<PAGE>
[LOGO OF CONSUMERS CONSUMERS
FINANCIAL APPEARS HERE] FINANCIAL
CORPORATION
1200 CAMP HILL BY-PASS
P.O. BOX 26 (17001-0026)
CAMP HILL, PENNSYLVANIA 17011-3744
================================================================================
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY ___, 1997
================================================================================
Dear Shareholders:
A Special Meeting of Shareholders of Consumers Financial Corporation, a
Pennsylvania corporation (the "Company") will be held on February ____, 1997 at
10:00 a.m., at Corporate Headquarters, 1200 Camp Hill By-Pass, Camp Hill,
Pennsylvania for the following purposes:
1. To consider and vote upon the approval of a Plan of Merger
between the Company and Consumers Acquisition Corp., a
Pennsylvania corporation ("CAC") and a wholly-owned subsidiary
of LaSalle Group, Inc., a Delaware corporation ("LaSalle"),
providing for the merger of CAC with and into the Company with
the Company being the surviving corporation, and pursuant to
which each outstanding share of the Company's Common Stock
will be converted into the right to receive $3.92 in cash,
without interest, subject to certain adjustments, all as more
fully described in the accompanying Proxy Statement and the
Plan of Merger, a copy of which is attached as Exhibit A to
the Agreement and Plan of Merger which is attached as Appendix
1 to this Proxy Statement.
2. To transact such other business as may properly come before
the Special Meeting.
Only shareholders of record at the close of business on November 29,
1996 will be entitled to notice of the Special Meeting or any adjournment
thereof. Only shareholders of record of the Company's Common Stock at the close
of business on November 29, 1996 will be entitled to vote at the Special Meeting
or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED AND
ADOPTED THE PLAN OF MERGER, AND BELIEVES THE PROPOSED MERGER IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE HOLDERS OF
THE COMPANY'S COMMON STOCK VOTE FOR THE APPROVAL OF THE PLAN OF MERGER.
Your proxy is important to ensure a quorum at the meeting, even if you
hold only a few shares of the Company's Common Stock. Whether or not you plan to
be present, please mark, sign and return promptly the enclosed proxy so that
your shares will be represented at the meeting. A return envelope, which
requires no postage if mailed in the United States, is enclosed for your
convenience.
By Order of the Board of Directors,
/s/ Peter J. Kramer
PETER J. KRAMER
GENERAL COUNSEL
AND SECRETARY
Camp Hill, PA
January ___, 1997
<PAGE>
[LOGO OF CONSUMERS CONSUMERS FINANCIAL CORPORATION
FINANCIAL APPEARS 1200 CAMP HILL BY-PASS
HERE] P.O. BOX 26 (17001-0026)
CAMP HILL PA 17011-3744
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY ___, 1997
INTRODUCTION
This Proxy Statement is being furnished to the shareholders of
Consumers Financial Corporation , a Pennsylvania corporation (the "Company") in
connection with the solicitation on behalf of the Company's Board of Directors
of proxies to be used at the Special Meeting of Shareholders to be held at
Corporate Headquarters, 1200 Camp Hill By-Pass, Camp Hill, Pennsylvania, at
10:00 a.m., local time, and any adjournment or adjournments thereof (the
"Special Meeting"). This Proxy Statement, the Notice of Special Meeting and the
accompanying proxy card and related materials are first being mailed to the
Company's shareholders on or about February ___, 1997.
At the Special Meeting, holders of Common Stock of the Company will be
asked to consider and vote upon the approval of a Plan of Merger between the
Company and Consumers Acquisition Corp., a Pennsylvania corporation ("CAC") and
a wholly-owned subsidiary of LaSalle Group, Inc., a Delaware corporation
("LaSalle"). A copy of the Plan of Merger is attached as Exhibit A to the
Agreement and Plan of Merger between the parties dated October 30, 1996 (the
"Merger Agreement"), attached as Appendix 1 to this Proxy Statement. Under the
terms of the Plan of Merger: (1) CAC will be merged with and into the Company
(the "Merger"), and (2) each outstanding share of the Company's Common Stock,
$.01 stated value (the "Common Stock") , will be converted into the right to
receive $3.92 in cash, without interest, subject to certain adjustments (the
"Merger Consideration").
Holders of the Company's 8 1/2% Convertible Preferred Stock, Series A
(the "Preferred Stock") will not be entitled to vote at the Special Meeting
since none of the rights and preferences of the holders of the Preferred Stock
are to be adversely affected by the Merger and no other preferred stock or other
class of shares of the Company will rank ahead of or be on a parity with the
Preferred Stock with respect to payment of dividends or distribution of assets
in liquidation as a result of the Merger.
If the Merger is not consummated for any reason, the Board of Directors
expects to continue the business of the Company as described under "Business of
Consumers Financial Corporation" while continuing to attempt to find a buyer or
strategic partner.
COMMON STOCK CERTIFICATES SHOULD NOT BE SENT WITH THE ENCLOSED PROXY. IF THE
MERGER IS CONSUMMATED, THE HOLDERS OF COMMON STOCK WILL BE FURNISHED WITH
INSTRUCTIONS FOR EXCHANGING THEIR COMMON STOCK FOR THE MERGER CONSIDERATION.
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF PROXY STATEMENT
The following is a brief summary of certain information in
this Proxy Statement and certain of the Exhibits attached hereto. This
summary is qualified in its entirety by the more detailed information
contained elsewhere in this Proxy Statement and the Appendices.
Shareholders are urged to read the entire Proxy Statement, including
the Appendices, and the other documents accompanying the Proxy
Statement. Some of the terms used in this summary are defined elsewhere
in this Proxy Statement. Copies of any documents referred to in this
Proxy Statement are available for inspection at the principal executive
offices of Consumers Financial Corporation which are located at 1200
Camp Hill By-Pass, Camp Hill, Pennsylvania.
Business of the Company
The Company is an insurance holding company which, through its
subsidiaries, is a leading provider of credit life and credit
disability insurance in the Middle Atlantic region of the United
States, marketed primarily through approximately 900 automobile
dealers. The Company also owns and administers a small block of
universal life insurance business, and, until recently, also conducted,
through its wholly-owned subsidiary, Interstate Auto Auction, Inc.
("Interstate"), wholesale and retail automobile auctions of used
vehicles for automobile dealers, banks and leasing companies. On
November 6, 1996, the Company sold the operating assets of Interstate
to a third party purchaser. See "Business of Consumers Financial
Corporation."
Business of LaSalle
LaSalle is a privately held corporation whose business purpose
is to purchase and operate insurance companies on behalf of private and
institutional investors. LaSalle's strategy is to acquire smaller life
insurance companies with defined niche products and markets in the
traditional life insurance, credit insurance, health insurance, payroll
deduction and annuity markets. LaSalle has executed three definitive
agreements to purchase insurance companies or insurance holding
companies, including the Company. When LaSalle completes the Merger
with the Company and the other two acquisitions, LaSalle's combined
assets will be approximately $500 million and its combined premium and
investment revenues will exceed $100 million. In addition, LaSalle's
shareholders' equity, including minority interests, will exceed $80
million.
The Special Meeting
The Special Meeting of the shareholders of the Company will be
held at Corporate Headquarters located at 1200 Camp Hill By-Pass, Camp
Hill, Cumberland County, Pennsylvania, on February ___, 1997 at 10:00
a.m., local time. At the Special Meeting, the holders of Common Stock
will be asked to consider and to vote upon the approval of the Plan of
Merger. Only holders of record of the Common Stock at the close of
business on Friday, November 29, 1996, will be entitled to vote at the
Special Meeting. As of the close of business on such date, there were
3,025,188 shares of Common Stock outstanding and entitled to vote and
approximately 6,895 holders of record. The presence, in person or by
proxy, of the holders of a majority of the outstanding shares of the
Common Stock entitled to vote is necessary to constitute a quorum at
the Special Meeting, and the affirmative vote of a majority of the
votes cast by all holders of Common Stock entitled to vote is required
for approval of the Plan of Merger. See "Voting and Proxy Information."
The Merger
Under the terms of the Plan of Merger, CAC will be merged with
and into the Company and each share of Common Stock which is
outstanding immediately prior to the Merger (other than shares as to
which the holders have exercised their dissenters rights under
Pennsylvania law) will be converted into the right to receive the
Merger Consideration. See "Agreement and Plan of Merger: Payment for
Shares." Thereafter, the separate existence of CAC will cease and the
Company, as the surviving corporation, will become a subsidiary of
LaSalle. Neither LaSalle, CAC nor any of their respective subsidiaries
owns any shares of Common Stock. A copy of the Plan of Merger is
attached as Exhibit A to the Merger Agreement which is attached as
Appendix 1 to this Proxy Statement.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
After consummation of the Merger, the holders of the Common
Stock immediately prior to the Merger will no longer possess any equity
interest in, or any rights as shareholders of, the Company and will not
be able to participate in any future earnings or growth of the Company.
Certificates held by such shareholders previously representing shares
of Common Stock will represent only the right to receive the Merger
Consideration, or the right to the judicially appraised fair value
thereof pursuant to dissenters rights which are perfected under
Pennsylvania law. See "Rights of Dissenting Shareholders" and Appendix
2 to this Proxy Statement. Each share of the Company's Preferred Stock
shall remain outstanding and unaffected by the Merger.
Financial Advisors
The Board of Directors of the Company engaged CreditRe
Corporation, an independent actuarial firm, and Ernst & Young LLP, a
major accounting firm ("E&Y"), to render certain financial advisory
services to the Board in connection with a possible business
combination (through merger, sale or exchange of stock, sale of all or
a substantial part of the assets or otherwise) of the Company with
another party upon terms and conditions satisfactory to the Board. The
Company, CreditRe Corporation, and E&Y participated in the development
of a sales memorandum and the subsequent review of responses thereto.
E&Y served as an intermediary in negotiations beginning in May 1996 and
concurred with management's determination that the Merger transaction
represented a better value for the Company's shareholders than any
other alternative that had been evaluated and concurred with
management's recommendation to the Company's Board of Directors to
approve the Merger. See "Background of the Merger."
Recommendation of the Board of Directors
The Board of Directors of the Company believes that the Merger
is in the best interests of and is fair to the holders of the Company's
Common Stock and Preferred Stock. The Board has unanimously approved
the Merger Agreement and the Plan of Merger and recommends approval of
the Plan of Merger by the holders of the Common Stock. The
recommendation of the Board is based upon a number of factors,
including (1) the Board's consideration of other strategic and
financial alternatives available to the Company; (2) the Board's
knowledge of the business, operations, properties, assets, earnings,
financial condition, capital needs and future prospects of the Company;
(3) the independent actuarial appraisals of the Company's insurance and
related operations; and (4) the advice of E&Y that the Merger
Consideration to be received in the Merger by the holders of the Common
Stock represented a better value for those shareholders than any other
alternative that had been evaluated. See "Background of the Merger."
Background of the Merger
On March 11, 1996, the Company announced its plans to explore
various alternatives for selling or merging its business units. The
decision to explore these alternatives was based on the operating
losses incurred by the Company over the previous two year period.
Direct contacts were made with over 45 potential buyers to solicit
their interest in participating in an auction process to acquire the
Company. This auction process was intended to achieve maximum value and
a timely sale through simultaneous broad exposure to a wide range of
potential purchasers. Furthermore, both the Company and E&Y believed
that the broad distribution and competitive environment would enhance
confidence in the reasonableness of the value ultimately to be
received.
Approximately 35 organizations expressed interest in acquiring
all or parts of the Company's operations. Following the receipt of
signed confidentiality agreements from these groups, each was provided
with a copy of the sales memorandum. The sales memorandum, which was
intended to assist prospective purchasers in their initial evaluation
of the Company and in their decision to proceed with future
investigation, included independent actuarial appraisals of the
Company's credit insurance and vehicle service contract business
(prepared by CreditRe Corporation) and its universal life insurance
business (prepared by Allen Bailey & Associates, Inc.). The Company
received 11 letters of intent from prospective purchasers, including
LaSalle. From this group, four bidders, including LaSalle, were invited
to proceed with a more detailed investigation and a due diligence
review. Following completion of all due diligence procedures, LaSalle
and the three other prospective purchasers submitted revised letters of
intent to the Company.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
After detailed discussions and negotiations were conducted
with these four bidders, the Company signed LaSalle's revised letter of
intent on September 27, 1996, contemplating that LaSalle would acquire
the Company in a merger transaction whereby the holders of the Common
Stock would receive the Merger Consideration. The Merger Agreement was
signed on October 30, 1996.
Interests of Certain Persons in the Merger
The Merger Agreement provides that the holders of all
outstanding stock options with accompanying stock appreciation rights
("SAR's"), which represent all of the outstanding stock options, shall
agree to exercise their SAR's in lieu of the exercise of the stock
options. The executive officers, other officers and former officers who
hold such SAR's will receive cash payments from the Company in an
amount equal to the excess, if any, of the Merger Consideration over
the exercise price, times the number of shares subject to such options
and SAR's. See "Background of the Merger" and "Interests of Certain
Persons in the Merger."
Following the Merger, the executive officers and directors of
CAC will become the executive officers and directors of the Company, as
the surviving corporation. None of the Company's current directors are
expected to remain as directors of the surviving corporation; however,
it is anticipated that certain executive officers of the Company and
certain officers and other employees of the Company's insurance
subsidiaries will remain with the Company or those subsidiaries in some
capacity following the Merger. No current directors of the insurance
subsidiaries will remain in any capacity following the Merger. Those
officers and other employees who are not retained by the insurance
subsidiaries will receive severance payments from the surviving
corporation, except for the Company's President and Chief Executive
Officer, who will retire at the Effective Time of the Merger and will
not receive any severance payment. None of the directors of either the
Company or its insurance subsidiaries will receive any severance
payments or other fees in connection with the Merger. Except for one
marketing officer, no employment contracts will be provided to any of
the officers who remain with the Company or its insurance subsidiaries.
The Company, as the surviving corporation, will indemnify
officers and directors of the Company and its subsidiaries against
losses, claims, damages, liabilities, costs, expenses, judgments and
amounts paid in settlement arising out of any action or omission
occurring prior to the Effective Time (including those that arise out
of or relate to the Merger) to the full extent permitted by
Pennsylvania law and the Company's charter and bylaws as currently in
effect. Expenses will be advanced to an indemnified party to the full
extent permitted by law. See "Interests of Certain Persons in the
Merger" and "Agreement and Plan of Merger: Indemnification."
There was no compensation paid to management or payments made
to advisors, consultants, accountants or attorneys which were
contingent upon the consummation of the Merger. See "Interests of
Certain Persons in the Merger."
To the extent any person has an interest in the Merger, as
described herein, those persons may have a conflict of interest in
voting for or recommending the Merger. The interests of those persons
in the Merger are not necessarily the same as those of unaffiliated
shareholders.
Financing of the Merger
The total funds required for financing the Merger, including
payments to the holders of the Company's Common Stock and the payment
of $500,000 to Acceleration Life Insurance Company in connection with
the termination of a Joint Venture Agreement, will be approximately
$12.4 million. The Merger Agreement contemplates that LaSalle and CAC
will finance the Merger through cash on hand at, or otherwise available
to, LaSalle. At the time the Merger is consummated, it is LaSalle's
intention to increase the capital and surplus of the Company's
principal insurance subsidiary from approximately $6.2 million at
October 31, 1996 to approximately $11.7 million in order to improve the
subsidiary's financial condition and its A.M. Best rating. See
"Financing of the Merger."
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Conditions of the Merger
Under the Merger Agreement, the Closing of the Merger is
conditioned upon the satisfaction of certain conditions, including (1)
the affirmative vote approving the Plan of Merger by a majority of the
votes cast by all holders of the Common Stock; (2) regulatory approvals
by each state insurance department having jurisdiction over the
Company's insurance subsidiaries; (3) the termination of the waiting
period under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976;
(4) the sale of the operating assets of Interstate, which condition has
previously been satisfied; and (5) the sale of the in-force block of
universal life business. See "Agreement and Plan of Merger: Conditions,
Representations and Covenants."
Effective Time of the Merger
The Merger shall become effective at such time as the Articles
of Merger are duly filed with the Secretary of State of the
Commonwealth of Pennsylvania (the "Effective Time"). The Company
expects to consummate the Merger in the first quarter of 1997. See
"Agreement and Plan of Merger: Effective Time."
Termination of the Merger Agreement; Expenses
The Merger Agreement may be terminated at any time prior to
the Effective Time (1) by mutual action of the Boards of Directors of
the Company and LaSalle, or (2) by either the Company or LaSalle in the
event the Merger is not consummated on or before March 31, 1997. Except
as indicated below, each party will pay its own costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby. The Company has agreed to pay LaSalle a $300,000
break-up fee if (1) the Company proceeds with another transaction which
it believes is more favorable to its shareholders, or (2) the Plan of
Merger is not approved by the holders of the Company's Common Stock.
See "Agreement and Plan of Merger: Termination, Amendment, Fees and
Expenses."
Payment for Shares
If the Merger is consummated, the Company will forward to each
holder of Common Stock a letter of transmittal containing detailed
instructions about the procedure for surrendering stock certificates
and receiving payment for the Common Stock. In order to receive the
cash to which each holder of the Common Stock will be entitled pursuant
to the Plan of Merger , such holder will be required to surrender to
the Company the certificates for his or her shares of Common Stock,
together with a fully executed and properly completed letter of
transmittal. Shareholders should not surrender their Common Stock
certificates until they receive and fill out the letter of transmittal,
which shall be sent to them by the Company. DO NOT SEND IN YOUR STOCK
CERTIFICATES WITH YOUR PROXY CARD. Assuming the holders of the Common
Stock approve the Plan of Merger at the Special Meeting and the other
conditions to the consummation of the Merger are satisfied or waived,
it is currently anticipated that the letter of transmittal will be
mailed to each holder of Common Stock shortly after the Effective Time.
No interest will be paid or accrued on the cash payable upon the
surrender of the stock certificates. See "Agreement and Plan of Merger:
Payment for Shares."
Certain Federal Income Tax Consequences
If the Merger is consummated, the receipt by a shareholder of
the Merger Consideration as a result of the Merger will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under state, local and foreign laws. If the Merger is
consummated, each holder of Common Stock will recognize gain or loss
equal to the difference between such shareholder's basis in the Common
Stock surrendered and the amount of cash received. Each shareholder
should consult a tax advisor with respect to the tax consequences of
the Merger. In addition, in order to avoid backup withholding of 20% of
the gross amount of payments made upon surrender of certificates
representing shares of Common Stock, each shareholder should provide
the Company with such shareholder's taxpayer identification number
(i.e., social security number or employer identification number) in
accordance with instructions included in the letter of transmittal. See
"Certain Federal Income Tax Consequences."
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Rights of Dissenting Shareholders
Holders of the Common Stock who do not wish to accept the
Merger Consideration to be paid under the terms of the Plan of Merger
may dissent from the Merger and elect to have a judicial determination
of the fair value of their shares of Common Stock at the Effective Time
of the Merger (exclusive of any element of value arising from the
accomplishment or expectation of the Merger). To do so, such
shareholders must comply with the requirements of Subchapter 15D of the
Pennsylvania Business Corporation Law ("PBCL"), 15 PA C.S.A. Section
1571 et seq. ("Dissenters Rights"), the full text of which is attached
as Appendix 2 to this Proxy Statement. These requirements include
filing with the Company a written notice of intention to demand payment
for "fair value" of such shares prior to the taking of any shareholder
vote on the Merger. To properly exercise such rights, holders of the
Common Stock must hold their shares on the date of mailing of notice of
intention to demand payment and continuously hold such shares through
the Effective Time, and must comply with all other procedural
requirements of Sections 1571 through 1580 of the PBCL. Failure to
follow any of these and other applicable procedures may result in the
loss of Dissenters Rights. A vote against the Merger is not sufficient
to exercise Dissenters Rights. See "Rights of Dissenting Shareholders."
- --------------------------------------------------------------------------------
VOTING AND PROXY INFORMATION
The record date fixed by the Board of Directors for the
determination of shareholders entitled to notice of and to vote at the
Special Meeting is November 29, 1996, at the close of business (the
"Record Date"). At November 29, 1996, the Company had outstanding and
entitled to vote at the Special Meeting 3,025,188 shares of Common
Stock. Each share of Common Stock entitles the holder to one vote. The
Company also had outstanding as of November 29, 1996, 536,500 shares of
Preferred Stock. Holders of the Preferred Stock are not entitled to
vote at the Special Meeting. See "Description of Capital Stock."
The presence, in person or by proxy, of the holders of a
majority of the total number of issued and outstanding shares of Common
Stock entitled to vote at the Special Meeting is necessary to
constitute a quorum for the transaction of business at the Special
Meeting, and the affirmative vote of a majority of the votes cast by
all holders of Common Stock entitled to vote is required for approval
of the Plan of Merger. Votes cast by proxy or in person at the Special
Meeting will be tabulated by the election inspectors appointed for the
meeting, who will also determine whether or not a quorum is present. A
proxy submitted by a shareholder may indicate that all or a portion of
the shares of Common Stock represented by such proxy are not to be
voted by such shareholder with respect to a particular matter. This
could occur, for example, when a broker is not permitted to vote shares
held in street name on certain matters in the absence of instructions
from the beneficial owner of the shares. The shares subject to any such
proxy which are not being voted with respect to a particular matter
will be considered shares not present and entitled to vote on such
matter, although such shares may be considered present and entitled to
vote for other purposes and will count for purposes of determining the
presence of a quorum. Shares voted to abstain as to a particular matter
will be considered voted shares, and will count for purposes of
determining the presence of a quorum.
The officers and directors of the Company as a group owned
239,584 shares of outstanding Common Stock as of the Record Date and
have agreed to vote such shares in favor of the Merger. In addition,
three wholly-owned subsidiaries of the Company together owned 409,964
shares of outstanding Common Stock as of the Record Date, and the
respective Boards of Directors of these subsidiaries have authorized
management to vote such shares in favor of the Merger. The Consumers
Financial Corporation and Subsidiaries Employee Stock Ownership Plan
(the "Plan") also owns 261,338 shares of outstanding Common Stock as of
the Record Date. Each of the Plan participants has voting power for the
shares held for him or her in the Plan. The officers of the Company,
for whom 89,991 shares are held by the Plan, have agreed to vote such
shares in favor of the Merger. Accordingly, at least 739,539 shares (or
24.4 %) of the Company's outstanding Common Stock are expected to be
voted in favor of the Merger. See "Security Ownership of Principal
Shareholders and Management."
All shares of Common Stock represented at the Special Meeting
by proxies in the form accompanying this Proxy Statement which are
received prior to or at the Special Meeting will be voted in accordance
with the instructions thereon, provided the proxies are properly signed
and dated. If no instructions are indicated thereon, the proxies will
be voted FOR the approval of the Plan of Merger. The Board of Directors
knows of no other matters which are expected to come before the Special
Meeting.
6
<PAGE>
In connection with the Merger, holders of shares of Common
Stock have the right to seek statutory Dissenters Rights if they (1)
deliver a written demand for Dissenters Rights to the Company prior to
the taking of the vote on the proposal to approve and adopt the Plan of
Merger, (2) do not vote for the proposal to approve and adopt the Plan
of Merger, and (3) otherwise comply with the requirements of Subchapter
15D of the PBCL, the full text of which is attached as Appendix 2 to
this Proxy Statement. Any written demand for Dissenters Rights should
be sent to the Company at the address set forth herein. See "Rights of
Dissenting Shareholders" for a description of the procedures required
to be followed to perfect such rights.
The cost of soliciting proxies pursuant to this Proxy
Statement will be borne by the Company. In addition to solicitation by
use of the mails, proxies may also be solicited by certain directors,
officers and employees of the Company in person or by telephone or
telegram. Such persons will receive no additional compensation for such
services. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding proxy solicitation materials as beneficial
owners of Common Stock held of record by such custodians, nominees and
fiduciaries, and the Company may reimburse such custodians, nominees
and fiduciaries for reasonable expenses incurred in connection
therewith.
BACKGROUND OF THE MERGER
The Board of Directors of the Company decided in 1995 that the
Company either had to make a significant acquisition of another credit
insurance business or it had to offer to sell or merge its operations
with another insurance organization. This decision was primarily based
on the losses from operations incurred over the previous two-year
period. From mid-1995, at which time the Company signed a letter of
intent to acquire another credit insurance company, until December of
1995, the Company was operating on the premise that it would complete
an acquisition which would have increased revenues sufficiently to
return the Company to profitability. However, the acquisition did not
materialize because the company to be acquired terminated the letter of
intent in December of 1995 to pursue another alternative. As a result
of the failure to complete the acquisition in 1995 and the time
required to rebuild its revenues, the Board of Directors decided that
the best alternative was to offer to sell or merge the Company with a
strategic buyer or partner. Accordingly, on March 11, 1996, the Company
announced its plans to explore opportunities to find a strategic buyer
or partner.
E&Y was initially retained specifically to assist the
management of the Company in the preparation of a sales memorandum
which would include a description of the Company's three lines of
business, including operations, facilities, systems, revenue sources,
products, employee structure and various financial information. In
addition, the sales memorandum incorporated a valuation of the credit
insurance and vehicle service contract businesses as developed by
CreditRe Corporation, an independent actuarial firm, and a valuation of
its universal life insurance business prepared by Allen Bailey &
Associates, Inc., also an independent actuarial firm. It also included
a description of the business and a valuation of the wholesale
automobile auction business of the Company prepared by the management
of the Company. The Company and its advisors began targeting
prospective purchasers, coordinating, screening and processing the
inquiries, mailing the confidentiality agreements and sales memoranda,
and analyzing and comparing the offers. Subsequently, E&Y was asked to
assist management in selecting the best four offers for purposes of
proceeding with the due diligence review of each potential purchaser,
in evaluating the best final offers, including separate offers for the
purchase of the automobile auction business, and in advising the Board
of Directors as to the appropriate offer to accept.
The Company determined that it could maximize the
consideration received for the sale of the auction business if it
solicited a separate group of buyers for the auto auction. Accordingly,
a separate group of over 60 potential purchasers for the auction
business was targeted and contacted. From this group, 16 expressed an
interest in purchasing the auction business. After receiving letters of
intent from three potential buyers, the Company determined that the
best overall offer was from ADESA Corporation. As a result, the Company
entered into a letter of intent with ADESA Corporation and closed on
the sale of the auction business to an affiliate of ADESA Corporation
on November 6, 1996. In addition, because the universal life insurance
business has been under an option agreement with World Insurance
Company, the Company has reached a tentative agreement to sell this
business to World Insurance Company for $1.2 million, subject to due
diligence. The sale of this business is expected to become effective in
January 1997.
After contacting over 45 insurance companies concerning their
interest in acquiring the Company or portions thereof and mailing 35
sales memoranda to potential buyers, the Company received 11 offers to
buy the Company or segments of the Company. E&Y assisted the Company's
management in selecting the four highest offers and set up a series
7
<PAGE>
of meetings with each buyer to review their bids and clarify the offers and to
negotiate further when it was determined that certain aspects of the offers were
not competitive with other offers. Each of the four potential buyers was then
invited to perform a due diligence review and submit a final offer in the form
of a binding letter of intent. The four buyers each performed a due diligence
review and made revised offers. With E&Y's assistance, management reviewed and
analyzed each offer and recommended and advised the Board of Directors of the
Company to accept the LaSalle offer as the best offer.
The primary considerations of the Board of Directors in approving the
Merger with LaSalle were to maximize the value to the holders of the Common
Stock and to maintain or improve the value of the Preferred Stock. The Board of
Directors, each of whom is a holder of Common Stock, consists of six directors,
five of whom are independent non-employees of the Company. Four Directors also
collectively own 28,563 shares of Preferred Stock. Each Director will vote his
shares for the approval of the Merger and will receive the same consideration
for his Common Stock as will be received by all other holders of Common Stock.
None of the Directors will remain as Directors or employees of the Company or
its insurance subsidiaries, and none will receive any severance payments or
other fees in connection with the Merger.
The Board of Directors believes that the value to the holders of the
Common Stock will be maximized in the Merger because the LaSalle offer will
produce the highest value of assets to be distributed to those shareholders.
Further, the LaSalle offer was a cash offer which would be paid at the time the
Common Stock certificates were surrendered, whereas each of the three next
highest offers would have delayed a portion of the cash distribution to the
holders of the Common Stock over a five-year period. There was also some
uncertainty as to the total cash distribution to the holders of Common Stock in
the three competing offers because a portion of the consideration was based on
the credit insurance premiums produced by the Company's former accounts during
the five year-period. The Board of Directors also considered liquidating the
various assets of the Company, permitting the credit insurance in force or
unearned premiums to become earned premiums and then liquidating the Company.
However, the Board of Directors determined that because greater Federal and
state corporate income taxes would be incurred, and the liquidation process
would require about five years before the full amount of the cash could be
distributed to the holders of the Common Stock, this was an unacceptable
approach when compared to LaSalle's offer. The Board of Directors also took into
consideration the market price and book value of the Common Stock, both of which
were lower than the Merger Consideration at the time LaSalle's offer was
approved. The price of $3.92 per share offered by LaSalle represents a 21%
premium above the trading value of the Common Stock on March 11, 1996, the date
of the Company's announcement to seek a strategic partner or buyer for its
businesses, and a 43% premium above the trading value on October 29, 1996, the
day prior to the announcement of the Merger with LaSalle. Further, the $3.92
price per share represents a 16% premium above the book value of the Common
Stock as of September 30, 1996.
Further, the interests of the holders of the Preferred Stock were
considered to be improved with respect to the relative financial condition of
the Company immediately before and after the proposed Merger for the following
reasons: (1) pursuant to the letter of intent between the Company and LaSalle
and discussions with the Delaware Insurance Department, LaSalle has indicated it
intends to increase the capital and surplus of the principal life insurance
subsidiary of the Company from approximately $6.2 million at October 31, 1996 to
approximately $11.7 million at the time the Merger is consummated in order to
improve the subsidiary's financial condition and its A.M. Best rating; (2) it
was intended that all of the Company's $1.7 million of debt would be repaid
before or at the time of the Merger; (3) the sale of the universal life
insurance business and the wholesale automobile auction, as required by the
terms of the Merger Agreement, would, in the case of the universal life
business, increase the regulatory surplus of the insurance subsidiaries and, in
the case of the auto auction, directly increase the capital of the Company; and
(4) the Company would become a subsidiary of a larger insurance organization
which would permit certain reductions of operating expenses and provide the
availability of additional capital. Each of these four factors relate to
increasing the capital of the Company, either directly or through its
subsidiaries, which should benefit the holders of the Preferred Stock. In
addition, all of the current rights and preferences of the holders of the
Preferred Stock would remain the same as before the Merger, as there will be no
class of stock ranking prior to or on a parity with the Preferred Stock.
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors of the Company believes that the proposed Merger
is in the best interests of and is fair to the Company's shareholders.
Accordingly, on October 22, 1996 the Board of Directors unanimously approved the
Merger Agreement and hereby recommends the approval of the Plan of Merger by the
holders of the Common Stock at the Special Meeting. If the Merger is not
consummated for any reason, the Board of Directors expects to continue the
business of the Company as described under "Business of Consumers Financial
Corporation", while the Company continues to attempt to find a buyer or a
strategic partner.
8
<PAGE>
BUSINESS OF CONSUMERS FINANCIAL CORPORATION
The Company is an insurance holding company which, through its
subsidiaries, is a leading provider of credit life and credit disability
insurance in the Middle Atlantic region of the United States. The Company also
owns and administers a small block of universal life insurance business, but no
longer markets those products. The insurance subsidiaries are licensed in 33
states and the District of Columbia and currently conduct the majority of their
business in the states of Pennsylvania, Delaware, Maryland, Nebraska, Ohio and
Virginia. Credit insurance, which accounted for $24 million, or 88%, of the
Company's total premium revenues in the first nine months of 1996, is marketed
primarily through approximately 900 automobile dealers. In connection with its
credit insurance operations, the Company also markets, as an agent, an
automobile extended service warranty contract. Universal life insurance, which
accounted for $2.9 million of premium and policy charge revenues, or 11%, of the
Company's total premiums and policy charges through September 30, 1996, was
marketed until 1992 through general agents, personal producing general agents
and independent brokers. Additional information regarding the termination of
marketing activities in the Individual Life Insurance Division and the sale of
the majority of the Division's in-force business appears below under "Individual
Life Insurance Division."
The Company also conducted, through Interstate, wholesale and retail
automobile auctions of used vehicles for automobile dealers, banks and leasing
companies. On November 6, 1996, the Company sold the operating assets of
Interstate to a third party purchaser for $4,850,000.
The Company currently operates through its wholly-owned subsidiaries,
principally Consumers Life Insurance Company (a Delaware life insurance company)
and Consumers Car Care Corporation (a Pennsylvania business corporation).
Consumers Life Insurance Company of North Carolina (a North Carolina life
insurance company) and Investors Fidelity Life Assurance Corp. (an Ohio life
insurance company) are subsidiaries of Consumers Life Insurance Company.
Automotive Resource Division
The Company sells credit insurance in connection with consumer credit
transactions, substantially all of which are automobile purchases. Credit life
insurance provides funds in the event of the insured's death for payment of a
specified loan or loans owed by the insured. Similarly, credit disability
insurance provides for the periodic pay down of such loans during the term of
the insured's disability. In most cases, the entire premium is paid at the time
the insurance is issued. Premiums collected are remitted to the Company net of
commissions. Credit life insurance generally is written on a decreasing term
basis with the policy benefit initially being the full amount of the loan and
thereafter decreasing in amounts corresponding to the repayment schedule. The
primary beneficiary under credit insurance is the lender, with any proceeds in
excess of the unpaid portion of the loan payable to a named second beneficiary
or the insured's estate.
Following the Merger, LaSalle intends to expand the Company's credit
insurance business by increasing marketing efforts in key states. In addition,
LaSalle plans to acquire blocks of credit insurance business and other credit
insurance companies in order to build a larger, more competitive credit
insurance operation.
Individual Life Insurance Division
As a result of continuing losses in its individual life insurance
operations, the Board of Directors decided in early 1992 to discontinue
marketing all universal life products and to sell all of the Company's whole
life, term, annuity and universal life business. The Company subsequently sold
its traditional whole life and term business in late 1992 and most of its
universal life business at the end of 1994. Although the remaining block of
assumed universal life business has been consistently profitable, the Company
has reached a tentative agreement with World Insurance Company, the direct
writer of that business, whereby World Insurance Company would purchase that
business effective in January 1997.
Best's Ratings
Since 1995, Consumers Life Insurance Company ("Consumers Life") has
received a C rating (Marginal) from A.M. Best Company, principally because of
its substantial amount of financial reinsurance and its relatively small capital
base. In 1994 Consumers Life had a C- rating (Marginal). In 1992 and 1993,
Consumers Life had an NA-9 rating (Not Rated at
9
<PAGE>
Company Request), which is assigned to any company which is otherwise eligible
for a letter rating, but has requested that the rating not be published. The NA-
9 designation was requested by Consumers Life while it completed the
restructuring of its individual life insurance operations. In 1991, Consumers
Life was rated "B" (Good). Consumers Life Insurance Company of North Carolina is
currently rated "NA-3" (Insufficient Operating Experience), while Investors
Fidelity Life Assurance Corp. is classified as "NA-9." Best's letter ratings
range from A++ (Superior) to D (Below Minimum Standards), with letters E and F
assigned to companies under state supervision or in liquidation. Best's ratings
are based on a comparative analysis of the statutory financial condition and
operating performance of the companies, rated as determined by their publicly
available reports. LaSalle plans to improve the financial strength of the
Company's insurance subsidiaries through the infusion of additional capital and
reduction of expenses.
Investments
The Company's general investment policy with respect to the assets of
its insurance subsidiaries has been to invest in fixed maturity securities and,
to a lesser extent, mortgages with intermediate terms (generally not more than
seven years). Investments in mortgages have allowed the Company to obtain higher
yields while maintaining maturities in the five to seven year range. Prior to
the sale of most of the Company's universal life business, the Company's
investment policy also included investing in certain mortgage-backed securities
which provided competitive yields on assets supporting these interest sensitive
products.
Competition
The Company competes with numerous other credit insurance companies,
many of which are larger than the Company and have greater financial and
marketing resources. The principal competitive factors in the automobile credit
insurance industry are commission levels, the quality of training for dealers,
the variety of related products, the availability of dealer incentive programs
and the level of administrative support and efficiency of claims handling
procedures.
Regulation
The Company's insurance operations are subject to regulation and
supervision in the states in which it is licensed. The extent of such regulation
varies from state to state, but, in general, each state has statutory
restrictions and a supervisory agency which has broad discretionary
administrative powers. Such regulation is designed primarily to protect
policyholders and relates to the licensing of insurers and their agents, the
approval of policy forms, the methods of computing financial statement reserves,
the form and content of financial reports and the type and concentration of
permitted investments. The Company's insurance subsidiaries are subject to
periodic examination by the insurance departments in the states of their
formation and are also subject to joint regulatory agency examination and market
conduct examinations in the other states in which they are authorized to do
business.
The dividends which a life insurance company may distribute are subject
to regulatory requirements based upon minimum statutory capital and surplus
and/or statutory earnings. In addition to regulatory considerations, the overall
financial strength of each operating entity is considered before dividends are
paid. Additionally, the amount of dividends a life insurance company can pay is
subject to certain tax considerations.
BUSINESS OF LASALLE GROUP, INC.
LaSalle is a privately held Delaware corporation formed in 1995 by two
insurance executives, Robert E. Hancox, Chairman and Chief Executive Officer,
and Charles E. Miller, Jr., President and Chief Operating Officer. Prior to
forming LaSalle, Mr. Hancox was the Managing Partner of the Wendover
International and Capital Consulting Group, which specialized in assisting
financial service companies in gaining a competitive advantage in the
marketplace, for two and one-half years. He has also served as the Chief
Executive Officer of ICMA Retirement Corporation, ICMA Investment Services,
Inc., R C Marketing Services, Inc. and the Public Administration Holding Company
for five years. These firms operated an insurance company, a pension plan
administrator, a money manager and investment advisory firm with assets over $3
billion, a real estate development firm, and other affiliated financial services
companies. Mr. Hancox also held executive positions with Penn Mutual Insurance
Company, CIGNA Insurance Company of North America and State Farm Insurance
Companies for over 22 years.
Mr. Miller most recently was a consultant for Insurance Partners, L.P.
which, along with the Zurich Insurance Group, recently acquired the Kemper
Corporation. He was responsible for the valuations of life insurance companies.
Mr. Miller previously served as Director, Executive Vice President and Chief
Financial Officer of the Harcourt General Insurance Companies, a group of life,
annuity, health and credit insurance companies with assets of $3.5 billion. Mr.
Miller held several senior financial executive positions in 17 years of service
with the Harcourt General Insurance Companies. In addition, he previously served
as an executive with Founders Financial Corporation and Estate Life Insurance
Company.
10
<PAGE>
LaSalle's business purpose is to purchase and operate insurance
companies on behalf of private and institutional investors who seek long-term
investment returns from the life insurance industry. LaSalle seeks to acquire
small and medium size life insurance companies in the universal life/traditional
life, credit, health, payroll deduction and annuity markets with well-defined
market, geographic and product niches. It is LaSalle's intent to continue to
maintain the marketing identity of each of its insurance company acquisitions
while achieving synergies and economies of scale among these companies.
At the present time, LaSalle has also executed definitive purchase
agreements to purchase the Concord General Life Insurance Company, a payroll
deduction insurer, and a 51% interest in three insurance holding companies
(United Trust, Inc., United Income, Inc. and United Trust Group, Inc.) which,
through a controlling interest in First Commonwealth Corporation, control four
life insurance companies primarily writing universal life insurance. When
LaSalle completes the Merger with the Company and the other two acquisitions,
LaSalle's combined assets will be approximately $500 million and its combined
premium and investment revenues will exceed $100 million. In addition, LaSalle's
shareholders' equity, including minority interests, will exceed $80 million.
LaSalle's strategic intent is to increase revenues and profitability in
the Company's core credit insurance business. LaSalle plans to expand the
Company's marketing in key states and increase the Company's credit insurance
business through the acquisition of blocks of credit insurance business and
other credit insurance companies.
LaSalle's mailing address is 1822 Spruce Street, Philadelphia,
Pennsylvania 19103 and its telephone number is (215) 772-1923.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreement provides that, immediately prior to consummation
of the Merger, the holders of all outstanding stock options, all of which were
issued in tandem with SAR's, shall agree to exercise their SAR's and waive their
right to exercise the stock options. In consideration thereof, each holder of
such options with SAR's shall receive from the Company, at the Effective Time of
the Merger, cash in an amount equal to the excess, if any, of the Merger
Consideration over $2.25 (the exercise price of the options), times the number
of shares of Common Stock available for purchase with respect to the options
with SAR's held.
The following table sets forth the number of options with SAR's held as
of December 13, 1996 and the amounts to be received by the Company's executive
officers individually and all other officers and former officers as a group,
with respect to the exercise of the SAR's, assuming the Merger Consideration is
equal to $3.92 and the exercise price per share is equal to $2.25.
<TABLE>
<CAPTION>
Stock Amount
Options/ to be
Name Office SAR's Received
=======================================================================================================
<S> <C> <C> <C>
William J. Walsh, Jr. Executive Vice President and Chief
Operating Officer 25,000 $41,750
Ralph R. Byrnes Senior Vice President-Automotive
Resource Division 25,000 41,750
R. Fredric Zullinger Senior Vice President, Chief
Financial Officer and Treasurer 25,000 41,750
Other Officers and Former
Officers as a Group
(7 Individuals) 74,000 123,580
------------- ------------
Total 149,000 $248,830
============= ============
</TABLE>
On December 13, 1996, James C. Robertson, Chairman of the Board,
President and Chief Executive Officer, exercised all of the 30,000 SAR's issued
to him in tandem with stock options. As a result, Mr. Robertson received a cash
payment of $41,250, which represented the difference between $3.625, the high
bid price of the Common Stock on December 13, 1996, and $2.25, the exercise
price of the options, multiplied by the 30,000 SAR's.
11
<PAGE>
Following the Merger, the executive officers and directors of CAC will
become the executive officers and directors of the Company, as the surviving
corporation. None of the Company's current directors are expected to remain as a
director of the surviving corporation. It is anticipated, however, that certain
executive officers of the Company and certain officers and other employees of
the Company's insurance subsidiaries will remain with the Company or those
subsidiaries in some capacity following the Merger. No current directors of the
insurance subsidiaries will remain in any capacity following the Merger. None of
the Directors of either the Company or its insurance subsidiaries will receive
any severance payments in connection with the Merger.
Those officers and other employees who are not retained by the
insurance subsidiaries after the Merger will receive severance payments, based
generally on years of service and compensation level, from the Company as the
surviving corporation. James C. Robertson, the Company's current Chairman of the
Board, President and Chief Executive Officer, will retire from the Company at
the Effective Time of the Merger and will receive no severance payment.
Ralph R. Byrnes, a senior vice president and top marketing executive of
the insurance subsidiaries, will remain in that capacity under the terms of a
three-year employment contract which became effective at the time the Merger
Agreement was signed. Mr. Byrnes will receive an annual salary of $120,000 and
will be entitled to receive a $20,000 bonus at the Effective Time of the Merger
and additional bonuses based upon performance during the term of his contract.
The contract contains certain non-competition provisions which apply during the
term of Mr. Byrnes' employment with the insurance subsidiaries and for a period
of one year thereafter.
E&Y has received fees of approximately $350,000 for its services in
connection with the Merger transaction, including tax consulting services and
services related to negotiating, on behalf of the Company, the termination of
the Joint Venture Agreement with Acceleration Life Insurance Company. E&Y also
received fees of approximately $172,000 for its services in connection with the
sale of the Company's auto auction business. These fees were not contingent upon
consummation of the Merger or the sale of the auto auction business. In
addition, there was no compensation paid to management or payments made to
advisors, consultants, or attorneys contingent upon consummation of the Merger
or the value to be received by the holders of Common Stock.
Certain persons with interests in the Merger, as described herein, may
have a conflict of interest in voting for or recommending the Merger and, thus,
their interests in the Merger are not necessarily the same as those of
unaffiliated shareholders.
For a description of the provision of the Merger Agreement relating to
indemnification for directors and officers, see "Agreement and Plan of Merger:
Indemnification."
FINANCING OF THE MERGER
The total funds required for financing the Merger, including payments
to the holders of the Common Stock and the payment of $500,000 to Acceleration
Life Insurance Company in connection with the termination of a Joint Venture
Agreement, will be approximately $12.4 million. The Merger Agreement
contemplates that LaSalle and CAC will finance the Merger through cash on hand
at, or otherwise available to, LaSalle. LaSalle is in the process of raising
capital through a private placement, but has received commitments in excess of
the cash required to complete the Merger. Additionally, LaSalle has indicated
that at the time the Merger is consummated, it intends to increase the capital
and surplus of the Company's principal insurance subsidiary from approximately
$6.2 million at October 31, 1996 to approximately $11.7 million in order to
improve the subsidiary's financial condition and its A.M. Best rating.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash by a holder of Common Stock pursuant to the Merger
or pursuant to the exercise of Dissenters Rights will be a taxable transaction
for such shareholder for Federal income tax purposes and may also be a taxable
transaction under applicable state, local and foreign tax laws. The following
summarizes the Federal income tax consequences, under currently applicable law,
to a shareholder who is a citizen or resident of the United States or is
otherwise subject to United States Federal income taxation on a net income basis
other than (1) shareholders who acquired Common Stock pursuant to the exercise
of stock options or otherwise as compensation and (2) shareholders who own
Common Stock under special circumstances, such as shareholders who hedge their
investment in Common Stock pursuant to options in that stock or otherwise. A
shareholder will recognize gain or loss equal to the difference, if any, between
the amount of cash to be received pursuant to the Merger or pursuant to the
exercise of Dissenters Rights and the adjusted tax
12
<PAGE>
basis of the shares of Common Stock exchanged. To the extent that the shares of
Common Stock exchanged are held as capital assets, any such gain or loss will be
characterized as a capital gain or loss for Federal income tax purposes. If the
shares were held for more than one year on the date of the Merger, any such
capital gain or loss will be a long-term capital gain or loss. The Revenue
Reconciliation Act of 1990 limits the maximum Federal tax rate on long-term
capital gains to 28% for taxpayers who are individuals, estates or trusts.
Taxpayers who are corporations may only deduct capital losses against capital
gains. Other taxpayers may deduct up to $3,000 of capital losses per year
against ordinary income, to the extent such taxpayer does not have sufficient
capital gains to offset such capital loss. Any capital losses disallowed under
these rules can be carried over to future tax years.
Under the backup withholding rules contained in the Internal Revenue
Code and its regulations, the Company may be required to withhold 20% of the
gross amount of any payments to certain shareholders. In order to avoid such
backup withholding, each shareholder (other than corporations and other persons
exempt from such backup withholding) should provide the Company with a taxpayer
identification number (i.e., social security number or employer identification
number) in accordance with the instructions included in the letter of
transmittal to be sent to the holders of Common Stock following the Merger.
The foregoing does not purport to be a comprehensive explanation of the
tax consequences of the receipt of cash pursuant to the Merger or pursuant to
the exercise of Dissenters Rights. In view of the individual nature of tax
consequences, shareholders are urged to consult their own tax advisors with
respect to the specific tax consequences of the Merger to them, including the
applicability and effect of federal, state, local and foreign tax laws.
AGREEMENT AND PLAN OF MERGER
All references to and summaries of the Merger Agreement in this Proxy
Statement are qualified in their entirety by reference to the Merger Agreement,
a copy of which is attached hereto as Appendix 1.
General Information
The Merger Agreement provides that, subject to approval of the Plan of
Merger by the holders of the Common Stock and the satisfaction or waiver of
certain other conditions, CAC will be merged with and into the Company, which
will be the surviving corporation and a subsidiary of LaSalle. See "Agreement
and Plan of Merger: Conditions, Representations and Covenants" for a description
of the conditions to which the Merger is subject. At the Effective Time of the
Merger, each share of Common Stock then issued and outstanding (other than
shares held by those holders that have perfected their Dissenters Rights under
Pennsylvania law) will, by virtue of the Merger and without any action on the
part of the holders of such shares be converted into the right to receive the
Merger Consideration. Holders of Common Stock who do not vote in favor of the
Merger Agreement and who otherwise comply with the provisions of Subchapter 15D
of the PBCL have the right to dissent from the Merger and be paid the fair value
of their shares of Common Stock. See "Rights of Dissenting Shareholders." After
the Merger, holders of Common Stock will possess no interest in or rights as
shareholders of the Company; their only right in respect of their shares of
Common Stock will be to receive payment as described above.
Merger Consideration
Pursuant to the terms of the Merger Agreement, the Merger Consideration
to be received for each share of Common Stock issued and outstanding at the
Effective Time shall be equal to:
(1) $3.92, plus or minus
(2) The per share effect of the difference between (a) the net
statutory surplus of Consumers Life at the end of the month
next preceding the Effective Time and (b) $6,710,623. (The
Merger Agreement provides that net statutory surplus shall be
equal to the total statutory capital and surplus of Consumers
Life, as reported to state regulatory authorities, plus the
asset valuation reserve and interest maintenance reserve of
Consumers Life and each of its subsidiaries.); plus or minus
13
<PAGE>
(3) The per share effect of the difference between (a) the net
sales proceeds (after Federal and state income taxes) received
from the sale of the operating assets of Interstate, and (b)
$4,900,000 less applicable Federal and state income taxes;
plus or minus
(4) The per share effect of the difference between (a) the
non-operating net assets (defined as the non-operating assets
less current liabilities, except the existing bank
indebtedness) of Interstate at October 31, 1996 and (b)
$899,440; plus or minus
(5) The per share effect of the difference between (a) the
purchase commission (after applicable Federal income taxes)
received by Consumers Life from the sale of its universal life
business, if such sale occurs before the Effective Time of the
Merger, and (b) $1,269,000.
Although the final computation of the Merger Consideration cannot be
completed until the end of the month next preceding the Effective Time of the
Merger, the Company currently has no reason to believe that the adjustments
required by Items 2 through 5 above will significantly increase or decrease the
$3.92 per share to be received by the holders of the Common Stock in the Merger
based upon the following information now available to the Company: (i) the
adjustment required by Item (2) above, assuming the Merger had been consummated
based on the September 30, 1996 net statutory surplus, would increase the Merger
Consideration by $.05 per share; (ii) the adjustment required by Item (3) above
will decrease the Merger Consideration by $.01 per share; (iii) the adjustment
required by Item (4) above will increase the Merger Consideration by $.05 per
share; and (iv) the adjustment required by Item (5) above, based on the
tentative agreement with World Insurance Company, would decrease the Merger
Consideration by $.03 per share. Based upon the above calculations and subject
to the estimates made with respect to Items (2) and (5), the Merger
Consideration would be $3.98 per share.
Payment for Shares
The Merger Agreement provides that at the Effective Time, CAC shall
make available to the Company, for the purpose of exchanging the certificates
formerly representing shares of Common Stock for the consideration to be paid
for such shares in the Merger, immediately available funds in an amount
sufficient to pay the Merger Consideration, with respect to each outstanding
share of Common Stock.
Promptly after the Effective Time, the Company will send a letter of
transmittal to each holder of a certificate or certificates evidencing Common
Stock of record as of the Effective Time, advising such holder of the
effectiveness of the Merger and the procedure for sending the Company such
certificates in exchange for the cash to be received therefor as a result of the
Merger.
Upon surrender to the Company of such certificates, together with a
properly completed letter of transmittal and other documents as may be
reasonably requested, such holders will be entitled to receive a check
representing the Merger Consideration multiplied by the number of shares of
Common Stock represented by such surrendered certificates. Until so surrendered,
after the Effective Time each such certificate shall be deemed to represent for
all purposes only the right to receive such cash, and no other right with regard
to the Company or the surviving corporation. After the Effective Time, there
shall be no further registration or transfers of shares of Common Stock, except
as it relates to the Preferred Stock. See "Description of Capital Stock."
If payment for shares of Common Stock surrendered is to be paid to a
person other than the registered holder of such shares, the certificate so
surrendered must be properly endorsed or otherwise be in proper form for
transfer, and the person requesting such payment must pay to the Company any
transfer or other taxes required as a result of the payment to a person other
than the registered holder or establish to the Company's satisfaction that such
tax has been paid or is not payable.
SHAREHOLDERS SHOULD NOT SURRENDER THEIR COMMON STOCK CERTIFICATES
BEFORE RECEIVING TRANSMITTAL MATERIALS FROM THE COMPANY AND, ACCORDINGLY, SHOULD
NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
14
<PAGE>
Conditions, Representations and Covenants
The respective obligations of the Company, LaSalle and CAC to
consummate the Merger are subject to certain conditions including the following:
(1) the truth in all material respects at the Effective Time of the
representations and warranties made by the Company (in the case of LaSalle and
CAC) and by LaSalle and CAC (in the case of the Company) in the Merger Agreement
and in any certificate or other writing delivered pursuant to the Merger
Agreement; (2) the performance by the Company (in the case of LaSalle and CAC)
and by LaSalle and CAC (in the case of the Company) in all material respects of
all of the obligations required by the Merger Agreement to be performed by them,
respectively; (3) the absence of any writ, order, decree or injunction of a
court of competent jurisdiction which prohibits or restricts the consummation of
the Merger; (4) the approval of the Plan of Merger by the holders of the Common
Stock, with holders of not more than 15% of the outstanding shares of Common
Stock having demanded Dissenters Rights; (5) the receipt of all consents,
approvals or waivers , including the approvals from the Insurance Departments of
Arizona, Delaware, North Carolina and Ohio; (6) the sale of the operating assets
of Interstate, which condition has previously been satisfied; (7) the sale of
the in-force block of universal life business; (8) the execution and delivery of
an employment contract with the Company's senior marketing executive; (9) the
termination of the waiting period required under the Hart-Scott-Rodino AntiTrust
Improvements Act of 1976; and (10) the receipt by each party of certificates of
officers of the other party to evidence compliance with the conditions to the
Merger. See Article IV of the Merger Agreement attached as Appendix 1 to this
Proxy Statement. The Company, LaSalle and CAC may each waive compliance with
certain obligations, covenants, agreements or conditions of the Merger
Agreement.
The Company has agreed that, so long as the Merger Agreement is in
effect, the Company and the officers, employees or other representatives or
agents of the Company will not take any action to solicit, initiate or encourage
any discussions or negotiations with any person with respect to any sale of
assets (other than in the ordinary course of business) or all of the shares of
the Company's capital stock or a merger, consolidation, recapitalization,
liquidation or similar transaction (collectively, an "Acquisition"), other than
the transactions contemplated by the Merger Agreement. The Company is obligated
to notify LaSalle promptly after receipt of any inquiry or proposal it receives
in regard to a proposed Acquisition.
The Company has also agreed to conduct its business in the ordinary
course and, subject to certain exceptions, not to engage in certain types of
transactions without the consent of LaSalle. These transactions include, among
other things, amending its Articles of Incorporation or Bylaws; issuing or
committing to issue any shares of capital stock; splitting, combining or
reclassifying any shares of its Common Stock; declaring, setting aside or paying
any dividends or other distributions with respect to, or redeeming, repurchasing
or otherwise acquiring, shares of its capital stock; incurring any material debt
or liabilities; encumbering its properties and assets; making any loans,
advances or capital contributions to, or investments in, any other person;
increasing the compensation of any of its employees; or paying or agreeing to
pay any employee benefit not required by existing plans or agreements or commit
itself to any additional employee benefit plans or to any employment agreements,
or amending any existing plans or agreements.
The Company, LaSalle and CAC have each agreed to use commercially
reasonable efforts to obtain consents of all third parties and governmental
authorities necessary to the consummation of the Merger and the transactions
contemplated thereby.
Effective Time
The Effective Time of the Merger will occur at such time as the
Articles of Merger are duly filed with the Secretary of State of the
Commonwealth of Pennsylvania, all in accordance with the PBCL.
Stock Options; Warrants; Employee Benefit Plans
Each holder of outstanding stock options with SAR's will receive at the
Effective Time of the Merger a cash payment from the Company in an amount equal
to the excess, if any, of the Merger Consideration over $2.25 (the exercise
price of the options), times the number of shares subject to such SAR's. See
"Interests of Certain Persons in the Merger."
The Company's existing employee benefit plans, which are applicable to
all employees, subject to certain vesting provisions, consist of a defined
benefit pension plan, a profit sharing plan or 401(k) plan, and an employee
group medical, dental, disability and life insurance plan.
15
<PAGE>
The Merger Agreement does not obligate LaSalle and CAC to continue the
stock option plan or any of the other employee benefit plans.
Termination, Amendment, Fees and Expenses
The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after its adoption by the holders of the
Common Stock, (1) by mutual action of the Boards of Directors of the Company and
LaSalle; or (2) by either the Company, LaSalle or CAC if the Merger has not been
consummated by January 31, 1997, unless consummation of the Merger has not
occurred due to a regulatory approval delay beyond the control of the parties
[if the Special Meeting occurs after January 31, 1997, the parties have agreed
that they will extend this date to five (5) business days after the date of the
Special Meeting]; or (3) by either the Company, LaSalle or CAC, in their sole
discretion, if the Merger has not been consummated by March 31, 1997, provided
that such termination may not be effected by a party whose failure to fulfill
any of its obligations under the Merger Agreement was the reason for such non-
consummation.
In the event of the termination of the Merger Agreement in accordance
with its terms for any reason, the Merger Agreement shall become void and have
no effect and no liability will exist on the part of any party thereto, except
as described in the following paragraph.
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such costs and expenses. The Merger
Agreement provides that certain of the Company's fees and expenses in connection
with the Merger will not exceed $100,000 in the aggregate after October 1, 1996.
See "Fees and Expenses." The Merger Agreement further provides that if, prior to
consummation of the Merger, the Merger Agreement is terminated because (1) the
Company proceeds with another transaction which it believes is more favorable to
its shareholders, or (2) the Plan of Merger is not approved by the holders of
the Common Stock, the Company shall pay LaSalle a $300,000 break-up fee.
Any provision of the Merger Agreement may be amended or waived by
written agreement of the parties thereto at any time prior to the Effective
Time, whether before or after the Special Meeting, except that after the Special
Meeting, the Company will not, without the further approval of the shareholders,
consent to any amendment or grant any waiver which reduces the Merger
Consideration to be received in exchange for any of the shares of Common Stock,
except as provided in the Merger Agreement, or otherwise materially adversely
affects the holders of the Preferred Stock. See "Description of Capital Stock".
Insurance Department Approvals
The Company is subject to regulation under the Insurance Holding
Company laws of the States of Arizona, Delaware, North Carolina and Ohio. These
laws vary from state to state but generally require insurance holding companies
and insurers that are subsidiaries of holding companies to register and file
certain reports, including information concerning their capital structures,
ownership, financial condition, and general business operations, and require
prior regulatory agency approval of changes in control of an insurer. The
purchase of more than 10% of the outstanding shares of the Company's Common
Stock by one or more affiliated parties requires the prior approval of the
Arizona, Delaware, North Carolina and Ohio Insurance Departments and the filing
of a Statement regarding the acquisition of control of a domestic insurer ("Form
A") with the respective State Departments of Insurance which have broad
discretionary administrative authority. LaSalle has filed Form A Statements with
the Arizona, Delaware, North Carolina and Ohio Insurance Departments, and, while
there can be no assurance that LaSalle's Form A will be approved by any or all
such State Departments of Insurance, the Company and LaSalle are not currently
aware of any reason why such approvals will not be granted.
Antitrust Matters
The Company and LaSalle intend to make appropriate filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. Prior to the Effective
Time, the Antitrust Division of the Department of Justice or the Federal Trade
Commission, or a state antitrust agency, could investigate the Merger and seek
to enjoin or rescind the Merger or see divestiture or seek damages with respect
thereto. The Company and LaSalle believe that consummation of the Merger will
not violate the antitrust laws.
16
<PAGE>
Indemnification
Under Pennsylvania law, the Company is obligated to indemnify and hold
harmless the directors and officers of the Company against losses, claims,
damages, liabilities, costs, expenses, judgments and amounts paid in settlement
(including reasonable attorneys' fees) arising out of or pertaining to any
action or omission occurring prior to the Effective Time (including those that
arise out of or relate to the Merger) while such person was a director or
officer of the Company to the full extent permitted by Pennsylvania law and the
Articles of Incorporation and Bylaws of the Company as currently in effect.
Accounting Treatment
It is intended that the Merger will be accounted for by LaSalle as a
purchase under generally accepted accounting principles.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of the following:
Common Stock
As of November 29, 1996, there were 10,000,000 authorized shares of
Common Stock with a stated value of $.01, of which 3,025,188 are issued and
outstanding. The holders of the Common Stock vote as a single class and are
entitled to one vote per share on all matters to be voted on by shareholders and
have the right of cumulative voting in connection with election of directors.
The holders of Common Stock are entitled to receive pro rata dividends, when and
as declared by the Board of Directors in its discretion, out of funds legally
available therefor, but only if all dividends on the Preferred Stock having
preferential dividend rights have been paid or provided for according to its
terms.
8 1/2% Convertible Preferred Stock, Series A
As of November 29, 1996, there were 632,500 authorized shares of
Preferred Stock, with a liquidation preference of $10.00, of which 536,500
shares are issued and outstanding. The Preferred Stock is convertible at any
time, unless previously redeemed, into shares of Common Stock at the rate of
1.482 share of Common Stock for each share of Preferred Stock (equivalent to a
conversion price of $6.75.) The Preferred Stock is currently redeemable at the
option of the Company at $10.094 per share, declining to $10.00 per share on or
after July, 1997, and, commencing July 1, 1998, a sinking fund will be
established requiring mandatory annual payments sufficient to redeem 10% of the
number of shares of Preferred Stock initially issued, calculated to redeem all
of the Preferred Stock by July 1, 2007.
Annual dividends at the rate of $.85 per share are cumulative from the
date of original issue and are payable quarterly on the first day of January,
April, July and October. If at any time the Company is in arrears as to
preferred dividends or sinking fund appropriations for the Preferred Stock,
dividends to holders of the Common Stock as well as redemptions or acquisitions
by the Company of shares of the Common Stock will be restricted. If the Company
is in default in an aggregate amount equal to four quarterly preferred
dividends, the holders of Preferred Stock will be entitled to elect two
additional board members to the then existing Board of Directors while such
arrearage exists. As of November 29, 1996, there were no arrearages with respect
to the payment of the Preferred Stock dividends.
Except in certain limited circumstances, the holders of Preferred Stock
have no voting rights; however, they can vote as a single class when the Company
attempts to (1) sell, transfer or dispose of all or substantially all of the
property, business or assets of the Company or participate in a statutory share
exchange whereby the Preferred Stock or the Common Stock is converted into other
securities or property or in a consolidation or merger of the Company with any
corporation; provided, however, that this restriction shall not prevent any such
statutory share exchange, consolidation or merger or require such separate class
vote if none of the preferences or other rights of the holders of the Preferred
Stock shall be adversely affected thereby and if the Corporation resulting from
or surviving any such statutory share exchange, consolidation or merger shall
not have authorized or outstanding, after such statutory share exchange,
consolidation or merger, any preferred stock or other class of shares ranking
prior to or on parity with the Preferred Stock with respect to payment of
dividends or distribution of assets on liquidation; or (2) amend the Articles of
Incorporation or By-Laws of the Company so as to affect adversely any of the
preferences or other rights of the holders of the Preferred Stock; or (3)
authorize any additional series of preferred stock or any class of stock ranking
prior to the Preferred Stock with respect to either the
17
<PAGE>
payment of dividends or the distribution of assets on any liquidation or any
securities convertible into preferred stock or any such shares ranking prior
thereto.
Since none of the preferences or other rights of the holders of the
Preferred Stock are to be adversely affected by the Merger and no other
preferred stock or other class of shares of the Company will rank ahead of or be
on a parity with the Preferred Stock with respect to payment of dividends or
distribution of assets on liquidation as a result of the Merger, no vote,
written consent or affirmation of the Merger is required from the holders of the
Preferred Stock.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded in the NASDAQ National Market System under
the symbol "CFIN". On March 8, 1996, the trading day prior to the public
announcement that the Board of Directors had engaged E&Y to assist the Company
in exploring its options for maximizing shareholder value, the reported high and
low sales price of the Common Stock was $3.25. On October 29, 1996, the trading
day prior to the public announcement of the execution of the Merger Agreement,
which provided for a cash payment of $3.92 per share, subject to certain
adjustments, the reported high and low sales price was $2.75.
The Company has not paid cash dividends on its Common Stock since 1994.
Dividends on both the Common Stock and Preferred Stock are declared by the Board
of Directors. Cash dividends on the Common Stock had been paid for 14
consecutive years through 1994. The 1994 cash dividend was $.05 per share. The
Preferred Stock dividends are paid quarterly on the first day of January, April,
July and October. The annual cash dividend on the Preferred Stock is $.85 per
share. If the Merger is not consummated for any reason and the Merger Agreement
is terminated, the Company expects that its current policy with respect to
dividends will continue.
The following table sets forth for the past three years the range of
high and low sale prices of the Common Stock in the NASDAQ National Market
Systems as reported by NASDAQ.
- -----------------------------------------------------------------
Year Quarter High Low
- -----------------------------------------------------------------
1994 1st Quarter 3 1/2 2
2nd Quarter 2 5/8 2
3rd Quarter 3 2
4th Quarter 3 1/4 2
- -----------------------------------------------------------------
1995 1st Quarter 3 2
2nd Quarter 3 3/4 2 1/2
3rd Quarter 4 3
4th Quarter 4 1/4 3 1/4
- -----------------------------------------------------------------
1996 1st Quarter 4 3
2nd Quarter 3 1/2 3
3rd Quarter 3 3/8 2 1/2
4th Quarter (Thru December 13) 3 15/16 2 3/4
- -----------------------------------------------------------------
18
<PAGE>
SELECTED FINANCIAL DATA
The following table summarizes certain information contained in or
derived from the Consolidated Financial Statements and the Notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, and the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
- --------------------------------------------------------------------------------
(Not covered by Independent Auditor's Report)
<TABLE>
<CAPTION>
Nine months ended
September 30, Year ended December 31,
(dollar amounts in thousands, ---------------------------------------------------------------------------
except per share amounts) 1996 1995 1995 1994 1993 1992 1991
- ---------------------------- ---- ---- ---- ---- ---- ---- ----
(Restated) (Restated) (Restated) (Restated) (Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues (before reinsurance ceded) $30,155 $34,000 $43,282 $47,618 $47,539 $48,225 $51,317
Premiums written and policy charges
(before reinsurance ceded) 27,273 30,603 38,909 41,095 39,510 39,700 42,090
Net investment income 1,917 2,194 2,758 4,964 5,642 7,477 8,485
Net return on average investments 5.3% 6.3% 6.0% 6.7% 7.2% 7.4% 7.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (1,241) (1,164) (2,056) (1,489) (957) (123) (4,171)
Discontinued operations 349 465 455 277 142 646 845
Income (loss) before cumulative effect of
change in accounting principles (892) (699) (1,601) (1,212) (815) 523 (3,326)
Cumulative effect of change in accounting principles 299 (710)
Net income (loss) (892) (699) (1,601) (913) (1,525) 523 (3,326)
Income (loss) per common and common
equivalent share:
Loss from continuing operations (0.60) (0.57) (0.95) (0.71) (0.51) (0.16) (1.43)
Discontinued operations 0.13 0.18 0.17 0.09 0.05 0.18 0.17
Income (loss) before cumulative effect of change
In accounting principles (0.47) (0.39) (0.78) (0.62) (0.46) 0.02 (1.26)
Cumulative effect of change in accounting principles 0.11 (0.26)
Net income (loss) (0.47) (0.39) (0.78) (0.51) (0.72) 0.02 (1.26)
- ------------------------------------------------------------------------------------------------------------------------------------
September December 31,
--------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets 117,686 123,322 125,276 144,393 174,003 164,087
Total debt 1,857 2,537 3,389 4,683 5,987 7,220
Shareholders' equity and redeemable preferred stock 13,505 15,671 15,226 19,502 21,295 21,442
Shareholders' equity per common share 3.38 4.20 3.96 5.41 5.91 5.88
Return on average total equity, including redeemable
preferred stock (11.6%) (9.9%) (5.1%) (7.4%) 2.8% (13.4%)
Cash dividends declared per common share NONE NONE 0.05 0.05 0.05 0.14
Life insurance in force (before reinsurance ceded) 2,003,291 2,132,073 2,265,919 2,489,330 2,917,021 3,658,779
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: The financial data for the years ended December 31, 1991 through 1995
and for the nine months ended September 30, 1995 has been restated to
reflect the operating results of the Company's auto auction business as
discontinued operations. This business was sold on November 6, 1996.
19
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table presents information as to the beneficial ownership
of the Common Stock as of December 13, 1996 for any person known to the Company
to hold 5% or more of the Common Stock.
<TABLE>
<CAPTION>
Amount and
Nature of
Title of Name and Address of Beneficial Percent
Class Beneficial Owner Ownership of Class
====================================================================================================================================
<S> <C> <C> <C>
Common Consumers Financial Corporation and Subsidiaries Employee Stock Ownership Plan 261,338 8.6 %
(ESOP), 1200 Camp Hill By-Pass, Camp Hill, PA 17011
Common Consumers Life Insurance Company of North Carolina, Consumers Reinsurance Company 409,964 13.6 %
and Interstate Auto Auction, Inc., affiliates of Consumers Financial Corporation,
1200 Camp Hill By-Pass, Camp Hill, PA 17011
</TABLE>
- ------------------------
(1) The Company's Employee Stock Ownership Plan is an employee benefit plan
which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Participating employees of the Company have
the power to vote the shares allocated to them under the Plan. The
Trustees of the Plan have discretionary investment powers including the
power to dispose of the shares.
The following table sets forth as of December 13, 1996, the number of
shares of the Common Stock and the Preferred Stock beneficially owned by (a)
each director; (b) each executive officer who is not a director; and (c) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Title of Name of Beneficial of
Class Beneficial Owner Ownership (1) Class
==================================================================
<S> <C> <C> <C>
(a)
Common Groninger, John E. 57,521 (2) 1.9
Preferred 22,410 (3) 4.2
Common Guida, Leon A. 3,000 *
Common Kremer, Edward J. 1,607 *
Common Little, Jr., Robert G. 9,143 (4) *
Preferred 218 (4) *
Common Martz, Sterling P. 4,000 (4) *
Preferred 1,400 (4) *
Common Robertson, James C. 99,775 3.3
Preferred 5,235 (5) *
(b)
Common Byrnes, Ralph R. 73,030 (6)(9) 2.4
Common Walsh, Jr., William J. 62,811 (7) (9) 2.1
Common Zullinger, R. Fredric 54,521 (8) (9) 1.8
(c)
Common Directors and Executive 365,408 (9) 11.8
Preferred Officers as a Group 28,263 5.5
(9 individuals)
</TABLE>
* Denotes less than 1%
- ----------
(1) Except where otherwise indicated, the beneficial owner of the shares
exercises sole voting and investment power.
20
<PAGE>
(2) Includes 42,542 shares owned by Mr. Groninger's wife.
(3) Includes 1,000 shares owned by Mr. Groninger's wife.
(4) Shared investment and voting power with their spouses for the shares
indicated.
(5) Includes 700 shares owned by Mr. Robertson's wife.
(6) Includes 31,717 shares for which Mr. Byrnes has voting power as to
shares held for him in the Employee Stock Ownership Plan.
(7) Includes 21,282 shares for which Mr. Walsh has voting power as to
shares held for him in the Employee Stock Ownership Plan.
(8) Includes 14,833 shares for which Mr. Zullinger has voting power as
to shares held for him in the Employee Stock Ownership Plan.
(9) Includes shares that are acquirable through the exercise of stock
options and SAR's. In accordance with the terms of the Merger
Agreement, the holders of all outstanding stock options and SAR's shall
agree to exercise their SAR's in lieu of the exercise of the stock
options. See "Interests of Certain Persons in the Merger."
FEES AND EXPENSES
All expenses in connection with solicitation of proxies will be borne
by the Company. The Company will pay brokers, nominees, fiduciaries or other
custodians their reasonable expenses for sending proxy materials to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies primarily by mail, but directors,
officers and other employees of the Company may also solicit in person, by
telephone, by telegraph or otherwise. With certain limited exceptions, all of
the fees and expenses (including investment banking, legal and accounting fees
and other expenses) of the Merger will be paid by the party incurring such fees
and expenses, whether or not the Merger is consummated. See "Agreement and Plan
of Merger: Termination, Amendment, Fees and Expenses."
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to Subchapter 15D of the PBCL, holders of record of shares of
the Common Stock are entitled to assert Dissenters Rights in connection with the
Merger and obtain payment of the "fair value" of their shares, provided that
such shareholders comply with the requirements of the PBCL. The following is a
summary of the procedures to be followed by holders of the Common Stock electing
to exercise their Dissenters Rights and is qualified in its entirety by
reference to the PBCL, the full text of which is set forth in Appendix 2 to this
Proxy Statement. The PBCL should be reviewed carefully by such shareholders who
wish to assert their Dissenters Rights or who wish to preserve the right to do
so, since failure to comply with those procedures will result in the loss of
such Dissenters Rights.
Holders of Common Stock who elect to exercise Dissenters Rights must
satisfy each of the following conditions: (1) before the taking of the vote with
respect to the Merger, such holders must file with the Company written notice of
their intention to demand payment of the fair value of their shares (this
written notice must be in addition to and separate from any proxy or vote
against the Merger; neither voting against nor a failure to vote for the Merger
will constitute such a notice); (2) such holders must effect no change in the
beneficial ownership of their shares from the date of such filing continuously
through the Effective Date of the proposed action; and (3) such holders must not
vote in favor of the Merger (a failure to vote will satisfy this requirement,
but a vote in favor of the Merger, by proxy or in person, will constitute a
waiver of such holder's Dissenters Rights and will nullify any previously filed
written notice of intent to demand payment). Holders of Common Stock who fail to
comply with any of these conditions will have no Dissenters Rights with respect
to their shares.
21
<PAGE>
All written notices should be addressed to: Consumers Financial
Corporation, 1200 Camp Hill By-Pass, [P. O. Box 26 (17001-0026)], Camp Hill,
Pennsylvania 17011-3744, Attention: Secretary and should be executed by, or with
the consent of, the holder of record. The notice must identify the shareholder
and indicate the intention of such shareholder to demand payment for fair value
for his or her shares of Common Stock. In the notice the shareholder's name
should be stated as it appears on his or her stock certificates. A beneficial
owner of shares of Common Stock who is not the holder of record may assert
Dissenters Rights as to shares held on such person's behalf, provided that such
beneficial owner submits a written consent of the holder of record to the
Company at or before the time such rights are asserted.
A holder of Common Stock may not assert Dissenters Rights as to less
than all of the shares registered in such name except in the situation in which
certain shares are beneficially owned by another person but registered in such
shareholder's name. If a holder of Common Stock wishes to dissent with respect
to shares beneficially owned by another person, such shareholder must dissent
with respect to all of such shares and disclose the name and address of the
beneficial owner on whose behalf the holder is dissenting.
After a vote approving the Merger, and assuming the Merger is to be
consummated, the Company must give written notice that the Merger has been
approved to each shareholder who filed a written notice of intent to demand
payment for such shareholder's shares of Common Stock and who did not vote in
favor of the Merger. The Company's notice shall specify the address to which a
demand for payment and stock certificates must be sent by the dissenting
shareholder in order to obtain payment and shall include a form for demanding
payment to be completed by the shareholder. In order to receive the fair value
of his or her shares, a dissenting shareholder must, within 30 days after the
mailing date of the Company's notice, send his or her stock certificates,
together with certain information pertaining to such stock on the form supplied
by the Company. After a valid demand for payment and the related certificates
are received, the Company must remit to each dissenting shareholder who has
complied with the requirements the amount the Company estimates to be the fair
value of that shareholder's shares of Common Stock, together with a statement of
the method used to determine such estimate and the closing balance sheet and
statement of income of the Company for the period ending December 31, 1995, and
the latest updated interim financial statement of the Company. Based upon the
auction process utilized, the Company believes that the Merger Consideration is
equal to the fair value of the shares of Common Stock.
If a dissenting shareholder believes that the amount remitted by the
Company is less than the fair value of his or her shares of Common Stock, plus
interest, the holder of Common Stock may give written notice to the Company of
his or her own estimate of the fair value of their shares within 30 days after
the mailing date of the remittance and demand payment of the difference. If the
shareholder fails to give written notice of his or her estimate and demand
payment of the difference within the 30-day time period, such shareholder will
be entitled only to the amount remitted by the Company.
If the Company and the dissenting shareholder are unable to settle the
shareholder's demand within 60 days, the Company shall file in court a petition
requesting that the court determine the fair value of the shares of Common
Stock, plus interest. All holders of Common Stock whose demands are not settled
within the applicable 60-day settlement periods shall be made parties to this
proceeding. The court, after determining that the shareholder has complied with
all statutory requirements, may use any valuation method or combination of
methods it deems appropriate, whether or not used by the Company or the
dissenting shareholder, or may appoint appraisers to determine the fair value of
the shares of Common Stock. The court's determination is binding on all holders
of Common Stock and the court must enter judgment for any amount by which the
court determines fair value exceeds the amount remitted to the shareholders by
the Company.
The costs and expenses of such a proceeding, including the expenses and
compensation of any appraisers, will be assessed against the Company, unless the
court, in its discretion, determines that the dissenting shareholder's action in
demanding supplemental payment is dilatory, obdurate, arbitrary, vexatious or in
bad faith, in which event the court may assess all or a part of such costs
against the shareholder. Fees and expenses of counsel for the dissenting
shareholder may be awarded by the court out of the amount, if any, awarded to
such shareholder.
The Board of Directors recommends to any holder of Common Stock having
questions with respect to his or her rights under the PBCL to consult with his
or her legal counsel.
22
<PAGE>
ANNUAL REPORT ON FORM 10-K AND QUARTERLY REPORTS ON FORM 10-Q
A copy of the Company's 1995 Annual Report on Form 10-K and a copy of
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996 (each without exhibits unless such exhibits are specifically incorporated
therein by reference) are being mailed along with this Proxy Statement to each
shareholder of record. Shareholders not receiving a copy of such Annual Report
or Quarterly Report may obtain one without charge by writing or calling the
Secretary, Consumers Financial Corporation, 1200 Camp Hill By-Pass, [P.O. Box 26
(17001-0026)], Camp Hill, PA 17011-3744, telephone (717) 761-4230.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
31, 1995, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996 and Current Reports on Form 8-K dated
October 30, 1996 and November 26, 1996, respectively, have been filed with the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934 (the "Exchange Act") and are incorporated herein by
reference. The Company's SEC file number is 0-2616.
The information relating to the Company contained in this Proxy
Statement does not purport to be comprehensive and should be read together with
the information in the documents incorporated by reference herein. All documents
filed by the Company pursuant to Section 13(a), 13(c), 14 and 15(d) of the
Exchange Act subsequent to the date hereof and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference herein and to be a part
hereof from the date any such document is filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently field document that also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded. All information appearing in this Proxy Statement is qualified in
its entirety by the information and consolidated financial statements (including
notes thereto) appearing in the documents incorporated herein by reference,
except to the extent set forth in the immediately preceding statement.
No person is authorized to give any information or to make any
representations with respect to the matters described in this Proxy Statement
other than those contained herein or in the documents incorporated by reference
herein. Any information or representations with respect to such matters not
contained herein or therein must not be relied upon as having been authorized by
the Company. The delivery of this Proxy Statement shall not under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information in this
Proxy Statement or in the documents incorporated by reference herein is correct
as of any time subsequent to the date hereof or thereof.
The Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. These documents (other than exhibits to
such documents, unless such exhibits are specifically incorporated therein by
reference) are available, without charge, to any person, including any
beneficial owner of stock of the Company to whom this Proxy Statement is
delivered, on written or oral request to the Secretary of the Company, 1200 Camp
Hill By-Pass [P. O. Box 26 (17001-0026)], Camp Hill, Pennsylvania, 17011-3744,
telephone number (717) 761-4230.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at certain regional offices of the
Commission located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such information can be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. Such material may also be accessed electronically
by means of the Commission's home page on the Internet (http://www.sec.gov).
23
<PAGE>
LEGAL OPINIONS
Certain matters relating to the Merger involving the holders of Common
Stock will be passed upon at the Effective Time, as a condition to the Merger,
by Duane, Morris & Heckscher, counsel to the Company, and by Morgan, Lewis &
Bockius, LLP, counsel to LaSalle and CAC.
INDEPENDENT AUDITORS
The consolidated financial statements and schedules of the Company and
its subsidiaries included in the Company's Annual Report on Form 10-K as of
December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995 and incorporated by reference in this Proxy Statement
are incorporated by reference herein in reliance upon the report of E&Y,
independent auditors, and upon the authority of said firm as experts in
accounting and auditing. Representatives of E&Y are expected to be present at
the Special Meeting and will have an opportunity to make a statement if they
desire to do so and are also expected to be available to respond to appropriate
shareholder questions.
On November 26, 1996, E&Y advised the Company that it could no longer
continue as the Company's independent auditors, and that it could not perform
the audit of the Company's 1996 financial statements. E&Y made this
determination because it had provided certain financial advisory services to the
Company in connection with the Company's efforts to sell or merge its business
operations. These services, in E&Y's judgment, impaired the firm's independence
as it relates to the Company's 1996 financial statements. E&Y further advised
the Company that its independence with respect to the Company's 1995 financial
statements was not impaired; however E&Y recommended that the Company retain new
auditors to re-audit the 1995 financial statements at E&Y's expense in order to
avoid any delays that might otherwise arise in the filing and review of this
Proxy Statement or periodic reports to be filed thereafter.
None of E&Y's reports on the Company's financial statements for the
past two years contained an adverse opinion or disclaimer of opinion, nor was
any such report qualified or modified as to uncertainty, audit scope or
accounting principles. Further, during the two most recent fiscal years and the
subsequent interim periods of 1996, there have been no disagreements between the
Company and E&Y on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, and no reportable events
have occurred.
E&Y's decision that it could not perform the audit of the Company's
1996 financial statements was acknowledged by the Audit Committee of the
Company's Board of Directors on November 26, 1996. On the same date, the Audit
Committee retained Arthur Andersen LLP to perform the audit of the Company's
1996 financial statements and the re-audit of the 1995 financial statements.
Prior to this time, during the Company's two most recent fiscal years
and subsequent interim periods, neither the Company nor anyone acting on its
behalf consulted Arthur Andersen regarding (1) either the application of
accounting principles to a specified transaction, completed or proposed, or the
type of audit opinion that might be rendered on the Company's financial
statements, and neither a written report nor oral advice was provided to the
Company which Arthur Andersen concluded was an important factor considered by
the Company in reaching a decision as to the accounting, auditing or financial
reporting issue; or (2) any matter that was the subject of a disagreement with
E&Y (no such disagreement existed) or as to a reportable event.
OTHER BUSINESS
The management of the Company knows of no matter other than the
approval of the Merger Agreement and the Plan of Merger to be brought before the
Special Meeting. However, the enclosed proxy gives discretionary authority in
the event any additional matters should be presented.
The foregoing Notice and Proxy Statement are sent by order of the Board
of Directors.
PETER J. KRAMER
GENERAL COUNSEL
AND SECRETARY
Dated: January ___, 1997
24
<PAGE>
CONSUMERS FINANCIAL CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
FIRST ADDRESS LINE
2ND LINE
3RD LINE
4TH LINE
5TH LINE
PLEASE VOTE YOUR SHARES, SIGN AND RETURN THE BOTTOM PORTION OF THIS PROXY CARD.
A POSTPAID ENVELOPE IS ENCLOSED.
TEAR HERE
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
CONSUMERS FINANCIAL CORPORATION
PROXY
SPECIAL MEETING OF SHAREHOLDERS
The undersigned Shareholder(s) of Consumers Financial Corporation, a
Pennsylvania corporation, hereby appoint Peter J. Kramer, Esq. and William J.
Walsh, Jr. as Proxies, acting individually or collectively, each with full power
of substitution, to vote all shares of Consumers Financial Corporation Common
Stock which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on ___________, February ___, 1997 at Corporate
Headquarters, 1200 Camp Hill By-Pass, Camp Hill, Pennsylvania, and at any
adjournment(s) thereof.
NAME OF SHAREHOLDER A/C#
2ND ADS LINE NUMBER OF SHS:
3RD ADS LINE SS#
4TH ADS LINE
5TH LINE (IF NECESSARY)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
Every properly signed proxy will be voted in accordance with the specifications
made thereon. If not otherwise specified, this Proxy will be voted FOR the Plan
of Merger. In addition, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(1) To consider and vote upon the approval of a Plan of Merger between the
Company and Consumers Acquisition Corp. ("CAC"), a Pennsylvania
corporation and a wholly-owned subsidiary of The LaSalle Group, Inc., a
Delaware corporation ("LaSalle"), providing for the merger of CAC with
and into theCompany with the Company being the surviving corporation,
and pursuant to which each outstanding share of the Company's Common
Stock will be converted into the right to receive $3.92 in cash,
without interest, subject to certain adjustments, all as more fully
described in the accompanying Proxy Statement and the Plan of Merger, a
copy of which is attached as Exhibit A to the Agreement and Plan of
Merger which is attached as Appendix 1 to the Proxy Statement.
For [_] Against [_] Withhold [_]
(2) In their discretion, to vote upon such other matters as may properly
come before the meeting.
SIGNATURE(S) / Dated: , 1997
-------------------- ----------------- -----------------
Please sign exactly as your name(s) appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, give your full title as such. If a
corporation, sign the full corporate name by an authorized officer. If a
partnership, sign in partnership name by an authorized person.
PLEASE SIGN AND RETURN THIS PORTION PROMPTLY, USING THE ENCLOSED ENVELOPE.
<PAGE>
EXHIBIT 2
Appendix 1
AGREEMENT AND PLAN OF MERGER
Among
CONSUMERS FINANCIAL CORPORATION,
LASALLE GROUP, INC.
and
CONSUMERS ACQUISITION CORP.
Dated as of October 30, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I THE MERGER................................................................ 1
SECTION 1.1 The Merger................................................... 1
SECTION 1.2 Terms and Conditions of The Merger........................... 1
SECTION 1.3 Timing....................................................... 3
ARTICLE II REPRESENTATIONS AND WARRANTIES............................................ 4
SECTION 2.1 Representations and Warranties by Consumers.................. 4
SECTION 2.2 Representations and Warranties by LaSalle and CAC............ 19
ARTICLE III ADDITIONAL COVENANTS AND AGREEMENTS....................................... 21
SECTION 3.1 Shareholder Approval......................................... 21
SECTION 3.2 Conduct of Consumers' Business............................... 21
SECTION 3.3 Expenses; Break-up Fee....................................... 24
SECTION 3.4 Other Agreements............................................. 24
SECTION 3.5 No Solicitation of Transactions.............................. 24
SECTION 3.6 Third Party Consents......................................... 25
SECTION 3.7 Tax Clearance Certificates................................... 25
SECTION 3.8 Notification of Certain Matters.............................. 25
SECTION 3.9 Access to Information........................................ 25
SECTION 3.10 Public Announcements........................................ 26
SECTION 3.11 Transmittal Letter.......................................... 26
ARTICLE IV CONDITIONS TO THE MERGER.................................................. 26
SECTION 4.1 Conditions to the Merger Relating to LaSalle and CAC......... 26
SECTION 4.2 Conditions to the Merger Relating to Consumers............... 30
ARTICLE V TERMINATION AND ABANDONMENT............................................... 32
SECTION 5.1 Termination and Abandonment.................................. 32
SECTION 5.2 Effect of Termination........................................ 32
SECTION 5.3 Amendment.................................................... 32
SECTION 5.4 Waiver....................................................... 32
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VI MISCELLANEOUS............................................................. 33
SECTION 6.1 Notices...................................................... 33
SECTION 6.2 No Survival of Representations and Warranties................ 34
SECTION 6.3 Headings..................................................... 34
SECTION 6.4 Entire Agreement............................................. 34
SECTION 6.5 Cooperation.................................................. 34
SECTION 6.6 No Rights; Etc............................................... 34
SECTION 6.7 No Assignment................................................ 34
SECTION 6.8 No Third Party Beneficiaries................................. 34
SECTION 6.9 Governing Law................................................ 34
SECTION 6.10 Counterparts................................................ 35
</TABLE>
Exhibit A Plan of Merger
Exhibit B Transmittal Letter
iii
<PAGE>
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").
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
<PAGE>
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
-2-
<PAGE>
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:
-3-
<PAGE>
(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.
-4-
<PAGE>
(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;
-5-
<PAGE>
(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
-6-
<PAGE>
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
-7-
<PAGE>
(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;
-8-
<PAGE>
(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
-9-
<PAGE>
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
-10-
<PAGE>
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
-11-
<PAGE>
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
-12-
<PAGE>
(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;
-13-
<PAGE>
(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
-14-
<PAGE>
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
-15-
<PAGE>
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.
-16-
<PAGE>
(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.
-17-
<PAGE>
(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
-18-
<PAGE>
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.
- 19 -
<PAGE>
(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.
- 20-
<PAGE>
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:
- 21-
<PAGE>
(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.
- 22 -
<PAGE>
(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
- 23 -
<PAGE>
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
- 24 -
<PAGE>
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
- 25 -
<PAGE>
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
- 26 -
<PAGE>
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
- 27 -
<PAGE>
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.
- 28 -
<PAGE>
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.
- 29 -
<PAGE>
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.
- 30 -
<PAGE>
(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
-31-
<PAGE>
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
-32-
<PAGE>
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.
-33-
<PAGE>
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.
-34-
<PAGE>
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
-35-
<PAGE>
EXHIBIT A
PLAN OF MERGER
merging
CONSUMERS ACQUISITION CORPORATION
(a Pennsylvania corporation)
with and into
CONSUMERS FINANCIAL CORPORATION
(a Pennsylvania corporation)
RECITALS
A. Consumers Acquisition Corporation (the "Merging Corporation")
is a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania, which is authorized to issue 1,000
shares of Common Stock, par value $.01 per share ("CAC Common Stock"), of which
1,000 shares are issued and outstanding, all of which are owned of record and
beneficially by LaSalle Group, Inc., a Delaware corporation ("LaSalle").
B. Consumers Financial Corporation (the "Surviving Corporation")
is a corporation duly organized and validly existing under the laws of the
Commonwealth of Pennsylvania, which is authorized to issue 10,000,000 shares of
Common Stock, stated value $.01 per share ("Consumers Common Stock"), of which
[3,025,501] shares are issued and outstanding and 632,500 shares of Preferred
Stock, liquidation preference $10.00 per share ("Consumers Preferred Stock"), of
which 536,500 shares are issued and outstanding.
C. The Board of Directors of the Merging Corporation has adopted
resolutions approving this Plan of Merger in accordance with the Pennsylvania
Business Corporation Law of 1988 ("BCL"), and directing that it be submitted to
the sole shareholder of the Merging Corporation for adoption.
D. The Board of Directors of the Surviving Corporation has
adopted resolutions approving this Plan of Merger in accordance with the BCL and
directing that it be submitted to the shareholders of the Surviving Corporation
for adoption.
A-1
<PAGE>
ARTICLE I
The Merger
1.1 The Merger. The Merging Corporation and the Surviving
----------
Corporation shall effect a merger (the "Merger") in accordance with and subject
to the terms and conditions of this Plan of Merger (the "Plan"). On the
Effective Date (as such term is defined in Section 1.2 hereof), the Merging
Corporation shall be merged with and into the Surviving Corporation, and the
separate existence of the Merging Corporation, except insofar as it may be
continued by law, shall cease, all with the effect provided in Section 1929 of
the BCL.
1.2 Effective Date. Articles of Merger, and such other documents
--------------
and instruments as are required by, and complying in all respects with, the BCL
shall be delivered to the Department of State of the Commonwealth of
Pennsylvania. The Merger shall become effective upon the filing of the Articles
of Merger with the Department of State of the Commonwealth of Pennsylvania (the
"Effective Date").
1.3 Further Assurances. If at any time the Surviving Corporation,
------------------
or its successors or assigns, shall consider or be advised that any further
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its rights, title or interest in, to or under any of the rights,
properties or assets of the Merging Corporation acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger, or
(b) otherwise carry out the purposes of this Plan, the Merging Corporation and
its proper officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
rights, properties or assets in the Surviving Corporation and otherwise to carry
out the purposes of this Plan; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Merging
Corporation or otherwise to take any and all such action.
1.4 Amendment or Termination. Notwithstanding shareholder
------------------------
approval of this Plan, this Plan may be amended or terminated at any time on or
before the Effective Date by agreement of the Boards of Directors of the Merging
Corporation and the Surviving Corporation, provided that no amendment may be
made which decreases the amount of Merger Consideration (as such term is defined
in Section 2.2 hereof) payable to holders of Consumers Common Stock.
A-2
<PAGE>
ARTICLE II
Capital Stock
2.1 CAC Common Stock. At the Effective Date, each share of CAC
----------------
Common Stock then issued and outstanding shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
share of the Common Stock of the Surviving Corporation.
2.2 Conversion of Consumers Common Stock.
------------------------------------
(a) Merger Consideration At the Effective Date, except for
--------------------
shares of Consumers Common Stock held by holders of Dissenting Shares (as such
term is defined in Section 2.5), each share of Consumers Common Stock then
issued and outstanding shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive
immediately deliverable cash in an amount equal to $11,859,964 divided by the
number of shares of Consumers Common Stock outstanding on the Effective Date
(the "Merger Consideration"), subject to adjustment prior to the Effective Date
as provided in Section 2.2(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 below and (y) the
effects of any 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.
A-3
<PAGE>
(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.
2.3 Consumers Preferred Stock. Each share of Consumers Preferred
-------------------------
Stock shall remain outstanding and unaffected by the Merger.
2.4 No Further Rights or Transfers. On and after the Effective
------------------------------
Date, the holder of a Certificate (as such term is defined in Section 3.2
hereof) representing Consumers Common Stock shall cease to have any rights as a
shareholder of Consumers, except for the right to surrender his or her
Certificate in exchange for payment of the Merger Consideration.
2.5 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
this 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, then the right of such holder of Dissenting Shares to be
paid the "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.
ARTICLE III
Merger Payment Procedure
3.1 Exchange Agent. CAC shall deposit the Merger Consideration
--------------
with Consumers Financial Corporation or such other transfer agent as may be
mutually acceptable to both CAC and Consumers (the "Exchange Agent") for the
benefit of holders of Consumers Common Stock, promptly after the Effective Date.
3.2 Transmittal Letter. As soon as practicable after the
------------------
Effective Date, the Exchange Agent shall send a notice and transmittal form to
each holder of record of a certificate
A-4
<PAGE>
or certificates theretofore evidencing shares of Consumers Common Stock (such
certificates are collectively referred to herein as the "Certificates"),
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent such Certificates for exchange into the
Merger Consideration. Upon the surrender of a Certificate to the Exchange Agent
together with and in accordance with such transmittal form, the holder thereof
shall be entitled to receive in exchange therefor the Merger Consideration
payable in respect of each share of Consumers Common Stock represented thereby.
Upon such surrender, the Exchange Agent will promptly pay the Merger
Consideration. Each such Certificate shall be deemed for all purposes to
evidence only the right to receive the Merger Consideration.
3.3 Delivery To Person Other Than Registered Holder. If the
-----------------------------------------------
Merger Consideration (or any portion thereof) is to be delivered to a person
other than the person in whose name the Certificates surrendered in exchange
therefor are registered, it shall be a condition to the delivery of the Merger
Consideration that the certificates so surrendered shall be properly endorsed or
accompanied by appropriate stock powers and otherwise be in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay to the Exchange Agent any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not required to be paid.
3.4 Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, the owner of such lost, stolen or destroyed Certificate
shall deliver to the Surviving Corporation a bond in such sum as the Surviving
Corporation may direct as indemnity against any claim that may be made against
the Surviving Corporation with respect to the Certificate alleged to have been
lost, stolen or destroyed.
ARTICLE IV
Surviving Provisions
4.1 Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation of the Surviving Corporation shall survive and be the Articles of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions therein and as provided by the BCL. The bylaws of
the Surviving Corporation shall survive and be the bylaws of the Surviving
Corporation until thereafter amended in accordance with the provisions therein
and as provided in the BCL.
4.2 Directors and Officers. The directors and officers of the
----------------------
Surviving Corporation shall be the directors and officers of the Merging
Corporation.
A-5
<PAGE>
Each director and officer shall hold office until the expiration
of his or her term of office or earlier death, resignation or removal in
accordance with the Articles of Incorporation and Bylaws of the Merging
Corporation and applicable law.
A-6
<PAGE>
EXHIBIT 4
APPENDIX 2
DISSENTERS RIGHTS PROVISIONS OF THE
PENNSYLVANIA BUSINESS CORPORATION LAW
Section 1930. Dissenters rights.
(a) General rule. If any shareholder of a domestic business corporation
that is to be a party to a merger or consolidation pursuant to a plan of merger
or consolidation objects to the plan of merger or consolidation and complies
with the provisions of Subchapter D of Chapter 15 (relating to dissenters
rights), the shareholder shall be entitled to the rights and remedies of
dissenting shareholders therein provided, if any. See also section 1906(c)
(relating to dissenters rights upon special treatment).
(b) Plans adopted by directors only. Except as otherwise provided
pursuant to section 1571(c) (relating to grant of optional dissenters rights),
Subchapter D of Chapter 15 shall not apply to any of the shares of a corporation
that is a party to a merger or consolidation pursuant to section 1924(1)(i)
(relating to adoption by board of directors).
(c) Cross references. See sections 1571(b) (relating to exceptions) and
1904 (relating to de facto transaction doctrine abolished).
SUBCHAPTER D
DISSENTERS RIGHTS
Section 1571. Application and effect of subchapter.
(a) General rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon
special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share
exchanges).
Section 1932(c) (relating to dissenters rights in asset
transfers).
Section 1952(d) (relating to dissenters rights in
division).
Section 1962(c) (relating to dissenters rights in
conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a
restriction on transfer of a security is
held invalid).
<PAGE>
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon
election).
Section 2705(d) (relating to dissenters rights upon
renewal of election).
Section 2907(a) (relating to proceedings to terminate
breach of qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the
holders of the shares of any class or series of shares that, at the
record date fixed to determine the shareholders entitled to notice
of and to vote at the meeting at which a plan specified in any of
section 1930, 1931(d), 1932(c) or 1952(d) is to be voted on, are
either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such shares
under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights
shall be available without regard to the exception provided in that
paragraph in the case of:
(i) Shares converted by a plan if the shares are not
converted solely into shares of the acquiring, surviving, new or
other corporation or solely into such shares and money in lieu of
fractional shares.
(ii) Shares of any preferred or special class unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class to vote thereon and require for the
adoption of the plan or the effectuation of the transaction the
affirmative vote of a majority of the votes cast by all shareholders
of the class.
(iii) Shares entitled to dissenters rights under section
1906(c) (relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by
purchase, lease, exchange or other disposition all or substantially
all of the shares, property or assets of another corporation by the
issuance of shares, obligations or otherwise, with or without
assuming the liabilities of the other corporation and with or without
the intervention of another corporation or other person, shall not be
entitled to the rights and remedies of dissenting shareholders
provided in this subchapter regardless of the fact, if it be the
case, that the acquisition was accomplished by the issuance of voting
shares of the corporation to be outstanding immediately after the
acquisition sufficient to elect a majority or more of the directors
of the corporation.
2
<PAGE>
(c) Grant of optional dissenters rights. The bylaws or a resolution of
the board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.
(d) Notice of dissenters rights. Unless otherwise provided by statute,
if a proposed corporate action that would give rise to dissenters rights under
this subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) A statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value of
their shares by complying with the terms of this subchapter; and
(2) A copy of this subchapter.
(e) Other statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective. This subchapter may not
be relaxed by any provision of the articles.
(g) Cross references. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
Section 1572. Definitions.
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have the sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.
3
<PAGE>
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors including the average
rate currently paid by the corporation on its principal bank loans.
Section 1573. Record and beneficial holders and owners.
(a) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that
event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
(b) Beneficial owners of shares. A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
Section 1574. Notice of intention to dissent.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed
corporate action shall constitute the written notice required by this section.
Section 1575. Notice to demand payment.
(a) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action
is to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
4
<PAGE>
(2) Inform holders of uncertificated shares to what extent
transfer of shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request
for certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment. The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
Section 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares. If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. The dissenter shall retain all
other rights of a shareholder until those rights are modified by effectuation of
the proposed corporate action.
Section 1577. Release of restrictions or payment for shares.
(a) Failure to effectuate corporate action. Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment. When uncertificated shares
have been released from transfer restrictions and deposited certificates have
been returned, the corporation may at any later time send a new notice
conforming to the requirements of section 1575 (relating to notice to demand
payment), with like effect.
(c) Payment of fair value of shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
5
<PAGE>
(1) The closing balance sheet and statement of income of the issuer
of the shares held or owned by the dissenter for a fiscal year ending not
more than 16 months before the date of remittance or notice together with
the latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair market
value of the shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment. If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by subsection
(c), it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenters had
after making demand for payment of their fair value.
Section 1578. Estimate by dissenter of fair value of shares.
(a) General rule. If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of failure to file estimate. Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing by
the corporation of its remittance or notice, the dissenter shall be entitled to
no more than the amount stated in the notice or remitted to him by the
corporation.
Section 1579. Valuation proceedings generally.
(a) General rule. Within 60 days after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demand for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578
(relating to estimate by dissenter of fair value of shares);
6
<PAGE>
If any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(b) Mandatory joinder of dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
Section 1580. Costs and expenses of valuation proceedings.
(a) General rule. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.
7
<PAGE>
(c) Award of fees for benefits to other dissenters. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
8
