIDAVIT OF VERIFICATION I verify that the statements made in the Complaint for Joinder of Additional Defendant are true and correct. I understand that false statements are subject to the penalties of 18 Pa. C. S. Section 4904, relating to unswom falsification to authorities. KMAN & KMAN FINANCIAL GROUP Date:?~ ',~'" ,2002 By: /~'~J~~ tMichael Kman IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff KMAN & KMAN FINANCIAL GROUP, Defendant Vo NATIONAL WESTERN LIFE, Additional Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW CERTIFICATE OF SERVICE AND NOW, this ~,~' ~ day of July, 2002, I, Gregory H. Knight, Esquire, hereby certify that I have this day served the following person with a copy of the Complaint for Joinder of Additional Defendant, by first class, United States Mail, postage pre-paid, addressed as follows: Ron S. Chima, Esquire ECKERT SEAMANS CHERIN & MELLOTT, LLC One South Market Square Building 213 Market Street Harrisburg, PA 17101 Attorney for Plaintiff HANFT & KNIGHT Gregory H' Knigh, Esquire Attorney ID No. 30622 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013-9142 (717) 249-5373 Attorney for Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff, V. KMAN & KMAN FINANCIAL GROUP, Defendant. Case Nd: Civil Action Law - Law 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 judgrnent 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. Lawyers Reference Service Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 800-990-9108 {L0252446.1} TRUE COPY FROM RECORD In Testimony w~reof, I here unto set my han(~ and the seal of said Cou~t at Carlisle. Pa. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff, V. KMAN & KMAN FINANCIAL GROUP, Defendant. NOTICIA Case No: Civil Action Law - Law Le hah demandado a usted en la corte. Si usted quiere defenderse de estas demandas expuestas en las paginas siguientes, usted tiene viente (20) dias de plazo al partir de la fecha de la demanda y la notificacion. Usted debe presentar una apariencia escrita o en persona o por abogado y archivar en la corte en forma escrita sus defensas o sus objeciones a las demandas en contra de su persona. Sea avisado que si usted no se defiende, la corte tomara medidas y puede entrar una orden contra usted sin previo aviso o notificacion y por cualquier queja o alivio que es pedido en la peticion de demanda. Usted puede perder dinero o sus propiedades o otros derechos importantes para usted. LLEVE ESTA DEMANDA A UN ABODAGO IMMEDIATAMENTE. SI NO TIENE ABOGADO O SI NO TIENE EL DINERO SUFICIENTE DE PAGAR TAL SERVICIO, VAYA EN PERSONA O LLAME POR TELEFONO A LA OFICINA CUYA DIRECCION SE ENCUENTRA ESCRITA ABA JO PARA AVERIGUAR DONDE SE PUEDE CONSEGUIR ASISTENCIA LEGAL. Lawyers Reference Service Cumberland County Bar Association Carlisle, PA 17013 800-990-9108 { L0252446. I } IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff, V. KMAN & KMAN FINANCIAL GROUP, Defendant. COMPLAINT Case N6: Civil Action Law - Law AND NOW, comes the Plaintiff, URL Financial Group, by and through its attorneys, Eckert Seamans Cherin & Mellott, LLP, and makes the following Complaint against the Defendant, Kman& Kman Financial Group, and in support thereof avers as follows: 1. The Plaintiff, U.R.L. Inc., a Pennsylvania business corporation d/b/a URL Financial Group (hereinafter "URL"), which holds a Certificate of Qualification issued by the Pennsylvania Insurance Department and has a principal place of business located at 5320 Jaycee Avenue, Harrisburg, Dauphin County, Pennsylvania. 2. The Defendant, Kman& Kman Financial Group (hereinafter "Kman"), is a Pennsylvania company which holds its Certificate of Qualification issued by the Pennsylvania Insurance Department and has a principal place of business located at 1018 Dogwood Lane, Enola, Cumberland County, Pennsylvania. 3. Defendant, Kman has an office in Cumberland County and regularly conducts business there. 4. Venue lies in Cumberland County pursuant to PA. R. Civ. P. 2179. Fact Applicable to All Counts 5. Pursuant to its Certificate of Qualification issued by the Pennsylvania Insurance Department, Kman obtained an appointment to sell insurance from National Western Life Insurance Company (hereinafter "National Western Life") on-or about December 2, 1999. 6. National Western Life has been licensed to write insurance policies in Pennsylvania by the Pennsylvania Insurance Department since 1979 and has a mailing address at 850 East Anderson Lane, Austin, Texas. 7. The appointment between Kman and National Western Life is a contractual agreement which was agreed to as evidenced by Mr, Kman's signature. A copy of the General Agent Contract and Schedule of Commissions is attached hereto Exhibit "A". 8. Kenneth M. Clemens, Executive Vice-President of URL as a general agent recruited Mr. Kman to sell National Western Life products based on Mr. Kman's representations made in the Agent Data Sheet where Mr. Kman indicated that he had appointments with Life USA, WRL, Nationwide, American Scandia, MML, Pioneer, CRL, CSD, John Elden plus "many others" in the last five years. As part of the licensing agreement, Mr. Kman filled out and signed an agent data sheet. A copy of the Agent Data Sheet is attached hereto as Exhibit "B". 9. Based on Mr. Kman's representations, in the agent data sheet, he was granted an appointment to sell National Western Life products. See Exhibit "B". 10. Based on the statements made by Mr. Kman on the agent data sheet, the recruiting agent, Kenneth M. Clemens, certified that Mr. Kman had a trustworthy character. 11. As part of the contracting and licensing document, Mr. Kman signed a General Agent Contract and Schedule of Commissions. See Exhibit "A". 12. Under paragraph eight of the General Agent Contract, Kman was to be paid on commission based on premiums to and received by National Western Life in accordance to the schedule of commissions which are listed as part of the contract. See Exhibit "A". 13. Under paragraph twenty of the General Agent Cofftract, Kman agreed repay commissions to National Western Life if premiums were returned to the policy-holder. See Exhibit "A". 14. On October 25, 2000, Kman sold a National Western Life fixed rate annuity under policy # 0100956114 to Gloria Osborne for which he was paid $7,393.98 in commission by National Western Life. A copy of the account statement reflecting commissions paid to Kman is attached hereto as Exhibit "C". 15. On February 27, 2001, Kman sold two National Western Life fixed rate annuities under policy #'s 0100953487 and 0100963403 to Suzanne E. Troy for which he was paid $9,708.98 in commission by National Western Life. See Exhibit "C". 16. National Westem Life fixed rate annuities have a "free look" period during which a policy holder may return the policy for a full refund of the premium. 17. During the free look period, Gloria Osbome and Suzanne E. Troy returned their respective fixed rate annuities to National Western Life for a full refund of the premiums paid. 18. Consequently, pursuant to paragraph twenty of the General Agent Contract, National Westem Life demanded a refund of the unearned commission and notified Kman of its outstanding debt by a letter dated July 27, 2001. A copy of the July 27, 2001 letter is attached hereto as Exhibit "D". 19. Under paragraph twenty of the General Agent Contract, Kman agreed to pay National Western Life court costs and reasonable attorneys fees for collection of the debt. See Exhibit 20. On September 4, 2001, National Western Life tern~inated through a letter notified that it was teiminating the General Agent Contract with Kman as a result of Kman's outstanding debt. A copy of the September 4, 2001 letter is attached hereto as Exhibit "E". 21. As a result of a Regional Agency Manager Contract between URL and National Western Life, URL became responsible for Kman's outstanding debt to National Western Life and in fact paid National Western Life Kman's unearned commissions. 22. Thereafter, on November 16, 2001, National Western Life assigned its right to collect the unearned commissions from Kman to URL. A copy of the November 16, 2001 assignment from National Western Life to URL is attached hereto as Exhibit "F". 23. As a result of accruing interest, Kman currently has an outstanding balance with URL in the amount of $17,815.56 24. Sometime prior to January 23, 2002, URL notified Kman of its intention to collect the unearned commissions it was owed. A copy of the email transmission from URL to Kman is attached hereto as Exhibit "G". 25. On February 26, 2002 URL through its undersigned counsel notified Kman of its outstanding debt and attempted to collect this debt without resorting to legal action. 26. Kman did not comply with any request to return the unearned commissions Count I - Breach of Contract 27. Paragraphs 1 through 27 of URL's Complaint are incorporated herein by reference. 28. By executing the General Agent Contract, Kman agreed to all terms and provisions of the contract including returning unearned commissions for all policies in which National Western Life returned premiums during the free look period. 29. By not refunding the unearned commissions for $1'7,815.56, Kman breached its contract with National Western Life: 30. Under URL's Regional Agency Manager Contract with National Western Life, URL became responsible for Kman's outstanding debt to National Western Life and in fact paid National Western Life Kman's unearned commissions. 31. Under the November 16, 2001 assignment, URL is entitled to collect the unearned commissions from Kman. See Exhibit "F". 32. To date, Kman has not refunded the unearned commissions to URL under its General Agent Contract, of which URL is a beneficiary as a result of the November 16, 2001 assignment. WHEREFORE, Plaintiff, URL, demands judgment against Defendant, Kman, in the amount of $17,815.56, together with interest and costs and attorney's fees which amount is within the limits requiring reference to a Board of Arbitrators under Cumberland County Rules. Count II - Unjust Enrichment 33. Paragraphs 1 through 33 of URL's Complaint are incorporated herein by reference. 34. URL refunded Kman's unearned commissions for $17,815.56 to National Western Life as referenced above. 35. Kman has been unjustly enriched at the expense of URL in the amotmt of $17,815.56, which represents the uneamed commissions for which National Westem Life had to refund premiums for the fixed rate annuities returned during the free look period. WHEREFORE, Plaintiff, URL, demands judgment against Defendant, Kman, in the amount of $17,815.56, together with interest costs and attorney's fees which is within the limits requiring reference to a Board of Arbitrators under Cumberland County Rules. Dated: June ~3K~, 2002 Respectfully submitted, ECKERT SEAMANS CHERIN & MELLOTT, LLC Supreme Ct. I.D. #81916 One South Market Square Building 213 Market Street Harrisburg, PA 17101 (717) 237-6000 Attomeys for Plaintiff, URL Financial Group ATTORNEY VERIFICATION I, Ron S. Chima, Esquire, on behalf of URL Financial Group, hereby verify and state that the facts set forth in the foregoing document 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.A. Section 4904 relating to unswom verification to authorities. Date: EXHIBIT A 01/75/2002 12:56 512-71 588 AGE]4CY DEPT ._ PAGE ' '~'...' ' ' ."'.' '~ ; . - " '" · .4'~; ?:,' ;- · - -' - : ". ~'~. , · ;..,;.'., ,.~.- . · . ...t · . : .;:.' . - ..... . -- . -- 01/25/2002 12:56 512-7i J506 AGENCY ,DEPT PAGE 06 ~ .- ~ ,,-'~- ~ .. ~ · ,..,:...,~ . ...,.~ _ . .- .' ~.,. , .. . - . - ..-... -. ..,---., · .- j. ~ - ~ ..- .-../ . . . ':.~=~-'~~ .'t . ".. "' ' ". ' ' f''... ':' ; .'-- ~ - ~" .C'' 3, ':.;=--~' ', · ..~~-.~.' .'.-..~ . ,; - , -, ~~'. ,' '...":~ .'.'. .~-.~~~'. ~ ., ~.-:. .-". .., ~~. . .. ,..",'. .-.~. ~~..~....'?,....,,.=,.~.:~~~' ;.-,.:: :.-= ..: :';. ~ . . . ... ~ . ,..-.~- .~.~' . - . .~" · .- .' - .. .. =..., .., .' . .. · .... .-.- . ,.J- . ~ ................... ,- ~ ~.~ ..... -. . , · ....... ~~~ ........ .~ ~,., ... '~, ..- ,- · · ..' cj:.'.~ --.~.~'"< ....... ~ ..... .~. (~...? . '-~- , - .... - . '..' . · - '~-'. ' · .... * .~~ ~~Fp.~'-*~-~,I~ · '' C ' ''~ ~ ' "'-'".' ..,: '~ ~- · ~ .... =.., ....... ~ . ..~_~~j~.~" --., ~~~ ........ . .... .. .-.~~ ........................ . · ._. · . . ~ ~,. .... . ..... :. ,:..-- , .... , ,,, .. .-'.~:~.-~ ..... ~.=:~;-/?-~, ~.~- : :,.',,~/.. :. .? .~ . .; ~~.-:k~".-· ~-. , .~ . -'-.'. ;:,.- .' ; '. , , ,.- -~..-. , , - · .... : .... , .... -.... . .. ,~. · ~.~.~ ..... t~.,.~..,t~.-~,~,-~-:-.,- , '.'." ',' ' - --'" ..- ~~ .,. . . . .~ ..~..~ ..... , .....~ ...... ~ ..... . . .. , :.. ,,L~_ . .....~,. '.. ~'. ~ ....... .-"'. -.z' ' .,~',.'~Y~'-,', .... ~, ....... ,,- ~ ,'. ~ ........... , ........... ~ ~,~ ..... ,,~.-'~ ..... , '~Y~"., . .~..... ..... - , ,,~ . ........ -. ....' .... .-. .. .. ~(~. mt ............ ,.. ~ .. · ~~, . ., -., , ~y~~.; ........ .,..,,,-~ ~__, .... _ ,t~- , ,. ~Y~,,-~,.~l~ .... · ....~,~ ~.~ · ~Y~ .... ,,,.~,~,t,,~ ....... t ~ ,~ ,.,,, :- ¢, -. ...... -; · ~' -.- :'~~-,,,.' ,.,,,---,' ;,---- · ,m~~..-.'`? ~,.-.. '"~ ,;.~..~.,~;~.' ,. L .. ~',~.,,~;,,.~.,~--. ~-.:t..,'...'..~.:,;;.:...'*~ ':'"{:,. ~: , ..... :'..-.,-,..... . .,.;:,...:?;: oo 03./25/~002 :19:513 51~-7i 3506 .~I'3E'NC.Y DEPT PAGE · . · ~,.....- .~ :'.. ~..": .... '..'-:: ': _: '_~'_-"g: ~,~'~42,..,,,~ ,,,;,,",~-_,,,:,,;,, ~, ~_,~,~,_ '...~_~,..,i.~.::.:',,~.~... ' - ~2~Z:~'%.,~'~lf~,,immi~lidl~,{ml~lL-J'~'..~m.mm"'~"''',~--'-.": - "'~' -' ' ' ' ' mm, l,~{~" .... ~' - ~, ".~ ..:.:~~-,,,. ,,~,,,,,~,-,~~~~ -.... :......- ..... ::.. -..-. ,~:... -..., . :.. - z ~'2'~~'m~i{~,m~.~'~4'l~l'~.i.~{'lr'~'~ .~m~"~""" -""'~"""m.~i.~"--: ~ - ' · i - · ' ' .... - ° ". · ' - - '- ' · · . '~{m{~,,~. ~-- ~ .-. . = ...... ' · ~ ~. .... .-' . o- '.~2- o. . ' . . :'- · "4' ~~~',.a,,,,...: =:- " ',,,.,~..~,,~...... ~ ......... . ....... ; . ~mr'a,-,~,,~ ' ' ' ~ ' ' "liml"" ' °'.' , ' '-.~'~::~_~&"~i~,i~-A,~_ .llim~ ~.~..~..~""~', "'"m'"~'~"'"'~:" .... : -.'.-' ". ",.. ' · - ' ' ' 3'2.' '. ' .. --,' .... . '.. -~ ." ' .'.. ' - ::.. · t,,~._-4ml~~ .... .. .... ~.. ,- .... ..._ :,:..,. -__ ............... ... ~..,].~.~.~~i,.-~w-~-,,~w,~.,-,,,,~._. ~.-.,.,e.............~. ,--.--~,',...-. ..... . '._' ' · .,~,~,...~..,,,~,~.~a;.~'.o,. .-... ~< ,.ii~...,,,~,-.~-~.--~..-- .'...-~. .. · · .~- : .- .;.-. ,-...... --. ~ .. · ....... ..- .~. - · ~__: .~. .....;.~,.z:,,.~,,,,.~,.~,~.,~,~'--,~,,i,~m~,~{,,~ ,,~i)dll.~.= . '?._'.~'ltll ' - ~:--'lm~f . : ': : ~'~- -..2:.": ' '. ',. · -:' -- · - ~'' ~"," ~ -' -:'"'.' · ": .~ ~ .'~. ~" ·, ~i4,ii~-,,,. ' . . _ . ' .': '" .' .'. --. · '-..' :,_ "' ":.'~...~...~...,;..'~,'~~,~l,*~-m~".,~. ~~ ' :' ;lla~mmlg,~m~m.~m,/,m.~.~.~~,~."-'.'"-~-- -- ~-d~l-'~,.~,~,~,. e,~.,,.~.,~--,,- . ......... . . ...... · ,:-.. ~. ~.~.'. mm~,,~.a'.m.-- .-,,,.'~'.-~.----~.--.-- , ~---.. -, -'. -.., · ,~... - ,- . .- '..-.~-.. -..: ..'~-.~_.': · ~ .. , . .- ... . .,.-... ...... ~-...~-_-..~:..~,,.~,~,,~,.~...,.~.~.~,,~,;. ,~,,..m~' .~Y'~'.~'~_~'""~'~-~_ _.~ _ . . . . ,... !. '.~.~.,,~'md~'~ml~m_M_m~ ~_]?~""~'~- ~--~,,~,~,~,~,~L~,~*.~gnF~ ; :' · '' '..' ' - - ;'. : . . '.' -'-. --2' ' · ;- .. :'-"'-' · -.~.~m~4m~,ll~.~,,W{--'~ev~.'~.~....,~.,.~.-.T.;.-{-,-.~.~--;...m~..-- .....-.,., . . ~1 ~. . ~ .. - · .... -._:...,,...; _-- : - ..... .. z - .~ ~,t~. ',,,~,~,,,,.~.-.... :..--.. :-.': -:.-.' ... ~ ... ..... =' "..;;,-'~,,,~~~,.,.,u~,~'- '. · ~,i,i~.:: ..l~...-d.,~,...m,~...~,~- .~.~,~...-~-.. .......... . ............ ... ,..., ...... ., ...... ............. ;:....:j ..... · ..........-,i,;- ,¥. '.--"' -: -: . · -- '- .' ...... ~ .;..~4~. '.d~l,i{~/,m. ........ ... .. ,~ ...... : . ... .. - ...... . ,... - · .,l~,',Dll~{3Ot/llll~m{~...~m~i~"m'mm~....'~"" _?"'~._...,...,,,d~,,~,.~,,~,,,.~,.~r,~i.,i~ .... ~'-r',.. -'~. ........ v ' '. '-' "'"' ' ': .... · "~." .'l'?'~"'--."'"'~'---'-'--"-' '; ....... -" ...... : '. .... . ..... :'".-' :-"-'~ ..... ,.,-.',.--- - ·. ,. · '-'- · ~,~{l~Ul,l~_ _ ~l'~ll,ml{m'i' .4~n~m{m.. ~v.,"-,.l"t~. -'e..,..""""~- ~. --' ~ -- ' .., '~' m"m'le~~~~'~P~-' ' """; '""';: "'"'" ' ' ' '; '~:" '° '" "" ' . ~,~~~,,~o~ ~,~..~,~.~ .~. '- ... .....:... _- ~z._-- · . .~,,,,.~,.~.....~, , ..,~ : ~.m,,,~ ,, : __ -. .. ... . ,; -- .~. .:,,.~ · -' -- .:..: . . ...--:---,..,:.....-..'.. = . .'"- ... ·.~.~. 01/25/2002 i2:56 512-7i 3586 ,AGENCY, DEPT PAGE 01/25/2002 12:56 512-7. 8505 AGENCY DEPT PAGE 10 · i CONFIDENCE FLEX.4S IssUe Ages Year I Yearn 2-10 There~ter Non-Qualified 0-70 13.00% 2.U0~ 0,~ 71-80 12.00% · 2.00~ 0.00% 81-85 10.00~ 2.00% 0.00% 0-70 13.00%' 71-75 10.00% 2.00~ 0.00~ CONFIDENCE Ft..BX..aS o-70. ~o:oo% ~r.oo~ o.oo~ 71-80 9.OO% 4.00~ 0,00~ 0-70 10.00~ 4.00% 0.00~ 71-7,5 7.00% 4,00~ ' 0.00~ ArUm W. .! 2-10 ~ ' o.0~/.. Issue Age,~ 0-17 0.00% 'iream.. 1' .2~10 P,A,YR..C~.' 'B.E. NEFIT U'FE II A;thur W. PlokerlngMark~n;i 8;mlor .Vl~e Prmsident - 'IqATIONAL w-r.~ zy.m'q UFE INS~£ COlg~. ANY- -- $~0 ~ ANDERSON'LANE * AUdi"IN, 81/25/2882 512-71 ,506 AGENCY DEPT PAGE NATIONAL' WESTERN AMB1~MENT TO oommi~on eohedule under your affent c~ntraca u~ m~t fo~h ~e Schedu~ o~ Oom~ for me BENEFACTOR SELECT Policy Form 01-1109-96 and All State Variations Thereof /ulhur W. Ploimrlng Senior Vice President - MlatcMIng 12 01/25/2002 ~2:5G 5~2-7] ~506 ~G~CV ~EPT PAGE ~3 NATIONAL ° WESTERN AME~ME~ TO GENERAL AGENT CONTRACT Amendment to you~ contmot, effp~ Ju;y 15, 1999, .ets forth the Schedule of'i~)mmbsl.on~ ~r the ~ ~elect FIve. When .tt~ to any (:ontra(~ ~r;~.~.~-T,d an or ;alter J.ul~.l~ 1999, ~ An~ndment BENEFACTOR SELECT'FIVE Polloy Form 01-11099.6 and All State Variations Thereof of ~/~ubeeque~ p~,cy y~r, Arthur W. Pi~sring Senior Vice President - M~rkeflng ~ft'le.~O ' 8~0 EA&'r XN'DE~ON ~ * 'XtJ~N. TEXAS 7r/~2-1Eo2 0~/25/200~ ~:56 5~2-7. 8506 ,AGENCV.DEPT P~GE ~4 NATIONAL' National We~m 'l.lf® Inl~,tran<~ (~rlpsny: Serdor V~-e Pr~ldm~ M~e~lng 01/25/2002 12:56 512-7. JSBG AGENCY, DEPT PAGE 15 NATIONAL~ AME~E)MF-,NT TO GJ~IV~E,I~L/L AGENT CONT~ MONEYSHIELD 2 1at Year. No~3.uidifled ]~tue ~._~_ 'Plan A Pllm B 0-80 10.00% Rene'm/ ·. 0.00% ~ 10.00% ~6-70 ~m 10.00% 71-75 8.1'0~ 7.70~ R~,leW. l O.OO% 0.OO% 01/25/2002 32:56 512-7: J506 ,AGE~JCV DE[PT PAC~E 04 "' ;~' w-e I Request for Taxpayer. J ~~'- ~ . ~~ ~ ~, ~ P~-~ ..~' ~ .................. , ................... - ~~ z II.~l~ ,7_~ / .... ~~. I ~ .... ~ Cac ~ ~oz~x F(,m W-O paw. ~ 0~/25/2002 ~2:56 512-71 ;506 ~:3-E't-,ICY pI~PT PAGE 03 EXHIBIT B 01/25t2002 1~:56 512-7 8586 ~GENCY ,DEPT PAGE °o EXHIBIT C 000001 000001 oo oo ~~1 I ~~1 ~o~ool ~~1 ooooool I I ~oo~1 I ooooo ooooo ooooo 0 o 0 o I..-I I.q t'~ 0 ~ ~n o ~ o 0 ~00 H O~ ~HH H ~ ~ 0 ~ ~ 0 H ~ M UHH o or~ 0 -1 H ~ EXHIBIT D NATIONAL _. .SE co September 4, 2001 CERTIFIED M~L P.O. Box 45 Enola, PA 17025-0045 RECEIVED SEP 1 fOOl URL RE: Agent Account #68383 Dew Mr. Kman: It is with regret that we notify you that your contract with National Western Life will be temfinated fifteen days from the date of this letter because your production has not been sufficient to cover your debit commission balance. In accordance with your contract, you should make arrangements to repay any monies you may owe to National Western Life. For infonnation concerning your account, please contact the Commission Department. The Department's toll-free number is (800) 760-3434, extension 369. Your contract further provides that you return all National Western Life materials immediately. They should be shipped to the attention of the Supply Department, National Western Life, 850 E. Anderson Lane, Austin, TX 78752-1602. We wish you much success in your future endeavors. Donna L. Richardson, FLMI, ACS, AIAA, SILAF cc: #53028 URL, Inc. 850 EAST ANDERSON LANE · AUSTIN, TEXAS 78752-1602 TEL. 512 -719-2369 · WATS 800 -531-5 { { 2 · FAX 512-719-8506 AGENT DIRECT WATS 800-760-3434 EXT. 369 · E-MAIL: dragency@onr.com EXHIBIT E NATIONAL WESTERN ~ LIFE INSURANCE COMPANY DONNA L RICHARDSON. FI. MI. ACS. A/AIl, SlLAF ASSISTANT VICE PRESIDENT Aa£Nr COt~rltaCTINa & UCENSINa July 27, 2001 'v&0 % Mr. Michael J. Kman, Jr. ~ ' P OBox45 ~,.~'. ~'~ Enola, PA 17025-0045 ~ RE: Agent Account #68383 (~f~ Dear Mr. Kman: While reviewing your production records, I noticed that National Western Life has not recently received new applications from you. We want to continue our association with you, for we appreciate having an opportunity to be of service to you and to your clients. There is a deficit balance in your commission account, and your commission earnings at this time do not appear to be sufficient to repay the balance. As of this date, the balance due this Company from you is $17,530.52. We would like to see your balance repaid by commissions on new business. However, if you do not anticipate placing new applications with National Western within the next month, please clear up your account balance by sending me your check or money order for $17,530.52. Your payment should be made payable to National Western Life and mailed to my personal attention at the address shown on this stationery. If it is inconvenient for you to send the entire $17,530.52 today, please contact me today. I shall be happy to discuss a repayment plan with you. Please send us your new applications, remit payment in full, or contact me within the next thirty (30) days so that we can continue your appointment to represent National Western Life. We look forward to heating from you soon. Best regards, Donna L. Richardson, FLMI, ACS, AIAA, SILA-F cc Lura Rogers #53028 URL 850 EAST ANDERSON LANE · AUSTIN, TEXAS 78752-1602 TEL. 512-719-2369 · WATS 800-531-5442 · FAX 512-719-8506 AGENT DIRECT WATS 800-760-3434 EXT. 369 · E-MAIL: dragcncyCZonr.com EXHIBIT F ~SSIGNMENT WHEREAS, URL, Inc., ("Agent") entered into a Regional Agency Manager Contract dated September 7, 1994, ("Contract") with National Western Life Insurance Company ("NWL"), and WHEREAS, the Contract authorizes Agent to contract sub-agents and requires supervision of such sub-agents, subject to approval of and appointment by NWL of such sub-agents, and WHEREAS, Michael Kman, Jr., ("Sub-agent") was contracted by NWL, at the request of Agent, on November 29, 1999, and WHEREAS, Sub-agent's contract was terminated effective September 19, 2001, and WHEREAS, Sub-agent became indebted to NWL while under the appointment and supervision of Agent and remained indebted to NWL on the date his/her contract was terminated in the amount of $17,815.56. NOW, THEREFORE, FOR VALUE RECEIVED, NWL, acting herein by and through its duly authorized officers, does hereby transfer and assign to Agent all its right, title and interest in and to any and all sums of money now due or to become due to it from Sub-agent under Sub-agent's contract, and any and all amendments and/or addenda thereto, and NWL hereby authorizes Agent at his/her own expense to take all steps necessary to collect such sums of money. DATED this 16th day of November, 2001. NATIONAL WESTERN LIFE INSURANCE COMPANY Assistant Vice President EXHIBIT G Good morning Mike: I regret that you may have perceived our discussion yesterday regarding your debit balance with URL Financial Group as threatening in nature. It is simply my ir~ention that you seriously consider the consequences of the actions I will be forced to take should you decide not to accept my offer for repayment. Understand that I take no pleasure in negatively affecting the careers of the financial services professionals it is normally my pleasure to serve. For the record, my offer for repayment remains valid until 5:00pm EST on Wednesday, January 23, 2002 and is as follows: Current debt of $17,815.56 will be discounted 10% as a gesture of good will. New balance = $16,034.00. 25% payment of new balance($4,008.50') due February 1,2002. New balance = $12,025.50 1/12 of new balance( $1,002.12 ) due the first of each, month beginning March1,2002 until the balance of the debt is zero. I am flexible in determining how monthly balance is paid ( either cash or commission debit from new business ). if I do not respond by 5pm EST on Wednesday, January 23, 2002, then I will accept this as an official rejection of my offer and I will proceed as follows: Contact counsel for URL Financial Group and instruc!,t~em to initiate legal proceedings against you. Contact Dun & Bradstreet Receivable Management ~ervices and instruct them to begin collection proceedings and notify creditors. File complaint with the Pennsylvania Insurance de~ar~ment and request a hearing and investigation regarding you, your business, clients, counsel, and potential improprieties and conflicts of interest. File a complaint with the Securities and ExchangeCommission and request a hearing and investigation regarding you, your business clients, counsel and potential improprieties and conflicts of interest. Mike, please do not misinterpret this communication as hostile in nature. If you choose to reject my offer for repayment, I will respect that. Howeyer,. p!e, ase respect the actions that I will, in turn, be forced to take against you. It is my hope that w~ ..c~:n,.put emotions aside and make prudent business decisions to resolve this matter. Sincerely, enneth Clemens Executive Vice President URL Financial Group Email: kenci~urlfinancial.com Phone 717-540-5690 Ext 107 Fax 717-540-5628 Visit our web site at: http://www, urlfinancial, com May 1,2000 -. ::. ?:<.'~ ~: Stephen A. Bankos 882 Heritage Hills Drive ~ York, PennsYlvania 17402 In Re: IRA (National Western Life #01~00945263) Hi!da M. Bankos, et al. Dear Steve, This letter is a summarization of our most recent telephone conversation and further explanation of some items we discussed over the past month. Your mom accepted custody of her IRA in February 1997. At that time we discussed extending a withdrawal option for 3 years at which time we would prepare her account for final annuitization. In preparing an account for annuitization several factors are considered. First the annuitants age, health and financial status; second the available vehicles for investment within the current market; the third consideration would be current market conditions and short to mid range market projections and finally making sure the annuity company's tables are in line with the annuitants monthly .need and income flexibility. Our most recent transaction is directly in line with the plans we discussed over the past 36 months. As you know every company is different with respect, to annuity tables, exclusion ratios, withdrawal options and life expectancy factors. The search which lead .me toNational Western Life dealt.with each of the above mentioned factors. You are well aware ofmost of.the indicators we discussed; however, I Would like to further discuss two main topics pursuant to our last conversation. The first topic is drawing a difference between Life USA and National Western'Life as relative to your mom's IRA. These accounts had/have two major differences. First, the Life USA, account is a 5 year point to point investment (the last 12 months of which are averaged so to avoid, a spike or dip in rates · just before liquidation or armuitization) while the National Western Life account has an annual reset. One main advantage of this "annual reset" is that the growth compounds year to year. Moreover, a favorable year's return cannot be offset (or eroded) by a future negative year since the guaranteed minimum interest would kick in and protect Hilda against losing principal and/or previous growth. Second, the Life USA account offered a 75% participation rate with the S&P Index while the National Western Life account offers a 100% participation rate with the S&P Index. A disadvantage is that Life USA offered a guaranteed minimum interest rate of 5.25% APR while the National Western Life guaranteed minimum rate is 2.75% APK Thc second topic refers.to charges to engage in any of these contracts. As you know past companies applied a 10% charge (offthe top) to participate in the S&P. This "rider" was charged to your mom's account as a cost*to participate in the index market (at 75%). Once that charge was deducted the remaining balance would earn guaranteed interest and/or participate in the S&P index. Page 2 May 1, 2000 Ifyoi~ review page 2, paragraph 2 of the NWL Confidence 2000 Disclo_sure Statement you will note that this contract has "No Loads, Initial Charges~ or Certificate Fees" and it goes on to say that "100% of the premium deposits are credited to the account Value". Note that we are discussing "Style III and Option A" as a version of the Confidence 2000. Once Company A deducts the 10% rider fee all remaining monies earn interest according to the contract provisions. If said balance were subsequently transferred that same balance would continue to earn interest only according to the provisions of the receiving company instead of the transferring company. To be specific, your mom's IRA will earn 2.75% as a minimum guarantee and will participate in the S&P Index at the rate of 100%, additionally, the account will reset each year. Because company B (National Western Life in this case) does not charge any loads or fees then the same account balance which was earning interest at Life USA continues to earn interest at NWL. As I noted to you during our conversation it doesn't matter to you which company pays interest; however, your focus is on how much interest is being paid. In this case the annual reset along with the additional 25% participation were critical to meeting your mom's long term goals. Additionally, National Western Life levies no charges whatsoever to annuitize. I believe you told me that Life USA stated that "there is a charge to annuitize". If that is true, said charge would be to annuitize with Life USA which again doesn't effect this case since your mom will annuitize with National Western Life (a company which does not charge to annuitize). Once your account is set and eligible for annuitization the full value at that time is annuitized. By full value I mean whatever the account balance is as of the annuitization date, this could be your mom's deposit plus 2.75% APR should the S&P Index market not have positive gain from now until annuitization OR it could be your mom's deposit plus the S&P Index growth up to the date ofannuitization. I can't say at this time what will be the amount annuitized since I don't know how the market will fair from now until she actually annuitizes. Finally, it is Our plan to continue with the monthly withdrawals for the foreseeable future. At some point I will contact both you and Yvonne for a meeting to discuss the specifics of your mom's annuitization. At that meeting you will need to decide how much money you wish to leave in an emergency fund and how much money you wish to annuitize. This is important since once you annuitize the annuitized monies are locked up and will produce a monthly income guaranteed for life. Also, we need to discuss the specific annuity option you whish to accept. There are several choices, the most common being Life Annuity with 10 Years Certain. This option guarantees a monthly income for your mom's life and should she pass away before 120 payments were made the balance would be paid to her beneficiary. The actual balance transferred from Life USA to National Western Life was $112,681.92. This same amount was the sum of money receiving interest at Life USA and this amount continues to be the same amount of money now receiving interest at National Western Life. The contract discussed herein has been mailed to YOUr mom under separate cover. )/'Stephen A. Bankos Page 3 May I, 2000 *"NOTE*~ This letter in no way is intended to change, modify or-~mend your National Western Life annuity contract and/or any applicable disclosures or Other documents; however, this letter has been reviewed with the marketing department of National Western Life for accuracy and verification of rates, participation and costs/charges. I hope this helps clear up any questions you may have regarding this transaction and/or this annuity. As always, if you have any questions, please feel free to contact me at 717-728-0711 or via facsimile at 717-728-0655. Thank you for your time and attention with this matter. X(ery truly yours, ~ Michael J. Kma , Jr. General Agent xc: National Western Life (redacted version) cio Iris Villarrea via fax transmission ID# 151233 98350 (April 11, 2000) file ,~ichael J. Kman, Jr. Kman l~ r..irJ,~.~l ~- ~nanc~a I C~rp K.man : Kman ~" P~NA~XAL OnOUP Lin) Wt~e _~"o ..vatlo;~ I$'e.s.tern Austin. Te.~ '/8752 COpy This let~-/s in r~ lo Om' r~rat te. kphone com'e,r~_ !~m mM yo~ ~ f~ a switt~ lo, ow up. Lan). white. NWL VP ?olio? Ow,ct .~rvic~s As ,~x'~u can ~ miginformation was provided by IqWL noi on.ly to me, boL to 3 d{ffen:m c)io~ls mid by ] ~ff~r~zlt marketit ,ig, · ~asaam~. AdditiO~uslb., re'ca as secenfly ~ I~cbruary 2~}1 w~ ~r~ retrying informa6oa Osat fl~e I¢~0% participation ratc was gurua~ieed omi) )'car Accordingly, nO' eltcats and I relied upon ~his infornmtioa in making impodant deOs'i~s. In sm: ¢~irt/olL allhou4ih I cau'¢ b'p/:ak for ntb' cticnls at tll]~ tithe, th~ differe~cc b~we~o_~4% and 2.75 is nol ~'~aL lC{mv~,~r, thc' [0/)~a anJllJId pa~cipatiols ~ xx.~ pm'mnollll{ R:ld ccmral to my r~~n. l ~u~ ~t ~VC r~Rl.ll~nd~ ~is an~ifl~ he wiU do ~ti~ U~ ~ct II~ql he n~ L~ows rile ~nln~ ~m~s d~fll~- th~o ~plau~. 'ltVe ~plttrac~; m q~.'~tion range four (4) ~ ~ ~i~ r~h)g in ~1~ ~ aRer furor ex~M~o~t orWs m~ OR a ~dl r~m~ silllotl. ~ll~ ancot [~ off I~ lh~L~ ~kJI t~s mmr~l would ~ c~'1 ~t~ ~ th~ will a~pt ~is ~¢. tlow~'cr, I A_s wo disc~J'.~ed t ~m holding offoa xpcnking lo :my additional clicnls re~d~ng I:lieit ¢oflir/~c[s until ym~ ~ld [ ~ mid aY 717-7284)71 R~ist~d (Draft to Iri~ Vii 'l~'m including C~wt Page and Fax Log Cefllfimlc) xc' Gr~o .fy H. Knigh[ F,~trc (w¢cncl, ¥ia Racsi.~ffile 1o 717-2494M57) I~. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff : NO. 02-2985 CIVIL TERM 2. 3. 4. 5. January, 2000. : CIVIL ACTION - LAW KMAN & KMAN FINANCIAL GROUP, : Defendant : ANSWER TO COMPLAINT AND NOW, comes the Defendant, Kman& Kman Financial Group, by and through its Counsel of Record, Hanft & Knight, P.C., to Answer the Complaint filed against it, in support of which Answer the following statements are made: Admitted. Admitted. Admitted. .' Admitted. Denied. Kman was not appointed to sell National Western Life products until early 6. Denied: The Defendant is without sufficient information to judge the correcmess of Paragraph 6 and therefore strict proof is demanded at trial. 7. Admitted. 8. Admitted. 9. Admitted. 10. Denied. Defendant is without sufficient information to judge the correctness oft he allegations of Paragraph 10 and strict proof thereof is demanded at trial. 11. Admitted. 12. Admitted. 13. Admitted. 14. Admitted. 15. Admitted. 16. Admitted. 17. Admitted. 18. Admitted and Denied. Admitted that National Western Life sent a letter dated July 27, 2001 to Defendant. Denied that the July 27, 2001 letter is attached as Exhibit "D." Defendant believes that letter is Exhibit "E" to the Complaint. Denied as Paragraph 18 includes a conclusion of law as to an unearned commission to which no answer need be filed. 19. Admitted and Denied. Admitted that Paragraph 20 of the General Agent Contract contains a provision for the collection of reasonable attorney fees and court costs for the collection of the debt. Denied that Defendant agreed to pay such expenses for the collection of the debt which is the subject of this litigation. Further denied that Defendant is liable for Plaintiff's debt. See Complaim for Joinder of Additional Defendant, filed contemporaneously with this Answer. 20. Admitted and denied. Admitted that National Western Life notified Defendant by letter dated September 4, 2001 that it was terminating its contract with Defendant. Denied that the September 4, 2001 letter is Exhibit "E." Defendant believes it is Exhibit "D." 21. Denied. Defendant is without sufficient information to judge the correctness of the allegations of Paragraph 21 and therefore strict proof is demanded at trial. In addition, Paragraph 21 is a conclusion of law to which no answer need be filed. To the extent that Paragraph 21 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. 22. Denied. Paragraph 22 is a conclusion of law to which no answer need be filed. To the extent that Paragraph 22 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. 23. Paragraph 23 is a conclusion of law to which no answer need be filed. To the extent that Paragraph 23 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. 24. Admitted and Denied. Admitted that URL sent an email transmission to Defendant sometime prior to January 23, 2002. Denied that Defendant owed unearned commissions to URL and strict proof thereof is demanded at trial. 25. Admitted and Denied. Admitted that URL made an attempt in February 2002 to collect amounts it alleged were owed to it. Denied that Defendant has an outstanding debt to Plaintiff. 26. Admitted and Denied. Admitted that Defendant has not returned any amounts to Plaintiff. Denied that Defendant is responsible for any unearned commissions. .COUNT I - BREACH OF CONTRACT 27. Admitted and Denied. See Answers to Paragraphs 1 through 26 ofURL's Complaint, which Answers are incorporated herein by reference. 28. Denied. Paragraph 28 is a conclusion of law to which no Answer need be filed. To the extent that Paragraph 28 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. 29. Denied. Paragraph 29 is a conclusion of law to which no Answer need be filed. To the extent that Paragraph 29 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. 30. Denied. Defendant is without sufficient information to judge the correctness of the allegations of Paragraph 30 and therefore strict proof is demanded at trial. In addition Paragraph 30 is a conclusion of law to which no Answer need be filed. To the extent that Paragraph 30 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. 31. Denied. Paragraph 31 is a conclusion of law to which no Answer need be filed. To the extent that Paragraph 31 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. 32. Denied. Paragraph 32 is a conclusion of law to which no Answer need be filed. To the extent that Paragraph 32 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. WHEREFORE, Defendant Kman & Kman Financial Group, Incorporated requests judgment against Plaintiff together with Counsel fees and such other relief as this Court deems appropriate. _COUNT II - UNJUST ENRICHMENT 33. Admitted and Denied. See Answers to Paragraphs 1 through 32 ofURL's Complaint, which Answers are incorporated herein by reference. 34. Denied. Defendant is without sufficient information to judge the correctness of the allegations of Paragraph 34 and therefore strict proof is demanded at trial. In addition, Paragraph 34 is a conclusion of law to which no Answer need be filed. To the extent that Paragraph 34 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. 35. Denied. Paragraph 35 is a conclusion of law to which no Answer need be filed. To the extent that Paragraph 35 is deemed to be a statement of fact, it is specifically denied and strict proof thereof is demanded at trial. WHEREFORE, Defendant Kman & Kman Financial Group, Incorporated requests judgment against Plaintiff together with Counsel fees and such other relief as this Court deems appropriate. Respectfully submitted, HANFT & KNIGHT, P.C. Gregory H. Knight, Esquire Attorney I.D. No. 30622 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013 (717) 249-5373 Attorney for Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff KMAN & KMAN FINANCIAL GROUP, Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW AFFIDAVIT OF VERIFICATION I verify that the statements made in the Answer to Complaint are true and correct. I understand that false statements are subject to the penalties of 18 Pa. C. S. Section 4904, relating to unswom falsification to authorities. Date: _~ /t~5" ,2002 KMAN & KMAN FINANCIAL GROUP By: ~ Michael Kman ~ ~'~ IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff Vo KMAN & KMAN FINANCIAL GROUP, Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW : CERTIFICATE OF SERVICE AND NOW, this 2~ ~ day of July, 2002, I, Gregory H. Knight, Esquire, hereby certify that I have this day served the following person with a copy of the Answer to Complaint, by first class, United States Mail, postage pre-paid, addressed as follows: Ron S. Chima, Esquire ECKERT SEAMANS CHERIN & MELLOTT, LLC One South Market Square Building 213 Market Street Harrisburg, PA 17101 Attorney for Plaintiff HANFT & KNIGHT ~~~ ego~~ght, ~q~re~~ Attorney ID No. 30622 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013-9142 (717) 249-5373 Attorney for Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff VS. KMAN & KMAN FINANCIAL GROUP, Defendant VS. NATIONAL WESTERN LIFE, Additional Defendant No. 02-2985 Civil Term Civil Action - Law PRAECIPE TO ENTER APPEARANCES TO THE PROTHONOTARY: Please enter the appearance of Brian P. Downey, Robert L. Hickok, and Alexandra Makosky, and the firm of Pepper Hamilton, LLP, as counsel of record on behalf of Defendant National Western Life in the above-captioned matter. pAeep~eXr~ (80267) 200 One Keystone Plaza North Front and Market Streets P. O. Box 1181 Harrisburg, PA 17108-1181 Phone: (717) 255-1155 Fax: (717) 238-0575 Dated: August 9, 2002 ROBERT L. HICKOK (30101) Pepper Hamilton LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA 19103 Phone: (215) 981-4000 Fax: (215) 981-4750 CERTIFICATE OF SERVICE I hereby certify that on August 9, 2002, I served a copy of the foregoing document upon counsel and parties of record by United States First Class Mail, postage prepared, addressed as follows: Ron S. Chima, Esquire Eckert Seamans Cherin & Mellot 213 Market Street 8th Floor Harrisburg, PA 17101 Attorney for Plaintiff Gregory H. Knight, Esquire 19 Brookwood Avenue Suite 106 Carlisle, PA 17013 Attorney for Defendant Kman& Kman Financial Group IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff VS. KMAN & KMAN FINANCIAL GROUP, Defendant VS. NATIONAL WESTERN LIFE, Additional Defendant VS. MICHAEL J. KMAN, JR. Additional Defendant No. 02-2985 Civil Term Civil Action - Law NOTICE YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this Complaint and Notice are served, by entering a written appearance personally or by attorney and filing in writing with the Court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the Court without further notice for any money claimed in the Complaint or for any other claim or relief requested by the Plaintiff. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 (717) 249-3166 (800) 990-9108 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, : : Plaintiff : No. 02-2985 Civil Term VS. KMAN & KMAN FINANCIAL GROUP, Defendant VS. NATIONAL WESTERN LIFE, Additional Defendant VS. MICHAEL J. KMAN, JR. Additional Defendant NOTICI Civil Action - Law A Le han demandado a usted en la corte. Si usted quiere defenderse de estas demandas expuestas en las paginas siguientes, usted tiene viente (20) dias de plazo al partir de la fecha de la demanda y la notificacion. Usted debe presentar una apariencia escrita o en persona o por abogado y archivar en la corte en forma escrita sus defensas o sus objeciones a las demandas en contra de su persona. Sea avisado que si usted no se defiende, la corte tomara medidas y puede entrar una orden contra usted sin previo aviso o notificacion y por cualquier queja o alivio que es pedido en la peticion de demanda. Usted puede perder dinero o sus propiedades o otros derechos importantes para usted. LLEVE ESTA DEMANDA A UN ABOGADO INMEDIATAMENTE. SI NO TIENE ABOGADO O SI NO TIENE EL DINERO SUFICIENTE DE PAGAR TAL SERVICIO, VAYA EN PERSONA O LLAME POR TELEFONO A LA OFICINA CUYA DIRECCION SE ENCUENTRA ESCRITA ABAJO PARA AVERIGUAR DONDE SE PUEDE CONSEGUIR ASISTENCIA LEGAL. Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 (717) 249-3166 (800) 990-9108 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff VS. KMAN & KMAN FINANCIAL GROUP, Defendant No. 02-2985 Civil Term Civil Action - Law VS. NATIONAL WESTERN LIFE, Additional Defendant VS. MICHAEL J. KMAN, JR. Additional Defendant : COMPLAINT FOR JOINDER OF ADDITIONAL DEFENDANT Additional Defendant National Western Life Insurance Company, by and through its undersigned counsel, complaining against Additional Defendant Michael J. Kman, Jr., pursuant to Pa.R.C.P. 2251, et seq., avers as follows: 1. National Western Life Insurance Company ("NWL") is a Colorado corporation with its principal place of business at 850 East Anderson Lane, Austin, Texas 78752. 2. Additional Defendant Michael J. Kman, Jr., ("Kman") is an adult individual with a business address of 1018 Dogwood Lane, Enola, Pennsylvania. FACTUAL BACKGROUND 3. NWL approved an application filed by Kman to sell NWL products effective November 30, 1999. Kman entered into a General Agent Contract ("General Agent Contract") with NWL on December 2, 1999. A tree and correct copy is attached hereto as Exhibit A. 4. Pursuant to the General Agent Contract, Kman is required to indemnify NWL for any amounts recovered against it in any action brought against it by reason of any alleged act, fault, or failure by Kman. 5. NWL has been named as an Additional Defendant in a Joinder Complaint filed by Kman & Kman Financial Group ("Kman Financial") in the above-captioned action ("Joinder Complaint"). 6. The Joinder Complaint constitutes a legal action against NWL by mason of an "act, fault, or failure" of Kman in connection with his activities under the General Agent Contract. 7. The Joinder Complaint relates to the sales of various annuity contracts by NWL to a group of annuitants, namely Gloria Osborne, Suzanne Troy, Mary Jane English, Philtip Weinert, Roger Bauer, and Hilda Bankos (collectively the "Annuitants"). 8. NWL is entitled to defense and indemnification of this claim by Kman. 9. In the Joinder Complaint Kman Financial alleges that it and Kman represented to the Annuitants that the Renewal Participation Rates for their annuity contracts would be 100%. This misrepresentation was contrary to the written terms of the annuity contracts and the documents provided by NWL to Kman & Kman Financial. 10. In the Joinder Complaint Kman Financial alleges that it and Kman represented to the Annuitants that the guaranteed interest rate represented a guaranteed minimum annual return under the annuity contracts. This misrepresentation was contrary to the written terms of the annuity contracts and the documents provided by NWL to Kman& Kman Financial. 11. These misrepresentations were made despite Kman& Kman Financial's assurances to NWL that neither had made any representations that differed from the documents provided by NWL. 12. In connection with the sale of policy number 0100956114, Gloria Osborne signed a Consumer Disclosure Signature Page in which she certified that she understood the "Renewal Participation Rates may be as low as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 13. In connection with the sale of policy number 0100956114 to Gloria Osborne, Kman& Kman Financial made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 14. In connection with the sale of policy number 0100953487, Suzanne Troy signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as low as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 15. In connection with the sale of policy number 0100953487 to Suzanne Troy, Kmart &Kman Financial made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 16. In connection with the sale of policy number 0100963403, Suzanne Troy signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as low as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 17. In connection with the sale of policy number 0100963403 to Suzanne Troy, Kman& Kman Financial made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 18. In connection with the sale of policy number 0100941006, Mary Jane English signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as low as 30% and Renewal Asset Fee Rates may be as high as 7%." 19. In connection with the sale of policy number 0100941006 to Mary Jane English, Kman& Kman Financial made the following certification: I certify that the disclosure material has been presented to the applicant and a copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 20. In connection with the sale of policy number 0100941007, Mary Jane English signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as low as 30% and Renewal Asset Fee Rates may be as high as 7%." 21. In connection with the sale of policy number 0100941007 to Mary Jane English, Kman & Kman Financial made the following certification: I certify that the disclosure material has been presented to the applicant and a copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 22. In connection with the sale of policy number 0100941008, Phillip Weinert signed a Customer Disclosure Signature Page in which he certified he understood that "Renewal Participation Rates may be as low as 30% and Renewal Asset Fee Rates may be as high as 7%." 23. In connection with the sale of policy number 0100941008 to Phillip Weinert, Kman& Kman Financial made the following certification: I certify that the disclosure material has been presented to the applicant and a copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 24. In connection with the sale of policy number 0100947967, Roger Bauer signed a Customer Disclosure Signature Page in which he certified he understood that "Renewal Participation Rates may be as low as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 25. In connection with the sale of policy number 0100947967 to Roger Bauer, Kman & Kman Financial made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 26. In connection with the sale of policy number 019945263, Hilda B ankos signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as Iow as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 27. In connection with the sale of policy number 019945263 to Hilda Bankos, Kman& Kman Financial made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 28. The Consumer Information Summary and Disclosure that Kman& Kman Financial provided to each of the Annuitants informed Kman, Kman Financial, and the Annuitants as follows: "The current Renewal Participation Rate is lower than the current First Year Participation Rate on newly issued Certificates: ask your agent for the current First Year Participation Rate and the current Renewal Participation Rate. The current Renewal Participation Rate is not guaranteed and subject to change at NWL's discretion. The Guaranteed Minimum Participation Rate is 30% in all available states except California where it is 20%. 29. The description of the Confidence Index 2000 Annuity that Kman & Kman Financial provided to the Annuitants included substantially similar language. 30. That same document provided the following description of the minimum guaranteed certificate value: The Minimum Guaranteed Certificate Value is an alternative method to determine the value of your certificate and applies only when its total value exceeds the total value achieved under the Interest Credit Option(s) chosen. This 2.50% or 2.75% interest rate applies only to the calculation of the Minimum Guaranteed Certificate Value and is not a minimum annual return under the indexed options. 31. Pursuant to the terms of the General Agent Contract, Kman & Kmart Financial agreed that they were thout authority to do or perform and expressly agree[d] not to "wi ' do or perform the following acts on [NWL's] behalf... (b) make, alter or discharge contracts... (d) quote rates other than as quoted by us... (g) guarantee dividends; (h) deliver any policy more than 30 days after issuance by us..." (Ex. A, ~[ 6). 32. Kman & Kman Financial also agreed that they would not "...(1) rebate or offer to rebate all or any part of a premium on [NWL's] insurance policies or annuities; (m) induce or attempt to induce any of our Annuitants to discontinue payment of premiums or to relinquish any insurance policy or annuity..." (Ex. A, ~[ 6). 33. Both Kman & Kman Financial further agreed that commissions would "not be allowed on premiums waived or commuted by reason of...exercise of policy options." (Ex. A, ~[8). 34. Kman& Kman Financial further agreed that "In the event of an annuitant's death, surrender, or election of any settlement option within the first three policy years, commission adjustments...shall be charged to [Kman's/Kman Financial's] accounts according to their respective contract(s) and shall become a debt to [NWL] which is due and payable on demand in accordance with the respective contract." In the event an Annuitant surrendered an annuity contract during the first year "all commissions previously paid to [Kman/Kman Financial] for such policy shall be charged back to [Kman/Kman Financial] according to the respective contracts." (~[ 8 (G)). 35. In the event an Annuitant surrenders an annuity contract the second year, "50% of all commissions previously paid to [Kman/Kman Financial] shall be charged back to [Kman's/Kman Financial's] accounts according to the respective contracts." (Ex. A, ~ 8(G)). 36. Pursuant to the terms of the General Agent Contract, in all cases where man s clmm to commissions is disputed for any reason, [NWL] shall have the right to decide and settle the dispute, and our decision shall be binding and conclusive." (~[ 10). 37. With respect to each of the Annuitants, Kman &Kman Financial certified that "the disclosure material has been presented to the applicant and a copy was provided to the applicant." 38. Kman & Kman Financial further certified that they had "not made statements which differ from this material, nor have I made any promises about the expected future indexed value of th~s contract. 39. On information and belief, Kman & Kman Financial misrepresented to the Annuitants that the Renewal Participation Rates would be 100% despite the fact the disclosure material made clear the rates could be as low as 20% or 30%, depending on the contract. 40. On information and belief, Kman & Kman Financial misrepresented to the Annuitants that the 2.75% Guaranteed Interest Rate represented a minimum annual return under the index options rather than being the rate that applies only to the calculation of the Minimum Guaranteed Certificate Value. 41. On information and belief, Kman & Kman Financial failed to deliver the policy to Gloria Osborne within 30 days after it was issued by NWL. COUNT I - BREACH OF CONTRACT 42. NWL incorporates by reference the allegations contained in Paragraphs 1 through 41 of this Complaint as fully as though the same were set forth herein at length. 43. Kman's and Kman Financial's actions constitute a breach of the General Agent Contract. 44. As a result of the breaches by Kman & Kman Financial, the Annuitants terminated their annuity contracts with NWL. 45. NWL has suffered damages as a result of Kman Financial and Kman's breaches of the General Agent Contract, including the loss of earnings from the termination of the annuity contracts, and legal fees incurred in defending this suit. 10 WHEREFORE, NWL requests this Court enter judgment in its favor and against Michael Kman, Jr., and award NWL its attorney fees, costs, and such other relief as the Court deems to be equitable. Dated: August 19, 2002 ~-qr~'t-..._~D~ DRA'~AKOS KY (80267) Peppe r~a~lllata~:~_~ --- 200 One Keyston~e_~ North Front and Market Streets P. O. Box 1181 Harrisburg, PA 17108-1181 Phone: (717) 255-1155 Fax: (717) 238-0575 ROBERT L. HICKOK (30101) Pepper Hamilton LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA 19103 Phone: (215) 981-4000 Fax: (215) 981-4750 11 VERIFICATION I, Rey Perez, hereby state that I am Corporate Counsel for National Western Life Insurance Company, and am authorized to make this verification on its behalf. I verify that the statements made in the foregoing document are true and correct to the best of my knowledge, information and belief. I understand that the statements in said document are made subject to the penalties of 18 Pa.C.S. § 4909 relating to unswom falsification to authorities. Dated: REY PEREZ ~ Exhibit A · This Amendment, effective October 25, 1999, replaces and supersedes any prior Commission Schedule or amendment uflder your Contract, if any, setOng forth the Schedule of Commi~slom for the Confidence Flex-45 Annuity and '0onfldance Flex-85 Annuity. CONFIDENCE FLEX-45 Issue Ages Year I Years 2-10 Non-Qualified- 0-70 13.00% 2.OO% 71-80 12.00% . 81-85 10.00% 2.00% Qualified 0-70 13.00%' 2. 00% 71-75 10.00% 2.O0% CONFIDENCE FLEX-85 Thereafter 0.00% 0.00% 0.00% 0.00% 0.00% Issue Ages Year I . Years 2-10 Thereafter Non-Qualified 070' 10:00o,4, 4.00% 0.00% 71-80 9.00% 4.00% 0.00% 81-85 7.00% 4.00% 0.00% Qual'~ied 0-70 10.00% 4.00% 71-75 7.00% 4.00% ' 0.00% 0.00% If the annuitant dies within one (1) year of ihs policy Issue date, all comm~ previonsly paid to you and/or your ~,~-,~ , .u~.uu--/~ c~ me commission will be reversed: if death _occ,__,r~ in the 7ih month - 85.00%; in the 8ih month - 70.00~; in'the 9th month - 55.(XP~; in'the 10ih month - 40.00%; in the 11ih month - 25.00%; and tn the 12th month - 10.00~ of the commission will be reversed. Nati~Lif~mpany Arthur W. Pickering Senior Vice President- Marketing NATIONAL WESTERN LIFE INSURA~C~ COMPANY 850 EAST AND£RSOlq LANE * AUSTIN, TEXAS 787,52-t602 ' PAYROLL BENEFIT LIFE'I :. Years issue Ages 18-65 Issue Ages 0-17 l* ss..op% so.oo%. . 2-10 '4.5{W.. 4.50% ~ Thereafter ' 0.00% - 0.00% '= PAYROLL BENEFIT LIFE II · . ' ~eam .Iss0e:.Age$:l~.. 65. -. I~de A~les 0-17 1' ; ' 93.00% 80:00%" ., .I: ' . 1. The pd.ma~..ina.ur.e~.'~ first year targ~ prerriiu, m,:and .. · , . . .. '. i i':' ' 2, .T~..e .annual ~ost of msur'"~,e- premiums'of ~ny ridem.and/or ~,alded to ~he .P~II:Be~' ': :; , . ".Lifelandll.: . ' " ',' , - ''.. ':'. I" ... . · . . · __.. __ _~ue__ PO my. y.~, sna,i ~e su~)ject to the. rate of com~lss!on..deagnated for-that policy ~/eal'. '. : - . · .. NaEb~~pany Arthur W. Picketing ·. Senior .Vioe President - Marketing · NATIONAL '~FESTE~ LIF~ IN~NCE COMPANY. · " 850 FAST ANDI~R$ON'LAN~ .. AU~F]N, TEY~$ This Amendment to your contract, effenfive July 1, 1998, sets forth the Schedule of. Commissions for Payroll Benefit Life I and Il. When attached to any co~,ct executed on or after July 1., 1998, the Amendment ' provides for the add'ffion of the Payroll Benefit ~ I and I1. NATIONAL ZF_,STERN AMEI~MENT TO GENERAL AGENT CONTRAGT commission schedule under your agent contract that set forth Ihe 8chedulea of Commissions for the Banefacb~,- Select. BENEFACTOR SELECT Policy Form 01-1109-96 and All State Variations Thereof Years Issue Ages 0-65 Issue Ages 86-70 Issue Ages 71-75 Issue Ages 78-80 1st Year' 100.00% 90.00% 80.00% 70.00% 2nd Year 4.00% 4. O(P/. 4.00% 4.0(~ 3rd-Tth Yea~ .2.50% 2.50% 2.50% 2.50% · .Thereafter 0.60% 0.60% 0.60% 0.60% · : .' The first-year commission rate for the Benefactor Select, is applicable only to the followi~tg premiums: 1. The primmy insured's first-year target premium, as set forth in the Company's published Ratobook, and 2. The.a~nuel cost of insurance premiums of any riders and/or benefits added to the Benefactor Select. 'i'he secopd-year commission rote is applicable to all first-year premiums recehn~ by the Company in exce_~s of the premiums no~l in the aforementioned items I and 2. If the premiums received by the Company in the r~a;. poF~,y ~mar do not equal or exceed the premiums noted in/terns I and 2, the first-year commission rate difference. · Ail other premiums receiv~l by the Company during the second policy year. or any subsequent policy year. shall be subject to the rate of commission deaig~ated for that policy year. +o Natio~Ufe~mpany Arl~ur W. Piokering Senior Vice President - Marketing NATIONAl, ~F'EST~R2q ~ INSDRANCE COMPANY 850. EAST AN.D£RSON LANE · AUS'ITH, TEXAS 78752-1602 NATIONAL* WESTERN AME~E)MENT TO GENERAL AGENT CONTRACT .This Amendment to_ your co~q~act, effective July 15, 1999, sets forth the ~chedule of'Commissions for the Ben, .e~ac[? .S?lect...F~'..e. W~...eh attach, ed to_ar~.'y .~_ntmot executed on or after July 15, 1999, the Amendment ~'o~oea tot me ssomon ot ms uenmactor select F'we to the Schedule of Commissions. BENEFACTOR SELECT' FIVE PoliCy Form 01-1109-9.6 and All State Variations Thereof Years Issue Ages 0-65 Issue Ages 66.70 Issue Ages 71-75 Issue Ages 76-80 1st Year* 95.00~ 85.00% 75.00% 65.00% 2nd Year 4.00% 4.00% 4.00% 4.00% 3rd-7th Year 2.50% 2.50% '2-50% 2.50% Thereafter 0.60% 0.60% 0.60% 0.60% $A-9118-9o · ' The first-year commission rate for the Benefactor Select Rve, is applicable only to'the followfng premiums: 1. The primaxy insured's first-year target premium, as set forth in the Company's published 2. The annual cost of insurance premiums of any riders and/or benefits added to the Benefactor Select Fwe. The second-year commission t&;~ is applicable to ell first-year premiums received by the Company in excess of the premiums noted in the aforementioned items I and 2. If the premiums received by the Company in the . ;;,,~;. policy year do not equal or exoeed the pren~.iums, rto. tsd irt items I and 2, the ~c~;,-year commission rate c~xallnuss to be appr~able to the premiums recewea aunng me second policy year up to the amount of such All other premiums received by the Company during the second policy year, or any subsequent poi'my year, shall be subject to the rote of commission designated for thst policy year. Nafio~~e Insurance Company. Arthur W. Pickering Senior Vice President - Marketing NATIONAL WESTERN LIFE INSURANCE COMPANY 8~0 EAST ANDERSON LANE · 'AUSTIN, TEXAS 78752-1602 NATION, L® WESTERN UFE INSUIIANC~ COHI~J, Ny AMENDMENT TO GENE~RAL AGENT CONTRACT . Effed~b ~ 1096 Aruaulty a~p~calions.~,,;ii~n by you anOor your'agents on o.r after 8ep[~mber 1, 1999, the followj.'r{g, addrdd~al con, mission tid'jus;,.ent provision-i~ in'effe~ ' 'ih ~ event df'a 1096 annuitanr, s elect~on of any setllem~nt option 'within 1he first t~o policy years, a portion df the w;;;~g agen{'$-con~L_~.' n shall be charged back to the w,;i;l~ agent's coiamission account and.shaJl ~ ~.. ~-. :.,-.: .--... · ,,,, u,=~, -~u~ at me ~in le Prbmium Irnmedia nuitv e~rnmLt*~nn · - . ............. ._... . .g . te. An .... . ----..--_.. ra~ tot .~xea periods ox .rive y.~. er longer and {he ~,= of.lh~ 1096' Annuity commission previously pSd to · the .~,;[;,~g ~ .again piG the amount of ths client's first .-ygar intomst bonus. National Westem Life Insurance Company. Arthur W. Picketing Senior Vlce President - Marketing NATIONAL WESTERN Ut~ ~ COHr;,~ AMENDMENT TO GENERAL AGENT CONTRACT 'i This Amendment. ~ '~ e c .3t. ('~ , replaces and supersedes .any prior Commission Sched- ule or amendment under your (;on,'act, if any, setting forlh t~e Schedule of Commissions Tot the MoneyShleld 2. MONEYSHIELD 2 m POLICY FORM 01-1108-A-99 & 01-1108-B.99 1st Yea'. Non-Quar~ed Issue Ages 'Plan A Plan B 0-80 10.00% 9.00% Renewal ·. 0.00% 0.00% 1st Year . Quar~led Issue Ages Plan A Plan B 0-65 10.00% · 9.00% 66-70 ";} 10.00% 9.00% 71-75 8.70% 7.70% Renewal 0.00% 0.00% (A) ff the annuitant dies wi~in one (1) year of the policy issue date, all cor~missions previously ;aM to you end/or your agents will be charged back to your and/or your agents' accounis according to the respective contract(s) and shall bec~me 8 debt to us ~fllch is due and payable on demand in accordance with the respective contract(s). ,~ac~u__~_r~__~.n.g to 1he ..mspectl .ye contn~(s) and shall become a d;bt be ch,~ar~l~ ~ba~.c.k_ t_o_y~our ~ .d/or your agent' · ~.,~,urum~'e W~m me respective contract(s), to us .,0.~. ~. uue eno ;ayaDle on oemand In CERTIFICATE OF SERVICE I hereby certify that on August 19, 2002, I served a copy of the foregoing document upon counsel and parties of record by United States First Class Mail, postage prepaid, addressed as follows: Ron S. Chima, Esquire Eckert Searnans Cherin & Mellot 213 Market Street 8th Floor Harrisburg, PA 17101 Attorney for Plaintiff Gregory H. Knight, Esquire 19 Brookwood Avenue Suite 106 Carlisle, PA 17013 Attorney for Defendant Kman& Kman Financial Group 13 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff VS. KMAN & KMAN FINANCIAL GROUP, Defendant VS. NATIONAL WESTERN LIFE, Additional Defendant No. 02-2985 Civil Term Civil Action - Law NOTICE YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set fol~th in the following pages, you must take action within twenty (20) days after this Complaint and Notice are served, by entering a written appearance personally or by attorney and filing in writing with the Court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the Court without further notice for any money claimed in the Complaint or for any other claim or relief requested by the Plaintiff. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 (717) 249-3166 (800) 990-9108 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff VS. KMAN & KMAN FINANCIAL GROUP, Defendant VS. NATIONAL WESTERN LIFE, Additional Defendant No. 02-2985 Civil Term Civil Action - Law NOTICIA Le han demandado a usted en la corte. Si usted quiere defenderse de estas demandas expuestas en las paginas siguientes, usted tiene viente (20) dias de plazo al partir de la fecha de la demanda y la notificacion. Usted debe pmsentar una apariencia escrita o en persona o por abogado y archivar en la corte en forma escrita sus defensas o sus objeciones a las demandas en contra de su persona. Sea avisado que si usted no se defiende, la corte tomara medidas y puede entrar una orden contra usted sin previo aviso o notificacion y por cualquier queja o alivio que es pedido en la peticion de demanda. Usted puede perder dinero o sus propiedades o otros derechos importantes para usted. LLEVE ESTA DEMANDA A UN ABOGADO INMEDIATAMENTE. SI NO TIENE ABOGADO O SI NO TIENE EL DINERO SUFICIENTE DE PAGAR TAL SERVICIO, VAYA EN PERSONA O LLAME POR TELEFONO A LA OFICINA CUYA DIRECCION SE ENCUENTRA ESCR1TA ABAJO PARA AVERIGUAR DONDE SE PUEDE CONSEGUIR ASISTENCIA LEGAL. Cumberland County Bar Association 2 Liberty Avenue Carlisle, PA 17013 (717) 249-3166 (800) 990-9108 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff VS. KMAN & KMAN FINANCIAL GROUP, Defendant VS. NATIONAL WESTERN LIFE, Additional Defendant No. 02-2985 Civil Term : Civil Action - Law ANSWER OF ADDITIONAL DEFENDANT NATIONAL WESTERN LIFE TO PLAINTIFF'S COMPLAINT WITH NEW MATTER AND COUNTERCLAIM Additional Defendant, National Western Life ("NWL"), by and through its counsel, answers the joinder complaint of third party plaintiff Kmart &Kman Financial Group ("Defendant") as follows: 1. Admits on information and belief. 2. Admits. 3. NWL denies that it approved an application filed by Defendant for an appointment to sell NWL products, including annuity contracts, on or about January 7, 2000. To the contrary, NWL approved an application filed by Michael J. Kman, Jr., ("Kman") to sell NWL products effective November 30, 1999. Mr. Kman entered into a General Agent Contract ("General Agent Contract") with NWL on December 2, 1999. A true and correct copy is attached hereto as Exhibit A. 4. Admits that Kman and Defendant marketed the three annuity contracts identified in this paragraph to Gloria Osborne and Suzanne E. Troy. 5. Admits. Hereinafter, the people listed in paragraphs 4 and 5 are referred to collectively as the "Annuitants". 6. Denies. NWL has been unable to identify any instance in which Philip Weinert or someone identifying himself/herself as a relative of Hilda Bankos contacted NWL to confirm the annuity contract each was considering to purchase would be computed on 100% of the S&P index. By way of further answer, the participation rate for the first certificate year of the annuity contracts purchased by Ms. Bankos and Mr. Weinert was 100%. Mr. Weinert and Ms. Bankos each signed a disclosure statement indicating that each understood that renewal participation rates may be as low as 30% for Mr. Weinert and 20% for Ms. Bankos. 7. After reasonable investigation, NWL is without knowledge or information sufficient to form a belief as to the truth of the allegations contained herein and, therefore, such allegations are deemed to be denied. By way of further answer, NWL did not confim~ or approve the representations made by Defendant in Exhibit B. To the contrary, Defendant and Kman misrepresented to NWL that they had not made any such representations which differed from the written material provided by NWL. 8. Admits in part and denies in part. NWL admits that the Annuitants purchased the annuity contracts described in Paragraphs 4 and 5. NWL denies that the Annuitants purchased the annuity contracts based on any misrepresentation made by NWL, Defendant, or Kman. To the contrary, each of the Annuitants purchased his/her respective policy based on the materials submitted to them by NWL through Defendant or Kman. 9. Denies. NWL specifically denies that it did not inform the Annuitants and Defendant that the renewal participation rates would be less than 100% until after the Annuitants received the first annual statement. To the contrary, NWL informed the Annuitants and Defendant that the renewal participation rates could be as low as 20 to 30%, depending on the annuity contract each purchased. By way of further answer, Exhibit B is directed only to the representatives of Hilda Bankos who did not terminate her annuity contract. Still by way of further answer, Gloria Osborne and Suzanne Troy canceled their annuity contracts pursuant to the terms of those contracts during the 1 O-day "free look" period. 10. Admits in part and denies in part. NWL admits that it received the letter attached as Exhibit C. NWL specifically denies that it did not compute the annuity return in a manner consistent with the terms of the annuity contracts. To the contrary, NWL computed the annuity returns in a manner consistent with the annuity contracts. NWL further denies that it did not accurately represent the method for computing the annuity returns to Defendant prior to the sale of the various annuities. To the contrary, NWL accurately represented the terms of the annuity contracts to Defendant and the Annuitants prior to the sale of. annuity contracts. 11. Admits in part and denies in part. Admits that Defendant requested that "NWL allow each of [the Annuitants] the option of either remaining in the contract after further explanation of it's [sic] mechanics OR a full refund without penalty and/or surrender charges and with the minimum 2.75% interest paid." NWL specifically denies that the Annuitants were entitled to such treatment. To the contrary, Defendant's request was directly contrary to the terms of the various annuity contracts. 12. Denies as stated. NWL denies that it failed to honor any assurances. To the contrary, NWL complied with all terms of the annuity contracts. By way of further answer, NWL denies that it returned premiums pursuant to the free look provision of the annuity product to Gloria Osborne and Suzanne Troy as the result of "efforts by Defendant." To the contrary, NWL returned those premiums in a manner consistent with the terms of the annuity contracts. 13. NWL admits that all of the Annuitants except for Hilda Bankos terminated their annuity contracts. NWL refunded money to them in a manner consistent with the annuity contracts. 14. NWL is without knowledge or information sufficient to form a belief as to whether Defendant has suffered losses in commission and/or continuing business with the Annuitants and, therefore, such allegations are deemed to be denied. By way of further answer, NWL specifically denies that Defendant has suffered any losses in commission and/or continuing business with the Annuitants as the result of any action by NWL. To the contrary, Defendant has not suffered any losses in commission and/or continuing business with the Annuitants as the result of any action by NWL. NWL further denies that it made any misrepresentation to Kman, Defendant and/or the Annuitants. To the contrary, NWL made no such misrepresentation to Defendant and/or the Annuitants. COUNT I 15. NWL incorporates paragraphs 1-14 of its answer as fully as though the same were set forth herein at length. 16. NWL specifically denies that it misrepresented any term(s) of the annuity contracts purchased by the Annuitants. To the contrary, NWL did not misrepresent any of the term(s) of the annuity product purchase by the Annuitants. 17. NWL specifically denies Defendant suffered any damages as the result of any actions by NWL. To the contrary, Defendant has not suffered any damages as the result of any actions by NWL. By way of further answer, NWL denies that it "refused to honor the assurances it made concerning the annuity policies." To the contrary, NWL complied at all times with the terms of the annuity contracts. COUNT II 18. NWL incorporates paragraphs 1-17 of its answer as fully as though the same were set forth herein at length. 19. NWL denies that it computed the annuities in a manner contrary to the terms of the annuity contracts. To the contrary, NWL computed the annuities in a manner consistent with the annuity contracts. By way of further answer, NWL specifically denies that it made any misrepresentation to Defendant or any of the Annuitants. To the contrary, NWL made no misrepresentation to Defendant or any of the Annuitants. 20. NWL specifically denies that it made any misrepresentation to Defendant or the Annuitants, that it intended at any point to deceive any of the Annuitants, or that, in fact, it did deceive Defendant or the Annuitants. To the contrary, NWL did not make any misrepresentations to Defendant or the Annuitants, did not intend to deceive, nor did it deceive the Annuitants or Defendant at any time. WHEREFORE, National Western Life Insurance Company requests that this Court grant judgment for it and against Defendant together with costs, attorney fees and such other relief as the Court deems to be appropriate. NEW MATTER 21. Defendant's joinder complaint fails to state a claim upon which relief can be granted. 22. Defendant's claims are barred, in whole or in part, by the applicable statute(s) of limitations. 23. Defendant's claims are barred by the Economic Loss Doctrine. 24. Defendant's claims are barred by the Gist of the Action Doctrine. 25. Defendant and Kman misrepresented to NWL that they did not make any such misrepresentations regarding the terms of the annuity contracts. WHEREFORE, National Western Life Insurance Company requests that this Court grant judgment for it and against Defendant together with costs, attorney fees and such other relief as the Court deems to be appropriate. COUNTERCLAIM NATIONAL WESTERN LIFE V. KMAN & KMAN FINANCIAL COUNT I - BREACH OF CONTRACT 26. NWL incorporates by referenced the allegations contained in paragraphs 1 through 25 of this Answer as fully as though same were set forth herein. 27. NWL and Kman signed the General Agent Contract on December 2, 1999. 28. Pursuant to the General Agent Contract, Kman and Defendant are required to indemnify NWL for any amounts recovered against it in any action brought against it by reason of any alleged act, fault, or failure by Kman or Defendant. 29. The Joinder Complaint constitutes a legal action against NWL by reason of an "act, fault, or failure" of Kman and/or Defendant in connection with his/its activities under the General Agent Contract. 30. NWL is entitled to defense and indemnification of this claim by Kman and Defendant. 31. In the Joinder Complaint Defendant alleges that it and Kman represented to the Annuitants that the Renewal Participation Rates for their annuity contracts would be 100%. This misrepresentation was contrary to the written terms of the annuity contracts and the documents provided by NWL to Kman and Defendant. 32. In the Joinder Complaint Defendant alleges that it and Kman represented to the Annuitants that the guaranteed interest rate represented a guaranteed minimum annual return under the annuity contracts. This misrepresentation was contrary to the written terms of the annuity contracts and the documents provided by NWL to Kman and Defendant. 33. These misrepresentations were made despite Kman and Defendant's assurances to NWL that neither had made any representations that differed from the documents provided by NWL. 34. In connection with the sale of policy number 0100956114, Gloria Osborne signed a Consumer Disclosure Signature Page in which she certified that she understood the "Renewal Participation Rates may be as low as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 35. In connection with the sale of policy number 0100956114 to Gloria Osborne, Kman and Defendant made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 36. In connection with the sale of policy number 0100953487, Suzanne Troy signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as low as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 37. In connection with the sale of policy number 0100953487 to Suzanne Troy, Kman and Defendant made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 38. In connection with the sale of policy number 0100963403, Suzanne Troy signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as low as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 39. In connection with the sale of policy number 0100963403 to Suzanne Troy, Kman and Defendant made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 40. In connection with the sale of policy number 0100941006, Mary Jane English signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as low as 30% and Renewal Asset Fee Rates may be as high as 7%." 41. In connection with the sale of policy number 0100941006 to Mary Jane English, Kman and Defendant made the following certification: I certify that the disclosure material has been presented to the applicant and a copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 42. In connection with the sale of policy number 0100941007, Mary Jane English signed a Customer Disclosure Signature Page in which she certified she understood that "Re ' ' · newal Participation Rates may be as low as 30% and Renewal Asset Fee Rates may be as high as 7%." 43. In connection with the sale of policy number 0100941007 to Mary Jane English, Kman and Defendant made the following certification: I certify that the disclosure material has been presented to the applicant and a copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 44. In connection with the sale of policy number 0 !00941008, Phillip Weinert signed a Customer Disclosure Signature Page in which he certified he understood that "Renewal Participation Rates may be as low as 30% and Renewal Asset Fee Rates may be as high as 7%." 45. In connection with the sale of policy number 0100941008 to Phillip Weinert, Kman and Defendant made the following certification: I certify that the disclosure material has been presented to the applicant and a copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 10 46. In connection with the sale of policy number 0100947967, Roger Bauer signed a Customer Disclosure Signature Page in which he certified he understood that "Renewal Participation Rates may be as low as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 47. In connection with the sale of policy number 0100947967 to Roger Bauer, Kman and Defendant made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 48. In connection with the sale of policy number 019945263, Hilda Bankos signed a Customer Disclosure Signature Page in which she certified she understood that "Renewal Participation Rates may be as Iow as 20% (0% in California) and Renewal Asset Fee Rates may be as high as 8%." 49. In connection with the sale of policy number 019945263 to Hilda Bankos, Kman and Defendant made the following certification: I certify that the disclosure material has been presented to the applicant and a signed copy was provided to the applicant. I have not made statements which differ from this material nor have I made any promises or assurances about the expected future index value of this contract. 11 50. The Consumer Information Summary and Disclosure that Kman and Defendant provided to each of the Annuitants informed Kman, Defendant, and the Annuitants as follows: "The current Renewal Participation Rate is lower than the current First Year Participation Rate on newly issued Certificates: ask your agent for the current First Year Participation Rate and the current Renewal Participation Rate. The current Renewal Participation Rate is not guaranteed and subject to change at NWL's discretion. The Guaranteed Minimum Participation Rate is 30% in all available states except California where it is 20%. 51. The description of the Confidence Index 2000 Annuity that Kman and Defendant provided to the Annuitants included substantially similar language. 52. That same document provided the following description of the minimum guaranteed certificate value: The Minimum Guaranteed Certificate Value is an alternative method to determine the value of your certificate and applies only when its total value exceeds the total value achieved under the Interest Credit Option(s) chosen. This 2.50% or 2.75% interest rate applies only to the calculation of the Minimum Guaranteed Certificate Value and is not a minimum annual return under the indexed options. 53. Pursuant to the terms of the General Agent Contract, Kman and Defendant agreed that they were "without authority to do or perform and expressly agree[d] not to do or perform the following acts on [NWL's] behalf... (b) make, alter or discharge contracts...(d) 12 quote rates other than as quoted by us...(g) guarantee dividends; (h) deliver any policy more than 30 days after issuance by us..." (Ex. A, ~[ 6). 54. Kman and Defendant also agreed that they would not "...(1) rebate or offer to rebate all or any part of a premium on [NWL's] insurance policies or annuities; (m) induce or attempt to induce any of our Annuitants to discontinue payment of premiums or to relinquish any insurance policy or annuity..." (Ex. A, ][ 6). 55. Both Kman and Defendant further agreed that commissions would "not be allowed on premiums waived or commuted by reason of...exercise of policy options." (Ex. A, ][ 8). 56. Kman and Defendant further agreed that "In the event of an annuitant's death, surrender, or election of any settlement option within the first three policy years, commission adjustments...shall be charged to [Kman's/Defendant's] accounts according to their respective contract(s) and shall become a debt to [NWL] which is due and payable on demand in accordance with the respective contract." In the event an Annuitant surrendered an annuity contract during the first year "all commissions previously paid to [Kman/Defendant] for such policy shall be charged back to [Kman/Defendant] according to the respective contracts." (~[ 8 (G)). 57. In the event an Annuitant surrenders an annuity contract the second year, "50% of all commissions previously paid to [Kman/Defendant] shall be charged back to [Kman's/Defendant's] accounts according to the respective contracts." (Ex. A, ~ 8(G)). 13 58. Pursuant to the terms of the General Agent Contract, in all cases where Kman's "claim to commissions is disputed for any reason, [NWL] shall have the right to decide and settle the dispute, and our decision shall be binding and conclusive." (~[ 10). 59. With respect to each of the Annuitants, Kman and Defendant certified that "the disclosure material has been presented to the applicant and a copy was provided to the applicant." 60. Kman and Defendant further certified that they had "not made statements which differ from this material, nor have I made any promises about the expected future indexed value of this contract." 61. On information and belief, Kman and Defendant misrepresented to the Annuitants that the Renewal Participation Rates would be 100% despite the fact the disclosure material made clear the rates could be as Iow as 20% or 30%, depending on the contract. 62. On information and belief, Kman and Defendant misrepresented to the Annuitants that the 2.75% Guaranteed Interest Rate represented a minimum annual return under the index options rather than being the rate that applies only to the calculation of the Minimum Guaranteed Certificate Value. 63. On information and belief, Kman and Defendant failed to deliver the policy to Gloria Osborne within 30 days after it was issued by NWL. Contract. 64. Kman's and Defendant's actions constitute a breach of the General Agent 14 65. As a result of the breaches by Kman and Defendant, the Annuitants terminated their annuity contracts with NWL. 66. NWL has suffered damages as a result of Defendant and Kman's breaches of the General Agent Contract, including the loss of earnings from the termination of the annuity contracts, and legal fees incurred in defending this suit. WHEREFORE, NWL requests this Court enter judgment in its favor and against Kman &Kman Financial Group and award NWL its attorney fees, costs, and such other relief as the Court deems to be equitable. ~2q P. DXlg[~9891) 200 One Keystone Plaza North Front and Market Streets P. O. Box 1181 Harrisburg, PA 17108-1181 Phone: (717) 255-I 155 Fax: (717) 238-0575 Dated: August 19, 2002 ROBERT L. HICKOK (30101) Pepper Hamilton LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA 19103 Phone: (215) 981-4000 Fax: (215) 981-4750 15 VERIFICATION I, Rey Perez, hereby state that I am Corporate Cotmsel for National Western Life Insurance Company, and am authorized to make this verification on its behalf. I verify that the statements made in the foregoing document are true and correct to the best of my knowledge, information and belief. I understand that the statements in said document are made subject to the penalties of 18 Pa.C.S. § 4909 relating to unsworn falsification to authorities. Dated: REY PEREZ ~__~ Exhibit A ti'. 90.00% ;~: .' ' 8:,o0% ·. o..o.~.~" ,..- .~: so':do~ AMEM) MENT TO GENERAL AGENT CONTRACT · This Amendment, effective October 25, 199g, replaces and supersedes any prior Commisalon ,Schedule or amendment under ~ Contract, if any, setting forth the Schedule of Commissions for the Conf~ence Flex,45 Annuity and ' Confidence Flex-85 Annuity. CONFIDENCE FLEX-4F, Issue Ages Year I Years 2-10 Thereafter Non-Qualified 0-70 13.00% 2-00% 0.00% 71-80 12.00% .2.00% 0.00% 81-85 10.00% 2-01)% 0.00% Qualified 0-70 13.00%' 2.00% 0.00% 71-75 10.00% 2.00% 0.00% CONFIDENCE FI. EX-85 Issue Ages Year 1 .Years 2-10 Thereafter Non-QualiEed 0-70' 10~00% 4.00% 0.00% 71-80 9.00% 4.00% 0.00% 81-85 7.00% 4.00% 0.00~ Qualified 0-70 10.00% 4.00% 0.00% 71-75 7.00% 4.00% ' 0.00% If the annuitant dies within one (1) year of the policy l-_~,__,e date, all co~d~uns previoual~ paid to you and/or your ageats re'II be cherged back to your and~or your agents' acc~unt~ ~_-~aGng to the resL-'~Jve contract(s) and ~hall do~uanmd roms e monms ct ~ Jaaue, 100.00% of the commission will be reversed; [f death occurs in the 7th month - 85.00%; In the 8th mon~ - 70~0%: in'the 9th month - SS.00%; in'the 10th month - 40.00%; in the 11th month - 2~.00%; and In the 12th month - 10.00% of the commission will be reversed. Natio~~mpany Arthur W. Picketing Senior Vice President- Marketing NATIONAL ~T.~'TEI~/LIFE INSURANCI/COMPANY 850 FAST AND£ESON LA~ * AIJST~N, ~EXJ~ 7~7~2.-t602 This Amendment to your contract, effective July 1, 1998, sets forth the Schedule of. Commissions for Payroll Benefit Ufe I and 11. When attached to any contract executed on or after July I, 1998, the Amendment ' p~bvides for ~e ac~.cr~ion of the Payroll Benefit i~ife I and I1. PAYROLL BENEFIT LIFE'I Years i.ssue'Ages 18-65 Issue Ages 0-17 1' 88.0.0% 60.00%. : 2-10 4.50% 4.50% There, alter ' 0.00% - 'j; PAYROLL'BENEFIT LIFE II . . ' ~ears .Issue-Ages 18r. 6S... "I~tie Ages 0-17 ,' · 93.00% 60:00% · -~ ~-~o ~,.oo~ ;,.o0%'.. · - ':~, Ther~aiter " · ..'0;~3%. ,..- ' 0:00%" ' ...-" ... ~. ..- :- . "..: :. '.. ' :,, · :. ::: . - ' .. :...,.. :"'. · ' Life dl].: .. · ' , -' .. '-'' · ' . -' ' · ~i .' ~ _u~,_ums~n_ _o~_... !n m,e..mom, m. en.~..onfm its.re, s,.~.an? 2:...It...~e pm~miurps, received by the C~. mpany in the :~; '.c?_'m_ nuestooe..appl~aolelomep!'.em~umsmceaie(l.oun.r)g, thb-secondpo~ year' ud to ths amount of suc~ ' ,, Arthur W. Piokering '.} i . · Senior .Vioe President - Marketing ~I 'NATIONAL WESTERN LIFE IN~,A_NCE COMPANY- g~. -887~-90 -" 8~0 EAST ANDERSON'LANE · AUSTIN, TEXAS 787~i-161)2 Ii : ' NATIONAL® WESTERN AME~)MENT TO GENERAL AGENT CONTRACT Amendment, effec~ve commission schedule under your agent contract th-* set forth the Schedules of Commissions for the BENEFACTOR SELECT Policy Form 01-1109-96 and All State Variations Thereof Yearn Issue Ages 0-65 Issue Ages 66-70 I~,ue Age~ 71-75 ~ Ages 78-80 1st Year' 100.00% 90.00% 80.00% 70.00% 2nd Year 4.00% 4.0D% 4.00% 4.00% · Thereafter 0.60% 0.60% 0.60% 0.60% ' The flrst-yea~ commission rate for the Benefactor Select, is applicable only to the following premiums: 1. The pr~nary insured's first-year target premium, as set forth in the Company's pubilehed Ratebook, and 2. The.a~nual cost of insurance premiums of any ridem and/or benefits added to the Benefactor Select. The seco0d-year commission rote is applicable to eli first-year premiums received by the Company in exce~ of the premiums noted in the aforementioned items 1 and 2. ff the premiums received by the Company in the ;',~=;. policy year do not equal or exceed the premiums noted in items I and 2, the F,~i.-year commission rate difference. Ail olher premiums received by the Company during the second policy year, or any subsequent policy year, shall be subject to the rate of commission designated for that policy year. Natio~~mpany Arthur W. Piokering Senior Vice President- Marketing NATIONAL. ~ESTEILN ~ INSURANCE COMPANY 8~0. EAST AN. DEl[SON LAN~ · AUSTIN, TEXAS 78752-1602 NATIONAL° WESTERN AMEI~MENT TO GENERAL AGENT CONTRACT This Amendment to your o(a~Vact, effective July 15, 1999, sets forth 1he Schedule of'Commissions for the Benefac[~' .S?ect Rye. When attached to any contmot executed on or after July 15, 1999, the Amendment 3rovides for me addition of the Benefactor Select' Rye to lfle Schedule of Commissions. BENEFACTOR SELECT'FIVE Policy Form 01-1109-9.6 and All State Variations Thereof Years Issue A4lea 0-65 Issue Ages 66.70 issue Ages 71-75 Issue Ages 76-80 1st Year* 95.00% 85.00~ 75.00% ~.00% ~ Y~ 4.~ 4.~ 4.~% 4.00% ~-7~ Y~ 2.5~ ~5~ '~ 2.5~ ~em~ 0.6~ 0.~% 0.6~ 0.60% 1 l ~dk-9118-S0 · * The first-year commission rote for the Benefactor Select F'me, Is applicable only to'the following premiums: 1. The primary insured'e ~cs[-yesr target premium, as set forth in the Company's published R~ebook, and 2. 'rhe annual cost of insurance premiums of any ~ers and/or bena~s added to the The senond-yesr commission ,~a[~ is applicable to ail first-year premiums received by the Company in excess of the premiums noted in the aforsmontfoned items I and 2. If the premiums received by the Company in the . ~..~e~ ,o ? :.q~ or. ~ the ~.iu.~ .o.~ ~ ~ 1 =~ ~ ~ .~t-y.r com,~-~on ~ corm uss to applma~m to me premiums received during me second policy year up to the amount of such All other premiums received by 1he Company during the second porky year, or any subsequent policy year, shall be subject to the rate of commission designated for ~hat policy year. Nafio~Ltfe~mpany. Arthur W. Pickering Senior Vice President - Marketing NATIONAL WF.,TI~RN LI~ IN$ORANCE COMPANY 850 EAST ANDERSON L,~NE * 'AUSTIN, TEXAS 78752-1602 NATIONAL® XVESTERN UF~ I~U~NC~ COMFA~Y AMENDMENT TO GENERAL AGENT CONTRACT .I · Effed'th~ ~ 1096 Antony a~.plications.written by you and/or your~agents on o.r after September 1, 1999, the follow~.r~. · add, brai c .o~mission '~/dju.stment pmvision'i~ in'effect: 'in ~ event df' a 1096 ann.ulta~t'.$ ele~on of any setllem~nt option?thin'the firs$. ~ .~cy years, a df ff~e v~i'~ng agent'.s'com, mi~n shall be cha~ged ..back .t? the vmilr~g agent'? ~on a .~. unt and.$haJl .bec6me a debt to us ~ is due and .p~.~yal~e eri di~nand: '~..?. charge, ba~k. ~s.tlie ff~ence, if. any, ~.~.n ~'~:pa .y~l~. e. on. ~ ..~:cum .u~tio. n.:Ac~.ou? ~ the p.~.g~ prbm.,um Immediate.Annu~ comm ..~.~ · the ,~ng :agent plus,, the amount of the chent'$ first .-y~ intems't bl3nus, . · Pleese ~ ibis Ame~cl.rnant to ~our agent con'~ot mci schedule of cornmissior~. National Western Ufe Insurance Company. Arthur W. Piokedng Senior Vice President - Marketing NATIONAL® AMENDMENT TO GENERAL AGENT CONTRACT · .' Amendment, effsc~ve *~¢c ~t' ~ ~"~ , repl~ and eupomd~ any prior Commission $ched- o~ ~mendmerlt under your Gontract, it any, settir~ to~d~ t~e 8ofiedule of Commi~ions to~ the MoneyShield p. MONEYSHIELD 2 oo POUCY FOaM 0~ -~ ~ ~^-99 & o~ -~ ~ 0S-S-~9 1st Year. N0n-Qu'al'dled Issue Ages 'Plan A Plan B 0-80 10.00% 9.00% Renewal -. 0,00% 0.00% 1st Year Quarrfied Issue A~e~ Plan A Plan B 0-65 10.00% .9.00% 66-70 ~) 10.00% 9.00% 71-75 8.70% 7.70% Renewal 0.00% 0.00% (A) If the annuitant dies w'tiffin one (1) year of the policy issue date, all c~r~missions previously paid to you and/or your agents will be charged back to your and/or your agents' accounts according to the respective contract(s) and shall become a debt to us ~ is due and pe, yable on demand in accordance with the respective contract(s). (B) If the annuitant eiec~s any settlement option, to include LER0, within three (3) years of the policy' issue d~te, any Commissions paid off the original policy in excess of 4.5% commission, will be charged beck to your and/or your agents' accounts according to ~ respective co,ir-act(s) and shall become a debt to us whiqh Is due and payable on demand in accordance with the respective contract(s). CERTIFICATE OF SERVICE I hereby certify that on August 19, 2002, I served a copy of the foregoing document upon counsel and parties of record by United States First Class Mail, postage prepaid, addressed as follows: Ron S. Chima, Esquire Eckert Seamans Cherin & Mellot 213 Market Street 8th Floor Harrisburg, PA 17101 Attorney for Plaintiff Gregory H. Knight, Esquire 19 Brookwood Avenue Suite 106 Carlisle, PA 17013 Attorney for Defendant Kman &Kman Financial Group 16 SHERIFF'S RETURN CASE NO: 2002-02985 p COMMONWEALTH OF PENNSYLVANIA: COI/NTY OF CUMBERLAND URL FINANCIAL GROUP VS K/WAN & KM3LN FINANCIAL GROUP - REGULAR SHAWN HARRISON , Sheriff or Deputy Sheriff of Cumberland County, Pennsylvania, who being duly sworn according to law, says, the within COMPLAINT & NOTICE was served upon KMAN MICHAEL J JR the ADD'L DEFENDANT, at 1832:00 HOURS, on the 19th day of August at 1018 DOGWOOD LANE ENOLA, PA 17025 MICHAEL K/Z_AN by handing to a true and attested copy of COMPLAINT & NOTICE together with , 2002 and at the same time directing His attention to the contents thereof. Sheriff's Costs: Docketing 18.00 Service 10.35 Affidavit .00 Surcharge 10.00 .00 38.35 Sworn and Subscribed to before me this ~ day of ~-~ A.D. ' ~rothonotary So Answers: R. Thomas Kline 08/20/2002 PEPPER HAMILT~ LLP ~ SHERIFF'S RETURN - U.S. CERTIFIED MAIL CASE NO: 2002-02985 P COMMONWEALTH OF PENNSYLVANIA cOUNTY OF CUMBERLAND URL FINANCIAL GROUP VS. KMAN & KMAN FINANCIAL GROUP R. Thomas Kline , Sheriff of Cumberland County, Pennsylvania, who being duly sworn according to law served the within named ADD'L DEFENDANT,NATIONAL WESTERN LIFE by United States Certified Mail postage prepaid, on the 25th day of ~ul¥ ,.2002 at 0000:00 HOURS, at 850 EAST ANDERSON LANE AUSTIN, TX 78752 and attested copy of the attached COMPLAINT & NOTICE a true Together with The returned receipt card was signed by SIGNATURE ILLEGIBLE 07/30/2002 on Additional Comments: Sheriff's Costs: Docketing 18.00 Cert Mail 9.99 Affidavit .00 Surcharge 10.00 .00 37.99 So answer~: R. Thomas Kline Sheriff of Cumberland County Paid by HANFT & KNIGHT Sworn and subscribed to before me this~.day of ~,~ ~_~A.D. ! thonotary ~ on 08/06/2002 · Comf~ 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Pdnt your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. 1. Article Addressed to: National Western Life 850 East Anderson Lane Austin, TX 78752 D. Is deiivey address different from item 17 rf YES, enter deiive~j address below: 7001 2510 0009 1017 8374 PS Form 3811, August 2001 Domestic Return Receipt 3. Service Type X~cerflfiad Mail [] Express Mail [] Registered ~-~ Return Receipt for [] Insured Meil r'l C.O.D. 4. Restricted Delivery? (Extra Fee) r. 02-2985 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff KMAN & KMAN FINANCIAL GROUP, Defendant NATIONAL WESTERN LIFE, Additional Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW REPLY OF DEFENDANT KMAN & KMAN FINANCIAL GROUP TO NEW MATTER AND COUNTERCLAIM FILED BY ADDITIONAL DEFENDANT NATIONAL WESTERN LIFE AND NOW, comes Defendant Kman & Kman Financial Group (Financial Group), by and through its Counsel of Record, Hanft & Knight, P.C., to file a Reply to New Matter and NEW MATTER 21. Denied. Paragraph 2 ! is a conclusion of law to which no Answer need be filed. 22. Denied. Paragraph 22 is a conclusion of law to which no Answer need be filed. 23. Denied. Paragraph 23 is a conclusion of law to which no Answer need be filed. 24. Denied. Paragraph 24 is a conclusion of law to which no Answer need be filed. 25. Denied. Paragraph 25 is a conclusion of law to which no Answer need be filed. WHEREFORE, Defendant Kman& Kman Financial Group requests that this Court grant judgment for it and against Additional Defendant National Western Life (NWL), with attorney fees, costs, and such other relief as the Court deems appropriate. Counterclaim, as follows: COUNTERCLAIM NATIONAL WESTERN LIFE v. KMAN & KMAN FINANCIAL COUNT I - BREACH OF CONTRACT 26. Financial Group incorporates the allegations contained in Paragraphs 1 through 20 of its Complaint, and its Reply to Paragraphs 21 through 25, New Matter, recited above and incorporated herein by reference. 27. Admitted and Denied. Admitted that an application was filed by Michael J. Kman to sell NWL products on November 30, 1999. Admitted that Kman signed a General Agent Contract with NWL on or about December 2, 1999. Denied that Kman could sell any NWL products as of November 30, 1999 as Kman was not appointed by NWL until early January 2000 because his appointment was withheld by NWL until an incorrect reporting of a debit balance was stricken from a reporting agency's record. 28. Denied. Paragraph 28 is a conclusion of law to which no Answer need be filed. Furthermore, the General Agent Contract speaks for itself. 29. Denied. Paragraph 29 is a conclusion of law to which no answer need be filed. In addition, the basis of the legal action filed against NWL were misrepresentations, both in writing and verbal, by NWL. 30. Denied. Paragraph 30 is a conclusion of law to which no Answer need be filed. 31. Denied. In its Joinder Complaint, Financial Group alleges that the misrepresentations to the Annuitants and upon which the Annuitants relied conceming the renewal participation rates were made first by Additional Defendant NWL and, based on that misrepresentation which was made to more than one party, Kman advised other Annuitants that the renewal participation rate was 100%. The remainder of Paragraph 31 is a conclusion of law to which no answer need be filed. 32. Admitted and Denied. In its Joinder Complaint, Kman Financial Group alleges that the misrepresentation to the Annuitants concerning the guaranteed interest rate was made by Additional Defendant NWL and, based on that misrepresentation, Kman advised Annuitants who relied upon the misrepresentation by NWL that the guaranteed interest rate was as represented by NWL. The remainder of Paragraph 10 is a conclusion of law to which no answer need be filed. 33. Denied. Paragraph 33 is a conclusion of law to which no Answer need be filed. In addition, the representations as to the annuity contracts were made as a result of misrepresentations made by Additional Defendant NWL and relied upon by the Annuitants. 34. Admitted and Denied. Admitted that Gloria Osborne signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 34. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, included that the renewal participation rate was 100%. 35. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 35. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 36. Admitted and Denied. Admitted that Suzanne Troy signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 36. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8%. 37. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 37. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 38. Admitted and Denied. Admitted that Suzanne Troy signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 38. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 39. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 39. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 40. Admitted and Denied. Admitted that Mary Jane English signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 40. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 41. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 41. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 42. Admitted that Mary Jane English signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 42. Denied that she understood that the renewal participation rate may be as low as 30% and renewal asset fee rates may be as high as 7% as the misrepresentation made to and relied upon by the Annuitants were made byNWL, including that the renewal participation rate was 100%. 43. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 43. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 44. Admitted and Denied. Admitted that Phillip Weinert signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 44. Denied that he understood that the renewal participation rate may be as low as 30% and renewal asset fee rates may be as high as 7% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 45. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 45. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 46. Admitted and Denied. Admitted that Roger Bower signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 46. Denied that he understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 47. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 47. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 48. Admitted and Denied. Admitted that Hilda Bankos signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 48. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 49. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 49. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100% 50. Admitted and Denied. Admitted that the Consumer Information Summary and Disclosure form included information as cited in Paragraph 50. Denied that Paragraph 50 represented the actual renewal participation rate for the Annuitants as Additional Defendant NWL explained to Kman& Financial Group that the renewal participation rate was 100%. 51. Denied. Paragraph 51 is a conclusion of law to which no Answer need be filed. In addition, it is impossible to respond to the averment that a document contains "substantially similar language." 52. Admitted and Denied. Admitted that the Consumer Information Summary and Disclosure form included information as cited in Paragraph 52. Denied that Paragraph 52 represented the actual renewal participation rate for the Annuitants as Additional Defendant NWL explained to Kman & Financial Group that the renewal participation rate was 100%. 53. Admitted and Denied. Admitted that the General Agent Contract included provisions as quoted in Paragraph 53 as both explained to Annuitants exactly what NWL had told them its contracts would produce. Denied that Financial Group or Kman did anything contrary to the provisions cited in Paragraph 53. In addition, Paragraph 53 is a conclusion of law to which no Answer need be filed. 54. Admitted and Denied. Admitted that the General Agent Contract included provisions as quoted in Paragraph 54. Denied that Financial Group or Kman did anything contrary to the provisions cited in Paragraph 54. In addition, Paragraph 54 is a conclusion of law to which no Answer need be filed. 55. Admitted and Denied. Admitted that the General Agent Contract included provisions as quoted in Paragraph 55. Denied that Financial Group or Kman did anything contrary to the provisions cited in Paragraph 55. In addition, Paragraph 55 is a conclusion of law to which no Answer need be filed. 56. Admitted and Denied. Admitted that the General Agent Contract included a provision as quoted in Paragraph 56. Denied that Financial Group or Kman did anything contrary to the provision cited in Paragraph 56. In addition, Paragraph 56 is a conclusion of law to which no Answer need be filed. 57. Admitted and Denied. Admitted that Paragraph 57 recites a portion of the General Agent Contract signed by Additional Defendant Kman. Denied that Additional Defendant Kman or Defendant Kman Financial did anything contrary to the provisions recited in Paragraph 57. 58. Denied. Paragraph 58 is a conclusion of law to which no Answer need be filed. Denied that the provision recited in Paragraph 58 is applicable to Additional Defendant Kman. 59. Admitted. 60. Admitted and Denied. Admitted that Kman and Financial Group made a certification as stated in Paragraph 60. Denied that Kman or Financial made statements which differ from "this material" as "this material" was represented to Kman and Financial Group and others to be consistent with the statements made by Kman and Financial Group. 61. Denied. Kman'and Financial Group represented to the Annuitants what Additional Defendant NWL, the seller of the annuity contracts, represented to Kman and Financial Group and others would be the renewal participation rates and those representations could legally be relied upon by the Annuitants and others. 62. Denied. Kman and Financial Group represented to the Annuitants what Additional Defendant NWL, the seller of the annuity contracts, represented to Kman and Financial Group and others would be the renewal participation rates and that the guaranteed interest rate and those representations could legally be relied upon by the Annuitants and others. 63. Denied. Paragraph 63 is a conclusion of law to which no Answer need be filed. 64. Denied. Paragraph 64 is a conclusion of law to which no Answer need be filed. 65. Denied. Paragraph 65 is a conclusion of law to which no Answer need be filed. 66. Denied. Paragraph 66 is a conclusion of law to which no Answer need be filed. WHEREFORE, Defendant Kman & Kman Financial Group requests this Court enter judgment in its favor and against Additional Defendant NWL and that it award Defendant Kman & Kman Financial Group its Counsel fees, costs, and such other relief as this Court deems appropriate. Respectfully submitted, HANFT & KNIGHT, P.C. Gregory H. Knight, Esquire Attorney I.D. No. 30622 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013 (717) 249-5373 Attorney for Defendant Kman &Kman Financial Group IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff Vo KMAN & KMAN FINANCIAL GROUP, Defendant Vo NATIONAL WESTERN LIFE, Additional Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW : : : : AFFIDAVIT OF VERIFICATION I verify that the statements made in the Reply to New Matter and Counterclaim are true and correct. I understand that false statements are subject to the penalties of 18 Pa. C. S. Section 4904, relating to unswom falsification to authorities. KMAN & KMAN FINANCIAL GROUP Date: C p/e 002 By: IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff KMAN & KMAN FINANCIAL GROUP, Defendant Vo NATIONAL WESTERN LIFE, Additional Defendant Vo MICHAEL J. KMAN, JR., Additional Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW CERTIFICATE OF SERVICE AND NOW, this '2'01~' day of September, 2002, I, Gregory H. Knight, Esquire, hereby certify that I have this day served the following person with a copy of the Reply to New Matter and Counterclaim, by first class, United States Mail, postage pre-paid, addressed as follows: Brian P. Downey, Esquire Alexandra Makosky, Esquire PEPPER HAMILTON LLP 200 One Keystone Plaza North Front and Market Streets P.O. Box 1181 Harrisburg, PA 17108-1181 Robert L. Hickock, Esquire PEPPER HAMILTON LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA 19103 Attorney for Additional Defendant Attorney for Additional Defendant Ron S. China, Esquire ECKERT, SEAMANS, CHERIN & MELLOTT, LLC One South Market Square Building 213 Market Street Harrisburg, PA 17101 Attomey for Plaintiff HANFT & KNIGHT, P.C. Gregory H. Knight, Esquire Attomey ID No. 30622 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013-9142 (717) 249-5373 Attorney for Defendant Kman & Kman Financial Group IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff KMAN & KMAN FINANCIAL GROUP, Defendant NATIONAL WESTERN LIFE, Additional Defendant MICHAEL J. KMAN, JR., Additional Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW ANSWER TO COMPLAINT FOR JOINDER OF ADDITIONAL DEFENDANT AND NOW, comes Additional Defendant, Michael J. Kman, Jr. (Kman), by and through his Counsel of Record, Hanft & Knight, P.C., to file an Answer to the Complaint for Joinder of Additional Defendant filed against him by Additional Defendant National Western Life (NWL), in support of which Answer the following statements are made: 1. Denied. Kman is without sufficient information upon which to judge the accuracy of Paragraph 1 and specific proof thereof is demanded at thai. 2. Admitted and Denied. Admitted that Kman is an adult individual. Denied that his business address is 1018 Dogwood Lane, Enola, Pennsylvania; that address is P.O. Box 45, Enola, PA 17025-0045. 3. Admitted and Denied. Admitted that an application was filed by Kman to sell NWL products on November 30, 1999. Admitted that Kman signed a General Agent Contract with NWL on or about December 2, 1999. Denied that Kman could sell anyNWL products as of November 30, 1999 as Kman was not actually appointed by NWL until early January 2000 because his appointment was withheld by NWL until an incorrect reporting of a debit balance was stricken from a reporting agency's record. 4. Denied. Paragraph 4 is a conclusion of law to which no Answer need be filed. Furthermore, the General Agent Contract speaks for itself. 5. Admitted. 6. Denied. Paragraph 6 is a conclusion of law to which no answer need be filed. In addition, the basis of the legal a'ction filed against NWL were misrepresentations, both in writing and verbally, by NWL. 7. Admitted and Denied. Admitted that the Joinder Complaint refers to various annuity contracts. Denied that the Joinder Complaint does not also involve misrepresentations by Additional Defendant NWL, which representations were relied upon by the Annuitants and others. 8. Denied. Paragraph 8 is a conclusion of law to which no Answer need be filed. 9. Denied. In its Joinder Complaint, Defendant Kman& Kman Financial Group (Financial Group) alleges that the misrepresentations to the Annuitants and upon which the Annuitants relied conceming the renewal participation rates were made first by Additional Defendant NWL and, based on that misrepresentation which was made to more than one party, Kman advised other Annuitants that the renewal participation rate was 100%. The remainder of Paragraph 9 is a conclusion of law to which no answer need be filed. 10. Admitted and Denied. In its Joinder Complaint, Financial Group alleges that the misrepresentation to the Annuitants concerning the guaranteed interest rate was made by Additional Defendant NWL and, based on that misrepresentation which was made to more than one party, Kman advised Annuitants who relied upon the misrepresentation by NWL that the guaranteed interest rate was as represented by NWL. The remainder of Paragraph 10 is a conclusion of law to which no answer need be filed. 11. Denied. Paragraph 11 is a conclusion of law to which no Answer need be filed. In addition, the misrepresentations as to the renewal participation rate for the annuity contracts were made as a result of misrepresentations made by Additional Defendant NWL and relied upon by the Annuitants. 12. Admitted and Denied. Admitted that Gloria Osborne signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 12. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 13. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 13. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 14. Admitted and Denied. Admitted that Suzaune Troy signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 14. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8%. 15. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 15. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 16. Admitted and Denied. Admitted that Suzanne Troy signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 16. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 17. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 17. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 18. Admitted and Denied. Admitted that Mary Jane English signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 18. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 19. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 19. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 20. Admitted and Denied. Admitted that Mary Jane English signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 20. Denied that she understood that the renewal participation rate maybe as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 21. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 21. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 22. Admitted and Denied. Admitted that Phillip Weinert signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 22. Denied that he understood that the renewal participation rate may be as low as 30% and renewal asset fee rates may be as high as 7% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 23. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 23. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 24. Admitted and Denied. Admitted that Roger Bower signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 24. Denied that he understood that the renewal participation rate may be as Iow as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 25. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 25. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 26. Admitted and Denied. Admitted that Hilda Bankos signed a Consumer Disclosure Signature Page that included a certification as stated in Paragraph 26. Denied that she understood that the renewal participation rate may be as low as 20% and renewal asset fee rates may be as high as 8% as the misrepresentation made to and relied upon by the Annuitants were made by NWL, including that the renewal participation rate was 100%. 27. Admitted and Denied. Admitted that Financial Group made the certification noted in Paragraph 27. Denied that the statements differ from the materials as the seller of the product, Additional Defendant NWL, assured Kman and other parties that the renewal participation rate was 100%. 28. Admitted and Denied. Admitted that the Consumer Infmmation Summary and Disclosure from included information as cited in Paragraph 28. Denied that Paragraph 28 represented the actual renewal participation rate for the Annuitants as Additional Defendant NWL explained to & Financial Group that the renewal participation rate was 100%. 29. Denied. Paragraph 29 is a conclusion of law to which no Answer need be filed. In addition, it is impossible to respond to the averment that a document contains "substantially similar language." 30. Disclosure form included information as cited in Paragraph 30. Admitted and Denied. Admitted that the Consumer Information Summary and Denied that Paragraph 30 represented the actual renewal participation rate for the Annuitants as Additional Defendant NWL explained to Kman & Financial Group that the renewal participation rate was 100%. 31. Admitted and Denied. Admitted that the General Agent Contract included provisions as quoted in Paragraph 31. Denied that Financial Group or Kman did anything contrary to the provisions cited in Paragraph 31 as both explained to Annuitants exactly what NWL had told them its contracts would provide. In addition, Paragraph 31 is a conclusion of law to which no Answer need be filed. 32. Admitted and Denied. Admitted that the General Agent Contract included provisions as quoted in Paragraph 32. Denied that Financial Group or Kman did anything contrary to the provisions cited in Paragraph 32. In addition, Paragraph 32 is a conclusion of law to which no Answer need be filed. 33. Admitted and Denied. Admitted that the General Agent Contract included provisions as quoted in Paragraph 33. Denied that Financial Group or Kman did anything contrary to the provisions cited in Paragraph 33. In addition, Paragraph 33 is a conclusion of law to which no Answer need be filed. 34. Admitted and Denied. Admitted that the General Agent Contract included a provision as quoted in Paragraph 34. Denied that Financial Group or Kman did anything contrary to the provision cited in Paragraph 34. In addition Paragraph 34 is a conclusion of law to which no Answer need be filed. 35. Admitted and Denied. Admitted that Paragraph 35 recites a portion of the General Agent Contract signed by Kman. Denied that Kman or Financial Group did anything contrary to the provisions recited in Paragraph 35. 36. Denied. Paragraph 36 is a conclusion of law to which no Answer need be filed. Denied that the provision recited in Paragraph 36 is applicable to the Joinder Complaint filed by Financial Group. 37. Admitted. 38. Admitted and Denied. Admitted that Kman and Financial Group made a certification as stated in Paragraph 38. Denied that Kman or Financial Group made statements which differ from "this material" as "this material" was represented and explained to Kman and Financial Group and others to be consistent with the statements made by Kman and Financial Group. 39. Denied. Kman and Financial Group represented to the Annuitants what Additional Defendant NWL, the seller of the annuity contracts, represented to Kman and Financial Group and others would be the renewal participation rates and those representations could legallybe relied upon by the Annuitants and others. 40. Denied. Kman and Financial Group represented to the Annuitants what Additional Defendant NWL, the seller of the annuity contracts, represented to Kman and Financial Group and others would be the renewal participation rates and the guaranteed interest rate and those representations could legally be relied upon by the Annuitants and others. 41. Denied. Paragraph 41 is a conclusion of law to which no Answer need be filed. COUNT I - BREACH OF CONTRACT 42. Admitted and Denied. See Answers to Paragraphs 1 through 41 above which Answers are incorporated herein by reference. 43. Denied. Paragraph 43 is a conclusion of law to which no Answer need be filed. See Answers to Paragraphs 1 through 42 above. 44. Denied. Paragraph 44 is a conclusion of law to which no Answer need be filed. See Answers to Paragraphs 1 through 43 above. 45. Denied. Paragraph 45 is a conclusion of law to which no Answer need be filed. See Answer to Paragraphs 1 through 44 above. WHEREFORE, Additional Defendant Michael J. Kman, Jr. requests that this Court enter judgment in his favor and against Additional Defendant National Western Life, and that the Court award him his Counsel fees and other relief as the Court deems appropriate. HANFT & KNIGHT, P.C. Gregory H. Knight, Esquire Attorney I.D. No. 30622 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013 (717) 249-5373 Attorney for Additional Defendant Michael J. Kman, Jr. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff KMAN & KMAN FINANCIAL GROUP, Defendant NATIONAL WESTERN LIFE, Additional Defendant Vo MICHAEL J. KMAN, JR., Additional Defendant NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW : AFFIDAVIT OF VERIFICATION I verify that the statements made in the Answer to Complaint for Joinder of Additional Defendant are tree and correct. I understand that false statements are subject to the penalties of 18 Pa. C.S. Section 4904, relating to unswom falsifications to authorities. Date: e~ %~I ~ 2002 ~¢(_~t~~ ' Michael J. Kman, Jr. C/ IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, Plaintiff Vo KMAN & KMAN FINANCIAL GROUP, Defendant Vo NATIONAL WESTERN LIFE, Additional Defendant MICHAEL J. KMAN, JR., Additional Defendant : NO. 02-2985 CIVIL TERM : : CIVIL ACTION - LAW CERTIFICATE OF SERVICE AND NOW, this ~0'1~' day of September, 2002, I, Gregory H. Knight, Esquire, hereby certify that I have this day served the following person with a copy of the Answer to Complaint for Joinder of Additional Defendant, by first class, United States Mail, postage pre-paid, addressed as follows: Brian P. Downey, Esquire Alexandra Makosky, Esquire PEPPER HAMILTON LLP 200 One Keystone Plaza North Front and Market Streets P.O. Box 1181 Harrisburg, PA 17108-1181 Robert L. Hickock, Esquire PEPPER HAMILTON LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA 19103 Attorney for Additional Defendant Attorney for Additional Defendant Ron S. China, Esquire ECKERT, SEAMANS, CHERIN & MELLOTT, LLC One South Market Square Building 213 Market Street Harrisburg, PA 17101 Attorney for Plaintiff HANFT & KNIGHT, P.C. Gregory H. Knight, Esquire Attorney 112) No. 30622 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013-9142 (717) 249-5373 Attorney for Additional Defendant Michael J. Kman, Jr. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FINANCIAL GROUP, : : Plaintiff : No. 02-2985 Civil Term VS. : Civil Action - Law KMAN & KMAN FINANCIAL GROUP, : : Defendant : VS. : NATIONAL WESTERN LIFE, : VS. Additional Defendant MICHAEL J. KMAN, JR., Additional Defendant JOINT PRAECIPE TO DISMISS COUNT II ONLY OF ,IOINDER COMPLAINT OF KMAN & KMAN FINANCIAL GROUP To the Prothonotary: Pursuant to Pennsylvania Rule of Civil Procedure 229, please mark Count II (Intentional Misrepresentation/Fraud) only of the Joinder Comp][aint ofKman & Kman Financial Group against National Western Life dismissed with prejudice. Ron g. Chima ECKERT SEAMANS CHERIN & MELLOTT, LLC One South Market Square Building 213 Market Street P.O. Box 1248 Harrisburg, PA 17108 (717) 237-6069 North Front and Market Streets P.O. Box 1181 Harrisburg, PA 17108-1181 (717) 255-1155 Counsel for URL Financial Group Counsel for National Westem Life Gregory H. Knight HANFT & KNIGHT 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013 (717) 249-5373 Counsel for Michael J. Kman, Jr. and Kman& Kman Financial Group -2- #75854 vi (1MJ201 !.DOC) IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA URL FiNANCIAL GROUP, : : Plaintiff : No. 02-2985; Civil Term VS. : Civil Action- Law KMAN & KMAN FiNANCIAL GROUP, : : Defendant : VS. : NATIONAL WESTERN LIFE, : : Additional Defendant : VS. MICHAEL J. KMAN, JR., : : Additional Defendant : JOINT PRAECIPE TO DISCONTINUE TO THE PROTHONOTARY: Please mark the above-captioned matter, including all cross-claims and counterclaims, discontinued, with prejudice, pursuant to Pa. R.C.P. 229. The parties shall bear their own costs and attorneys' fees. ECKERT SEAMANS CHERiN & MELLOTT, LLC One South Market Square Building 213 Market Street P.O. Box 1248 Harrisburg, PA 17108 (717) 237-6069 "~.pE~.AM~TON~'M,~ -~-~ P.O. Box 1181 Harrisburg, PA 17108-1181 (717) 255-11:55 Counsel for URL Financial Group Counsel for National Western Life HANFT & KNIGHT 19 Brookwood Avenue, Suite 106 Carlisle, PA 17013 (717) 249-5373 Counsel for Michael J. Kmart, Jr. and Kman & Kman Financial Group -2- HB: #78278 v2 (I_##02!,DOC)