westchester fire insurance company v. sweports, ltd. et al complaint

8/6/2019 WESTCHESTER FIRE INSURANCE COMPANY v. SWEPORTS, LTD. et al Complaint

1/98

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

WESTCHESTER FIRE )INSURANCE COMPANY )

)Plaintiff, )) No. 11-C-3473

v. ))

SWEPORTS, LTD., )UMF CORPORATION, )GEORGE CLARKE, and )CHRISTOPHER LEISNER )

)Defendants. )

COMPLAINT FOR DECLARATORY JUDGMENT

Plaintiff, WESTCHESTER FIRE INSURANCE COMPANY (WF), by and through its

attorneys, OHAGAN SPENCER, LLC, as its Complaint for Declaratory Judgment against

Defendants SWEPORTS, LTD (SWEPORTS), UMF CORPORATION (UMF), GEORGE

CLARKE (CLARKE) and CHRISTOPHER LEISNER (LEISNER) allege as follows:

NATURE OF ACTION

This case involves, CLARKE, who as the principal of both UMF and SWEPORTS

sought to avoid and repudiate various agreements that he entered into with his attorneys and

various investors. In order to accomplish this objective, CLARKE initiated a series of actions

that sought to rescind the other parties interests, while at the same time, CLARKE, as majority

shareholder, would still retain all his interests. CLARKE alleges that from August 2006 through

April 2007 these parties committed various acts and omissions that were part of an intentional

plan to improperly seize control of SWEPORTS/UMF. When CLARKE sought to rescind the

agreements, the other parties objected to CLARKES actions, notifying him of their claims

verbally, through emails, letters and then lawsuits. After the disputes arose, CLARKE tendered

Case: 1:11-cv-03473 Document #: 1 Filed: 05/24/11 Page 1 of 37 PageID #:1


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certain correspondences to WF under the UMF policy. The UMF policy did not cover

SWEPORTS and CLARKE as a director or officer of SWEPORTS. CLARKE then purchased a

policy for SWEPORTS. However, the policy for SWEPORTS did not provide coverage for the

disputes that CLARKE was aware of and had previously tendered under the UMF policy. This

declaratory judgment action seeks to have the Court conclude that no coverage exits for these

matters pursuant to the terms and conditions of the policies.

THE PARTIES

1. Plaintiff, WF, is an insurance company incorporated under the laws of New York,

with its principal place of business in Roswell, Georgia. At all times relevant to this action, WF

was an insurer duly licensed and authorized to conduct business in the State of Illinois.

2. Defendant, SWEPORTS, is incorporated under the laws of Delaware, with its

principal place of business at 340 Ridge Road, Wilmette, Illinois in Cook County, Illinois.

SWEPORTS is the parent company and majority shareholder of defendant UMF.

3. Defendant, UMF, is incorporated under the laws of Illinois, with its principal

place of business at 340 Ridge Road, Wilmette, Illinois in Cook County, Illinois. UMF is

majority owned by and a subsidiary of SWEPORTS.

4. Upon information and belief, Defendant, CLARKE, is a foreign national currently

residing in Wilmette, Illinois in Cook County. At all relevant times CLARKE was a majority

shareholder of Defendants SWEPORTS and UMF, the chairman of both SWEPORTS and UMF,

and the president of SWEPORTS.

5. Upon information and belief, Defendant, LEISNER, is a resident of Cook County,

Illinois. Upon information and belief, LEISNER was and/or is a director of UMF.



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JURISDICTION AND VENUE

6. Jurisdiction is based on 28 U.S.C. 1332 as all defendants are of diverse

citizenship from WF and the amount in controversy exceeds $75,000.

7. Venue is proper in the Northern District of Illinois pursuant to 28 U.S.C.

1391(a) as some of the defendants reside in this district and the Underlying Lawsuits are pending

in Cook County, Illinois.

FACTS COMMON TO ALL COUNTS

Facts Regarding Underlying Disputes

8. In or around July 2006, SWEPORTS and CLARKE retained the law firms of

ORourke, Katten & Moody (OKM) and Perkaus & Farley (PF) to represent SWEPORTS

with respect to certain Investment Transactions (the Sandbox Proposals). The terms of their

retention by SWEPORTS was memorialized in retainer agreements (Retainer Agreements).

Michael ORourke (ORourke) and Michael C. Moody (Moody) of OKM, and John Perkaus

(Perkaus) of PF, were the attorneys who represented SWEPORTS.

9. OKM and PF provided extensive legal services to SWEPORTS and CLARKE

under the retainer agreements and pursuant to the Sandbox Proposals. However, SWEPORTS

was unable to or failed to pay certain of OKM and PF invoices.

10. As a result, on December 31, 2006, CLARKE, as the majority shareholder and

president/chairman of SWEPORTS, executed separate stock purchase agreements with OKM

and PF that converted their outstanding receivables for legal fees into 1.25% of SWEPORTS

common stock with the option to purchase additional common stock for cash, and with the right

to acquire additional equity interests in SWEPORTS. (OKM Stock Purchase Agreement and

PF Stock Purchase Agreement).



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11. In connection with the Sandbox Proposals, in November 2006, ORourke, Moody,

Perkaus, John Dore (Dore) and AG Chennelle (Chennelle), served as guarantors on a

$500,000 loan to SWEPORTS in exchange for SWEPORTS common stock. These agreements

were memorialized in Individual Shareholder Agreements executed by CLARKE on behalf of

SWEPORTS. That same day, SWEPORTS provided UMF with $600,000 via a promissory note

to enable UMF to repay certain of the loans made by investor Sandbox. (11/13/2006 Promissory

Note).

12. In November and December 2006, Dore, Moody and ORourke exercised their

options to purchase additional stock, each thereby investing an additional $100,000 in

SWEPORTS. On December 15, 2006, SWEPORTS provided UMF with an additional $423,000

via a promissory note. (12/15/2006 Promissory Note).

13. According to the Underlying Lawsuits, Dore was appointed to serve on the board

of SWEPORTS in January 2007.

14. According to the Underlying Lawsuits, on February 20, 2007, Dore proposed to

take the informal action of appointing ORourke to the board of UMF, over the objections of

CLARKE.

15. According to the Underlying Lawsuits, SWEPORTS and UMF began to

experience financial difficulties as legal fees for UMFS counsel (Sachnoff & Weaver) continued

to mount and loans became due. On February 27, 2007, Dore, Moody, O'Rourke, Perkaus, and

Brian Hopcraft signed a Promissory Note (2/27/07 Promissory Note) for $125,000 to UMF to

pay the legal fees. The note was guaranteed by SWEPORTS and secured by all assets of

SWEPORTS including all intellectual Property rights. The 2/27/07 Promissory Note was

signed by CLARKE. According to the Underlying Lawsuits, CLARKE expressed serious



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objections to the actions of ORourke, Moody, Perkaus, and Dore. Further, CLARKE expressed

his serious objections to intentions to approve the Sandbox Proposals. As a result, the

relationships between CLARKE and ORourke, Moody, Perkaus and Dore rapidly deteriorated.

16. Accordingly to the Underlying Lawsuits, on or about March 20, 2007, the boards

for SWEPORTS and UMF met and purported to approve the pending Sandbox Proposal over the

strenuous objection of CLARKE and his vote against the Sandbox Proposal at both meetings.

CLARKE asserted that these efforts were in furtherance of OKMs and other co-conspirators

illegal scheme and efforts to misappropriate control of SWEPORTS and UMF, and with this

control, to compel both companies to approve and implement the Sandbox Proposal over his

objections.

17. On March 23, 2007, OKM wrote to SWEPORTS asserting that, although

$120,000 in past legal bills had been converted into SWEPORTS stock, OKM was owed over

$200,000 in additional legal fees for its services provided to SWEPORTS. CLARKE stated that

OKMs March 23, 2007 letter was transmitted to Dore within days of efforts by Messrs. Dore,

ORourke, Perkaus and others to seize control of Sweports and UMF and to compel their

acceptance of a certain proposal submitted by Sandbox Industries, LLC. (George Clarke

affidavit dated October 1, 2007).

18. On or about March 30, 2007, CLARKE unilaterally effected an Informal Action

in Lieu of a Special Meeting of the Shareholders of SWEPORTS (3/30/2007 Informal Action),

that, inter alia, asserted that ORourke had not been duly elected to the board of UMF, and

therefore, his vote in favor of the Sandbox Proposal was improperly counted, such that the

Sandbox Proposal had not been properly approved.



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24. On April 2, 2007, Perkaus, sent correspondence to CLARKE, which responded to

the 3/30/2007 Informal Action (Perkaus 4/2/2007 Letter) (Attached hereto as Exhibit A). In

this letter, Perkaus asserted that he had been duly appointed as Secretary of SWEPORTS by

appointment and unanimous vote of the Board, including [CLARKE], and requested that

CLARKE recognize the legitimacy of that appointment. Perkaus asserted that the 3/30/2007

Informal Action was invalid and void, and stated that [m]ost disconcerting is your

disingenuous reliance upon Delaware General Corporate Law in your desperate attempt to

remove Messrs. Dore and ORourke from the board. The Perkaus letter ended with the

warning that [a]ny attempts by you to enforce the provisions contained therein will be met with

appropriate corporate and legal actions.

25. On April 2, 2007, Dore sent an email to CLARKE (Dore 4/2/2007 Email)

(attached hereto as Exhibit B), confirming their telephone call and advising that he [Dore] has

been unable to connect with [his] attorney,.about the proposed agreement you [CLARKE]

gave me. Dore alleged that CLARKE and SWEPORTS had stiffed him on his pay, and asked

CLARKE to discuss severance and back pay.

26. The same day, CLARKE sent an email in response to Dores 4/2/2007 email,

disputing Dores salary, stating that the Sweports Board of Directors cannot increase the salary

of a UMF employee, and that the increase was never proposed, voted upon, nor approved by

the UMF board. CLARKE advised Dore that his pay would be reduced from $100,000 to

$50,000.

27. In response, on April 3, 2007, Dore sent correspondence to CLARKE that stated:

I would prefer that you leave me out of the fight between you and Mike[ORourke]. Naming me in a lawsuit does not improve your case. It will merely



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drive up the costs for both of us. You can always name me later, if you think it isnecessary.

28. On April 7, 2007, CLARKE sent correspondence to Moody asserting that what

was done and attempted was nothing short of a well orchestrated scheme to misappropriate the

assets of SWEPORTS and UMF Corporation, sought to discuss a possible resolution of the

current situation, and advised that he had . no interest in unnecessary litigation.

29. On April 26, 2007, CLARKE received correspondence from Henry Proesel (a

purported shareholder of SWEPORTS) which stated, inter alia, that [i]t appears I have

purchased a lawsuit rather than an investment.

30. On June 23, 2007, CLARKE, as CEO and Chairman of the Board of

SWEPORTS, Ltd., unilaterally signed an additional Informal Action in Lieu of a Special

Meeting of the Shareholders of SWEPORTS (6/23/2007 Informal Action), which, in

furtherance of his earlier action, purported to rescind all of the stock purchase agreements and

promissory notes between SWEPORTS, UMF, OKM, PF, ORourke, Moody, and Chennelle, but

which purportedly allowed SWEPORTS and CLARKE to retain all invested funds.

31. The 6/23/2007 Informal Action resolved that all of the agreements and actions

entered into from November 2006 to April 2007, between Sandbox, UMF, SWEPORTS,

CLARKE, OKM, PF, O'Rourke, Moody, Perkaus, Dore, Chennelle (and others). Further,

CLARKE alleged that these parties were part of one integrated and indivisible transaction and

scheme committed and furthered by Sandbox, OKM, PF, ORourke, Moody, Perkaus, Dore,

Chennelle (and others) to gain control of SWEPORTS/UMF.

32. The various Underlying Lawsuits were filed soon thereafter by Dore, OKM, PF

and others. These suits allege, inter alia, that the actions initiated and pursued by CLARKE



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were unjustified, malicious, undertaken for his own gain as well as in furtherance of his scheme

to interfere and avoid the various contracts that he had previously entered into.

The UMF Policy, the SWEPORTS Policy and Tender of Claims

33. WF issued a Business and Management Indemnity Policy to UMF, bearing policy

number BMI20031914, with a policy period of May 23, 2006 to May 23, 2007 (UMF Policy)

(Attached hereto as Exhibit C).

34. On April 11, 2007, during the UMF Policy Period, CLARKE tendered to WF the

Perkaus 4/2/2007 Letter and the Dore 4/2/2007 Email. WF agreed to defend these actions,

pursuant to various reservations.

35. On May 4, 2007, SWEPORTS submitted an insurance application (Sweports

Application) (attached hereto as Exhibit D) to WF. Based upon the representations in the

Sweports Application, WF issued a Business and Management Indemnity Policy to SWEPORTS

bearing policy number BMI20043288, with a Policy Period of May 22, 2007 to May 22, 2008

(attached hereto as Exhibit E). The Sweports Application advised that it did not maintain any

current insurance. The Sweports Application did not indicate that UMF was a subsidiary of

SWEPORTS, nor did it advise of any of the above disputes with OKM, PF, Dore or any others.

The Sweports Application did not advise that any of these disputes had been tendered under the

UMF policy.

The Underlying Lawsuits

36. On June 7, 2007, the lawsuit, ORourke Katten & Moody, an Illinois Partnership

v. SWEPORTS, Ltd. and George CLARKE (Court No. 07 CH 15081) was filed in the Chancery

Division of the Circuit Court of Cook County, Illinois (OKM Lawsuit). CLARKE was named

as a defendant in the lawsuit, solely in his capacity as director or officer of SWEPORTS. UMF



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was not named in the OKM Lawsuit. The OKM Lawsuit asserted counts for Declaratory Relief

and Injunction against SWEPORTS and CLARKE (related to the OKM Shareholder Agreement

and the 3/30/2007 Informal Action), alleged Breach of Contract against SWEPORTS regarding

its failure to pay OKMs invoices, alleged an action for accounting regarding the unpaid fees,

and a cause of action for unjust enrichment.

37. On June 8, 2007, the lawsuit, Perkaus & Farley v. SWEPORTS, Ltd. and George

CLARKE(Court No. 07 CH 15165) was filed in the Chancery Division of the Circuit Court of

Cook County, Illinois (PF Lawsuit). CLARKE was named as a defendant, solely in his

capacity as a director or officer of SWEPORTS. UMF was not named in the PF Lawsuit. The

PF Lawsuit asserted counts for injunctive relief against SWEPORTS and CLARKE regarding the

3/30/2007 Informal Action, Declaratory Relief against SWEPORTS and CLARKE (with regard

to the PF Shareholder Agreement), and Breach of Contract arising out of SWEPORTS failure to

pay PFs invoices for legal fees.

38. On October 26, 2007, the lawsuit,John A. Dore, Michael C. Moody and Michael

ORourke v. SWEPORTS, Ltd. and George CLARKE (Court No. 07 CH 12136) (First Dore

Lawsuit) was filed in the Chancery Division of the Circuit Court of Cook County, Illinois. On

November 26, 2007, a second Dore lawsuit was also filed which was consolidated with the First

Dore Lawsuit on February 5, 2008 (the Consolidated Dore Lawsuits). On April 3, 2008, the

Dore Plaintiffs filed a Consolidated Complaint against SWEPORTS and CLARKE.

39. On January 24, 2008, the lawsuit, SWEPORTS, Ltd. by Andrew Chennelle, Fred

Proesel, Thomas Murray, Michael Murray, Frank Gazzola v. UMF Corporation (Court No. 08 L

00863) (hereafter the Derivative Lawsuit), was filed in the Law Division of the Circuit Court

of Cook County, Illinois. Plaintiffs in the Derivative Lawsuit, as purported shareholders of



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SWEPORTS, sought recovery in connection with two loans issued by SWEPORTS to UMF. On

May 29, 2008, the Derivative Lawsuit was voluntarily dismissed and has not been re-filed.

40. The OKM Lawsuit, the PF Lawsuit, the Consolidated Dore Lawsuits and the

Derivative Lawsuit are sometimes collectively referred to herein as the Underlying Lawsuits.

41. In January 2010, a Third Amended Complaint was filed in the PF Lawsuit (PF-

TAC) which amended the PF Lawsuit to include UMF and LEISNER as additional defendants.

The PF Lawsuit contained eight counts, including: Declaratory Relief, Breach of Contract,

Tortious Interference with Contract, Civil Conspiracy, Civil Conspiracy to Commit Tax Fraud,

Aiding and Abetting the Commission of Civil Conspiracy, Aiding and Abetting the Commission

of Civil Conspiracy with regard to the tax fraud.

Facts related to the Coverage Issues

42. CLARKE tendered Exhibits A and B to WF on or about April 11, 2007. WF

issued a coverage letter dated May 22, 2007 which advised that WF agreed to defend CLARKE

with respect to the tendered letters, subject to various reservations. Based upon the request of

CLARKE, WF agreed to the retention of CLARKES chosen counsel.

43. On May 4, 2007, CLARKE, on behalf of SWEPORTS submitted its insurance

application (Sweports Application) to WF. WF issued a Policy to SWEPORTS (Exhibit D)

which incepted on May 22, 2007. The SWEPORTS Policy was issued based upon and in

reliance on the facts and information provided by CLARKE on the Sweports Application.

44. The UMF Policy expired on May 23, 2007.

45. At various dates after each of the Underlying Lawsuits were filed, CLARKE

supplemented his original tender to WF by tendering the Underlying Lawsuits.



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46. Upon tender of the Underlying Lawsuits, upon request, WF reviewed coverage

under both the UMF and SWEPORTS policies and issued coverage letters under each of the

policies.

47. In August 2008, WF issued four separate coverage letters to SWEPORTS in

connection with the four then pending Underlying Lawsuits. The letters advised, inter alia, that

there was no coverage under the SWEPORTS Policy for the OKM Lawsuit, the PF Lawsuit , the

Consolidated Dore Lawsuit or the Derivative Lawsuit because:

(1) the Underlying Lawsuits were Claims involving Interrelated WrongfulActs that were the subject of Claims previously tendered under the UMF Policy;

(2) these Underlying Lawsuits arose from wrongful acts previously allegedand known to CLARKE prior to the Continuity Date (May 22, 2007) of theSWEPORTS Policy, and CLARKE had reason to believe prior to the ContinuityDate that these wrongful acts could reasonably be expected to give rise to theUnderlying Lawsuits; and

(3) CLARKE made misrepresentations/omissions in the SWEPORTSApplication regarding SWEPORTS prior activities, divestments and acquisitions,and these Underlying Lawsuits arose out of and/or were connected to themisrepresentations made by CLARKE and were therefore, excluded fromcoverage.

48. On September 4, 2008, WF issued a letter to UMF regarding coverage under the

UMF Policy in connection with the four then pending Underlying Lawsuits (supplementing

WFS earlier May 22, 2007 letter). In the September 4, 2008 letter, WF advised UMF that the

Underlying Lawsuits arose out of facts, circumstances and the disputes related to those involved

in the Dore 4/2/2007 Email and the Perkaus 4/2/2007 Letter that had previously been tendered by

CLARKE in April 2007. Specifically, the Underlying Lawsuits involved disputes that arose out

of the 2006 Sandbox Proposals, and CLARKES subsequent acts and series of Informal Actions

taken to rescind the various agreements. WF advised that because the initial tender and the



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Underlying Lawsuits involve the same facts and circumstances, they constituted Interrelated

Wrongful Acts as defined by the Policy, and that these Interrelated Wrongful Acts constitute a

single Claim made under the UMF Policy.

49. In the supplemental letter to UMF, subject to various reservations of rights, WF

agreed to defend UMF and CLARKE, based upon the allegations against him in his capacity as a

UMF director and officer. In addition to CLARKES chosen counsel, WF appointed panel

defense counsel to assist in the representation of UMF.

50. The supplemental letter also advised that the UMF Policy only provided coverage

for UMF and UMFS Subsidiaries, and that SWEPORTS (the parent company of UMF) was not

an Insured under the UMF Policy. Therefore, CLARKE, in his capacity as Director and

Officer of SWEPORTS was not an Insured under the UMF Policy. WF also advised UMF that

there was no indemnity coverage available under the UMF Policy for the damages sought in the

Underlying Lawsuits, as the suits involved amounts owed under various written

contracts/agreements which were specifically excluded from coverage.

51. In early 2009, WF was informed by panel defense counsel that pursuant to the

current pleadings it was clear that neither UMF nor CLARKE (or any other individual) in his

capacity as a director or officer of UMF were named defendants in any of the then pending

Underlying Lawsuits as amended.

52. On February 5, 2009, WF issued a letter to UMF to advise it had determined that

neither UMF nor CLARKE (or any other individual) in their capacity as a director or officer

were currently named as defendants in any of the then pending Underlying Lawsuits, as

amended, and therefore, WF was withdrawing from the defense of the Underlying Lawsuits.



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The letter reiterated that the UMF policy did not provide coverage for SWEPORTS or for

CLARKE (or any other individual) in their capacity as a director or officer of SWEPORTS.

53. Certain defense fees were tendered by CLARKES chosen counsel as well as by

panel defense counsel. After review of the fees submitted, the amounts that were reasonable and

in compliance with WFS guidelines were funded.

54. Approximately eleven months later, on January 13, 2010, CLARKES counsel

tendered the PF-TAC. The PF-TAC added UMF, CLARKE (in his capacity as Director and

Officer of UMF), and LEISNER as Defendants.

55. On April 14, 2010, WF issued a letter advising that in light of the PF-TAC, WF

would agree to defend UMF, CLARKE (in his capacity as director and officer of UMF), and

LEISNER (in his capacity as director and officer of UMF) in the PF-TAC.

56. WF again advised that the UMF Policy did not provide coverage to SWEPORTS

or CLARKE (or LEISNER or any other individual) in his capacity as a director or officer of

SWEPORTS. The April 14, 2010 letter again advised that there was no indemnity coverage for

the damages sought against UMF and CLARKE (in his capacity as a UMF director and officer)

in the Underlying Lawsuits, as they involved amounts owed to UMF shareholders under written

contracts/agreements.

POLICY TERMS AND CONDITIONS

57. WF issued a Business Management Indemnity Policy to UMF bearing policy

number BMI20031914 for the period May 23, 2006 to May 23, 2007. WF issued a Business

Management Indemnity Policy to SWEPORTS bearing the policy number BMI20043288 for the

period May 22, 2007 to May 22, 2008. The Policy language is identical for both policies. The



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Directors & Officers and Company Coverage Section of the Policy provides at Section A, in

relevant part, as follows:

A. INSURING CLAUSES1. The Insurer shall pay the Loss of the Directors and Officers for which the

Directors and Officers are not indemnified by the Company and which theDirectors and Officers have become legally obligated to pay by reason of aClaim first made against the Directors and Officers during the Policy Period or,if elected, the Extended Period, and reported to the Insurer pursuant tosubsection E1 herein, for any Wrongful Act taking place prior to the end of thePolicy Period.

2. The Insurer shall pay the Loss of the Company, for which the Company hasindemnified the Directors and Officers and which the Directors and Officers

have become legally obligated to pay by reason of a Claim first made against theDirectors and Officers during the Policy Period or, if elected, the ExtendedPeriod, and reported to the Insurer pursuant to subsection E1 herein, for anyWrongful Act taking place prior to the end of the Policy Period.

3. The Insurer shall pay the Loss of the Company which the Company becomeslegally obligated to pay by reason of a Claim first made against the Companyduring the Policy Period or, if elected, the Extended Period, and reported to theInsurer pursuant to subsection E1 herein, for any Wrongful Act taking placeprior to the end of the Policy Period.

58. The General Terms and Conditions of the Policy provides at Section B, in


B. DEFINITIONS

Whenever used in this Policy, the terms that appear below in boldface type shall have themeanings set forth in this Definitions subsection of the General Terms and Conditions.

* * *1. Company means:

a. the Parent Company; and

b. any Subsidiary,



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and includes any such organization as a debtor-in-possession or the bankruptcyestate of such entity under United States bankruptcy law or an equivalent statusunder the law of any other jurisdiction.

* * *

2. ParentCompany means the entity first named in Item A. of the Declarations.

* * *3. Subsidiary means:

a. any entity of which more than 50% of the outstanding securitiesrepresenting the present right to vote for the election of such entitysdirectors or managers are owned by the Parent Company, directly orindirectly, if such entity:

i. was so owned on or prior to the inception date of this Policy; orii. becomes so owned after the inception date of this Policy; and

b. any joint venture entity in which the Parent Company, or an entitydescribed in a. above, has an exact fifty percent (50%) ownership of theinterests of such joint venture entity and where, pursuant to a written jointventure agreement, the Parent Company or entity described in a. abovesolely controls the management and operations of such joint ventureentity.

* * *

59. The General Terms and Conditions of the Policy provides at Section D, in


D. WARRANTY

It is warranted that the particulars and statements contained in the Application are thebasis of this Policy and are to be considered incorporated into and constituting a part ofthis Policy and each Coverage Section.

By acceptance of this Policy, the Insureds agree that:

1. the statements in the Application are their representations, that suchrepresentations shall be deemed material to the acceptance of the risk or thehazard assumed by the Insurer under this Policy, and that this Policy and eachCoverage Section are issued in reliance upon the truth of such representations;and



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4. Costs, Charges and Expenses do not include salaries, wages, fees, overhead orbenefit expense of or associated with officers or employees of the Company.

5. Directors and Officers means any person who was, now is, or shall become:

a. a duly elected or appointed director, officer, or similar executive of theCompany, or any member of the management board of the Company;

b. a person who was, is or shall become a full-time or part-time employee ofthe Company,

* * *

6. Insureds mean the Company and the Directors and Officers.

7. Interrelated Wrongful Acts means all Wrongful Acts that have as a commonnexus any fact, circumstance, situation, event, transaction, cause or series of facts,circumstances, situations, events, transactions or causes.

8. Loss means damages, judgments, settlements, and Costs, Charges and Expensesincurred by Directors and Officers under Insuring Clauses 1. or 2. or theCompany under Insuring Clause 3. Loss does not include:

a. taxes, fines or penalties;b. matters uninsurable under the laws pursuant to which this Policy is

construed;

c. punitive or exemplary damages, or the multiple portion of anymultiplied damage award, except:

i. that with respect to a Claim falling within the coverage of thispolicy seeking both compensatory and punitive or exemplarydamages, we will defend this Claim without liability, however, forsuch punitive or exemplary damages; or

ii. to the extent that such punitive or exemplary damages are insurableunder the law pursuant to which this Policy shall be construed orthe law of the jurisdiction in which such damages are awarded,which legal venue is most favorable for the Insureds in decidingthe insurability of such damages; however in the state of Illinois aninsurer may not reimburse an insured for punitive damagesassessed as a result of the insureds own misconduct;



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* * *d. any amount for which the Insured is not financially liable or legally

obligated to pay;

* * *

e. any amounts owed or paid to one or more securities holders of theCompany under any written or express contract or agreement.

* * *9. Wrongful Act means any actual or alleged error, omission, misleading statement,

misstatement, neglect, breach of duty or act allegedly committed or attempted by:

a. any of the Directors and Officers, while acting in their capacity as such,or any matter claimed against any Director and Officer solely by reasonof his or her serving in such capacity;

b. any of the Directors and Officers, while acting in their capacity as adirector, officer, trustee, governor, executive director or similar position ofany Outside Entity where such service is with the knowledge or consentof the Company; and

c. the Company, but only with respect to Insuring Clause 3 of this CoverageSection.

* * *

61. The Directors & Officers and Company Coverage Section of the Policy provides

at Section C, in relevant part, as follows:

C. EXCLUSIONS

1. Exclusions Applicable to All Insuring ClausesInsurer shall not be liable for Loss under this Coverage Section on account ofany Claim:

* * *

e. brought or maintained by, on behalf of, or at the direction of any Insuredin any capacity, any Outside Entity or any person or entity that is an owner of or joint venture participant in any Subsidiary in any respect and whether or notcollusive, unless such Claim:

* * *



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i. is brought derivatively by a securities holder of the Parent Company andis instigated and continued totally independent of, and totally without thesolicitation, assistance, active participation of, or intervention of any Insured;

* * *

f. alleging, based upon, arising out of, attributable to, directly or indirectlyresulting from, in consequence of, or in any way involving:

i. any dishonest, deliberately fraudulent or criminal act of anInsured; provided, however, this exclusion f.i. shall not apply unless anduntil there is a final judgment against such Insured as to such conduct;

ii. the gaining of any profit, remuneration or financial advantage towhich any Directors and Officers were not legally entitled;provided, however, this exclusion f.ii. shall not apply unless anduntil there is a final judgment against such Insured as to such

conduct.

When f.i. or ii. apply, the Insured shall reimburse the Insurer for anyCosts, Charges or Expenses.

g. for the return by any of the Directors and Officers of any remunerationpaid to them without the previous approval of the appropriate governing body ofthe Company or Outside Entity, which payment without such previous approvalshall be held to be in violation of law.

* * *i. alleging, based upon, arising out of, attributable to, directly or indirectlyresulting from, in consequence of, or in any way involving any Wrongful Actactually or allegedly committed subsequent to a Takeover;

j. for a Wrongful Act actually or allegedly committed or attempted by anyof the Directors and Officers in his or her capacity as a director, officer, trustee,manager, member of the board of managers or equivalent executive of a limitedliability company or employee of, or independent contractor for or in any othercapacity or position with any entity other than the Company; provided however,that this exclusion shall not apply to Loss resulting from any such Claim to theextent that:

i. such Claim is based upon the service of any Directors andOfficers as a director or officer, trustee, governor, executive director orsimilar position or any Outside Entity where such services is within theknowledge and consent of the Company; and

ii. such Outside Entity is not permitted or required by law to provideindemnification to such Directors and Officers; and



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iii. such Loss is not covered by insurance provided by any of theOutside Entitys insurer(s).

* * *.k. alleging, based upon, arising out of, attributable to, directly or indirectly

resulting from, in consequence of, or in any way involving:

ii. any prior or pending litigation or administrative or regulatoryproceeding, demand letter or formal or informal governmentalinvestigation or inquiry filed or pending on or before the Continuity Date;or

iii. any fact, circumstance, situation, transaction or event underlying oralleged in such litigation or administrative or regulatory proceeding,demand letter or formal or informal governmental investigation or inquiry;

l. alleging, based upon, arising out of, attributable to, directly or indirectlyresulting from, in consequence of, or in any way involving, any Wrongful Act,fact, circumstance or situation which any of the Insureds had knowledge of priorto the Continuity Date where such Insureds had reason to believe at the timethat such known Wrongful Act could reasonably be expected to give rise to suchClaim;

* * *

2. Exclusions Applicable Only to Insuring Clause A3

Insurer shall not be liable for Loss on account of any Claim:

a. alleging, based upon, arising out of, attributable to, directly or indirectlyresulting from, in consequence of, or in any way involving the actual oralleged breach of any contract or agreement, except and to the extent theCompany would have been liable in the absence of such contract oragreement; or

b. alleging, based upon, arising out of, attributable to, directly or indirectlyresulting from, in consequence of, or in any way involving

i. any actual or alleged infringement, misappropriation, or violation

of copyright, patent, service marks, trademarks, trade secrets, titleor other proprietary or licensing rights or intellectual property ofany products, technology or services; or

ii. any goods or products manufactured, produced, possessed,packaged, sold, marketed, distributed, advertised or developed bythe Company.



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Provided, however, the exclusions in 2.a. and 2.b. above shall not apply to anysuch Claim brought or maintained, directly or indirectly, by one or moresecurities holders of the Company in their capacity as such.

* * *

62. The Directors & Officers and Company Coverage Section of the Policy provides

at Section D, in relevant part, as follows:

D. LIMIT OF LIABILITY AND RETENTIONS

* * *3. All Claims arising out of the same Wrongful Act and all Interrelated Wrongful

Acts shall be deemed to constitute a single Claim and shall be deemed to havebeen made at the earliest of the following times, regardless of whether such date

is before or during the Policy Period:

a. the time at which the earliest Claim involving the same Wrongful Act orInterrelated Wrongful Act is first made; ...

* * *

E. NOTIFICATION

1. The Insureds shall, as a condition precedent to their rights to payment under thisCoverage Section only, give Insurer written notice of any Claim as soon aspracticable, but in no event later than sixty (60) days after the end of the PolicyPeriod.

2. If, during the Policy Period any of the Insureds first becomes aware of aspecific Wrongful Act which may reasonably give rise to a future Claim coveredunder this Policy, and if the Insureds, during the Policy Period give writtennotice to Insurer as soon as practicablethen any Claim made subsequentlyarising out of such Wrongful Act shall be deemed for the purposes of thisCoverage Section to have been made at the time such notice was received by theInsurer.

[End of Policy Terms and Conditions]

THE SWEPORTS APPLICATION

63. On May 4, 2007, CLARKE, in his capacity as CEO of SWEPORTS, completed

the Sweports Application (attached as Exhibit E), which reads in pertinent part as follows:



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I. General Information* * *

7. Has the Company in the past 18 months been involvedwith any actual, negotiated or attempted merger,acquisition or divestment? If yes, please provide details on

a separate page.

Yes __ No

* * *II. Financial Information

* * *5. Does the Company anticipate in the next 12months or has the Company transacted in the last 24months any restructuring or legal or financialreorganization or filing for bankruptcy? If yes,please provide details on a separate page.

__ Yes No

* * *

III. Prior Insurance InformationDescribe any current insurance maintained(The Insured indicated No prior insurance)

Has any insurer made any payments, taken notice of claim or potential claim ornon-renewed any management liability or similar insurance any time in the last 24

months? If yes, provide details on a separate page. __Yes No

IV. Prior Activities Informationa. Within the last three years, has anyperson or entity proposed for this insurance been thesubject of or involved in any litigation, administrativeproceeding, demand letter, or formal or informalgovernmental investigation or inquiry including anyinvestigation by the Department of Labor or the EqualEmployment Opportunity Commission. If yes, pleaseprovide details on a separate page.

__ Yes No

* * *

V. Other Information1) The undersigned declares that to the best of his/her knowledge thestatements herein are true. Signing of the Application does not bind the



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undersigned to complete the insurance, but it is agreed that this Applicationshall be the basis of the contract should a Policy be issued, and thisapplication will be attached to and become a part of such Policy, if issued

2) It is warranted that the particulars and statements contained in the

Application for the proposed Policy and any materials submittedherewith, are the basis for the proposed Policy and are to be considered asincorporated into and constituting a part of the proposed Policy.

3) It is agreed that in the event there is any material change in the answers tothe questions contained herein prior to the effective date of the Policy, theapplicant will notify Insurer and, at the sole discretion of Insurer, anyoutstanding quotations may be modified or withdrawn.

4) It is agreed that in the event there is any misstatement or untruth in theanswers to the questions contained herein, Insurer has the right to exclude

from coverage any claim based upon, arising out of or in connection withsuch misstatement or untruth.

64. CLARKE was a central party in the various ongoing disputes listed above,

however, the Sweports Application signed on May 4, 2007 does not advise of any of these

disputes or demand letters. In addition, the Sweports Application does not advise of the

existence of the UMF Policy, does not indicate that UMF was in any way related to

SWEPORTS, and does not advise in any way of the matters previously tendered under the UMF

Policy.

REQUESTS FOR DECLARATORY JUDGMENT SPECIFIC TO SWEPORTS

COUNT I

No Coverage for any of the Defendants under the SWEPORTS Policy as the demand

letters and subsequent Underlying Lawsuits are Claims Made Prior to the Inception of the

SWEPORTS Policy

65. WF incorporates and re-alleges, as though fully set forth herein, Paragraphs 1

through 64 above, as if fully set forth under Count I.



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66. Pursuant to Section A.1. of the SWEPORTS policy, coverage is only available for

Claims made and reported during the Policy Period.

67. Pursuant to Section D.3. of the SWEPORTS Policy, all Claims arising out of the

same Wrongful Act and all Interrelated Wrongful Acts shall be deemed to constitute a single

Claim first made at the time the earliest Claim involving the same Wrongful Act or

Interrelated Wrongful Acts is first made and reported.

68. The Wrongful Acts alleged in the Underlying Lawsuits tendered under the

SWEPORTS policy involve the Underlying Plaintiffs purported scheme to control

SWEPORTS/UMF and CLARKES efforts to avoid the agreements entered into with these

Plaintiffs. These acts constitute Interrelated Wrongful Acts that were first tendered to WF

under the UMF policy on April 11, 2007.

WHEREFORE, WF respectfully requests this Honorable Court find and enter judgment,

declaring that there is no defense or indemnity owed for SWEPORTS, and CLARKE and/or

LEISNER in their capacity as directors or officers of SWEPORTS, for the Underlying Lawsuits

as they constitute Claims first made and reported prior to the inception of the SWEPORTS

policy.

COUNT II

No Coverage Under the SWEPORTS Policy as the Claims were Tendered Under the UMF

Policy Prior to the SWEPORTS Policy Period Inception Date.


through 68 above, as if fully set forth under Count II.

70. Pursuant to the Exclusions in Section C.1.b., the SWEPORTS policy does not

provide coverage for any Claim alleging or arising out of a Wrongful Act, when such acts



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constitute Interrelated Wrongful Acts that had been previously tendered under a different/prior

policy.

71. The alleged Wrongful Acts contained in the Underlying Lawsuits have as a

common nexus various facts, circumstances, events, transactions or series of facts and

circumstance related to the alleged scheme to take over control of SWEPORTS/UMF and

CLARKES efforts to thwart these efforts and repudiate the various agreements with these

parties, and therefore, constitute Interrelated Wrongful Acts under the Policy. Notice was first

tendered to WF under the UMF policy on April 11, 2007.

72. Accordingly, the Underlying Lawsuits are all deemed to be Claims first made on

April 11, 2007, and previously tendered under the UMF policy.


declaring that there is no defense or indemnity coverage for SWEPORTS, CLARKE or

LEISNER under Section C.1.b of the SWEPORTS policy, because the Underlying Lawsuits

involve Interrelated Wrongful Acts that relate to Claims previously tendered under another

policy.

COUNT III

No Coverage For any Defendant Under the SWEPORTS Policy as these disputes and the

resultant demand letters were pending before the Continuity Date


through 72 above, as if fully set forth under Count III.

74. Pursuant to Exclusion C.1.k., the SWEPORTS policy does not provide coverage

for any Claim in any way involving any priordemand letterpending before the Continuity



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Date or in any way involving any fact, circumstance, situation, transaction or event underlying

or alleged in such demand letter.

75. Prior the May 22, 2007 Continuity Date of the SWEPORTS policy, CLARKE had

already received demand letters, specifically, the Perkaus 4/2/2007 Letter and Dore 4/2/22007

Email. Therefore, these demand letters were pending prior to the Continuity Date, and therefore

are excluded from coverage pursuant to Exclusion C.1.k.



LEISNER because these demand letters were pending before SWEPORTS Continuity Date and

therefore, Exclusion C.1.l. precludes coverage.

COUNT IV

No Coverage For Any Defendant Under the SWEPORTS Policy as the Defendants had

knowledge of Facts and Allegations of Wrongful Acts that Could Reasonably Be Expected

to Give Rise to the Underlying Lawsuits


through 7 above, as if fully set forth under Count IV.

77. Prior the May 22, 2007 inception date of the SWEPORTS policy, CLARKE had

knowledge of all of the facts and allegations contained in Paragraphs 13 26 of this Complaint.

Specifically, CLARKE was aware of the alleged scheme to take over control of

SWEPORTS/UMF, his efforts and acts to repudiate the various agreements, as well as the other

parties threats to initiate legal action to pursue their alleged rights.

78. Accordingly, Defendants had knowledge of facts, circumstances and situations

that could reasonably be expected to give rise to a Claim prior to the inception of the



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SWEPORTS policy on May 22, 2007. Therefore, pursuant to Exclusion C.1.l. of the

SWEPORTS policy, the Underlying Lawsuits are excluded from coverage.



LEISNER for the Underlying Lawsuits, because the Defendants had knowledge of facts,

circumstances or situations prior to the Continuity Date (5/22/2007) that could reasonably be

expected to give rise to a Claim, and therefore, Exclusion C.1.l. precludes coverage.

COUNT V

No Coverage For any Defendant Under the SWEPORTS Policy Due to MaterialMisrepresentations or Omissions in the Policy Application


through 75 above, as if fully set forth under Count V.

80. On May 4, 2007, CLARKE signed the Sweports Application in his capacity as

CEO of Sweports.

81. In the Sweports Application, inter alia, Clarke was asked if any person or entity

proposed for this insurance had been the subject of or involved in any litigation, administrative

proceeding, demand letter, or formal or informal governmental investigation to which

CLARKE responded No.

82. In connection with the Sweports Application, CLARKE failed to advise WF of

his attempts to divest various individuals and entities, including all of the Claimants in the

Underlying Lawsuit of their shareholder interests in SWEPORTS.

83. In connection with the Sweports Application, CLARKE failed to advise WF of

the significant disputes and prior demand letters he had received including but not limited to the



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Perkaus 4/2/2007 Letter (Exhibit C), the Dore 4/2/2007 Email (Exhibit D), correspondence from

shareholder Henry Proesel, or the April Informal Action(s) and significant disputes (as well as

threatened litigation) resulting there from.

84. The information that was either misrepresented and/or omitted by CLARKE was

material to WF as it materially impacted the risk and hazard assumed by WF when it agreed to

issue the SWEPORTS Policy.

85. Section V.4. of the Sweports Application states that in the event there is any

misstatement or untruth in the answers to the questions contained herein, Insurer has the right to

exclude from coverage any claim based upon, arising out of or in connection with such

misstatement or untruth.



LEISNER under the SWEPORTS policy for the Underlying Lawsuits, as CLARKE made

material misrepresentations or omissions in the Sweports Application which precludes coverage.

REQUESTS FOR DECLARATORY JUDGMENT SPECIFIC TO UMF POLICY

COUNT VI

No Coverage for any Claims made against SWEPORTS or

CLARKE (as SWEPORTS D&O) under the UMF Policy.


through 85 above, as if fully set forth under Count VI.

87. Pursuant to Section A.1., the UMF policy only provides coverage for the

Company, defined as the Parent Company and any Subsidiary, and the Directors and Officers of

the Company. Item A. of UMFS Declarations Page identifies UMF as the Parent Company.



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88. SWEPORTS is the parent company of UMF, and therefore, no coverage is

available for SWEPORTS under the UMF policy.

89. Pursuant to Exclusion C.1.j., the UMF policy does not provide coverage for any

Claims arising out of Wrongful Acts committed by any of its directors and officers, in their

capacity as directors, officers, or board members of any other entity other than UMF. Therefore,

CLARKE in his capacity as a director and officer of SWEPORTS, or any other individual acting

in his or her capacity as a director and/or officer of SWEPORTS, are not covered under the UMF

policy.


declaring that there is no coverage for SWEPORTS or CLARKE as a director and officer of

SWEPORTS or any other individual acting in his or her capacity as a director and/or officer of

SWEPORTS under the UMF Policy.

COUNT VII

No Coverage for any of the Defendants under the UMF Policy to the extent that they were

not named as Defendants or not named in the capacity as a Director or Officer of UMF.


through 89 above, as if fully set forth under Count VII.

91. UMF, CLARKE as a Director and Officer of UMF and LEISNER as a Director

and Officer of UMF have never been named as defendants in the OKM Lawsuit.


and Officer of UMF have never been named as defendants in the Consolidated Dore Lawsuits.


and Officer of UMF were not named as defendants in the PF Lawsuit until January 13, 2010.



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94. On April 21, 2010, LEISNER was dismissed as a defendant from the PF Lawsuit.

95. UMF was named in the Derivative Lawsuit, for which a defense was provided.

However, that case was dismissed on May 29, 2008 and has not been re-filed.

WHEREFORE, WF respectfully requests that this Honorable Court find and enter

judgment, declaring that WF owes no coverage to UMF and CLARKE and LEISNER under the

UMF Policy to the extend UMF, CLARKE and LEISNER are not named as Defendants in any of

the Underlying Lawsuits or are not named in their capacity as a Director or Officer of UMF.

REQUESTS FOR DECLARATORY JUDGMENT APPLICABLE TO BOTH POLICIES

COUNT VIII

No Coverage for any Claims made against any of

the Defendants based upon the Insured vs. Insured Exclusion


through 95 above, as if fully set forth under Count VIII.

97. Pursuant to Exclusion C.1.e. of the UMF and SWEPORTS policies, the policies

do not provide coverage for Claims brought, or maintained by, on behalf of, in the right of, or at

the direction of any Insured in any capacity.

98. UMF, CLARKE and LEISNER allege that they are Insureds under the policies.

102. In the Underlying Lawsuits it is alleged that Dore is or was a SWEPORTS Board Member,

that ORourke is or was a UMF Board Member, that Perkaus is or was SWEPORTS Corporate

Secretary and that various of the other Underlying Plaintiffs are or were UMF/SWEPORTS

Board Members or employees.

99. Therefore, to the extent that any of the Plaintiffs in the Underlying Lawsuits are

deemed to be current or former directors or officers of UMF/SWEPORTS, there is no coverage



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for the Defendants under either the UMF or SWEPORTS policies based upon the Insured v.

Insured Exclusion.

WHEREFORE, WF respectfully requests this Honorable Court to find and enter

judgment, declaring that to the extent that any of the Plaintiffs in the Underlying Lawsuits are

deemed to be current or former directors or officers of UMF and/or SWEPORTS, there is no

coverage for the Defendants under either the UMF or SWEPORTS Policies based upon the

Insured v. Insured Exclusion.

COUNT IX

No Coverage for any Claims made against any ofthe Defendants based upon the Fraud and Personal Gain Exclusion


through 99 above, as if fully set forth under Count IX.

101. Pursuant to Exclusion C.1.f.i. of the SWEPORTS and UMF policies, WF does not

provide coverage for any Claim based upon or any way involving any dishonest or deliberately

fraudulent acts of an Insured.

102. Pursuant to Exclusion C.1.f.ii. of the policies, WF does not provide coverage for

any Claim based upon or any way involving the gaining of any profit or financial advantage to

which a director or officer is not legally entitled.

103. The Underlying Lawsuits assert that CLARKE dishonestly entered into

agreements with the underlying Plaintiffs which he intended to breach from the outset, including

the OKM Stock Purchase Agreement, the PF Stock Purchase Agreement, the Individual

Shareholder Agreements, the Retainer Agreements and various promissory notes. The

Underlying Plaintiffs allege that CLARKE committed these acts for his own personal gain.



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104. Accordingly, pursuant to Exclusions C.1.f.i. and C.1.f.ii., the UMF Policy and

SWEPORTS policies would not provide coverage for Claims based upon or in any way

involving a dishonest or fraudulent act by CLARKE, or CLARKES gain of any profit or

financial advantage to which he was not entitled.


declaring that, pursuant to Exclusions C.1.f.i. and C.1.f.ii., there is no coverage for Claims based

upon or in any way involving a dishonest or fraudulent act by CLARKE, or CLARKES gain of

any profit or financial advantage to which he was not entitled.

COUNT X

No Coverage for any Claims made against any of the

Defendants based upon the Intellectual Property Exclusion


through 104 above, as if fully set forth under Count X.

106. Pursuant to Exclusion C.2.b., the UMF and SWEPORTS policies do not provide

coverage for any Claim based upon, arising out of or in any way involving the intellectual

property of any products, technologies or services.

107. The Underlying Lawsuits assert that the certain of the Plaintiffs were granted

intellectual property in exchange for investment funds provided to SWEPORTS/UMF pursuant

to certain agreements.

108. Pursuant to the Exclusions in Section C.2.b., the UMF and SWEPORTS policies

do not provide coverage for any Claims based upon, arising out of, or in any way involving

intellectual property of any products, technologies or services.



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declaring that, pursuant to the Exclusions in Section C.2.b. there is no coverage for Claims based

upon, arising out of, or in any way involving intellectual property of any products, technologies

or services.

COUNT XI

No Coverage for any Claims made against any of

the Defendants based upon the Contract Exclusion


through 108 above, as if fully set forth under Count XI.

110. Pursuant to Exclusion C.2.a., the UMF and SWEPORTS policies do not provide

coverage for any Claim based upon, arising out of or in any way involving the breach of any

contract or agreement, except to the extent that SWEPORTS or UMF would have otherwise been

liable in the absence of such contract or agreement.

111. The Underlying Lawsuits arise out of CLARKES repudiation/breach of

numerous agreements, including the OKM Stock Purchase Agreement, the PF Stock Purchase

Agreement, the Individual Shareholder Agreements, the Intellectual Property Agreement, the

Retainer Agreements and various promissory notes.

112. Pursuant to Exclusion C.2.a., the policies do not provide coverage for Claims

based upon, arising out of, or in any way involving the breach of any contract or agreement

entered into by SWEPORTS or UMF.


declaring that, pursuant to Exclusion C.2.a., there is no coverage for Claims based upon, arising



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out of, or in any way involving the breach of any contract or agreement entered into by

SWEPORTS or UMF.

COUNT XII

No Coverage for the Indemnity of any Claims made against the Defendants for amounts

owed to Securities Holders of UMF and/or SWEPORTS.


through 112 above, as if fully set forth under Count XII.

114. Pursuant to Section B.7.g, the UMF and SWEPORTS policies do not provide

coverage for any amount owed or paid to one or more securities holders of the Company under

any written or express contract or agreement.

115. The Underlying Lawsuits are filed by certain alleged shareholders of SWEPORTS

and/or UMF, and seek amounts owed under numerous agreements, including the OKM Stock

Purchase Agreement, the PF Stock Purchase Agreement, the Individual Shareholder Agreements,

the Intellectual Property Agreement, the Retainer Agreements and various promissory notes.

116. Pursuant to Section B.7., the policies do not provide coverage for any damages

sought by the various shareholders who filed the Underlying Lawsuits for amounts owed to them

under any contract or agreement.


declaring that, pursuant to Section B.7., there is no coverage for damages sought by the various

alleged shareholders who filed the Underlying Lawsuits for amounts owed to them under any

contract or agreement.

Jury Demand

117. Plaintiff demands trial by jury.



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PRAYER FOR RELIEF

WHEREFORE, WF respectfully requests this Honorable Court find and enter judgment,declaring as follows:

1. WHEREFORE, WF respectfully requests this Honorable Court find and enterjudgment, declaring that there is no defense or indemnity owed for SWEPORTS, and CLARKEand/or LEISNER in their capacity as directors or officers of SWEPORTS, for the UnderlyingLawsuits as they constitute Claims first made and reported prior to the inception of theSWEPORTS policy.

2. WHEREFORE, WF respectfully requests this Honorable Court find and enterjudgment, declaring that there is no defense or indemnity coverage for SWEPORTS, CLARKEor LEISNER under Section C.1.b of the SWEPORTS policy, because the Underlying Lawsuitsinvolve Interrelated Wrongful Acts that relate to Claims previously tendered under anotherpolicy.

3. WHEREFORE, WF respectfully requests this Honorable Court find and enterjudgment, declaring that there is no defense or indemnity coverage for SWEPORTS, CLARKEor LEISNER because these demand letters were pending before SWEPORTS Continuity Dateand therefore, Exclusion C.1.l. precludes coverage.

4. WHEREFORE, WF respectfully requests this Honorable Court find and enterjudgment, declaring that there is no defense or indemnity coverage for SWEPORTS, CLARKEor LEISNER for the Underlying Lawsuits, because the Defendants had knowledge of facts,circumstances or situations prior to the Continuity Date (5/22/2007) that could reasonably beexpected to give rise to a Claim, and therefore, Exclusion C.1.l. precludes coverage.

5. WHEREFORE, WF respectfully requests this Honorable Court find and enterjudgment, declaring that there is no defense or indemnity coverage for SWEPORTS, CLARKEor LEISNER under the SWEPORTS policy for the Underlying Lawsuits, as CLARKE madematerial misrepresentations or omissions in the Sweports Application which precludes coverage.

6. WHEREFORE, WF respectfully requests this Honorable Court find and enterjudgment, declaring that there is no coverage for SWEPORTS or CLARKE as a director andofficer of SWEPORTS or any other individual acting in his or her capacity as a director and/orofficer of SWEPORTS under the UMF Policy.

7. WHEREFORE, WF respectfully requests this Honorable Court find and enter judgment, declaring that, pursuant to Section B.7., there is no coverage for damages sought bythe various alleged shareholders who filed the Underlying Lawsuits for amounts owed to themunder any contract or agreement.

8. WHEREFORE, WF respectfully requests this Honorable Court to find and enter judgment, declaring that to the extent that any of the Plaintiffs in the Underlying Lawsuits are



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deemed to be current or former directors or officers of UMF and/or SWEPORTS, there is nocoverage for the Defendants under either the UMF or SWEPORTS Policies based upon theInsured v. Insured Exclusion.

9. WHEREFORE, WF respectfully requests this Honorable Court find and enter

judgment, declaring that, pursuant to Exclusions C.1.f.i. and C.1.f.ii., there is no coverage forClaims based upon or in any way involving a dishonest or fraudulent act by CLARKE, orCLARKES gain of any profit or financial advantage to which he was not entitled.

10. WHEREFORE, WF respectfully requests this Honorable Court find and enter judgment, declaring that, pursuant to the Exclusions in Section C.2.b. there is no coverage forClaims based upon, arising out of, or in any way involving intellectual property of any products,technologies or services.

11. WHEREFORE, WF respectfully requests this Honorable Court find and enter judgment, declaring that, pursuant to Exclusion C.2.a., there is no coverage for Claims based

upon, arising out of, or in any way involving the breach of any contract or agreement enteredinto by SWEPORTS or UMF.

12. WHEREFORE, WF respectfully requests this Honorable Court find and enter judgment, declaring that, pursuant to Section B.7., there is no coverage for damages sought bythe various alleged shareholders who filed the Underlying Lawsuits for amounts owed to themunder any contract or agreement.

Respectfully submitted,

OHAGAN SPENCER, LLC

By: /s/Kevin M. OHaganAttorneys for Plaintiff

Kevin M. OHagan (ARDC No. 6211446)James W. Davidson (ARDC No. 6281542)OHagan Spencer LLCOne E. Wacker Drive, Suite 3400Chicago, IL 60602PH: 312-422-6100FX: [email protected]@ohaganspencer.com



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westchester fire insurance company v. sweports, ltd. et al complaint

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