UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 30, 1996
CONSUMERS FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA
(State or Other Jurisdiction of Incorporation)
0-2616 23-1666392
(Commission File No.) (I.R.S. Employer
Identification No.)
1200 Camp Hill By-Pass, Camp Hill, Pennsylvania 17011-3774
(Address of Principal Executive Offices) (Zip
Code)
717-761-4230
(Registrant s Telephone Number, Including Area Code)
FORM 8-K CURRENT REPORT
ITEM 1. Changes in Control of Registrant
On October 30, 1996, Consumers Financial Corporation ( Consumers ), a
Pennsylvania corporation entered into an Agreement and Plan of Merger (the
Merger Agreement ) with LaSalle Group, Inc. ( LaSalle ), a Delaware
corporation, and Consumers Acquisition Corp. ( CAC ), a Pennsylvania
corporation, whereby CAC will be merged with and into Consumers (the Merger ).
As the surviving corporation in the Merger, Consumers will become a wholly-owned
subsidiary of LaSalle. The Merger is subject to, among other things, the
approval of insurance regulators in various states and the approval of the
common shareholders of Consumers.
As a result of the Merger, the holders of Consumers 3,025,305 shares of
outstanding common stock will receive cash in the amount of $3.92 per share,
subject to certain adjustments. The total consideration to be paid by LaSalle
to the common shareholders will be approximately $11.9 million, which will be
paid from liquid funds presently in, or available to, LaSalle.
Neither LaSalle, CAC or any affiliate thereof presently owns any of the
outstanding common shares of Consumers. The only holders of Consumers common
stock who are known to Consumers to own 5% or more of such shares are (1) the
Consumers Financial Corporation and Subsidiaries Employee Stock Ownership Plan,
which owns approximately 326,000 shares (10.8%) and (2) three wholly-owned<PAGE>
subsidiaries of Consumers, which together own approximately 410,000 shares
(13.6%).
Consumers 8 1/2% Redeemable Preferred Stock, Series A (the Preferred
Stock ) will remain outstanding following the Merger, and the holders thereof
will retain all of the rights and preferences which currently exist for the
Preferred Stock. Because the Merger will not adversely affect any of their
rights and preferences, the holders of the Preferred Stock are not entitled to
vote with respect to the Merger transaction.
ITEM 2. Acquisition or Disposition of Assets
On November 1, 1996, Consumers and its wholly-owned subsidiary,
Interstate Auto Auction, Inc. ( Interstate ), a Pennsylvania corporation,
entered into an Asset Purchase Agreement (the Agreement ) with ADESA
Pennsylvania, Inc. ( ADESA ), also a Pennsylvania corporation, pursuant to
which all of the operating assets and the business of Interstate would be sold
to ADESA, an unrelated third party, for cash in the amount of $4,850,000.
The sale of Interstate s operating assets and business was completed on
November 6, 1996 (the Closing Date ), at which time ADESA acquired all of
Interstate s property, plant and equipment and its inventories, customer lists,
books and records, permits and name. The real estate and equipment which were
sold to ADESA under the terms of the Agreement had been pledged as collateral
for a term loan payable by Interstate to PNC Bank, N.A. and were also cross-
collateralized to a second term loan payable by Consumers to PNC Bank.
Accordingly, on the Closing Date, $1,703,000 of the sale proceeds was
transferred by ADESA directly to PNC Bank as full repayment for such loans,
which resulted in the release of all liens on the property disposed of as well
as the release of all the common stock of Interstate and the common stock of
two other wholly-owned subsidiaries of Consumers, which had also been held as
collateral by the bank. The net proceeds received by Interstate from the sale,
after deducting certain sales expenses, totaled $3,110,000. The after-tax gain
realized by Interstate from the sale was approximately $1,970,000.
The sale of the auto auction business was consistent with Consumers
strategic plan to sell all of its non-credit insurance operations prior to the
Merger Transaction with LaSalle (see Item 1. above).
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Not Applicable
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated financial statements
are filed with this report:
Pro Forma Consolidated Balance Sheet
at June 30, 1996 Pages F-1 & F-2
Pro Forma Consolidated Statements of Operations:
Year Ended December 31, 1995 Pages F-3 & F-4
Six Months Ended June 30, 1996 Pages F-5 & F-6
The Pro Forma Consolidated Balance Sheet of the Registrant at June
30, 1996 reflects the financial position of the Registrant after giving effect
to the disposition of the operating assets discussed in Item 2 and assumes the
disposition took place on June 30, 1996. The Pro Forma Consolidated Statements
of Operations for the year ended December 31, 1995 and the six months ended
June 30, 1996 assume that the disposition occurred on January 1, 1995 and are
based on the operations of the Registrant for the year ended December 31, 1995
and the six months ended June 30, 1996.
The unaudited pro forma consolidated financial statements have been
prepared by the Registrant based upon assumptions which it con-
sidered to be appropriate. These pro forma financial statements are
shown for illustrative purposes only and are not necessarily indi-
cative of the future financial position or future results of opera-
tions of the Registrant, or of the financial position or results of
operations of the Registrant that would have actually occurred had
the transaction been in effect as of the date or for the periods
presented. In addition, it should be noted that the Registrant s
financial statements will reflect the disposition only from Novem-
ber 6, 1996, the Closing Date.
The unaudited pro forma consolidated financial statements should be
read in conjunction with the historical financial statements and related notes
of the Registrant.
(c) Exhibits
2.1 Agreement and Plan of Merger, dated October 30, 1996 entered
into by and among Registrant, LaSalle Group, Inc. and Consumers
Acquisition Corp.
2.2 Asset Purchase Agreement, dated November 1, 1996, entered into
by and among Registrant, Interstate Auto Auction, Inc. and ADESA
Pennsylvania, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSUMERS FINANCIAL CORPORATION
Registrant
Date November 13, 1996 By /S/ James C. Robertson
James C. Robertson, President
and Chief Executive Officer
Date November 13, 1996 By /S/ R. Fredric Zullinger
R. Fredric Zullinger
Senior Vice President, Chief
Financial Officer and
Treasurer
ITEM 7. (b) PRO FORMA FINANCIAL INFORMATION
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996
(Unaudited)
[CAPTION]
<TABLE> Pro Forma
(in thousands) Histori Adjustments
cal Interstate
Pro
Other Forma
<S> <C> <C> <C> <C>
Assets
Investments:
Fixed maturities $35,822 $35,822
Mortgage loans on real 3,536 3,536
Policy loans 482 482
Other invested assets 2,461 2,461
Short-term investments 3,648 3,648
Total investments 45,949 45,949
Cash 532 $2,595 ( 3,127
Accrued investment income 668 668
Receivables 23,836 23,836
Prepaid reinsurance premiums 18,759 18,759
Deferred policy acquisition 21,571 21,571
Property and equipment 3,965 ($1,726 ( 2,239
Other real estate 3,134 3,134
Other assets 2,373 (107) ( 2,266
$120,78 ($1,833 $2,595 $121,54
Liabilities, Redeemable
Shareholders Equity
Liabilities:
Future policy benefits $36,235 $36,235
Unearned premiums 58,349 58,349
Other policy claims and 2,584 2,584
Other liabilities 5,979 ($48) ( ($20) ( 5,911)
Income taxes:
Current 534 1,233 ( 1,767
Deferred 1,113 (166) ( 947
Notes payable 2,207 (1,218) ( (989) ( 0
107,001 (1,266) 58 105,793
Redeemable preferred stock:
Series A, 8 1/2%
net of treasury stock 4,675 4,675
Shareholders equity:
Common Stock 30 30
Capital in excess of stated 8,016 8,016
Net unrealized depreciation
of debt and equity (261) (261)
Retained earnings 2,798 (567) 2,537 4,768
Treasury stock (1,472) (1,472)
9,111 (567) 2,537 11,081
$120,78 ($1,833) $2,595 $121,549
</TABLE>
ITEM 7.(b) PRO FORMA INFORMATION (continued)
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996
(Unaudited)
(a) To reflect the elimination of certain Interstate assets and liabilities
in connection with the sale transaction with ADESA, including the
repayment of the Interstate bank loan
(b) To reflect the net proceeds from the sale of the Interstate operating
assets to ADESA after repayment of both Interstate s and Consumers bank
debt.
(c) To reflect federal and state income tax liabilities incurred in
connection with the sale transaction and the elimination of deferred
income tax liabilities.
(d) To reflect the repayment of Consumers bank debt from the sale proceeds.
ITEM 7.(b) PRO FORMA FINANCIAL INFORMATION (continued)
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION> Pro Forma Adjustments
(in thousands, except per share data) Historical Interstate Other ProForma
<S> <C> <C> <C> <C>
Revenues:
Premiums written and policy charges $38,909 $38,909
Increase in unearned premiums (1,392) (1,392)
Gross premium income and policy 37,517 37,517
Less reinsurance ceded (15,473) (15,473)
Net premium income and policy charges 22,044 22,044
Net investment income 2,779 $36(b) 2,815
Net realized investment losses (119) (119)
Fees and other income 4,863 ($3,128)(a) 1,735
29,567 (3,128) 36 26,475
Benefits and expenses:
Death and other benefits 7,373 7,373
Increase in future policy benefits 4,754 4,754
Amortization of deferred policy
acquisition costs 10,734 10,734
Operating expenses 8,709 (2,353)(a) (145)(c) 6,211
31,570 (2,353) (145) 29,072
Income (loss) before income taxes (2,003) (775) 181 (2,597)
Income tax expense (benefit) (402) (316) (a) 72 (d) (646)
Income (loss) from continuing operations (1,601) (459) 109 (1,951)
Discontinued operations:
Gain on disposal of Auto Auction
business (net of income taxes 1,804 (e) 1,804
Net income (loss) ($1,601) ($459) ($1,913) ($147)
</TABLE>
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION> Pro Forma Adjustments
(in thousands, except per share data) Historical Interstate Other Pro Forma
<S> <C> <C> <C> <C>
Per share data:
Loss from continuing operations ($0.78) ($0.91)
Discontinued operations 0.68
Net loss ($0.78) ($0.23)
Weighted average number of shares
outstanding 2,634 2,634
Loss per common share - assuming full * *
* Anti-dilutive
Cash dividends declared per common share None None
</TABLE>
(a) To eliminate after-tax operating income of Interstate for the year.
(b) To reflect estimated investment earnings from both the net proceeds from
the sale transaction and the increased cash flows from elimination of
debt service payments (assumed earnings rate - 6%).
(c) To eliminate interest expense on Consumers bank debt.
(d) To reflect Federal and State income taxes on pro forma adjustments (b) and
(c).
(e) To reflect the after tax gain on the disposal of the operating assets of
the Company s auto auction business as of January 1, 1995.
ITEM 7.(b) PRO FORMA FINANCIAL INFORMATION (continued)
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION> Pro Forma Adjustments
(in thousands, except per share data) Historical Interstate Other ProForma
<S> <C> <C> <C> <C>
Revenues:
Premiums written and policy charges $18,504 $18,504
Increase in unearned premiums (407) (407)
Gross premium income and policy charges 18,097 18,097
Less reinsurance ceded 7,832 7,832
Net premium income and policy charges 10,265 10,265
Net investment income 1,325 $43 (b 1,368
Net realized investment losses (22) (22)
Fees and other income 2,399 ($1,597) (a 802
13,967 (1,597) 43 12,413
Benefits and expenses:
Death and other benefits 4,259 4,259
Increase in future policy benefits 1,264 1,264
Amortization of deferred policy
acquisition costs 5,267 5,267
Operating expenses 3,779 (1,196) (a (100) (c 2,483
14,569 (1,196) (100) 13,273
Income (loss) before income taxes (602) (401) 143 (860)
Income tax expense (benefit) 65 (170) (a 57 (d (48)
Net income (loss) ($667) ($231) $86 ($812)
</TABLE>
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION> Pro Forma Adjustments
(in thousands, except per share data) Historical Interstate Other Pro Forma
<S> <C> <C> <C> <C>
Per share data:
Net loss ($0.34) ($0.40)
Weighted average number of shares
outstanding 2,615 2,615
Loss per common share - assuming full * *
* Anti-dilutive
Cash dividends declared per common share None None<PAGE>
(a) To eliminate the after-tax operating income of Interstate for the six month
period.
(b) To reflect estimated investment earnings from both the net proceeds from
the sale transaction and the increased cash flows from elimination of
debt service payments (assumed earnings rate - 6%).
(c) To eliminate interest expense on Consumers bank debt.
(d) To reflect Federal and State income taxes on pro forma adjustments (b) and
(c).
</TABLE>
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
Among
CONSUMERS FINANCIAL CORPORATION,
LASALLE GROUP, INC.
and
CONSUMERS ACQUISITION CORP.
Dated as of October 30, 1996
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 30, 1996, among
CONSUMERS FINANCIAL CORPORATION, a Pennsylvania corporation ("Consumers"),
LASALLE GROUP, INC., a Delaware corporation ("LaSalle ), and CONSUMERS
ACQUISITION CORP., a Pennsylvania corporation and a wholly-owned subsidiary of
LaSalle ("CAC").
B A C K G R O U N D
The respective boards of directors of Consumers, LaSalle and CAC have
each
approved the acquisition of Consumers by CAC through a merger (the "Merger") of
CAC with and into Consumers (CAC and Consumers being sometimes hereinafter
collectively referred to as the "Constituent Corporations") pursuant to the
Pennsylvania Business Corporation Law of 1988 ("BCL") and in accordance with
the
provisions of this Agreement and Plan of Merger (the "Agreement"), and the Plan
of Merger in substantially the form attached hereto as Exhibit A (the "Plan of
Merger").<PAGE>
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying
the
same into effect, the parties hereto, intending to be legally bound, hereby
agree as follows;
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Subject to the terms and conditions of this
Agreement,
on the Effective Date (as hereinafter defined), CAC shall be merged with and
into Consumers pursuant to the Plan of Merger and the separate corporate
existence of CAC shall cease. Consumers shall be the surviving corporation in
the Merger (sometimes hereinafter referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the Commonwealth of
Pennsylvania, and all rights, privileges, immunities and franchises of the
Constituent Corporations shall vest in the Surviving Corporation and continue
unaffected by the Merger.
SECTION 1.2 Terms and Conditions of The Merger.
(a) Merger Considerations. On the Effective Date, each share of Common
Stock, stated value $.01 per share, of Consumers ( Consumers Common Stock )
issued and outstanding on the Effective Date, subject to Section 1.2(b) and
Section 1.2(c), shall be converted into the right to receive $3.92 per share or
an aggregate $11,859,964 assuming 3,025,501 shares outstanding on the date of
this Agreement (the Merger Consideration ), subject to adjustment prior to the
Effective Date as provided in Section 1.2(b).
(b) Merger Consideration Adjustments.
(i) The Merger Consideration shall be increased or decreased by
an
amount equal to the difference between (x) Consumers Net Statutory Surplus (as
defined below) at the end of the month preceding the Effective Date and (y)
$6,710,623. For purposes of this Agreement, Consumers Net Statutory Surplus
shall mean (x) the total statutory capital and surplus of Consumers Life
Insurance Company ( CLI ), as reported in statutory statements reported to
state
regulatory authorities, plus (y) the asset valuation reserve and interest
maintenance reserve of CLI and each of its subsidiaries. In computing any
Merger Consideration adjustments, the effects on total capital and surplus of
any transactions which are not in the ordinary course of business, including
(x)
any effects from the sale of assets contemplated by this Agreement and (y) the
effects of severance costs up to $300,000, shall be excluded.
(ii) In the event the business of Interstate Auto Auction, Inc.
( Interstate ) is sold prior to the Effective Date, the Merger Consideration
shall be increased or decreased by (A) an amount equal to the difference
between
(x) the net sales proceeds (after Federal and state income taxes) received from
the sale of Interstate and (y) $4,900,000, less applicable Federal and state
taxes and (B) an amount equal to the difference between (x) the Non-operating
net assets (defined as all Non-operating assets less liabilities except the
existing bank indebtedness) of Interstate at the end of the month preceding the
date on which Interstate is sold and (y) $899,440. Non-operating net assets,
as
used herein, shall not be reduced by any principal payments made after June 30,
1996 pursuant to the PNC Bank Loan Agreement. In the event Interstate is not
sold prior to the Effective Date, the Merger Consideration shall be decreased
by
$4,378,000.
(iii) In the event Consumers universal life business is sold prior
to the Effective Date, the Merger Consideration shall be increased or decreased
by an amount equal to the difference between the purchase commission (after
applicable Federal income taxes) received by Consumers from the sale of its
universal life business and $1,269,000.
(c) Dissenting Shares. Notwithstanding anything herein to the contrary,
shares of Consumers Common Stock that are outstanding immediately prior to the
Effective Date and that are held by shareholders, if any, who are entitled to
assert a right to dissent from the Merger and who demand and validly perfect
their rights to receive the fair value of their shares with respect to the
Merger under Section 1574 of the BCL (the Dissenting Shares ) shall be
entitled
solely to the payment of the fair value of such shares in accordance with the
provisions of the BCL; except that (i) if such demand to receive fair value
shall be withdrawn upon the consent of the Surviving Corporation, (ii) if the
Plan of Merger shall be terminated, or the Merger shall not be consummated,
(iii) if no demand or petition for the determination of fair value by a court
shall have been made or filed within the time provided in the provisions of the
BCL or (iv) if a court of competent jurisdiction shall determine that such
holder of Dissenting Shares is not entitled to the relief provided by the
provisions of the BCL, the right of such holder of Dissenting Shares to be paid
fair value of his shares of Consumers Common Stock shall cease and with
respect to clauses (i), (iii) and (iv) above, such Dissenting Shares shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Date, the right to receive the Merger Consideration
with respect thereto, without any interest thereon, and with respect to clause
(ii) above, the status of such shareholder shall be restored retroactively
without prejudice to any corporate proceeding which may have been taken during
the interim.
SECTION 1.3 Timing.
(a) Shareholder Approval. Consumers shall submit the Plan of
Merger to its shareholders for approval and adoption at a meeting to be held as
soon as practicable and will use commercially reasonable efforts to hold such
meeting on or before December 31, 1996, subject to the provisions of Section
3.1. In connection with such meeting, Consumers shall take such reasonable
steps as shall be necessary for the prompt preparation and filing by Consumers
of a proxy statement (the "Proxy Statement"), as contemplated by Rules 14a-1
et.
seq. under the Securities Exchange Act of 1934 (the "Exchange Act"), with the
Securities and Exchange Commission ("SEC") and shall use commercially
reasonable
efforts to cause the Proxy Statement to be mailed to the holders of shares of
Consumers Common Stock as soon as practicable. Prior to filing the Proxy
Statement with the SEC, Consumers shall send a draft of the Proxy Statement to
LaSalle for comments.
(b) Closing and Effective Date. Subject to receiving all
requisite shareholder and regulatory approvals relating to the Merger and
subject to the provisions of this Agreement, the parties shall hold a closing
(the "Closing") on (i) the later of (A) ten business days following the meeting
of the shareholders of Consumers to consider and vote upon the Plan of Merger
or
(B) ten business days following the date on which the last of the conditions
set
forth in Article IV is fulfilled or waived or (ii) at such other date as the
parties hereto may agree (the "Closing Date"), at 10:00 A.M., (local time) at
the offices of Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, or at
such other place or time as the parties hereto may agree. At Closing, LaSalle
shall pay the Merger Consideration to Consumers by wire transfer of immediately
available funds to a segregated account to be specified in writing by
Consumers,
and LaSalle shall cause the Articles of Merger to be filed with the Secretary
of
State of the Commonwealth of Pennsylvania. The Merger shall become effective
upon the filing of Articles of Merger with the Secretary of State of the
Commonwealth of Pennsylvania in accordance with the provisions of the BCL (the
"Effective Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations and Warranties by Consumers. The
representations and warranties set forth in this Section 2.1 shall not pertain
to or reflect the assets of Interstate to be assigned or the liabilities of
Interstate to be assumed pursuant to the contemplated sale of Interstate to a
third party. Consumers represents and warrants to LaSalle and CAC that:
(a) Organization and Good Standing of Consumers and Affiliates.
Consumers is a corporation duly organized and presently subsisting under the
laws of the Commonwealth of Pennsylvania. CLI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Consumers Life Insurance Company of North Carolina ( Consumers North Carolina )
is a corporation duly organized validly existing and in good standing under the
laws of the State of North Carolina. Interstate is a corporation duly
organized
and presently subsisting under the laws of the Commonwealth of Pennsylvania.
Investors Fidelity Life Assurance Corp. ( Investors ) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. CLMC Insurance Agency, Inc. (CLMC ) is a corporation duly organized and
presently subsisting under the laws of the Commonwealth of Pennsylvania.
Consumers Reinsurance Company ( Consumers Re ) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arizona.
Consumers Car Care Corporation ( Car Care ) is a corporation duly organized and
presently subsisting under the laws of the Commonwealth of Pennsylvania.
Investors Consolidated Reinsurance, Ltd. ( Consolidated Re ) is a corporation
duly organized, validly existing and in good standing under the laws of the
Island of Nevis. Consumers Limited ( Consumers Limited ) is a corporation duly
organized, validly existing and in good standing under the laws of the Island
of
Nevis. Consumers II Limited ( Consumers II ) is a corporation duly organized,
validly existing and in good standing under the laws of the Island of Nevis.
Each of CLI, Investors, Consumers North Carolina, Consumers Re, Consolidated
Re,
(together hereinafter sometimes referred to as the "Insurance Company
Subsidiaries"), is a legal reserve life insurance company duly organized,
validly existing and in good standing under the laws of the State or Island of
its domicile and duly licensed to sell life insurance under the laws of each
State or Island as set forth in a disclosure schedule of even date herewith
delivered to LaSalle and CAC, incorporated herein by reference (the Disclosure
Schedule ). Each of Consumers, CLI, Consumers North Carolina, Interstate,
Investors, CLMC, Consumers Re, Car Care, Consumers Limited and Consumers II
(together, the Consumers Companies ) is qualified to do business in each State
where the nature of its business activities and ownership of its properties
require it to be so qualified, as set forth in the Disclosure Schedule. Except
as identified on the Disclosure Schedule, none of the Insurance Company
Subsidiaries is the subject of any supervision, conservation, rehabilitation,
liquidation, receivership, insolvency or other similar proceeding, nor is any
of
the Insurance Company Subsidiaries operating under any formal or informal
arrangement or understanding with the licensing authority of any jurisdiction
which restricts its authority to do business or requires it to take, or to
refrain from taking, any action.
(b) Corporate Power. Each of the Consumers Companies has full
corporate power to own its properties and carry on its business as currently
conducted.
(c) Certificates of Incorporation and By-laws. The copies of (i)
the charter of each of the Consumers Companies and all amendments thereto to
date, as certified by the applicable State or Island governmental authority,
and
(ii) the bylaws of each of the Consumers Companies, as amended to date, and as
certified by each company's respective Corporate Secretary as being complete
and
correct, which have been delivered to LaSalle, are complete and correct.
(d) Corporate Organization Structure. Consumers owns of record
and beneficially 100% of the issued and outstanding common stock of each of its
affiliates, as shown on the Organizational and Share Ownership Chart included
in
the Disclosure Schedule.
None of the Consumers Companies has issued and outstanding any
class
of capital stock other than common stock except for (i) preferred stock of
Consumers, liquidation preference $10.00 per share, of which 632,500 shares are
authorized and 536,500 are issued and outstanding and (ii) preferred stock of
Consumers Re, par value and liquidation preference $1.00 per share, of which
1,000,000 shares are authorized and 65,500 shares are issued and outstanding.
None of the Consumers Companies has any investment in any other
entity (other than portfolio investments made in the ordinary
course of
business) except as disclosed in the Disclosure Schedule.
(e) Capitalization. The authorized, issued and outstanding
capital stock of each of the Consumers Companies is as set forth in the
Disclosure Schedule.
Except for the outstanding options/stock appreciation rights listed
on the Disclosure Schedule issued pursuant to the Consumers Financial
Corporation 1989 Stock Incentive Plan, there is no outstanding option, warrant
or other agreement or commitment to which any of the Consumers Companies is a
party or by which it is bound providing for the issuance of any additional
shares of its capital stock or any securities convertible into its capital
stock.
No person has demand or other rights to cause any of the Consumers
Companies to file any registration statement under the Securities Act of 1933,
as amended, relating to the stock of any of the Consumers Companies, nor is any
such entity prohibited from granting such rights to any person in the future.
The offer, sale and repurchase of all capital stock and other securities of the
Consumers Companies complied with or were exempt from all applicable federal
and
state securities laws at the time such securities were offered and sold.
(f) Authorization and Validity of Agreement. The execution,
delivery and performance of this Agreement have been duly and validly
authorized
by all necessary corporate action on the part of Consumers. This Agreement has
been duly executed and delivered by Consumers and is the valid and legally
binding obligation of Consumers, enforceable by LaSalle in accordance with its
terms, except to the extent that enforcement may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting the rights of creditors
generally and except to the extent that enforcement may be limited by the
application of general equitable principles. The execution and delivery of
this
Agreement and the consummation of the transactions contemplated hereby will not
result in the acceleration of any indebtedness or other obligation of the
Consumers Companies and are not prohibited by, do not violate any provision of,
and do not result in a default under:
(i) any of the Consumers Companies' respective Charters or
bylaws;
(ii) any material contract, agreement or other instrument to
which any of the Consumers Companies is a party or by which it is bound, except
as identified on the Disclosure Schedule;
(iii) any regulation, rule, order, decree or judgment of any
court, arbitration tribunal or governmental agency; or
(iv) any law applicable to the Consumers Companies;
except that (A) the Insurance Holding Company Systems Acts of Arizona,
Delaware,
North Carolina and Ohio prohibit any person from acquiring control of a
domestic
insurance company or a holding company controlling a domestic insurance company
unless such acquisition of control has been approved by the Commissioner of
Insurance of each such state in the manner prescribed and (B) the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 ( HSR ) requires certain pre-
acquisition notification of certain transactions by the Federal Trade
Commission
and the Antitrust Division of the Department of Justice.
(g) Financial Statements. Consumers has delivered to LaSalle
audited consolidated balance sheets of Consumers and its subsidiaries at
December 31, 1994 and 1995, and the related consolidated statements of
operations, consolidated statements of stockholders' equity and consolidated
statements of changes in financial position for each of the two years 1994 and
1995 with the footnotes and schedules thereto, together with the reports of
independent public accountants with respect thereto. Said audited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles, and fairly present the consolidated financial position
of Consumers and its subsidiaries as of the respective dates thereof and its
consolidated results of operations and changes in consolidated financial
position and stockholders' equity for the years indicated as stated therein.
The annual statements of each of the Insurance Company
Subsidiaries,
filed with the state insurance department of its domiciliary state, for each of
the years ended December 31, 1994 and 1995 and delivered to LaSalle, present
fairly the required information, and the audited statutory financial statements
covering each said year, which Consumers has heretofore delivered to LaSalle,
present fairly the financial position of each of the Insurance Company
Subsidiaries, respectively, at the end of each of the years then ended and the
results of its operations for each such year, in conformity with accounting
practices prescribed or permitted by the applicable state insurance laws and
regulations as and to the extent described in such annual statements and
related
statutory financial statements.
Consumers has also delivered to LaSalle unaudited consolidated
balance sheets of Consumers and its subsidiaries, at March 31, 1996 and at June
30, 1996, and related unaudited consolidated statements of operations,
unaudited
consolidated statements of stockholders' equity and unaudited consolidated
statements of changes in financial position for the three months ended
March 31,
1996 and six months ended June 30, 1996, respectively. The said unaudited
consolidated financial statements contain the necessary adjustments, all of
which are of a normal recurring nature for interim period reporting purposes,
for a fair representation of results for the interim periods. The
consolidated balance sheet of Consumers and its subsidiaries as of June 30,
1996
is sometimes referred to herein as the Interim Balance Sheet.
Consumers has also delivered to LaSalle the quarterly statements
of
condition of each of the Insurance Company Subsidiaries filed, where required,
with the state insurance department of its domiciliary state, as of March 31,
1996 and June 30, 1996 including statutory financial statements covering the
three months ended March 31, 1996 and the six months ended June 30, 1996. The
said statutory financial statements contain the necessary adjustments, all of
which are of a normal recurring nature for interim period reporting purposes,
for a fair presentation of results for the interim periods, in conformity with
accounting practices prescribed or permitted by the applicable state insurance
laws and regulations.
Consumers has duly filed all material reports, schedules, forms,
statements and other documents required to be filed by it with the Securities
and Exchange Commission, and each such statement or other document has been
timely filed and when filed was in material compliance with the requirements of
the applicable federal securities law and rules and regulations promulgated
thereunder. Consumers has not received any written or oral communications from
the staff of the Securities and Exchange Commission over the past two years.
As of their respective dates, Consumers (i) Annual Report on Form
10-K for the fiscal year ended December 31, 1995, as filed with the SEC, (ii)
Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, as filed with
the SEC, and (iii) proxy statements, as filed with the SEC and as mailed to
stockholders (together, the SEC Filings ) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except any statement
or omission therein which has been corrected or otherwise disclosed or updated
in a subsequent SEC filing.
(h) Absence of Undisclosed Liabilities. Except as set forth in
the Disclosure Schedule, there is no direct or indirect, indebtedness,
obligation, expense, claims, deficiency, guaranty or endorsement of or by any
person of any type, whether accrued, absolute, contingent, matured or
unmatured,
of the Consumers Companies ( Liabilities ), except:
(i) those Liabilities adequately and specifically set forth
or reserved for on the Interim Balance Sheet and not
heretofore paid or
discharged or not required under statutory accounting principles to be so set
forth or reserved on the Interim Balance Sheet and contingencies disclosed in
the SEC filings;
(ii) those Liabilities arising in the ordinary course of
business consistent with past practice under any Commitment specifically
disclosed in Section 2.1(p) of the Disclosure Schedule or not required to be
disclosed therein because of the nature of such Commitment or the term or
amount
involved; and
(iii) those Liabilities incurred, consistent with past
business practice, in the ordinary course of business since the date of the
Interim Balance Sheet and not heretofore paid or discharged.
(i) Absence of Changes. Except as reflected in the Disclosure
Schedule, since June 30, 1996 there has not been:
(i) any material adverse change in the financial condition,
assets, properties, liabilities, results of operations or prospects of any of
the Consumers Companies;
(ii) any declaration, setting aside or payment of any
dividend (excluding intercompany dividends), or other distribution, in respect
of any of the capital stock of any of the Consumers Companies or any direct or
indirect redemption, purchase or other acquisition by any of the Consumers
Companies of any of its capital stock,
(iii) except for agents' contracts entered into in the
ordinary course of business, any entry into or amendment of any employment or
deferred compensation agreement between any of the Consumers Companies and any
of its officers, directors, employees, agents or consultants;
(iv) any issuance or sale by any of the Consumers Companies
of any of its authorized capital stock, debentures, bonds, notes or other
corporate securities, or any modification or amendment of the rights of the
holders of any of its outstanding capital stock, debentures, bonds, notes or
other securities;
(v) any creation of any lien (other than deposits with
State
Insurance Departments and liens for current taxes not yet due), including,
without limitation, any deposit for security made of, created on or in any
asset
or property of any of the Consumers Companies, or assumed by any of them with
respect to any such asset or property;
(vi) any material indebtedness or other material liability
or
obligation (whether absolute, accrued, contingent or otherwise) incurred, or
other material transaction engaged in, by any of the Consumers Companies,
except
in the ordinary course of business;
(vii) any material obligation or liability discharged or
satisfied, other than the current liabilities reflected in the consolidated
balance sheet of any of the Consumers Companies as of June 30, 1996 and current
liabilities incurred since the date thereof in the ordinary course of business
and except as contemplated by this Agreement;
(viii) any sale, transfer or other disposition of any
assets or properties of any of the Consumers Companies, except in the ordinary
course of business or as contemplated by this Agreement;
(ix) any amendment, termination or waiver of any material
right of any of the Consumers Companies under any material contract, agreement
or governmental license or permit except the termination of the Joint Venture
Agreement with Accel and the termination of the Pennsylvania Automotive
Association endorsement;
(x) any material change in the practices and policies
customarily followed by any of the Consumers Companies
(including, without
limitation, any underwriting, actuarial, pricing, financial or accounting
practices or policies);
(xi) with respect to the Insurance Company Subsidiaries, any
material increase or decrease in the percentage of its reinsured business, or
any material increase in its lapse ratio, or any material decrease in the
amount
of its in-force business;
(xii) any actual or, to the knowledge of the executive
officers of Consumers, threatened labor trouble, strike, loss of employees or
agents;
(xiii) any increase in salaries or other compensation
of,
or advances to, any employees, other than advances to non-executive employees
in
the ordinary course of business and the Employment Agreement to be entered into
with Ralph Byrnes; or
(xiv) any transaction which was not in the ordinary course of
business consistent with past practice.
(j) Absence of Defaults. Except as set forth in the Disclosure
Schedule, none of the Consumers Companies is in default under its respective
charter or bylaws, or under any term or provision of any deed of trust,
mortgage, indenture or security agreement or of any contract or instrument to
which it is a party or by which it or any of its assets or properties is bound,
the result of which default has caused or reasonably might be expected to cause
a material adverse effect on its business, operations, properties, prospects or
assets or its financial condition.
(k) Compliance with Laws. Except as set forth in the Disclosure
Schedule, there has been no failure by the Consumers Companies to comply in all
material respects with any law or regulation of any applicable jurisdiction in
the conduct of its business and corporate affairs.
(l) Tax Status. Each of the Consumers Companies has duly filed
all federal, state, local and foreign tax returns and reports, and all returns
and reports of all other governmental units having jurisdiction, with respect
to
taxes imposed upon it or upon its income, assets, properties, licenses or
operations. Since December 31, 1994, except for Consumers Re which files a
separate return, the Insurance Company Subsidiaries file a consolidated federal
income tax return. Except as disclosed in the Disclosure Schedule, all of such
returns or reports reflect the true and correct tax liability of any of the
Consumers Companies, as the case may be, and all taxes shown on such returns or
reports and all assessments received by each of the Consumers Companies have
been paid to the extent that such taxes have become due; and except as
disclosed
in the Disclosure Schedule, there are no waivers or agreements by any of the
Consumers Companies for the extension of time for the assessment of taxes as
above described. Except as set forth in the Disclosure Schedule, none of the
federal or other income tax returns of any of the Consumers Companies has been
audited by the Internal Revenue Service or other government agency. Federal
and
other income tax returns of each of the Consumers Companies for those years
specified in the Disclosure Schedule are closed by applicable statutes of
limitations. A true, complete and accurate copy of each audit report and other
notices and letters issued by the Internal Revenue Service in connection with
the audit of any federal income tax return of any of the Consumers Companies
relating to any year or period not barred by the applicable statute of
limitations has been or will be made available to LaSalle prior to the
Closing.
With respect to the period of time through the date hereof for which tax
returns
have not yet been filed, or for which taxes are not yet due or owing, each of
the Consumers Companies has set up reserves which Consumers, after due inquiry,
believe to be adequate to cover all taxes which may become owing by reason of
income earned or activities engaged in prior to the date hereof. Except as
described in the Disclosure Schedule, there is not now, to the knowledge of
Consumers, any proposed assessment of additional taxes against any of the
Consumers Companies which is material. There are no tax liens (other than any
lien for current taxes not yet due and payable) on any of the assets or
properties of the Consumers Companies. The Consumers Companies have made all
deposits required by law to be made with respect to employee withholding and
other employment taxes. Each life insurance or annuity policy issued, sold or
administered by, or on behalf of, any Insurance Company Subsidiary or any trust
created or administered by any Insurance Company Subsidiary has at all relevant
times qualified for, and currently qualifies for, appropriate tax treatment
under Sections 72, 264, 7702 or 7702A of the Code and the treasury regulations
promulgated thereunder or similar provision of state, local or foreign law.
(m) Title to Properties. Except as set forth in the Disclosure
Schedule, the Consumers Companies have good and marketable title to all of its
properties and assets used or provided for use in their business, including
those reflected on the consolidated balance sheets of Consumers and its
subsidiaries at June 30, 1996, and on the statutory balance sheets of the
Insurance Company Subsidiaries at June 30, 1996, (except as since sold or
otherwise disposed of in the ordinary course of business or as contemplated by
this Agreement), free and clear of all mortgages, pledges, liens, claims,
conditional sale agreements, encumbrances or other charges and title objections
(together, "Liens"), except for Liens securing specific liabilities set forth
on
such balance sheets (with respect to which no default exists) and except for
minor imperfections of title and encumbrances, if any, which are not
substantial
in amount, which do not materially adversely affect the marketability of a
property or properties or materially impair the operations of any of the
Consumers Companies and have arisen only in the ordinary course of business.
(n) Litigation. Except as set forth in the Disclosure Schedule,
(i) there is no action, suit or proceeding pending or, to the knowledge of the
executive officers of Consumers, threatened against the Consumers Companies,
before any court, at law or in equity, arbitration tribunal or any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality which individually or in the aggregate could have a
material adverse effect on the financial condition or prospects of the
Consumers
Companies, and (ii) the Consumers Companies are not in default in any material
respect under any order, decree, judgment, award, determination, ruling or
regulation of any court, arbitration tribunal, governmental department,
commission, board, bureau, agency or other instrumentality.
(o) Employee Benefit Plans.
(i) The Consumers Companies do not have a collective
bargaining agreement with any labor union or other representative of employees
and, to Consumers knowledge, there has been no demand or attempt by employees
to organize a union or labor organization. There are no unfair labor practice
charges or complaints pending or, to the knowledge of the executive officers of
Consumers, threatened against the Consumers Companies before the National Labor
Relations Board or any other federal, state, local or foreign court or agency.
There has been no other labor trouble or other occurrence, event or condition
of
a similar character, which is occurring or threatened or has occurred or been,
to the knowledge of the executive officers of Consumers, threatened.
(ii) Except for the plans listed in the Disclosure Schedule
(the "Employee Benefit Plans"), the Consumers Companies do not sponsor,
maintain
or contribute to, or have not sponsored, maintained or contributed to, any
plan,
fund, program, policy, arrangement, contract or commitment, whether or not
qualified for federal income tax purposes, whether or not funded, whether
formal
or informal, and whether for the benefit of a single individual or more than
one
individual, which is in the nature of (i) an employee pension benefit plan (as
defined in section 3(2) of ERISA), (ii) an employee welfare benefit plan (as
defined in section 3(1) of ERISA), (iii) an incentive current or deferred
compensation, or other benefit or compensation arrangement for employees,
former
employees, their dependents and/or their beneficiaries or (iv) an arrangement
that could be characterized as providing for additional compensation,
compensation associated with a change of control, severance benefits,
perquisites, or fringe benefits.
(iii) Except as set forth in the Disclosure Schedule, the
Consumers Companies do not sponsor or maintain, and are not
contributing
employers or otherwise parties to, or have any obligation or liability under or
with respect to, and have never maintained or participated in, or been
obligated
to contribute to any defined benefit plan (as defined in section 3(35) of
ERISA)
or multiemployer plan (as defined in section 3(37) of ERISA). Except as set
forth in the Disclosure Schedule there are no circumstances pursuant to which
the Consumers Companies may be liable to the Pension Benefit Guaranty
Corporation ("PBGC"), to any such defined benefit plan (or to any participant,
beneficiary, trustee or fiduciary thereof), presently or heretofore sponsored
or
maintained by the Consumers Companies or any entity other than the Consumers
Companies, including within the concept of "entity other than the Consumers
Companies" any predecessor of the Consumers Companies or any "controlled
company." A "controlled company" is any enterprise which, with the Consumers
Companies, forms or formed at any time since September 2, 1974 a controlled
group of corporations within the meaning of Section 414(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), a group of trades or businesses
under common control within the meaning of Section 414(c) of the Code, or any
affiliated service group within the meaning of Section 414(m) of the Code.
(iv) Each Employee Benefit Plan intended to be qualified
under Sections 401(a), 4975(e)(7), and 401(k) of the Code has been determined
to
be so qualified by the Internal Revenue Service ("IRS"), and any trust created
pursuant to any such Employee Benefit Plan has been determined by the IRS to be
exempt from federal income tax under Section 501(a) of the Code. To the
knowledge of the executive officers of Consumers, nothing has occurred since
the
date of the last such determination which resulted or could result in the
revocation of such determination. As of the Closing, all of the Employee
Benefit Plans comply with all applicable requirements of the Code (including,
for an Employee Benefit Plan which is an employee stock ownership plan under
Section 4975(e)(7) of ERISA (the ESOP ), the requirements of Sections 409 and
4975(e)(7) of the Code), and all amendments and actions required to bring each
Employee Benefit Plan into conformity in all respects with all applicable laws
have been made or taken to the extent that such amendments or actions are
required by law to be made or taken in order to obtain a favorable
determination
letter upon termination of the Employee Benefit Plan, if applicable. The
Consumers Companies have properly and timely submitted all qualified Employee
Benefit Plans in a good faith effort to meet the applicable requirements of
ERISA and the Code to the IRS for its determination of their continuing tax-
qualified status within the time prescribed therefor under applicable law. The
Consumers Companies are not presently liable for failure to make contributions
to any such Employee Benefit Plan or for their fiduciary conduct in connection
with such Employee Benefit Plan. There has been no violation of Sections 404,
406 or 407 of ERISA or Section 4975 of the Code, no violation of the reporting
and disclosure provisions of the Code or ERISA, and no termination or partial
termination with respect to any Employee Benefit Plans.
(v) Full payment has been made of all amounts which the
Consumers Companies are required, under applicable law or under any Employee
Benefit Plan or any agreement related to any Employee Benefit Plan to which the
Consumers Companies are a party, to have paid as contributions thereto as of
the
last day of the most recent fiscal year of each Employee Benefit Plan ended
prior to the date hereof. The Consumers Companies have made adequate provision
for reserves to meet contributions that have not been made because they are not
yet due under the terms of any Employee Benefit Plan or related agreements.
Benefits under all Employee Benefit Plans are as represented and have not been
increased subsequent to the date of such documents.
(vi) No Employee Benefit Plan provides any health, life or
other welfare benefit coverage to employees of the Consumers Companies beyond
termination of their employment with the Consumers Companies by reason of
retirement or otherwise, other than coverage as may be required under
Section 4980B of the Code or Part 6 of ERISA, or under the continuation of
coverage provisions of the laws of any state or locality.
(vii) Except for the Employment Agreement to be entered into
with Ralph Byrnes, the consummation of the transactions contemplated by this
Agreement will not (other than any payment made pursuant to Code Section
401(k)(10) under any 401(k) Plan) accelerate the time of payment or vesting,
increase any compensation due to any current employee or former employee of
the
Consumers Companies or entitle any employee to severance pay, unemployment
compensation or any other payment.
(viii) No proceedings, suits or material claims (other
than routine claims for benefits) exist or are, to the knowledge of the
executive officers of Consumers, threatened against the Consumers Companies
with
respect to any Employee Benefit Plan.
(ix) The Buying Parties (as defined below) have no
obligation
to continue any Employee Benefit Plan as of the Closing and may, in their sole
and absolute discretion, terminate, modify or discontinue any such Employee
Benefit Plan, in whole or in part, without penalty and without prior notice to
the Consumers Companies, any participant, beneficiary or present or former
employee of the Consumers Companies.
(p) Contracts. The Disclosure Schedule contains a list, as of
the
date hereof, of each contract, agreement, understanding or other commitment,
whether written or oral (including any and all amendments thereto) relating to
the business of the Consumers Companies, to which any of the Consumers
Companies
is a party or by which they are bound (collectively, the "Commitments"),
described below:
(i) contract with any employee, consultant or labor union;
(ii) contract for the future purchase of, or payment for,
supplies or products or services in any single instance exceeding $25,000, or
in
the aggregate $100,000, which are not terminable without penalty upon not more
than 30 days' notice;
(iii) representative or sales agency contract;
(iv) contract limiting or restraining such company from
engaging or competing in any lines of business with any person or entity;
(v) contract with any customer or agent providing for a
retrospective price adjustment or retrospective commission or future premium
guarantee;
(vi) commitment to guarantee the obligations of others or
commitment by others to guarantee the obligations of the Consumers Companies;
(vii) real or personal property lease;
(viii) mortgage, indenture, note debenture, bond, letter
of credit agreement, surety agreement, loan agreement or other commitment for
the borrowing or lending of money relating to the Consumers Companies or
agreement for a line of credit;
(ix) license, franchise, distributorship or other agreement,
including those which relate in whole or in part to any software, technical
assistance or other know-how of or used in the prior twenty-four months;
(x) commitment or agreement for any capital expenditure or
leasehold improvement in excess of $100,000;
(xi) reinsurance agreement;
(xii) investment in or agreement to invest in derivative
securities; or
(xiii) material contract, agreement or commitment not
otherwise disclosed herein.
True and complete copies of such Commitments have been delivered or made
available to LaSalle prior to the date hereof. Each Commitment is a valid and
binding obligation, which, to the knowledge of Consumers, is in full force and
effect. Except as disclosed on the Disclosure Schedule, the Consumers
Companies
are not in default under any of the Commitments, and, to Consumers knowledge,
no third party is in default under any of the Commitments. The Disclosure
Schedule identifies each Commitment that requires consent by a third party to
give the Consumers Companies all rights under such Commitment following the
consummation of the transactions contemplated by this Agreement.
(q) Intellectual Property. The Disclosure Schedule contains a
true, complete and correct list of all of the names and trademarks, whether or
not registered, which are used in or related to the business of the Consumers
Companies (each a "Name" or "Trademark" and collectively the "Names and
Trademarks"), the Consumers Companies own all such Names and Trademarks and
have
good title thereto, free and clear of all Liens. The Disclosure Schedule
contains a true, complete and correct list of each jurisdiction where the
Consumers Companies have filed a certificate of assumed name with respect to
their business. As to each of the Names and Trademarks that is registered, or
as to which any application for registration by the Consumers Companies is
pending, the Disclosure Schedule lists each jurisdiction in which such Name or
Trademark is registered and the expiration date for such registration, and each
jurisdiction in which an application to register such Name or Trademark is
pending and the date such application was made. There are no judicial or
administrative actions pending, or, to the knowledge of Consumers executive
officers, threatened against, the Consumers Companies with respect to any of
the
Names or Trademarks, and no right to use any Name or Trademark which is
currently outstanding has been granted by the Consumers Companies or any past
or
present subsidiary or affiliate of the Consumers Companies to any person or
third party. No person or third party has any right, title or interest in any
Name or Trademark in the United States, for any use in any class or field which
is the same or similar to any aspect of the Consumers Companies' business.
None
of the Consumers Companies have either infringed on, or are alleged to be
infringing on, any trademark, service mark, copyright, trade dress, trade name,
corporate name, graphic work of art, slogan or logo of any person or third
party
in connection with their business and, to Consumers knowledge, no person or
third party is infringing any of the Names or Trademarks listed. No employee
or
officer of any of the Consumers Companies has any interest in any of the Names
or Trademarks.
(r) Insurance Policies. All insurance policies or contracts
issued by the Insurance Company Subsidiaries are valid policies or contracts,
the form of which has been approved, where required, by the applicable state
insurance departments and provided to LaSalle.
(s) Reserves. The reserves for policy liabilities of each of the
Insurance Company Subsidiaries as set forth on its December 31, 1995 statutory
balance sheet have been computed in accordance with generally accepted
actuarial
methods and principles consistently applied and, in all cases, have been
properly computed, were based on actuarial assumptions that were in all
material
respects in accordance with or more conservative than those called for in the
related policy or contract, and are adequate under the applicable requirements
of the law of the state of its domicile and the law of the states in which it
is
licensed to do business to enable the Insurance Company Subsidiaries to conduct
their insurance business in those states, except those states listed on the
Disclosure Schedule. The reserves for policy liabilities of each of the
Insurance Company Subsidiaries as set forth on its June 30, 1996 statutory
balance sheet have been computed in a manner which is consistent with the
methods and principles described above.
(t) Operations Insurance. The Disclosure Schedule contains a
description of all property and casualty, liability, directors' and officers'
liability, key man life, group health, group disability, group life and other
insurance policies owned by the Consumers Companies. All such policies are in
full force and effect in accordance with their terms, no notice of cancellation
has been received, and there is no existing default or event which, with the
giving of notice or lapse of time or both, would constitute a default
thereunder. Such policies are in amounts which are adequate in relation to the
business and assets of the Consumers Companies and all premiums to date have
been paid in full. The Consumers Companies have not been refused any
insurance,
nor has their coverage been limited, by any insurance carrier to which they
have
applied for insurance or with which they have carried insurance during the past
five years. The Disclosure Schedule also sets forth a summary of all past
product liability insurance coverage (primary and excess), including coverage
relating to lines of business or subsidiaries which have been discontinued or
dissolved, which summary shall include the name of insurer, the policy number,
whether the policy was on a claims-made or occurrence basis and the policy
limits for each policy. The Disclosure Schedule also contains a true and
complete description of all outstanding bonds and surety arrangements issued or
entered into in connection with the business, assets and liabilities of the
Consumers Companies.
(u) Real Estate. All of the real estate owned by any of the
Consumers Companies in the aggregate, has a net value at June 30, 1996 of not
less than the aggregate carrying value of all such real estate on the June 30,
1996 statutory balance sheets of the Insurance Company Subsidiaries. Except as
set forth in the Disclosure Schedule, all buildings, plants, structures,
equipment and other personal property owned or leased by the Consumers
Companies
are in good operating condition and repair (ordinary wear and tear excepted)
and
are usable in the ordinary course of business of the Consumers Companies. The
Consumers Companies are not, and have not received notification that they are,
in violation of any applicable building, zoning, anti-pollution, health, safety
or other law, ordinance or regulation in respect of its buildings, plants or
structures or their operations. Except as set forth in the Disclosure
Schedule,
each real property lease in which any of the Consumers Companies are landlord
or
tenant is, and on the Closing shall be, in full force and effect and has not
been assigned, modified, supplemented or amended and neither the Consumers
Companies, as landlord or tenant under any such lease, nor, to the knowledge of
the executive officers of Consumers, any other party to any such lease, is in
default under any such lease, and no circumstances or state of facts presently
exists which, with the giving of notice or passage of time, or both, would
permit the landlord or tenant to terminate any such lease. Neither the whole
nor any portion of the property or leaseholds owned or held by the Consumers
Companies is subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any governmental body or other
person with or without payment of compensation therefor. There are no
assessments with respect to any of the properties owned or leased by any of the
Consumers Companies which remain unpaid.
(v) Environmental Matters.
(i) Except as may be disclosed on the Disclosure Schedule,
the Consumers Companies have conducted their business in material compliance
with all Environmental Laws (as hereinafter defined). For purposes of this
Agreement, the term "Environmental Laws" means any and all federal, state,
provincial, local laws, regulations and ordinances and foreign laws and
requirements relating to health and safety and pollution or protection of the
environment, including laws, regulations and requirements relating to
emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or Hazardous Substances (as hereinafter
defined)
into the environment (including without limitation ambient air, surface water,
groundwater or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes. For purposes of this Agreement, the term "Hazardous
Substance" means (i) any petroleum products, explosives, alcohols, chemical
solvents, polychlorinated biphenyls ("PCBs") or related or similar materials,
(ii) any substance, waste, material or good defined as hazardous, radioactive,
extremely hazardous, toxic or dangerous, or as a pollutant or contaminant,
under
any Environmental Law, or by any federal, state or municipal government or
governmental agency, and (iii) any asbestos, asbestos-containing substances or
urea formaldehyde insulation.
(ii) No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced against
the Consumers Companies alleging any violation or failure to comply with any
Environmental Law. The Consumers Companies are not parties to any agreement,
consent order or adjudication of any type with any person, including any
government agency, that is authorized under or make reference to any
Environmental Law.
(iii) The Consumers Companies have obtained and have at all
times possessed all permits, licenses, registrations and other authorizations
(the "Environmental Permits") necessary to conduct their business under the
Environmental Laws and have filed timely and complete applications for renewal
of any such Environmental Permits that are required prior to the Closing. The
Environmental Permits necessary for the Consumers Companies to conduct their
business are currently in effect and are listed on the Disclosure Schedule, and
the Consumers Companies are in material compliance with all terms and
conditions
of such Environmental Permits and have not materially violated any of same. The
Consumers Companies have not received any notice of any proposal to amend,
revoke, reissue or replace any Environmental Permit, nor have any events
occurred that could form a reasonable basis for any such action.
(iv) There has not been any spill, release or unauthorized
discharge of any Hazardous Substance in connection with the business of the
Consumers Companies or at any of the properties or facilities occupied by the
Consumers Companies, where such spill, release or discharge was required to be
reported under any Environmental Law or would require abatement or correction
under any Environmental Law. The Consumers Companies have not permitted any
Hazardous Substances to be disposed of, treated or stored on the facility or
any
other property used by the Consumers Companies.
(v) There has not been and is not any Environmental
Condition (as hereinafter defined) in connection with the business of the
Consumers Companies at or relating to the properties or facilities used by the
Consumers Companies or any predecessor, or at or relating to any property
owned,
leased or operated at any time by the Consumers Companies or any such
predecessor, or at or relating to any property at which wastes have been
deposited or disposed by or at the behest or direction of the Consumers
Companies or any such predecessor, nor have the Consumers Companies received
written notice of any such Environmental Condition. For purposes of this
Agreement the term "Environmental Condition" means any condition or
circumstance, that (i) requires abatement or correction under any Environmental
Law, (ii) could give rise to any civil or criminal liability under any
Environmental Law, or (iii) could create a public or private nuisance,
including
the presence of Hazardous Substances.
(w) Books and Records. The minute books of each of the Consumers
Companies contain the records of all of the official actions of its board of
directors and its shareholders and there are no material omissions therefrom or
misstatements therein. The minutes of the meeting of the board of directors
fully and correctly describe all official actions taken by the executive
committee and other committees of the board of directors except to the extent
fully and correctly set forth in minutes of such committees. The books,
records
and accounts of the Consumers Companies accurately and fairly reflect in
reasonable detail the transactions and the assets and liabilities of the
Consumers Companies. The Consumers Companies have not engaged in any
transaction, maintained any bank account or used any funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the business.
(x) Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Consumers directly
with the Buying Parties, without the intervention of any person in such manner
as to give rise to any valid claim by any person against any of the parties
hereto for a finder's fee, brokerage commission or similar payment.
(y) Transactions with Affiliates. Except as set forth on the
Disclosure Schedule, no shareholder, director, officer, employee
or sales
representative of any of the Consumers Companies or any member of his or her
immediate family or any other of its, his or her affiliates, owns or controls
any party which has any material contract, agreement, understanding, business
arrangement or relationship to any of the Consumers Companies.
(z) Full Disclosure. No representation or warranty by Consumers
in this Agreement nor any certificate, schedule, statement, document or
instrument furnished to the Buying Parties pursuant to this Agreement, or in
connection with the negotiation, execution or performance of this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make any statement herein or therein not misleading.
SECTION 2.2 Representations and Warranties by LaSalle and CAC. Each of
LaSalle and CAC (together, the Buying Parties ) represents and warrants to,
and
agrees with, Consumers as follows:
(a) Organization and Good Standing of LaSalle. LaSalle is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of Delaware. CAC is a corporation duly organized, validly
existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
(b) Corporate Power. Each of the Buying Parties has corporate
power to own its properties and carry on its business as now conducted.
(c) Articles of Incorporation and Bylaws. The copies of (i) the
charters of the Buying Parties, and all amendments thereto to date, and (ii)
the
bylaws of the Buying Parties, as amended to date, as certified by each
company s
respective Corporate Secretary as being complete and correct, have been
delivered to Consumers.
(d) Authorization and Validity of Agreement. The execution,
delivery and performance of this Agreement has been duly and validly authorized
by all necessary corporate action on the part of the Buying Parties. This
Agreement has been duly executed and delivered by the Buying Parties, and is
the
valid and legally binding obligation of the Buying Parties, enforceable by
Consumers in accordance with its terms, except to the extent that enforcement
may be limited by bankruptcy, insolvency, moratorium or similar laws affecting
the rights of creditors generally and except to the extent that enforcement may
be limited by the application of general equitable principles. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not result in the acceleration of any indebtedness or
other obligation of the Buying Parties and are not prohibited by, do not
violate
any provision of, and do not result in a default under:
(i) The Buying Parties charters or bylaws;
(ii) any material contract, agreement or other instrument to
which the Buying Parties are a party or by which they are bound;
(iii) any regulation, rule, order, decree or judgment of any
court or governmental agency; or
(iv) any law applicable to the Buying Parties;
except that (A) the Insurance Holding Company Systems Acts of Arizona,
Delaware,
North Carolina and Ohio prohibit any person from acquiring control of a
domestic
insurance company or a holding company controlling a domestic insurance company
unless such acquisition of control has been approved by the Commissioner of
Insurance of such state in the manner prescribed, and (B) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 requires certain preacquisition notification
of the Federal Trade Commission and the Antitrust Division of the Department of
Justice.
(e) Insurance Department Approvals. The Buying Parties are not
aware of any facts or circumstances relating to the Buying Parties,
or any of
the Buying Parties executive officers, directors or controlling shareholders
that might cause any insurance department whose approval may be required to
consummate the transactions contemplated by this Agreement to refuse to grant
its approval of such transactions.
(f) Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Buying Parties
directly with Consumers without the intervention of any person in such manner
as
to give rise to any valid claim by any person against any of the parties hereto
for a finder's fee, brokerage commission or similar payment.
(g) Litigation. Except as set forth in the Disclosure Schedule,
(i) there is no action, suit or proceeding pending or, to the knowledge of the
executive officers of LaSalle, threatened against the Buying Parties, before
any
court, at law or in equity, arbitration tribunal or any federal, state,
municipal or other governmental department, commission, board, bureau, agency
or
instrumentality which individually or in the aggregate could have a material
adverse effect on the financial condition or prospects of the Buying Parties,
and (ii) the Buying Parties are not in default in any material respect under
any
order, decree, judgment, award, determination, ruling or regulation of any
court, arbitration tribunal, governmental department, commission, board,
bureau,
agency or other instrumentality.
(h) Full Disclosure. No representation of warranty of LaSalle in
this Agreement nor any certificate, schedule, statement, document or instrument
furnished to Consumers pursuant to this Agreement, or in connection with the
negotiation, execution or performance of this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to
state a
material fact required to be stated herein or therein or necessary to make any
statement herein or therein not misleading.
ARTICLE III
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 3.1 Shareholder Approval.
(a) As soon as reasonably practicable following the date hereof,
Consumers shall take all action necessary in accordance with the Exchange Act,
the laws of the Commonwealth of Pennsylvania and its Articles of Incorporation
and Bylaws to call and give notice of a meeting (the "Meeting") of its
shareholders to consider and vote upon the approval and adoption of the Plan of
Merger and for such other purposes as may be necessary or desirable. The Board
of Directors of Consumers has unanimously determined that the Merger is
advisable and in the best interests of the shareholders of Consumers and,
subject to their fiduciary duties as advised by counsel, shall recommend
without
qualification of any nature that Consumers shareholders vote to approve and
adopt the Plan of Merger and any other matters to be submitted to Consumers
shareholders in connection therewith. The Board of Directors of Consumers
shall
use commercially reasonable efforts to solicit and secure from shareholders of
Consumers such approval and adoption, subject to their fiduciary duties as
advised by counsel, which efforts shall include causing Consumers to solicit
shareholder proxies therefor and advising LaSalle promptly upon its request
from
time to time as to the status of the shareholder vote then tabulated. With
regard to any shares of Consumers Common Stock held by the ESOP, the trustee
of
the ESOP shall vote upon the approval and adoption of the Plan of Merger with
regard to all such shares of Common Stock in accordance with the terms of the
ESOP, Sections 404 and 406 of ERISA, and Section 4975 of the Code.
(b) Consumers shall prepare and file with the SEC under the
Exchange Act and the rules and regulations promulgated by the SEC thereunder
within 15 days following the date hereof, a preliminary draft of the Proxy
Statement. LaSalle and CAC shall cooperate with Consumers in the preparation
and filing of the Proxy Statement and any amendments and supplements thereto.
Neither the Proxy Statement nor any preliminary draft thereof shall be filed,
no
amendment or supplement thereto shall be made, nor shall any communication with
the SEC be initiated, by Consumers, in each case, without prior consultation
with LaSalle and their counsel and without first having sent such materials to
LaSalle for its comments. Consumers will use commercially reasonable efforts
to
have any review of the Proxy Statement conducted by the SEC promptly. As soon
as reasonably practicable following completion of any review by, or in the
absence of such review, the termination of any applicable waiting period of,
the
SEC, Consumers shall cause to be mailed a definitive Proxy Statement to its
shareholders entitled to vote on the Plan of Merger.
SECTION 3.2 Conduct of Consumers Business. Consumers covenants and
agrees that, prior to the Effective Date, unless LaSalle shall otherwise agree
in writing or as otherwise expressly contemplated by this Agreement:
(a) Consumers shall use commercially reasonable efforts to sell
the business of Interstate, the universal life block of business and Consumers
North Carolina prior to the Effective Date. If the Interstate business is not
sold prior to the Effective Date, Interstate will be spun off to Consumers
shareholders on or prior to the Effective Date. Consumers shall not directly
or
indirectly do any of the following: (i) issue, sell, pledge, dispose of or
encumber any assets of the Consumers Companies other than in the ordinary
course
of its business consistent with past practice or as contemplated by this
Agreement, (ii) amend or propose to amend its Articles of Incorporation or
Bylaws, (iii) split, combine or reclassify any outstanding shares of its
capital
stock, or declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to such shares, except for dividends with
respect to outstanding shares of Consumers preferred stock, (iv) redeem,
purchase, acquire or offer to acquire any shares of its capital stock, or (v)
enter into any contract, agreement, commitment or arrangement with respect to
any of the matters set forth in this paragraph (a) except as provided in
paragraph (l) of this Section 3.2.
(b) Except as contemplated herein, Consumers shall not (i) issue,
sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any
additional shares of, or securities convertible or exchangeable for, or any
options, warrants or rights of any kind to acquire any shares of, its capital
stock of any class or other property or assets whether pursuant to any rights
agreement, stock plan or otherwise, (ii) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof, (iii) incur any indebtedness for borrowed
money or issue any debt securities, except in the ordinary course of its
business consistent with past practice, (iv) enter into or modify any material
contract, lease or agreement other than in the ordinary course of business and
consistent with past practice, other than the termination of the Joint Venture
Agreement with Accel and the sale of Consumers home office building, (v)
terminate, modify, assign, waive, release or relinquish any material contract
rights or amend any material rights or claims not in the ordinary course of its
business consistent with past practice or except as expressly provided herein,
or (vi) dissolve or otherwise alter its corporate existence.
(c) Except for increases in salary to non-executive officers in
the ordinary course of business and the Employment Agreement to be entered into
with Ralph Byrnes, Consumers shall not grant any increase in the salary or
other
compensation of its employees or independent contractors or grant any bonus to
any employee or independent contractors or enter into any employment agreement
or make any loan to or enter into any material transaction of any other nature
with any officer or employee of Consumers.
(d) Consumers shall not take any action to institute any new
severance or termination pay practices with respect to any directors, officers
or employees of Consumers or to increase the benefits payable under its
severance or termination pay practices.
(e) Except for seasonal hires not inconsistent with past
practices, Consumers shall not hire any new employees except for
employees
having an annualized salary of less than $30,000, who are terminable at will or
who are hired to replace a former employee.
(f) Consumers shall not (except as provided in Section 3.2(l) or
as it relates to the termination of the Excess Benefit Plan) adopt or amend, in
any respect, except as may be required by applicable law or regulation, any
bonus, profit sharing, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment or other employee benefit plan,
agreement, trust, fund, plan or arrangement for the benefit or welfare of any
directors, officers or employees.
(g) Except for security interests set forth on the Disclosure
Schedule, Consumers shall not mortgage, pledge or otherwise subject to any
lien,
security interest, encumbrance or charge of any nature, any of its property or
assets, or become committed so to do, or permit or suffer any of such property
or assets to become subject to any mortgage, pledge, lien, security interest,
encumbrance or charge of any nature, other than liens of current taxes not yet
due and payable, or become committed to do so.
(h) Consumers shall use commercially reasonable efforts to
maintain its relationships with its suppliers, customers and employees, and if
and as requested by LaSalle or CAC, (i) Consumers shall make reasonable
arrangements as reasonably requested by LaSalle or CAC for representatives of
LaSalle or CAC to meet with customers and suppliers of Consumers (provided
however that LaSalle shall give Consumers reasonable notice of such meetings),
and (ii) Consumers shall schedule, and the management of Consumers shall
participate in, meetings of representatives of LaSalle or CAC with employees
and
customers of Consumers.
(i) Consumers shall not make any capital expenditures or capital
commitments or incur any debt in excess of $50,000 in the aggregate except for
expenditures for maintenance of capital assets in the ordinary course of its
business consistent with past practice.
(j) Consumers shall use commercially reasonable efforts to
maintain all of the assets used or useful to the business of Consumers in good
repair, order and condition, maintain in full force and effect all permits and
other authorizations to do business currently in effect and maintain in full
force all policies of insurance or satisfactory substitute insurance policies
insuring against the risks, damages and losses covered by the insurance
policies
currently in force.
(k) Consumers shall not otherwise conduct its business except in
the ordinary course consistent with past practice.
(l) Consumers shall obtain agreements in form and substance
reasonably satisfactory to LaSalle from holders of all stock options
outstanding
under Consumers stock option plans to, on the day prior to the Closing Date,
exercise their stock appreciation rights and waive their right to exercise such
options, and, in consideration therefor, each holder shall be entitled to
receive from Consumers on the Effective Date, for each share of Consumers
Common Stock subject to an option, an amount of cash equal to the excess, if
any, of the Merger Consideration per share, as adjusted pursuant to Section
1.2(b), over the per share exercise price of such option. Assuming no
adjustment pursuant to Section 1.2(b), the holders of outstanding stock
options,
each of which has an exercise price of $2.25 per share, would be entitled to
$1.67 per option share or an aggregate $298,930. Appropriate arrangements
shall
be made for reduction of the amount to be paid to each holder of a stock option
for any applicable withholding taxes or other amounts required by law to be
paid
or withheld through reducing the amount paid to such holder. Prior to the
Effective Date, the Board of Directors of Consumers or the appropriate
committee
thereof shall take such action as is necessary to effectuate the foregoing.
SECTION 3.3 Expenses; Break-up Fee. If, prior to the Closing Date, (i)
Consumers is offered a transaction by another party that Consumers believes
is a
more favorable transaction for its shareholders, and the board of directors of
Consumers, in the exercise of its fiduciary duty, decides to proceed with the
new party or (ii) in the event that the Plan of Merger shall not be approved by
the shareholders of Consumers pursuant to Section 3.1, Consumers shall promptly
(and, in any event, within five days) pay LaSalle a $300,000 break-up fee,
which
shall be LaSalle s sole remedy against Consumers for such action. Except as
provided in the immediately preceding sentence, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses. Without the prior consent of LaSalle, which will not be
unreasonably withheld, professional fees incurred since October 1, 1996
including accounting, investment banking and legal fees incurred by Consumers
in
connection with the investigation, negotiation, execution and delivery of this
Agreement and the transactions contemplated hereby shall not exceed $100,000 in
the aggregate.
SECTION 3.4 Other Agreements. Subject to the terms and conditions
herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective
as promptly as practicable the transactions contemplated by this Agreement,
including using commercially reasonable efforts to obtain all necessary
waivers,
consents and approvals and to effect all necessary registrations and filings,
including, but not limited to, filings required under the Exchange Act;
provided
that the foregoing shall not require LaSalle or Consumers to make, or agree to
make, any divestiture of a material asset in order to obtain any waiver,
consent
or approval.
SECTION 3.5 No Solicitation of Transactions. Consumers shall not, and
shall not permit its officers, employees, representatives or agents to,
directly
or indirectly, continue, encourage, solicit or initiate discussions or
negotiations with, or provide any nonpublic information to, any person other
than LaSalle or its affiliates or any group in which LaSalle or its affiliates
participates, concerning any sale of assets (other than in the ordinary course
of its business consistent with past practice and other than the sale of assets
contemplated by this Agreement) or shares of capital stock of Consumers, or any
merger, consolidation, recapitalization, liquidation or similar transaction
including Consumers (collectively, an "Acquisition Transaction"). Consumers
will promptly communicate to LaSalle and CAC the terms of any inquiry or
proposal which it may receive in respect of an Acquisition Transaction.
Consumers notification under this Section 3.5 shall include the identity of
the
person making such proposal, the terms of such proposal and any other such
information with respect thereto as LaSalle may reasonably request. Nothing
contained in this Agreement shall be construed to prohibit Consumers or its
Board of Directors from (i) making any recommendation with respect to any
Acquisition Transaction and related disclosure to shareholders or (ii)
disclosing, under protection of an appropriate confidentiality agreement, non-
public information concerning Consumers to a person who has made a bona fide,
binding and firm, fully-financed offer to acquire all of the outstanding
Consumers Common Stock for a price in excess of the price to be paid to the
shareholders in the Merger and on terms which are higher and better to
Consumers shareholders than the terms of the Merger, which, in the judgment of
Consumers, on the advice in writing of counsel, shall be required by law.
SECTION 3.6 Third Party Consents. Consumers shall use commercially
reasonable efforts to obtain prior to the Effective Date all consents and
approvals to the consummation and performance of the transactions contemplated
hereby, as set forth in the Disclosure Schedule.
SECTION 3.7 Tax Clearance Certificates. Consumers shall use
commercially
reasonable efforts to obtain a tax clearance certificate in each state where
Consumers pays taxes, and, in the event that such tax clearance certificates
may
not be obtained prior to the Closing, Consumers shall provide LaSalle or CAC a
ledger account of taxes owed and paid in each such state where ledger account
information is available.
SECTION 3.8 Notification of Certain Matters. Consumers shall give prompt
notice to LaSalle and CAC, and LaSalle and CAC shall give prompt notice to
Consumers, of (i) the occurrence, or failure to occur, of any event which such
party believes would likely cause any of its representations or warranties
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Date and (ii) any material
failure of Consumers, LaSalle or CAC, as the case may be, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that failure to give such notice shall not constitute a
waiver of any defense that may be validly asserted.
SECTION 3.9 Access to Information.
(a) Consumers shall, and shall cause its officers, directors,
employees and agents, including attorneys and accountants, to afford, upon
LaSalle or CAC's reasonable request, from the date hereof to the Effective
Date,
the officers, employees and agents of LaSalle and CAC complete access at all
reasonable times to its officers, employees, agents, properties, books, records
and work papers, and shall furnish LaSalle and CAC all financial, operating and
other data and information as LaSalle or CAC, through its officers, employees
or
agents, may reasonably request.
(b) No investigation pursuant to this Section shall effect, add
to
or subtract from any representations or warranties or the conditions to the
obligations of the parties hereto to effect the Merger.
SECTION 3.10 Public Announcements. None of LaSalle, CAC or Consumers
will make, issue or release any oral or written public announcement or
statement
concerning, or acknowledgment of the existence of, or reveal the terms,
conditions or status of, the transactions contemplated by this Agreement and
the
Plan of Merger, or make any other communication to its shareholders or the
investing public, directly or indirectly (including press releases and
statements to securities analysts), without first making a good faith attempt
to
obtain the prior approval of, or concurrence in, the contents of such
announcement, acknowledgment or statement by the other party or parties, which
approval or concurrence shall not be unreasonably withheld or delayed.
SECTION 3.11 Transmittal Letter. Within five business days following
the
Effective Date, Consumers shall send each holder of Consumers Common Stock on
the Effective Date a transmittal letter in substantially the form attached as
Exhibit B.
ARTICLE IV
CONDITIONS TO THE MERGER
SECTION 4.1 Conditions to the Merger Relating to LaSalle and CAC. The
obligation of LaSalle and CAC to effect the Merger is, at their option, subject
to the satisfaction, on or before the Effective Date, of each of the following
conditions:
(a) Representations, Warranties, and Covenants of Consumers. The
representations and warranties of Consumers herein contained and the information
contained in the Disclosure Schedule and other documents delivered by Consumers
in connection with this Agreement shall be true and correct on the Closing Date
in all material respects with the same effect as though made at such time,
except to the extent waived hereunder or affected by the transactions
contemplated herein; Consumers shall have performed in all material respects
all
obligations and complied in all material respects with all agreements,
undertakings, covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date; and Consumers
shall have delivered to LaSalle a certificate in form and substance
satisfactory
to LaSalle dated the Closing Date and signed by the President and by the Chief
Financial Officer of Consumers to such effect.
(b) Pending Litigation. There shall not be any litigation or
other proceeding pending or threatened to restrain or invalidate the
transactions contemplated by this Agreement, which, in the sole reasonable
judgment of LaSalle, made in good faith, would make the consummation of the
Merger imprudent in light of applicable law or the defense of which would
involve expense that would be materially adverse to LaSalle. In addition,
there
shall not be any other litigation or other proceeding pending or threatened
against Consumers not otherwise set forth in the Disclosure Schedule, the
consequences of which, in the reasonable judgement of CAC and LaSalle's Board
of
Directors, could be materially adverse to Consumers.
(c) Shareholder Approval. This Agreement and the Plan of Merger
shall have been approved and adopted by the requisite vote of the holders of
the
outstanding Consumers Common Stock in accordance with the BCL and Consumers'
Articles of Incorporation and Bylaws.
(d) No Convertible Securities Outstanding. Consumers shall have
canceled, on terms and conditions reasonably satisfactory to LaSalle, all
outstanding stock options issued pursuant to the Consumers Option Plan pursuant
to Section 3.2(l), and no equity securities of Consumers (other than Consumers
Preferred Stock), options, warrants, or other instruments exercisable for
equity
securities of Consumers shall be outstanding.
(e) Regulatory Approval. All authorizations, consents and
permits
required to perform this Agreement and the Plan of Merger shall have been
obtained, including approval by each State Insurance Commission in which an
Insurance Company Subsidiary is domiciled, and shall be in form and substance
satisfactory to LaSalle. The required statutory waiting period under HSR shall
have terminated and no condition with respect thereto shall be unacceptable to
LaSalle.
(f) Material Adverse Changes. From the date hereof to the
Closing
Date, there shall have been no material adverse change in statutory operating
results or new material information provided to LaSalle. There shall be no
conditions existing or threatened with respect to Consumers or its business or
assets that could reasonably be expected to have a material adverse affect on
Consumers.
(g) Shareholder Vote/Dissenters Rights. The holders of a
majority
of the outstanding shares of Consumers Common Stock shall have approved and
adopted this Agreement and the Plan of Merger at the Meeting to take place in
accordance with Section 3.1 hereof. The holders of not more than 15% of the
outstanding shares of Consumers Common Stock shall have demanded dissenters
rights under the BCL with respect to their shares of Consumers Common Stock.
(h) Opinion of Counsel for Consumers. LaSalle shall have
received
opinions dated the Closing Date of Duane, Morris & Heckscher, counsel for
Consumers, in form and substance reasonably satisfactory to LaSalle and its
counsel, substantially to the effect that:
(i) Consumers is a corporation duly organized, and
presently
subsisting under the laws of the Commonwealth of Pennsylvania, with full
corporate power and authority to own its properties and assets and to carry on
its business;
(ii) Consumers has the corporate power and authority to
execute and deliver this Agreement and the Plan of Merger and to consummate the
transactions contemplated thereby. The execution and delivery of this
Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by Consumers and constitutes the legal, valid and
binding
obligation of Consumers, enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and except to the extent that enforceability is
subject to general principles of equity.
(iii) Neither the execution and delivery by Consumers of
this Agreement or the Plan of Merger, nor the consummation by it of the
transactions contemplated thereby will (A) contravene or violate any provisions
of the Articles of Incorporation or Bylaws of Consumers; or (B) result in any
violation of or default under or permit the acceleration of any obligation
under, any contract or authorization listed on the Disclosure Schedule or any
judgment, order, decree, statute, law, ordinance, rule or regulation known to
such counsel and applicable to Consumers or its properties, other than any such
violation, default, or acceleration which would not have a material adverse
effect on the business, financial condition, or operating results of Consumers
or assets and liabilities of Consumers taken as a whole.
(iv) The Plan of Merger was duly and validly approved by
Consumers and its shareholders in accordance with the BCL and the Articles and
Bylaws of Consumers. Assuming that the Plan of Merger was duly and validly
approved by CAC and its shareholders in accordance with the BCL and the
Articles
of Incorporation and Bylaws of CAC and that all necessary actions have been
taken to cause the Merger to become effective under the BCL, upon filing of the
Articles of Merger with the appropriate office of the Commonwealth of
Pennsylvania and the issuance thereby of a Certificate of Merger relating to
the
Merger, the Merger will become effective under the laws of the Commonwealth of
Pennsylvania.
(v) The authorized capital stock of Consumers consists
solely of 10,000,000 shares of Consumers Common Stock, $.01 stated value, of
which [3,025,501] are outstanding and [632,500] shares of Consumers Preferred
Stock, $10.00 liquidation value, of which 536,500 are outstanding. To the
knowledge of such counsel after inquiring of Consumers officers, there are no
existing subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or otherwise) to
purchase or otherwise acquire from Consumers at any time, or upon the happening
of any stated event, any shares of the capital stock of Consumers whether or
not
presently issued or outstanding.
(vi) The transactions contemplated by this Agreement will
not
give the holders of Consumers Preferred Stock any right to accelerate
redemption of the Consumers Preferred Stock.
(vii) All of the outstanding shares of capital stock of the
subsidiaries of Consumers are owned by Consumers, directly or indirectly,
through wholly-owned subsidiaries, free and clear of any lien, pledge, charge
or
encumbrance or any other claim of any third party.
Except as expressly set forth in the opinions, where such opinions
are qualified to the "knowledge of counsel" or "known to such counsel," such
terms shall mean such counsel's actual knowledge as of the date of the opinion
without independent investigation or inquiry.
In addition, such counsel shall advise LaSalle that (A) the Proxy
Statement, as of the date of mailing, complied in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of
the
SEC thereunder, and (B) with respect to information relating to Consumers and
its business, properties, management, shareholders or securities, such counsel
has participated in the preparation of the Proxy Statement and no facts have
come to their attention to lead such counsel to believe that the Proxy
Statement
on the date of mailing and the Effective Date, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(i) Due Diligence Review. There shall not exist prior to the
Effective Date any condition which was not disclosed in writing to LaSalle on
or
prior to the date hereof and which materially adversely affects the business,
financial condition, or operating results of Consumers or the assets and
liabilities of Consumers taken as a whole; provided, however, that the
foregoing
condition to the Merger shall lapse and be rendered null and void with respect
to any such condition unless LaSalle notifies Consumers that LaSalle is
terminating or intends to terminate this Agreement pursuant to Section 5.1(b)
because of a breach of this Section within fifteen days after such condition is
first disclosed in writing to LaSalle.
(j) Third Party Consents. Consumers shall have obtained all
consents and approvals to the consummation and performance of the transactions
contemplated hereby, as set forth in the Disclosure Schedule.
(k) Tax Clearance Certificates. Consumers shall have received
tax
clearance certificates in each state in which Consumers pays taxes and in which
such a tax clearance certificate is obtainable, and, in the event that such tax
clearance certificates may not be obtained prior to the Closing, Consumers
shall
provide LaSalle or CAC with a ledger account of taxes owed and paid in each
such
state where ledger account information is available.
(l) Sale of Interstate. Consumers shall have either sold the
business of Interstate to third parties (the Interstate Assets ) or
distributed
the common stock of Interstate to its shareholders.
(m) Sale of Universal Life Block. Consumers shall have sold its
universal life block of business to a third party.
(n) Employment Agreement. Ralph Byrnes shall have entered into a
three year employment agreement with Consumers in substantially the form
provided in the Disclosure Schedule.
(o) Closing Documents. LaSalle and CAC shall have received such
certificates and other closing documentation as Morgan, Lewis & Bockius, LLP
counsel for LaSalle and CAC, shall reasonably request.
SECTION 4.2 Conditions to the Merger Relating to Consumers. The
obligation of Consumers to effect the Merger is, at its option, subject to the
satisfaction, on or before the Effective Date, of each of the following
conditions:
(a) Representations, Warranties, and Covenants of LaSalle and
CAC.
The representations and warranties of LaSalle and CAC herein contained shall be
true and correct at the Closing Date in all material respects with the same
effect as though made at such time, except to the extent waived hereunder or
affected by the transactions contemplated herein; LaSalle and CAC shall have
performed in all material respects all obligations and complied in all material
respects with all agreements, undertakings, covenants and conditions required
by
this Agreement to be performed or complied with by it at or prior to the
Closing
Date; and LaSalle and CAC shall have delivered to Consumers a certificate in
form and substance satisfactory to Consumers dated the Closing Date and signed
by the Chairman and Chief Executive Officer and by the President and Chief
Operating Officer of each of LaSalle and CAC to such effect.
(b) Injunctions; Etc. There shall not be any judgment, decree,
injunction, ruling or order of any court, governmental department, commission,
agency or instrumentality outstanding against LaSalle, CAC or Consumers which
prohibits or materially restricts or delays consummation of the Merger.
(c) Shareholder Approval. This Agreement and the Plan of Merger
shall have been approved and adopted by the requisite vote of the holders of
Consumers Common Stock in accordance with the BCL and Consumers Articles of
Incorporation and Bylaws.
(d) Opinion of Counsel for LaSalle and CAC. Consumers shall have
received opinions dated the Closing Date of Morgan, Lewis & Bockius, LLP
counsel
for LaSalle, and Dorsey & Whitney, counsel for CAC, as applicable, in form and
substance reasonably satisfactory to Consumers and its counsel, substantially
to
the effect that:
(i) Each of LaSalle and CAC is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation, with full corporate power and authority to own its
properties and assets and to carry on its business;
(ii) Each of LaSalle and CAC has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate and shareholder action. This Agreement
has been duly executed and delivered by LaSalle and CAC and constitutes the
legal, valid and binding obligation of each such party, enforceable against
each
in accordance with its terms, except as may be limited by bankruptcy,
insolvency
or similar laws affecting creditors' rights generally and except to the extent
that enforceability is subject to general principles of equity.
(iii) Neither the execution and delivery by LaSalle or CAC of
this Agreement or the Plan of Merger, nor the consummation by either of them of
the transactions contemplated hereby will (i) contravene or violate any
provisions of the Charter or Bylaws of LaSalle or CAC or (ii) result in any
violation of or default or loss of a benefit under, or permit the acceleration
of any obligation under, any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation known to such counsel and
applicable to such corporation or its properties, other than any such
violation,
default, loss or acceleration which would not have a material adverse effect on
the business, financial condition, or operating results of such corporation or
assets and liabilities of such corporation taken as a whole.
Where such opinions are qualified "known to such counsel," such
term
shall mean such counsel's actual knowledge as of the date of the opinion
without
independent investigation or inquiry.
(e) Regulatory Approval. All authorizations, consents and
permits
required to perform this Agreement and the Plan of Merger shall have been
obtained, including approval by each State Commissioner of Insurance in which
an
Insurance Company Subsidiary is domiciled, and shall be in form and substance
satisfactory to Consumers. Buyer shall have filed all necessary premerger
notifications pursuant to HSR, and the required statutory waiting period under
HSR, if applicable, shall have terminated.
(f) Closing Documents. Consumers shall have received such
certificates and other closing documents as Duane, Morris & Heckscher, counsel
for Consumers, shall reasonably request.
ARTICLE V
TERMINATION AND ABANDONMENT
SECTION 5.1 Termination and Abandonment. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Date, whether before or after approval by the shareholders of Consumers:
(a) by mutual action of the Boards of Directors of LaSalle, and
Consumers; or
(b) by the Board of Directors of LaSalle, if the representations
and warranties of Consumers contained in Section 2.1 were materially incorrect
when made or if Consumers shall not have complied in any material respect with
any of the covenants set forth in Article III;
(c) by the Board of Directors of Consumers, if the
representations
and warranties of LaSalle and CAC contained in Section 2.2 were materially
incorrect when made or if LaSalle or CAC shall not have complied in any material
respect with any of the covenants set forth in Article III.
(d) by either LaSalle, CAC or Consumers, if the Closing has not
occurred by January 31, 1997; provided, however, that this Agreement shall not
terminate if the Closing has not occurred due to a regulatory approval delay
beyond the control of the parties, in which case any of the parties may request
an extension reasonably necessary to obtain regulatory approval, and which
consent may not be unreasonably withheld prior to March 31, 1997 after which
such consent may be withheld in the sole discretion of any party.
SECTION 5.2 Effect of Termination. Except as provided in Section 3.3
with respect to expenses and fees, in the event of the termination of this
Agreement and the abandonment of the Merger, this Agreement shall thereafter
become void and have no effect, and no party hereto shall have any liability to
any other party hereto or its shareholders or directors or officers in respect
thereof, and each party shall be responsible for its own expenses, except that
nothing herein shall relieve any party from liability for any willful breach of
this Agreement.
SECTION 5.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that after approval of the Merger by the shareholders of Consumers, no
amendment may be made which decreases the amount of cash to which the
shareholders of Consumers are entitled pursuant to this Agreement or otherwise
materially adversely affects the shareholders of Consumers without the further
approval of the shareholders of Consumers.
SECTION 5.4 Waiver. Any time prior to the Effective Date, whether
before
or after any meeting of Consumers shareholders as referred to in Section 3.1,
any party hereto may (a) in the case of LaSalle or CAC, extend the time for the
performance of any of the obligations or other acts of Consumers or, subject to
the provisions contained in Section 5.3, waive compliance with any of the
agreements of Consumers or with any conditions to the respective obligations of
LaSalle or CAC, or (b) in the case of Consumers, extend the time for the
performance of any of the obligations or other acts of LaSalle or CAC, subject
to the provisions contained in Section 5.3, or waive compliance with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party by a duly authorized officer.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by telecopy or
facsimile
transmission (with hard copy to follow), registered or certified mail, postage
prepaid, or Federal Express or similar overnight delivery services addressed,
in
the case of Consumers, to it at
Consumers Financial Corporation
1200 Camp Hill By-Pass
Camp Hill, PA 17001
Attn: James C. Robertson
with a required copy to:
Duane, Morris & Heckscher
305 N. Front Street, 5th Floor
P.O. Box 1003
Harrisburg, PA 17108-1003
Attn: Scott C. Penwell, Esquire
or, in the case of LaSalle and CAC, to them at:
LaSalle Group, Inc.
1822 Spruce Street
Philadelphia, PA 19103
Attn: Robert E. Hancox and Charles E. Miller, Jr.
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square,
Philadelphia, Pennsylvania 19103
Attn: Steven M. Cohen, Esquire
or such other address as shall be furnished in writing by any party to the
others prior to the giving of the applicable notice or communication.
SECTION 6.2 No Survival of Representations and Warranties. The
representations and warranties in this Agreement shall not survive the
consummation of the Merger.
SECTION 6.3 Headings. The headings herein are for convenience of
reference only, do not constitute a part of this Agreement, and shall not be
deemed to limit or affect any of the provisions hereof.
SECTION 6.4 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties, with respect to the subject matter hereof.
SECTION 6.5 Cooperation. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its commercially reasonable
efforts to take, or cause to be taken, such action, to execute and deliver, or
cause to be executed and delivered, such governmental notifications and
additional documents and instruments and to do, or cause to be done, all things
necessary, proper or advisable under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated
by
this Agreement.
SECTION 6.6 No Rights; Etc.. Nothing in this Agreement express or
implied is intended to confer upon any other person any rights or remedies
under
or by reason of this Agreement.
SECTION 6.7 No Assignment. This Agreement shall not be assigned, by
operation of law or otherwise, except that LaSalle or CAC may assign all of
CAC's rights and obligations hereunder to any wholly-owned subsidiary of
LaSalle.
SECTION 6.8 No Third Party Beneficiaries. No provision of this
Agreement
shall create any third-party beneficiary rights in any person or organization,
including, without limitation, any past, current or future employee of the
Company or any successor thereto.
SECTION 6.9 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
Commonwealth of Pennsylvania applicable to contracts made and to be performed
in
that State.
SECTION 6.10 Counterparts. This Agreement may be executed in two or
more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan
of Reorganization to be duly executed as of the date first above written.
CONSUMERS FINANCIAL CORPORATION
By: /s/ James C. Robertson
Name: James C. Robertson
Title: President
LASALLE GROUP, INC.
By: /s/ Robert E. Hancox
Name: Robert E. Hancox
Title: Chairman and Chief Executive Officer
CONSUMERS ACQUISITION CORP.
By: /s/ Charles E. Miller, Jr.
Name: Charles E. Miller, Jr.
Title: President and Chief Operating Officer
EXHIBIT 99
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ADESA PENNSYLVANIA, INC.
INTERSTATE AUTO AUCTION, INC.
AND
CONSUMERS FINANCIAL CORPORATION
Dated ______________
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated ___________, is
entered into by and between ADESA PENNSYLVANIA, INC., a Pennsylvania
corporation (the "Buyer"), INTERSTATE AUTO AUCTION, INC., a Pennsylvania
corporation (the "Seller"), and CONSUMERS FINANCIAL CORPORATION, a Pennsylvania
corporation, the sole shareholder of Seller (the "Shareholder").
RECITALS
A. The Seller is owned one hundred percent (100%) by the Shareholder,
and is engaged in owning, maintaining, and operating a wholesale vehicle auc-
tion (the "Business")
B. The Seller agrees to sell to the Buyer, and the Buyer agrees to
purchase from the Seller, on a going concern basis, certain assets and
properties of Seller used in the Business for cash, all upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties and covenants which are made and to be performed by
the respective parties, it is hereby agreed as follows:
ARTICLE 0.
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
herein specified, unless the context otherwise requires:
Section a.. "Closing" and "Closing Date" shall have the meanings set
forth in Section 4.1.
Section a.. "Employee Benefit Plans" shall mean all written and oral,
formal and informal annuity, bonus, cafeteria, stock option, stock purchase,
profit sharing, savings, pension, retirement, incentive, group insurance,
disability, employee welfare, prepaid legal, nonqualified deferred compensation
including, without limitation, excess benefit plan, top-hat plans, deferred
bonuses, rabbi trusts, secular trusts, non-qualified annuity contracts,
insurance arrangements, non-qualified stock options, phantom stock plans, or
golden parachute payments, or other similar fringe benefit plans, and all other
employee benefit plans or programs (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), covering
employees or former employees of the Seller who worked in the Business.
Section a.. "Environmental Laws" shall have the meaning set forth in
Section 6.25.
Section a.. "Excluded Assets" shall have the meaning set forth in Sec-
tion 2.2.
Section a.. "Financial Statements" shall have the meaning set forth in
Section 6.6.
Section a.. "FMV Schedule" shall have the meaning set forth in Section
2.4.
Section a.. "Hazardous Material" shall have the meaning set forth in
Section 6.25.
Section a.. "Indemnifying Party" shall have the meanings set forth in
Sections 11.1. and 11.2.
Section a.. "Liens" shall mean any lien, encroachment, easement,
encumbrance, mortgage, hypothecation, pledge, conditional sales contract,
equity, charge, hire or hire purchase agreement, or other similar conflicting
ownership or security interest in favor of any third parties; but, with respect
to the Real Estate, shall not include any lien for real estate taxes not yet
due and payable and normal and minor encumbrances, including those for utili-
ties and rights-of-way, which do not destroy marketability of title or
adversely affect in any material respects the right to conduct the Business.
Section a.. "Losses" shall mean any and all losses, liabilities,
deficiencies, penalties, fines, costs, damages and expenses whatsoever
(including, without limitation, reasonable professional fees and costs of
investigation (other than costs of Buyer s Phase I and Phase II, if necessary,
site assessments or any follow up thereto), litigation, settlement, and
judgment
and interest).
Section a.. "Non-Competition Agreement" shall have the meaning set forth
in Section 5.2.
Section a.. "Permits" shall mean all franchises, permits, licenses,
certificates, privileges, immunities, approvals and other authorizations
(excluding those required pursuant to laws or regulations relating to the
protection of the environment) necessary to own or lease, operate and use the
Purchased Assets and carry on and conduct the Business as now conducted.
Section a.. "Permitted Assignee" shall have the meaning set forth in
Section 13.6.
Section a.. "Proprietary Rights" shall mean all trademarks, service
marks, tradenames, patents, logos, copyrights, and all applications and
registrations for any of the foregoing used in the Business.
Section a.. "Purchased Assets" shall have the meaning set forth in
Section 2.1.
Section a.. "Purchase Price" shall have the meaning set forth in Section
3.1.
Section a.. "Real Estate" shall mean the real estate located at RD4,
Route 62, Mercer, Mercer County, Pennsylvania, and used in connection with the
Business, together with all improvements, rights, easements, rights-of-way and
appurtenances thereto, and more particularly described in Exhibit A attached
hereto.
Section a.. "Retained Records" shall mean the Seller's corporate minute
book, supporting documents and other records not relating to the Business.
ARTICLE 0.
SALE AND PURCHASE OF ASSETS AND
ASSUMPTION OF LIABILITIES
Section a.. The Purchase and Sale. Upon the terms and subject to all of
the conditions set forth herein, at the Closing, the Seller shall sell, convey
and deliver to the Buyer and the Buyer shall purchase from the Seller, on a
going concern basis, free and clear of all Liens, all of Seller s right, title
and interest in and to the assets, properties and business (excepting only
Excluded Assets) of every kind and description, wherever located, personal or
real, tangible or intangible, owned or held by Seller and used or held for use
in the Business (collectively, the "Purchased Assets"), including, without
limitation, all right, title and interest of Seller in, to and under:
(a) All inventory for parts and supplies related to the Business,
machinery and equipment, furniture, fixtures, and other personal property owned
by Seller and used in the Business;
(b) All of Seller s rights and claims to the extent assignable under
the
leases and other contracts identified on Schedule 2.1(b);
(c) The Proprietary Rights;
(d) The Permits listed in Schedule 2.1(d), to the extent assignable;
(e) All customer lists, royalty rights, processes, trade secrets, know-
how and other proprietary or confidential information used in the Business;
(f) All of Seller's right, title and interest to the ownership and use
of the name or any variation thereof and the goodwill associated with the
Business;
(g) All of Seller's right and interest in the telephone number and
facsimile number;
(h) All of Seller's right and interest in the unemployment compensation
rating experience of the Business;
(i) All books and records (including all computer programs and data) of
Seller relating to the assets, properties, business and operations of the
Business, provided, however, that Seller shall retain the Retained Records;
(j) The Real Estate;
(k) The motor vehicles listed on Schedule 2.1(k) which are not
inventory; and
(l) All of Seller's rights, claims or causes of action against third
parties related to the assets, properties, business or operations of the
Business arising out of transactions occurring prior to the Closing Date,
except
for any claims arising in connection with the litigation set forth on Schedule
2.1(l).
The parties agree that, with respect to real or personal property leased
by Seller, the term "Purchased Assets" only includes Seller's right, title and
interest in and to such leases and does not include the underlying assets
subject to such leases.
Section a.. Excluded Assets. Notwithstanding the foregoing, the
Purchased Assets shall not include the following assets used in the Business
(herein referred to as the "Excluded Assets"):
(a) Seller's cash and cash equivalents;
(b) Seller's trade account receivables and other receivables;
(c) Seller's prepaid taxes and other prepaid expenses;
(d) Seller's marketable securities;
(e) Seller's rights, claims or causes of action against third parties
relating to the assets, properties, business or operations of the Business
which
may arise in connection with the discharge by Seller of the liabilities and
obligations of the Business which are not expressly assumed by Buyer pursuant
to
Section 2.3 below;
(f) Any employment agreement with any employee of the Seller who works
in the Business which is not terminable at will without cost or liability; and
(g) The Retained Records.
Section a.. No Liabilities Assumed. Except as set forth on Schedule
2.1(b), the Buyer shall not assume and Buyer shall not be liable for any debts,
obligations, contracts, leases or liabilities of Seller, direct or indirect,
known or unknown, absolute or contingent, whether arising or occurring before
or
after the Closing Date, including, but not limited to, any foreign, federal
state, county, or local income taxes of Seller, and other foreign, federal,
state, county or local taxes of the Seller, and any obligations or liabilities
of Seller relating to the Employee Benefit Plans, including, without limitation,
any liabilities or obligations arising under the Employee Retirement Income
Security Act, as amended.
Section a.. FMV Schedule. The Buyer and the Seller have determined the
fair market value of the various classes of the Purchased Assets, the covenants
contained in the "Non-Competition Agreement" (as defined in Section 5.2 below),
and the other rights and benefits conferred hereunder, which fair market values
are set forth on Schedule 2.4. Such values shall be adjusted pursuant to
Section 3.3 and as so adjusted shall be referred to as the "FMV Schedule." The
parties agree that the consideration described in Section 3.1 shall be
allocated, for tax purposes, among the Purchased Assets and the covenants
contained in the Non-Competition Agreement in a manner consistent with the FMV
Schedule and the provisions of Section 1060 of the Internal Revenue Code of
1986, as amended (the "Code"), applying principles of Code Section 338(b)(5) as
required by Code Section 1060. The parties shall promptly deliver to each
other
a copy of the Form 8594 prior to it being filed with the Internal Revenue
Service, the contents of which forms shall be consistent with the allocations
set forth in this Section 2.4 and Schedule 2.4. The parties agree not to file
the Form 8594 without the other party s prior approval, which approval shall
not
be unreasonably delayed or withheld.
ARTICLE 0.
PURCHASE PRICE
Section a.. Purchase Price. The aggregate Purchase Price to be paid by
the Buyer to the Seller for the Purchased Assets, and the rights and benefits
conferred hereunder, shall be Four Million Eight Hundred Fifty Thousand Dollars
($4,850,000), subject to adjustment pursuant to Section 3.3.
Section a.. Payment. On the Closing Date, the Buyer shall pay to the
Seller the Purchase Price by wire transfer as indicated by Seller.
Section a.. Adjustments. Seller shall prepare and deliver to Buyer at
or
before the Closing a written schedule of the accrued but unused and unpaid
vacation and sick leave of Seller s employees as of the Closing Date and Buyer
shall either authorize payment by Seller of such accrued vacation and sick
leave
or shall assume Seller s obligation for such accrued vacation and sick leave.
If Buyer assumes Seller s obligation, the vacation and sick leave schedule
shall
be approved in writing, the Purchase Price shall be reduced by such amount, and
Buyer shall thereafter hold Seller harmless against claims by each of Seller s
employees for the amount of accrued but unpaid vacation and sick leave shown on
the approved schedule.
ARTICLE 0.
CLOSING
Section a.. Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place on November 6, 1996, at a time
and at such place as may be agreed upon by the parties hereto, or on such other
date mutually agreed upon by the parties hereto. The date of the Closing is
sometimes referred to herein as the "Closing Date."
Section a.. Deliveries by the Seller. At the Closing, the Seller shall
deliver the following items to the Buyer:
(a) Certified resolutions of the Board of Directors and Shareholder of
the Seller authorizing the execution, delivery and performance of this Agree-
ment by the Seller and the consummation of the transactions contemplated
herein;
(b) Executed documents of transfer and assignment required to transfer
title to the Purchased Assets to the Buyer, including without limitation (i) a
recordable Special Warranty Deed for the Real Estate in form reasonably
satisfactory to Buyer; (ii) a Bill of Sale and Assignment Agreement in form
reasonably satisfactory to Buyer and Seller; and (iii) such other deeds, bills
of sale, endorsements, assignments and other good and sufficient instruments of
conveyance and delivery as the Buyer may reasonably request;
(c) The Non-Competition Agreement (as defined in Section 5.2 below),
duly executed by Seller and Shareholder;
(d) Such tax clearance certificates as may be reasonably required by
the
Buyer to evidence payment of any outstanding tax obligations of the Seller;
provided, however, in the event such tax clearance certificates are unavailable
at Closing, the Seller shall deliver such tax clearance certificates to Buyer
as
soon as possible after the Closing; and
(e) All other previously undelivered items required to be delivered by
the Seller to the Buyer at or prior to the Closing pursuant to this Agreement
or
otherwise required in connection herewith unless waived in writing by the
Buyer.
Section 0.1. Deliveries by the Buyer. At the Closing, the Buyer shall
deliver, or cause to be delivered, the following items to the Seller:
(a) The Purchase Price as required under Section 3.1;
(b) The Non-Competition Agreement, duly executed by the Buyer;
(c) Certified resolutions of the Board of Directors of the Buyer
authorizing the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein;
(d) All other previously undelivered items required to be delivered by
the Buyer at or prior to the Closing pursuant to this Agreement or otherwise
required in connection herewith unless waived in writing by the Seller.
Section 0.2. Further Assurances. From time to time after the Closing,
Seller shall execute and deliver to Buyer such other instruments of conveyance
and transfer and such other documents as Buyer may reasonably request or as may
be otherwise necessary to more effectively convey and transfer to, and vest in,
Buyer and to put Buyer in possession of, the Purchased Assets and, in the case
of licenses, certificates, approvals, authorizations, agreements, contracts,
leases, easements and other commitments included in the Purchased Assets which
cannot be transferred or assigned effectively without the consent of third
parties and which consent has not been obtained prior to the date of Closing,
to
cooperate with Buyer at its request in endeavoring to obtain such consent
promptly, and if any such consent is not obtained, to use its best efforts to
secure to Buyer the benefits thereof in some other manner.
Section 0.3. Change in Corporate Name. Within sixty (60) days of
Closing, Seller shall change its corporate name to a name which does not
include
the term "Interstate Auto Auction, Inc." or similar words or terms, and neither
Seller nor the Shareholder shall thereafter use such words in any business
activities it or they conduct after such required change. During the period
after Closing in which the Seller is permitted to use the name "Interstate Auto
Auction, Inc.," Seller shall use such name only for purposes of dissolving and
winding up the affairs of the Seller. During such period, the Seller hereby
consents to the Buyer using such name in conducting the Business and agrees to
provide any documentation necessary to effectuate such consent.
ARTICLE I
ADDITIONAL AGREEMENTS
Section 1.1. Expenses. Except as otherwise stated herein, the Buyer and
the Seller will pay their own expenses incident to the preparation and carrying
out of this Agreement and the expenses and fees involved in the preparation and
delivery of all documents and reports required to be delivered by or on behalf
of it hereunder. The Seller and Buyer shall equally share the cost of all
sales
and transfer taxes due as a result of the consummation of the transactions
contemplated herein; provided, however, that, Buyer shall pay all sales and
transfer taxes due as a result of the sale of the motor vehicles set forth on
Schedule 2.1(k) and Buyer shall pay all recording fees. Notwithstanding
anything in this Section 5.1 to the contrary, the Buyer shall pay all expenses
associated with the ALTA Owner s Title insurance policy relating to the Real
Estate, and the expenses associated with the ALTA Survey for the Real Estate.
Section 1.2. Non-Competition Agreement. The Buyer, Seller, and
Shareholder shall enter into a Non-Competition Agreement at the Closing in
substantially the form attached hereto as Exhibit B (the "Non-Competition
Agreement").
Section 1.3. Consents and Approvals. Buyer and Seller shall cooperate
with each other and each make good faith efforts to obtain all required
consents
and approvals to the consummation of the transactions contemplated hereunder.
Section 1.4. Confidentiality.
(a) From and after the date hereof, each party hereto and its respec-
tive
accountants, attorneys, employees and other agents, will keep confidential all
information, oral and written, obtained from any other party hereto and refrain
from using any such information which is not otherwise publicly available,
notwithstanding the termination of this Agreement; provided, however, that a
party may disclose such information to the extent the party is advised in
writing by its legal counsel that disclosure is required by law; provided,
further, that in such event the party intending to so disclose such information
shall give the other party prompt notice permitting the other party to seek a
protective order or such other remedy as may be desired.
(b) The Seller and Shareholder agree that, at all times from and after
the Closing Date, they shall keep secret and retain in strictest confidence,
and
shall not use for their benefit or for the benefit of others, confidential
information with respect to the Business, including, but not limited to, know-
how, trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans other than any of the foregoing which are in
the
public domain prior to any disclosure by the Seller and except as required by
law.
Section 1.5. Accounts Receivable. For a period of sixty (60) days after
Closing (the Collection Period ), Buyer shall make reasonable, good faith
efforts, consistent with its own practices, to collect Seller's accounts
receivable as of and through the close of business on the Closing Date (the
Accounts Receivable ), and shall remit the amount of all such accounts
collected to Seller on the 15th day and 30th day of each month following the
Closing Date and as set forth in this Section 5.5. Seller and Buyer agree to
cooperate reasonably with one another during the Collection Period in connec-
tion
with the collection of such Accounts Receivable, including, without limitation,
providing each other upon request with information with respect to the amount,
nature, documentation and status of such Accounts Receivable. Any amounts
received by Buyer at any time after the Collection Period which relate to the
Accounts Receivable shall be remitted within ten (10) days to Seller.
Buyer shall apply the proceeds of such Accounts Receivable collected to
payment of those accounts payable or vehicle transactions which match or
correspond to the particular collected Accounts Receivable and which have not
been previously paid. Any additional amounts which cannot be matched or shown
to correspond with either Seller s or Buyer s receivables shall be retained by
Buyer. Buyer shall provide a written accounting to Seller of such Accounts
Receivable collected.
Nothing herein contained shall make Buyer responsible or liable for any
such account receivable which Buyer is unable to collect as provided herein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND SHAREHOLDER
The Seller and Shareholder represent and warrant to the Buyer, and the
Buyer in agreeing to consummate the transactions contemplated by this Agreement
has relied upon such representations and warranties, that, except as set forth
in certain "Schedules" which are referred to herein and which have been
delivered by Seller just prior to the execution and delivery of this Agreement
to Buyer:
Section 2.1. Title to the Purchased Assets. Except as set forth on
Schedule 6.1, the Seller has good title to all of the Purchased Assets free and
clear of any Lien. On the Closing Date, the Seller will have complete and
unrestricted power and the unqualified right to sell, assign, transfer, convey
and deliver to the Buyer, and will transfer and convey to the Buyer at the
Closing, and the Buyer will acquire at the Closing, good and valid title to the
Purchased Assets free and clear of any Lien.
Section 2.2. Valid and Binding Agreement. The Seller has taken all
necessary corporate action to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Seller and constitutes a valid and binding
agreement of the Seller, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization or similar laws relating to creditors'
rights generally.
Section 2.3. Corporate Organization. The Seller is a corporation duly
organized and presently subsisting under the laws of the Commonwealth of
Pennsylvania and has the requisite power and authority to carry on the Business
as currently conducted and to own the properties and assets it now owns with
respect to the Business. The Seller is licensed or qualified and is in good
standing to do business as a foreign corporation in any other jurisdictions
where the nature of the Business or character or location of its assets
requires
such license or qualification.
Section 2.4. No Violation, Etc. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby nor
compliance by the Seller or Shareholder with any of the provisions hereof will
(i) violate or conflict with any provisions of the Articles of Incorporation or
By-laws of the Seller or Shareholder, or any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Seller
or Shareholder, or (ii) except as set forth on Schedule 6.4, violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or any event that, with or without due notice or lapse of time, or
both, would constitute a default) under, or result in the termination of,
accelerate the performance required by, or result in the creation of any Lien,
upon any of the properties or assets of the Seller or Shareholder used in the
Business under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation of the Seller or Shareholder except for any such
violation, conflict, breach or default which would not have a material adverse
effect on the Business.
Section 2.5. Consents and Approvals. Except as set forth on Schedule
6.5
and Schedule 6.25, no material permit, consent, approval or authorization of,
or
declaration, filing or registration with, any governmental authority is
necessary in connection with the execution and delivery by the Seller and
Shareholder of this Agreement or the consummation by either of them of the
transactions contemplated hereby and no consent of any third party is required
to consummate any of the transactions contemplated hereby.
Section 2.6. Financial Statements. The reviewed financial statements of
the Seller for the year ended December 31, 1995, as well as the interim
financial statements for the periods ended March 31, 1996 and June 30, 1996
(the
"Financial Statements") have been prepared in accordance with generally
accepted
accounting principles.
Section 2.7. Interim Operations and Absence of Certain Changes. Since
December 31, 1995, except as set forth on Schedule 6.7, the Business has been
conducted only in the ordinary course and consistent with past practice and the
Seller did not, with respect to the Business:
(i) suffer any damage, destruction or loss of tangible assets in
excess of $10,000.00;
(ii) suffer any change in its financial condition, assets not
covered by insurance, liabilities or business or suffer any other event or
condition of any character which individually or in the aggregate had or has a
material adverse effect on the financial condition, earnings, or prospects of
the Business, or materially diminishes the value of the Purchased Assets as a
whole;
(iii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) except in each case in
the ordinary course of business;
(iv) waive any claims or rights of substantial value, except in
each case in the ordinary course of business;
(v) except for purchase money security interests, pledge or
permit the imposition of any lien on or sell, assign, transfer or otherwise
dispose of any of the tangible assets used in the Business, except the sale of
inventory in the ordinary course of business;
(vi) sell, assign or otherwise transfer any Proprietary Rights;
(vii) make any change in any method of accounting or accounting
principle or practice;
(viii) write up or down the value of the inventory, except for
write-ups or write-downs and other determinations in accordance with generally
accepted accounting principles and in the ordinary course of business and
consistent with past practice;
(ix) grant any general increase in the compensation payable or
to
become payable to the employees of the Business (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment) or
any special increase in the compensation payable or to become payable to any
employee, or make any bonus payments to any employee, except for normal merit
and cost of living increases in the ordinary course of business and in
accordance with past practice;
(x) lose or learn of the prospective loss of any account which
would have a material adverse effect on the earnings of the Business;
(xi) make capital expenditures or commitments in excess of
$2,000.00 in the aggregate; or
(xii) agree, whether in writing or otherwise, to take any action
described in this Section 6.7.
Section 2.8. Employee Benefit Plans. Schedule 6.8 is a true and com-
plete
list of all Employee Benefit Plans. Except as set forth on Schedule 6.8, the
Seller is not a party to any employee agreement, understanding, plan, policy,
procedure or arrangement, whether written or oral, which provides compensation
or fringe benefits to employees of the Business and the Seller has no direct or
indirect, actual or contingent liability for any Employee Benefit Plan, other
than to make payments for contributions, premiums or benefits when due, all of
which payments have been timely made. None of the Purchased Assets are subject
to any lien or security interest under Section 302(f), 306(a), 307(a) or 4068
of
ERISA or Section 401(a)(29) or 4l2(m) of the Code and, no plan is a defined
benefit plan, as defined in Section 414(j) of the Code.
Section 2.9. Compliance with Law, Etc. Except as set forth on Schedule
6.9 and Schedule 6.25, the Seller has been, is and on the Closing Date will
continue to be in compliance in all material respects with all laws applicable
to the Business (including duties imposed by common law), rules, regulations,
orders, ordinances, judgments and decrees of all governmental authorities
(federal, state, local and foreign) including, without limitation, all
applicable building, zoning, occupational safety and health, pension, fair
employment, equal opportunity or similar laws, rules, regulations and ordinances
and all requirements imposed in writing by an insurance carrier.
Section 2.10. Litigation, Claims. Schedule 6.10 contains a complete and
accurate list of (a) all claims, actions, suits, proceedings or investigations
pending or, to best of the knowledge of Seller s senior management or executive
officers, threatened by or against the Seller and relating to the Business of
which the Seller is aware, and (b) all judgments, decrees, arbitration awards,
agreements or orders binding upon the Seller and relating to the Business.
Section 2.11. Trademarks, Patents, Etc. Schedule 6.11 sets forth an
accurate and complete list of Proprietary Rights. The Seller owns or possesses
the Proprietary Rights and all royalty rights, trade secrets, confidential
information, know how, rights to relief for known or unknown past infringements,
that are required to conduct the Business as now conducted without conflict with
the rights of others. The Seller has the right to use the Proprietary Rights
(including applications for any of the foregoing) used in connection with the
Business. The Proprietary Rights are assignable to the Buyer and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. No claims have been asserted by any person to the use of any
of the Proprietary Rights, or challenging or questioning the Seller's right to
such use, and there is no basis for any such claim.
Section 2.12. Liens. Except as set forth in Schedule 6.1 hereto, none of
the Purchased Assets are subject to any Lien.
Section 2.13. Insurance. All insurance policies and fidelity bonds
relating to the Purchased Assets, are set forth on the Certificate of Insurance
delivered to the Buyer as Schedule 6.13. If the Seller receives, prior to the
Closing, any notice of cancellation or other termination of any such policies
presently in effect, the Seller will promptly inform Buyer of such notice and
will use its best efforts to replace such policies not later than a date prior
to the effective date of any such cancellation or other termination with
policies providing substantially the same coverage. Except for the non-renewal
of its property and casualty insurance package in September, 1995, the Seller
has not been refused any insurance with respect to the Business or the
Purchased Assets, nor has coverage been limited by any insurance carrier to
which it has applied for such insurance or with which it has carried such
insurance, during the last two years.
Section 2.14. Disclosure. No representation or warranty by the Seller
and Shareholder to the Buyer contained in this Agreement, and no statement
contained in the Schedules hereto or any certificate furnished to the Buyer
pursuant to the provisions hereof, contains or will contain any untrue
statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein not misleading.
Section 2.15. Inventory. All of the inventory of the Business is at
RD4,
Route 62, Mercer, Pennsylvania 16137.
Section 2.16. Tangible Personal Property. Schedule 6.16A includes all
of
the material tangible personal property (other than inventory) and the material
fixed assets used in the Business. Schedule 6.16B lists all material tangible
personal property leased by the Seller and used in the Business and the
location
thereof. Except as set forth on Schedule 6.16B, none of such leases contain
any
covenant or restriction preventing or limiting the consummation or the
transactions contemplated hereunder. All of the tangible property is at the
same locations as the inventory as set forth in Section 6.15.
Section 2.17. Real Property. The Seller owns the Real Estate free and
clear of any Liens, except as set forth on Schedule 6.17. With respect to the
Real Estate, except as set forth on Schedule 6.17 and Schedule 6.25, there does
not exist on the date hereof (i) any building or zoning violations which would
affect the present use of the Real Estate and have a material adverse effect on
the Business; (ii) any liability which might be asserted with respect to the
Real Estate under any Environmental Laws; (iii) any pending or proposed
condemnation of all or any part of the Real Estate; or (iv) any pending or
proposed special assessment for work relating to all or any part of the Real
Estate. The buildings and any other improvements included in the Real Estate
have no material structural defects.
Section 2.18. Employee Relations. No union organizing efforts known to
the Seller have been conducted within the past five years or are now being
conducted in respect of the Business; the Seller has not at any time during the
past five years had, nor to the knowledge of the Seller, is there now
threatened, a strike, picket, work stoppage, work slowdown, or other labor
trouble with respect to the Business; and the Seller has never been a party to
any collective bargaining or similar labor agreement with respect to the
Business.
Section 2.19. Employees. Schedule 6.19 sets forth a substantially
complete and accurate list in all material respects of all employees of the
Seller who work in the Business showing for each his or her name, hire date,
current job title or description, current salary level (including any bonus or
deferred compensation arrangements) and any bonus, commission or other
remuneration paid during the most recently completed fiscal year, and
describing
any existing contractual agreement with each such employee.
Section 2.20. Governmental Authorizations. The Seller has all licenses
or other authorizations from governmental, regulatory or administrative
agencies
or authorities required for the conduct of the Business, each of which will be
in full force and effect on the Closing Date. Except as specified in Schedule
6.5 and Schedule 6.25, no registrations, filings, applications, notices,
transfers, consents, approvals, orders, qualifications, waivers or other
actions
of any kind are required by virtue of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby to enable
the Buyer to continue the operation of the Business as presently conducted in
all material respects.
Section 2.21. Tax Matters. All tax and information returns and related
information required to be filed by or on behalf of the Seller prior to the
date
hereof as a result of its operation of the Business prior to the date hereof,
including, but not limited to the notices required by 72 P.S. Section 1403,
have been
prepared and filed in accordance with applicable law, and all taxes, interest,
penalties, assessments or deficiencies that have become due pursuant to such
returns or any assessments or otherwise have been paid in full. All such
returns are true and correct in all material respects and there is no
unresolved
claim concerning the Seller's federal, state and local tax liabilities. All
monies required to be withheld by Seller from employees of the Business or
otherwise for income taxes, social security and other payroll taxes have been
collected or withheld, and either paid to the respective governmental agencies
or set aside in accounts for such purpose, and the Seller is not liable for any
taxes or penalties for failure to comply with any of the foregoing.
Section 2.22. Permits.
(a) Seller owns, holds or possesses all the Permits. Schedule 2.1(d)
sets forth a list and brief description of the Permits.
(b) Seller has fulfilled and performed its obligations under each of
the
Permits, and no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a
breach
or default under any of the Permits or which authorizes or, after notice or
lapse of time or both, would authorize revocation or termination of any of the
Permits, or which may adversely affect in any material respect the rights of
Seller under any of the Permits. No notice of cancellation, of default or of
any material dispute concerning any of the Permits, or of any event, condition
or state of facts described in the preceding sentence, has been received by, or
is known to, Seller or Shareholder.
Section 2.23. Broker's or Finder's Fees. Any agent, broker, investment
banker, person or firm acting on behalf of the Seller or Shareholder
or under
the authority of the Seller or Shareholder shall be paid by the Seller.
Section 2.24. Assets in the Business. The Purchased Assets and the
Excluded Assets constitute all of the assets used by Seller to operate the
Business.
Section 2.25. Environmental Matters.
(a) As used in this Agreement "Hazardous Material" shall mean: (i) any
"hazardous substance" as now defined pursuant to the Comprehensive
Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601(14), (ii) any
material now defined as "hazardous waste" pursuant to 40 C.F.R. Part 261; (iii)
any petroleum in a material quantity, including crude oil and any fraction
thereof; (iv) any "hazardous chemical" as defined pursuant to 29 C.F.R. Part
1910; (v) any asbestos, polychlorinated biphenyl (PCB), or isomer of dioxin, or
any material or thing containing or composed of such substance or substances;
and (vi) any other substance, regardless of physical form, that is subject to
any past or present federal, state or local governmental statute, requirement,
rule of liability or standard of conduct relating to the protection of human
health, plant life, animal life, natural resources or property from the
presence
in the environment of any solid, liquid, gas, odor or any form of energy, from
whatever source.
(b) Any Hazardous Material at, under or on any properties owned,
leased,
operated or controlled by the Seller have been processed, distributed, used,
treated, stored, disposed of, transported or handled with care such that they
will not have a material adverse effect on the condition (financial or
otherwise), properties, assets, operations or prospects of the Business.
(c) Except as set forth on Schedule 6.25, neither the Seller nor its
predecessors in interest have any obligation or liability, known or unknown,
matured or not matured, absolute or contingent, assessed or unassessed, imposed
or based upon any provision under any federal, state or local law, rule, or
regulation or common law, and regulations, or under any code, order, decree,
judgment or injunction applicable to the Seller or its predecessors in interest
or any notice, or request for information issued, promulgated, approved or
entered thereunder, or under the common law, or any tort, nuisance or absolute
liability theory, relating to public health or safety, worker health or safety,
or pollution, damage to or protection of the environment including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of Hazardous Materials into the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface), or otherwise relating to the manufacture, processing,
distribution,
use, treatment, storage, generation, disposal, transport or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes (hereinafter collectively referred to as "Environmental
Laws") where such obligation or liability could have a material adverse effect
on the Business.
(d) Except as indicated on Schedule 6.25, there are no specific facts
or
circumstances (i) that would indicate that the Business is not, or will not be
prior to Closing, in compliance in all material respects with the Environmental
Laws and with the provisions of the Federal Occupational Safety and Health Act,
nor (ii) that would indicate the Seller's operation of the Business gives rise
to any liability to any person, contingent or otherwise, under the
Environmental
Laws.
(e) Except as set forth on Schedule 6.25, the Seller possesses and is
in
compliance in all material respects with all permits, licenses, certificates,
franchises and other authorizations relating to Environmental Laws necessary to
conduct the Business.
(f) Except as set forth on Schedule 6.25, no claims involving the
Business have been made against the Seller or its predecessors in interest
during the past five years (except minor claims, all of which have been resolved
without materials fines or penalties) and no presently outstanding citations or
notices involving the Business have been issued against the Seller under the
Environmental Laws where such could have a material adverse effect on the
condition (financial or otherwise), properties, assets, operations or prospects
of the Business, including, without limitation, any such obligation or
liability
relating to or arising out of or attributable, in whole or in part, to:
(i) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Material involving
the
Business by the Seller or its predecessors in interest, or any of their
respective employees, agents or representatives in connection with or in any
way
arising from or relating to the Seller or its predecessors in interest or any
of
its respective properties;
(ii) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Material, by any
other
person at, on or under any real property or any other location where such could
have a material adverse effect on the condition (financial or otherwise),
properties, assets, operations.
(g) The Seller has not been subject to any civil, criminal or
administrative action, suit, claim, hearing, notice of violation,
investigation,
inquiry or proceeding for failure to comply with, or received notice of any
violation or potential liability under the Environmental Laws where such could
have a material adverse effect on the condition (financial or otherwise),
properties, assets, operations or prospects of the Business, nor, except as
set
forth in Schedule 6.25, is the Seller or Shareholder aware of any information,
whether or not confirmed or reported, which could give rise to any such
potential liability.
(h) No real property, site or facility (as defined in the Act of 1980,
42 U.S.C. Section 9601(9) ("CERCLA")) of the Seller involved in the Business is
(i)
listed or proposed for listing on the National Priority List or, is (ii) listed
on the Comprehensive Environmental Response, Compensation, Liability
Information
System List ("CERCLIS") promulgated pursuant to CERCLA, or any comparable list
maintained by any foreign, state or local government authority.
(i) Except as set forth in Schedule 6.25, there are no underground
storage tanks at any real property, site or facility (as defined in CERCLA) of
the Seller.
(j) The Seller has delivered to the Buyer true, complete and correct
copies or results of any reports, studies, analyses, tests or monitoring in the
possession of or initiated by the Seller pertaining to the Business and to the
existence of Hazardous Materials and any other environmental concerns relating
to any of the Business' facilities, or sites or real property owned, leased,
operated, used or controlled by the Seller or any of its predecessors in
interest, involving the Business or concerning compliance with or liability
under the Environmental Laws.
(k) Except as set forth on Schedule 6.25, there are no polychlorinated
biphenyls in or at any premises owned, operated or controlled by the Seller.
(l) There is no asbestos or asbestos containing materials at the
properties and assets owned, leased, operated or controlled by the Seller, and
further warrants and represents that, except as set forth on Schedule 6.25, the
facilities on such properties comply with the Environmental Laws including, but
not limited to, Occupational Safety and Health Act regulations with respect to
ambient air exposure to asbestos.
Section 2.26. Effective Date of Representations and Warranties. Each
representation and warranty set forth in this Article VI together with the
Schedules shall be deemed to be made on and as of and speak on and as of the
date hereof. <PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
THE Buyer represents and warrants to the Seller, and the Seller in
agreeing to consummate the transactions contemplated by this Agreement has
relied upon such representations and warranties, that:
Section 3.1. Organization and Power. The Buyer is a corporation duly
organized and presently subsisting under the laws of the Commonwealth of
Pennsylvania and has the requisite power and authority (corporate and other) to
own, lease and operate its properties, to carry on its business and to enter
into this Agreement and consummate the transactions contemplated hereby.
Section 3.2. Valid and Binding Agreements. All necessary action on the
part of the Buyer has been taken to authorize the execution and delivery of
this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Buyer and constitutes a valid and binding
agreement of the Buyer, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization or similar laws or equitable principles
relating to creditors' rights generally.
Section 3.3. No Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance with any of the provisions hereof will (i) violate or conflict with
the Articles of Incorporation or the By-Laws of the Buyer or any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Buyer, or (ii) violate or conflict with, or result in a
breach
of any of the provisions of, or constitute a default (or any event which, with
or without due notice or lapse of time, or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in the creation of any Lien upon the stock or any of the
properties or assets of the Buyer under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument of the Buyer.
Section 3.4. Consents and Approvals. No permit, consent, approval or
authorization of, or declaration, filing or registration with, any governmental
authority is necessary in connection with the execution and delivery of this
Agreement by the Buyer or the consummation by the Buyer of the transactions
contemplated hereby and no consent of any third party is required to consummate
any of the transactions contemplated hereby.
Section 3.5. Broker's or Finder's Fees. Any agent, broker, investment
banker, person or firm acting on behalf of the Buyer or under the authority of
the Buyer shall be paid by the Buyer.
ARTICLE IV
COVENANTS PENDING CLOSING
Section 4.1. Compliance with Law. Except as set forth on Schedule 6.25,
prior to Closing, the Seller will promptly comply in all material respects with
all laws and regulations applicable to the Business and all laws and
regulations
with which compliance is required for the valid consummation of the
transactions
contemplated hereby and will promptly notify the Buyer of any legal,
administrative or other proceedings, investigations, inquiries, complaints,
notices of violation or other asserted claims, judgments, injunctions or
restrictions, pending, outstanding or, to the Seller's and Shareholder's
knowledge, threatened or contemplated, which could affect the Purchased Assets
or the Business.
Section 4.2. Operation of Business Prior to Closing. From and after the
date hereof until the Closing, and except as otherwise contemplated by this
Agreement or with the specific prior written consent of the Buyer, the Seller
covenants and agrees as follows:
(a) The Seller shall conduct the Business in the ordinary course,
consistent with past practices;
(b) The Seller shall not enter into any contract or commitment
entailing
a commitment, or make any expenditures for, property or equipment to be used in
the Business in excess of $2,000.00 in any single transaction;
(c) The Seller shall not enter into any new employment agreement, sales
agency agreement or other contract for the performance of personal services in
connection with the Business which is not terminable without liability upon no
more than thirty (30) days' notice or grant any increase in the rate of
compensation or in the benefits payable or to become payable to any officer or
other employee or to any agent or consultant in the Business over the levels in
effect on the date hereof other than normal merit increases of officers and
employees or increases required by applicable law;
(d) The Seller will use its best efforts to preserve the Business
intact
and the goodwill of customers and others having business relations with the
Seller and to keep available the employees of the Seller;
(e) The Seller will maintain the Purchased Assets in as good as state
of
operating condition and repair they are on the date of this Agreement, except
for ordinary wear and tear;
(f) The Seller will not terminate or modify any leases, contracts,
governmental licenses, permits, or other authorizations or agreements
materially
affecting the Purchased Assets or the Business or the operation thereof;
(g) The Seller will keep in force all policies of insurance covering or
relating to the Purchased Assets;
(h) The Seller will not do or omit to do any act, or permit any act or
omission to act, which may cause a breach of any representation, warranty,
covenant or agreement made by Seller herein;
Section 4.3. Access. At all times prior to the Closing, the Seller
shall
provide the Buyer and its representatives, at Buyer's sole expense, with full
access to, and will make available for inspection and review, all properties,
personnel, books, records and accounts of the Seller in order that the Buyer
may
have full opportunity to make such investigation as it shall desire to make of
the Business. It is understood that the Buyer shall be permitted to maintain
personnel on the premises of the Seller during customary business hours to
confer with the Seller's management, accountants, attorneys and other third
parties reasonably requested for verification of any information obtained
pursuant hereto. The Seller also consents to the examination by the Buyer's
accountants of work papers and other records of Seller's accountants pertaining
to the Business and will cooperate with Buyer to obtain such access and related
information from Seller's accountants. Notwithstanding anything to the
contrary
contained herein, Seller shall control all access by Buyer to the Business, the
Purchased Assets and the employees of the Business prior to the Closing and all
such access shall be upon reasonable advance notice and during business hours.
The Buyer shall not generally announce or disclose the transaction contemplated
hereunder to the employees of the Business until after the Closing without the
consent of Seller.
Section 4.4. Completion of Seller and Shareholder Schedules and Buyer
Due
Diligence. The Seller and Shareholder have completed and delivered to Buyer
the
Schedules referred to in Article VI of this Agreement. Buyer had until
October 30, 1996 to review such Schedules and to complete its legal,
accounting,
business and environmental due diligence investigation of the Business and
Purchased Assets.
Section 4.5. Best Efforts. The Buyer and the Seller each agree to use
their respective best efforts in good faith in order to consummate the
transactions contemplated by this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
Notwithstanding anything in this Agreement to the contrary, all
obligations of the Buyer that are to be discharged under this Agreement at the
Closing are subject to the Seller's fulfillment, at Closing or effective as of
the Closing Date, of each of the following conditions (unless expressly waived
in writing by the Buyer at any time at or prior to the Closing) and the Seller
shall use its best efforts to cause each of such conditions to be satisfied:
Section 5.1. Representations and Warranties. On the Closing Date, the
representations and warranties of the Seller and Shareholder set forth in
Article VI of this Agreement together with the Schedules thereto shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though such representations and warranties had been made on
and as of the Closing Date and the Buyer shall have received at the Closing a
certificate, dated the Closing Date, signed by the authorized officer of the
Seller and the Shareholder to such effect.
Section 5.2. Covenants, Agreements and Conditions. The Seller shall
have
performed and complied in all material respects with all covenants, agreements
and conditions contained in this Agreement required to be performed by it on or
prior to the Closing Date, and the Buyer shall have received at the Closing a
certificate, dated the Closing Date, signed by the President or the Vice
President of the Seller to such effect.
Section 5.3. No Material Adverse Change. During the period from the
date
hereof to the Closing Date, there shall not have been any material adverse
change in the Purchased Assets or the financial condition or earnings prospects
of the Business of the Seller.
Section 5.4. Consents and Approval. All corporate and other
proceedings,
as applicable, to be taken by Seller and all material consents to be obtained
in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Buyer and its counsel, Sommer & Barnard, PC, each of whom
shall
have received all such originals or certified or other copies of such documents
as either may reasonably request.
Section 5.5. Proceedings. No action or proceeding shall be pending or
threatened to restrain or prevent the consummation of the transactions
contemplated hereby or Buyer's conduct of Business post Closing.
Section 5.6. Governmental Approvals. Except as set forth on Schedule
9.6, Buyer shall have received all necessary governmental consents,
authorizations, licenses and permits required in connection with the
transactions contemplated hereby or to conduct the business of a wholesale
vehicle auction.
Section 5.7. Deliveries. The Seller shall have delivered to the Buyer
the items referred to in Section 4.2.
Section 5.8. No Liens. There shall be no Liens on the Purchased Assets
which are not released at the Closing.
Section 5.9. Opinion of Counsel. The Seller and Shareholder shall have
delivered to Buyer an opinion, dated as of the Closing Date, of counsel in the
form and substance, reasonably satisfactory to Buyer as to the matters set
forth
in Sections 6.2, 6.3 and 6.4(i), and to the best of counsel s knowledge, as to
the matters set forth in Sections 6.4(ii), 6.5, 6.9, 6.10, and 6.20.
Section 5.10. Notice to Pennsylvania Department of Revenue. The Seller
shall have given the Pennsylvania Department of Revenue all notices required by
72 P.S. Section 1403.
Section 5.11. Survey and Title Insurance Commitment. The ALTA survey of
the Real Estate obtained by the Buyer, and the ALTA Owner's Title
insurance
policy relating to the Real Estate shall reflect that Seller has good and
marketable title to the Real Estate free and clear of any Lien other than any
encumbrances, easements or restrictions of record which, in the sole
determination of the Buyer, do not adversely affect marketability of title to
the Real Estate.
Section 5.12. Uninsured Loss. There shall have been no uninsured loss,
damage to or destruction of the Purchased Assets. In the event of any insured
loss, the Buyer shall have the exclusive right to the insurance proceeds and
the
Seller shall reimburse the Buyer for any deductible at or prior to Closing. In
the event of an uninsured loss and the waiver of this Section 9.12 by the
Buyer,
the Seller shall pay to Buyer an amount equal to the uninsured portion of such
loss at or prior to Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER
All obligations of the Seller that are to be discharged under this
Agreement at the Closing are subject to the Buyer's fulfillment at the Closing
or effective as of the Closing Date of each of the following conditions (unless
expressly waived in writing by the Seller at any time at or prior to the
Closing) and the Buyer shall use its best efforts to cause each of such
conditions to be satisfied:
Section 6.1. Representations and Warranties. On the Closing Date, the
representations and warranties of the Buyer set forth in Article VII of this
Agreement together with the Schedules thereto shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date
as
though such representations and warranties had been made on and as of the
Closing Date, and the Seller shall have received at the Closing a certificate,
dated the Closing Date, signed by the authorized officer of the Buyer to such
effect.
Section 6.2. Covenants, Agreements and Conditions. The Buyer shall have
performed and complied in all material respects with all covenants, agreements
and conditions contained in this Agreement required to be performed by it on or
prior to the Closing Date, and the Seller shall have received at the Closing a
certificate, dated the Closing Date, signed by the authorized officer of the
Buyer to such effect.
Section 6.3. Proceedings. No action or proceeding shall be pending or
threatened to restrain or prevent the consummation of the transactions
contemplated hereby or Buyer's conduct of the Business post Closing.
Section 6.4. Corporate Proceedings. All corporate and other proceedings,
as applicable, to be taken by Buyer, and all material consents to be obtained
in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Seller and its counsel, Peter J. Kramer, 1200 Camp Hill
Bypass,
Camp Hill, Pennsylvania 17001-0026, each of whom shall have received all such
originals or certified or other copies of such documents as either may
reasonably request.
Section 6.5. Government Approvals. Except as set forth on Schedule 9.6,
there shall have been received all necessary and material governmental consents
or authorizations required in connection with the transactions contemplated
hereby.
Section 6.6. Deliveries. The Buyer shall have delivered to the Seller
the items referred to in Section 4.3.
Section 6.7. Opinion of Counsel. The Buyer shall have delivered to the
Seller and Shareholder, dated as of the Closing Date, an opinion of counsel, in
the form and substance, reasonably acceptable to the Seller and Shareholder as
to the matters set forth in Sections 7.1, 7.2, 7.3(i) and to the best of
counsel s knowledge, as to matters set forth in Sections 7.3(ii) and 7.4.
ARTICLE VII
POST CLOSING MATTERS
Section 7.1. Indemnification by Seller and Shareholder.
(a) Subject to the provisions of Section 13.1, the Seller and
Shareholder shall protect, defend, hold harmless and indemnify the Buyer, its
officers, directors, shareholder, employees and agents, and their respective
successors and assigns from, against and in respect of any and all Losses that
may be suffered or incurred by any of them arising from or by reason of any of
the following:
(1) Any breach of any representation or warranty made by the
Seller or Shareholder in this Agreement or contained in any certificate
executed by the Seller and delivered to the Buyer in connection with this
Agreement;
(2) Any breach or non-fulfillment of any covenant or agreement
made by the Seller in this Agreement;
(3) Any obligation or liability of the Seller, other than
liabilities of Seller specifically assumed by Buyer as set forth on
Schedule 2.3;
(4) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses (including, without
limitation, interest, penalties, reasonable legal fees and accounting
fees) arising out of and attributable to the Seller s use of the landfill
operated by Tri-County Industries, Inc. asserted within two (2) years
following the Closing Date;
(5) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses (including, without
limitation, interest, penalties, reasonable legal fees and accounting
fees) arising out of and attributable to the Seller s use of any portion
of the open dump area on the Real Estate for the on-site disposal of
waste
asserted within two (2) years following the Closing Date; and
(6) Any and all actions, suits, proceedings, claims, demands,
assessments, judgements, costs and expenses (including, without
limitation, interest, penalties, reasonable legal fees and accounting
fees) incident to the foregoing and the enforcement of the provisions of
this Section 11.1;
provided, however, that Buyer shall not be entitled to make a claim for
indemnification under this Section 11.1 until Losses giving rise to an
obligation of the Seller and Shareholder to indemnify the Buyer pursuant to
this
Section 11.1 in the aggregate equal or exceed Fifty Thousand Dollars ($50,000)
(the Threshold Level ); provided further, that, once the Threshold Level is
satisfied Seller and Shareholder shall indemnify the Buyer from the first
dollar
of Losses giving rise to an obligation of the Seller and Shareholder to
indemnify the Buyer pursuant to this Section 11.1.
(b) Whenever the Buyer shall learn of a claim which, if allowed
(whether
voluntarily or by judicial or quasi-judicial tribunal or agency), would give
rise to an obligation of the Seller and Shareholder (the "Indemnifying Party")
to indemnify the Buyer pursuant to this Section 11.1, before paying the same or
agreeing thereto, the Buyer shall promptly notify the Indemnifying Party in
writing of all such facts within the Buyer's knowledge with respect to such
claim and the amount thereof. If, prior to the expiration of fifteen (15) days
from the date notice is deemed to have been given pursuant to Section 13.2, the
Indemnifying Party shall request, in writing, that such claim not be paid, the
Buyer shall not pay the same, provided the Indemnifying Party proceeds
promptly,
at the expense of the Indemnifying Party (including employment of counsel
reasonably satisfactory to the Buyer), to settle, compromise or litigate, in
good faith, such claim. After notice from the Indemnifying Party requesting
the
Buyer not to pay such claim and the Indemnifying Party's assumption of the
defense of such claim at its expense, the Indemnifying Party shall not be
liable
to the Buyer in connection with the defense thereof. However, the Buyer shall
have the right to participate at its expense and with counsel of its choice in
such settlement, compromise or litigation. The Buyer shall not be required to
refrain from paying any claim which has matured by a court judgment or decree,
unless an appeal is duly taken therefrom and execution thereof has been stayed,
nor shall it be required to refrain from paying any claim where the delay in
paying such claim would result in the foreclosure of a lien upon any of the
property or assets then held by the Buyer or where any delay in payment would
cause the Buyer an economic loss. The Buyer shall not be required to notify the
Indemnifying Party prior to settling any claim described in this Section
11.1(b)
of less than $50,000.00. The failure to provide notice as provided in this
Section 11.1(b) shall not excuse the Indemnifying Party from its continuing
obligations hereunder, however the Buyer's claim shall be reduced by any damage
to the Indemnifying Party resulting from the Buyer's delay or failure to
provide
notice as described in this Section 11.1(b).
Section 7.2. Indemnification by Buyer.
(a) Subject to the provisions of Section 13.1, the Buyer shall protect,
defend, hold harmless and indemnify the Seller and Shareholder, their officers,
directors, employees and agents, and their respective successors and assigns
from, against and in respect of any and all Losses that may be suffered or
incurred by any of them arising from or by reason of any of the following:
(1) Any breach of any representation or warranty, made by
the Buyer in this Agreement or contained in any certificate executed by
the Buyer and delivered to the Seller in connection with this Agreement;
(2) Any breach or non-fulfillment of any covenant or
agreement made by Buyer in this Agreement; and
(3) Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses (including, without
limitation, interest, penalties reasonable legal fees and accounting
fees)
incident to the foregoing and the enforcement of the provisions of this
Section 11.2.
(b) Whenever the Seller shall learn of a claim which, if allowed
(whether voluntarily or by judicial or quasi-judicial tribunal or agency),
would
give rise to an obligation of the Buyer (the "Indemnifying Party") to indemnify
the Seller pursuant to this Section 11.2, before paying the same or agreeing
thereto, the Seller shall promptly notify the Indemnifying Party in writing of
all such facts within the Seller's knowledge with respect to such claim and the
amount thereof. If, prior to the expiration of fifteen (15) days from the date
notice is deemed to have been given pursuant to Section 13.2 below of such
notice, the Indemnifying Party shall request, in writing, that such claim not
be
paid, the Seller shall not pay the same, provided the Indemnifying Party
proceeds promptly, at the expense of the Indemnifying Party (including
employment of counsel reasonably satisfactory to the Seller), to settle,
compromise or litigate, in good faith, such claim. After notice from the
Indemnifying Party requesting the Seller not to pay such claim and the
Indemnifying Party's assumption of the defense of such claim at its expense,
the
Indemnifying Party shall not be liable to the Seller in connection with the
defense thereof. However, the Seller shall have the right to participate at
its
expense and with counsel of its choice in such settlement, compromise or
litigation. The Seller shall not be required to refrain from paying any claim
which has matured by a court judgment or decree, unless an appeal is duly taken
therefrom and execution thereof has been stayed, nor shall it be required to
refrain from paying any claim where the delay in paying such claim would result
in the foreclosure of a lien upon any of the property or assets then held by
the
Seller or where any delay in payment would cause the Seller an economic loss.
The Seller shall not be required to notify the Indemnifying Party prior to
settling any claim described in this Section 11.2(b) of less than $50,000.00.
The failure to provide notice as provided in this Section 11.2(b) shall not
excuse the Indemnifying Party from its continuing obligations hereunder,
however
the Seller's claim shall be reduced by any damage to the Indemnifying Party
resulting from the Seller's delay or failure to provide notice as described in
this Section 11.2(b).
ARTICLE VIII
TERMINATION
Section 8.1. Methods of Termination. This Agreement may be terminated
at
any time prior to the Closing:
(a) by the mutual consent of the Buyer and the Seller;
(b) by either Buyer or Seller at any time after November 30, 1996 if
the
Closing has not occurred on or before such date.
Section 8.2. Procedure Upon Termination. In the event of termination by
the Buyer, the Seller, or both, pursuant to this Article XII, written notice
thereof shall promptly be given to the other party or parties and the
obligations of the Buyer and the Seller under this Agreement shall, except as
set forth below, terminate without further action. Upon any such termination:
(a) each party will redeliver all documents, work papers and other
materials of the other party or parties relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party or parties furnishing the same;
(b) all information received by any of the parties shall be held in
accordance with Section 5.4; and
(c) no party shall have any liability or further obligation to any
other
party, except for such legal and equitable rights and remedies as any party may
have under this Agreement or otherwise, by reason of any breach or violation of
this Agreement by the other party.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival of Representations, Warranties and Agreements.
All
representations, warranties, and agreements of the Buyer, Seller and
Shareholder
contained in Articles VI and VII herein and in any certificate executed and
delivered by any of them in connection with this Agreement, shall survive the
Closing Date, and shall remain in full force and effect until two (2) years
following the Closing Date, other than the representations and warranties
concerning environmental matters set forth in Section 6.25 and Schedule 6.25,
which shall terminate at the Closing, regardless of any investigation made by
or on behalf of any party hereto, but subject to all limitations and other
provisions contained in this Agreement.
Section 9.2. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and may be delivered personally
(including by courier), by facsimile or by first-class registered or certified
mail, postage prepaid, addressed to the following addresses or to other such
addresses as may be furnished in writing by one party to the others:
if to the Seller:
Consumers Financial Corporation
1200 Camp Hill Bypass
Camp Hill, Pennsylvania 17001-0026
Attention: William J. Walsh, Jr.
Executive Vice President
Fax No.: (717) 761-9473<PAGE>
with a copy to:
Peter J. Kramer
General Counsel
1200 Camp Hill Bypass
Camp Hill, Pennsylvania 17001-0026
Fax No.: (717) 761-9473
if to the Buyer:
ADESA Corporation
1919 South Post Road
Indianapolis, Indiana 46239
Attention: Warren Byrd, General Counsel
Fax No: (317) 862-7307
with a copy to:
Dan L. O'Korn
Sommer & Barnard, PC
4000 Bank One Tower
111 Monument Circle
Indianapolis, Indiana 46204-5140
Fax No: (317) 236-9802
Service of any such notice or other communication so made by mail shall
be
deemed complete on the day of actual delivery thereof as shown by the
addressee's registry or certification receipt.
Section 9.3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania,
without regard to such jurisdiction's conflicts of laws principles. The
parties
agree that venue for any suit, action, proceeding or litigation arising out of
or in relation to this Agreement shall be in any federal court for the federal
district which includes Mercer, Pennsylvania or state court in Mercer,
Pennsylvania having subject matter jurisdiction.
Section 9.4. Modification; Waiver. This Agreement shall not be altered
or otherwise amended except pursuant to an instrument in writing signed by the
Buyer and the Seller. Any party may waive any misrepresentation by any other
party, or any breach of warranty by, or failure to perform any covenant,
obligation or agreement of, any other party, provided that mere inaction or
failure to exercise any right, remedy or option under this Agreement, or
delaying in exercising the same, will not operate as nor shall be construed
as a
waiver, and no waiver will be effective unless set forth in writing and only to
the extent specifically stated therein.
Section 9.5. Entire Agreement. This Agreement, the exhibits hereto, the
Schedules and any other agreements or certificates delivered pursuant hereto or
on the date hereof constitute the entire agreement of the parties hereto with
respect to the matters contemplated hereby and supersede all previous written
or
oral negotiations, commitments, representations and agreements.
Section 9.6. Assignment; Successors and Assigns. This Agreement may not
be assigned by either party without the prior written consent of the other
party; provided, however, that Buyer shall be permitted to assign to an
affiliated corporation (a "Permitted Assignee") its right hereunder to purchase
the Real Estate, equipment, certain inventory and other fixed assets located
thereon. In the event of such an assignment, (a) the Permitted Assignee shall
take title to such Real Estate, equipment, inventory and other fixed assets
directly from Seller at the Closing, and (b) Buyer shall not be relieved of any
of its obligations hereunder. Any attempted assignment not permitted hereunder
shall be void ab initio. All covenants, representations, warranties and
agreements of the parties contained herein shall be binding upon and inure to
the benefit of their respective successors and permitted assigns as set forth
herein.
Section 9.7. Public Announcements. No public announcement of the terms
hereof at any time shall be made by any party without the prior written consent
of the other parties, not to be unreasonably withheld or delayed, except to the
extent as may be required by law in the opinion of counsel to the Buyer or
counsel to the Seller.
Section 9.8. Severability. The provisions of this Agreement are
severable, and in the event that any one or more provisions are deemed illegal
or unenforceable, the remaining provisions shall remain in full force and
effect.
Section 9.9. No Third Party Beneficiary. This Agreement is intended and
agreed to be solely for the benefit of the parties hereto, and no third party
shall accrue any benefit, claim or right of any kind whatsoever pursuant to,
under, by or through this Agreement.
Section 9.10. Execution in Counterpart. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"BUYER" "SELLER"
By: /S/ Warren W. Byrd By: /S/ William J. Walsh,
Jr.
Name: Warren W. Byrd Name: William J. Walsh, Jr.
Title: Secretary Title: Vice President
"SHAREHOLDER"
By: /S/ R. Fredric Zullinger
Name: R. Fredric Zullinger
Senior Vice President and
Title: Chief Financial Officer
