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[CONSUMERS FINANCIAL CORPORATION LOGO APPEARS HERE]
1200 CAMP HILL BY-PASS
P. O. BOX 26 (17001-0026)
CAMP HILL, PENNSYLVANIA 17011-3744
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 25, 1997
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Dear Shareholders:
A Special Meeting of Shareholders of Consumers Financial Corporation, a
Pennsylvania corporation (the "Company") will be held on March 25, 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 January 31,
1997 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 January 31, 1997 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
[Bnvenience.
By Order of the Board of Directors,
/S/ PETER J. KRAMER
PETER J. KRAMER
GENERAL COUNSEL
AND SECRETARY
Camp Hill, PA
February 18, 1997
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[LOGO OF CONSUMER FINANCIAL CORPORATION APPEARS HERE]
CONSUMERS FINANCIAL CORPORATION
1200 CAMP HILL BY-PASS
P. O. BOX 26 (17001-0026)
CAMP HILL PA 17011-3744
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 25, 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 on March
25, 1997 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 18, 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.
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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 March 25, 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, January 31, 1997, 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 6,841 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
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to the Merger Agreement which is attached as Appendix 1 to this Proxy Statement.
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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 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."
The Company did not obtain a fairness opinion from an investment banking
firm for this transaction. While it is often customary in merger transactions to
obtain an expert opinion for the purpose of determining the fairness of the
price offered, the Company and E&Y believe the comprehensive auction bidding
process undertaken generated a fair price for the Company.
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.
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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.
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.
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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."
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 and payment is
expected to be made within 10 business days after receipt of the required
information and accompanying documentation. 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."
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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."
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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
January 31, 1997, at the close of business (the "Record Date"). At January 31,
1997, 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 January 31, 1997, 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. If a proxy in the accompanying
form is duly executed and returned, the shares represented thereby will be voted
as specified. Any person executing the proxy may revoke it at anytime prior to
its exercise at the Special Meeting, by written notice to the Secretary of the
Company. The proxy may also be revoked by delivery of a later dated executed
proxy. Mere attendance at the Special Meeting, without such notice, will not
revoke the proxy. 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.
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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.
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. There will be no additional solicitation of proxies
undertaken other than by mail. 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.
The Board of Directors decided to engage a financial advisor to assist
in the sale of the Company and to retain actuarial advisors to provide the
valuation expertise necessary to value the insurance business and related assets
of the Company. In selecting the financial advisor, the Board of Directors
considered the services provided by E&Y, investment banking firms, and brokers
specializing in selling either insurance companies or auto auction companies.
E&Y was selected as the financial advisor because of its knowledge of the
insurance industry and its expertise both in marketing companies to prospective
buyers and conducting an auction process aimed at obtaining the highest value
for the assets being sold. It was also estimated that the cost to the Company
for financial advisory services from E&Y would be lower. CreditRe Corporation
was the only actuarial firm considered for the credit insurance and vehicle
service contract business due to its expertise in valuations of credit
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insurance and related products. Allen Bailey & Associates, Inc. was the only
actuarial firm considered for the universal life insurance valuation as it had
previously completed such a valuation for the Company which could be updated at
a reasonable cost.
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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
actuarial reports prepared by CreditRe Corp. and Allen Bailey & Associates, Inc.
were used as benchmarks by the Company to evaluate the fairness of offers
received for the Company from the various purchasers and the adequacy of the
prices offered for the various lines of insurance business.CreditRe Corporation
was paid approximately $57,000 for its appraisal report and actuarial services.
Allen Bailey & Associates, Inc. has served as the Company's valuation actuary
for its life insurance subsidiaries since 1993 and currently serves in that
capacity. Allen Bailey & Associates was paid $43,000 for its actuarial services
in 1996 and approximately $10,000 for its updated valuation of the Company's
universal life insurance business. 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 60 potential
purchasers for the auction business was developed from industry and association
listings and from E&Y's and the Company's knowledge of potential buyers of auto
auctions. The potential purchasers were contacted by E&Y in a letter inquiring
about their interest in purchasing an auto auction. 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. The Merger Agreement provides that the $3.92 per
share to be paid to the holders of Common Stock shall be adjusted by the after-
tax effect of the difference between (a) the gross sales proceeds received from
the sale of the auction business and (b) $4.9 million. Accordingly, the sale of
the auction business in November 1996 for $4.85 million (a $50,000 pre-tax
reduction) will decrease the Merger Consideration by approximately $30,000, or
$.01 per share. See "Agreement and Plan of Merger".
In mid-February 1996, E&Y and the Company initiated calls to and sent
letters to over 45 insurance companies, not including the ultimate buyer,
LaSalle, concerning their interest in acquiring the Company or portions thereof.
After confidentiality agreements were signed, 35 sales memoranda were mailed to
potential buyers beginning on February 21, 1996. Between mid-March and late
April 1996, 11 offers were received to buy the Company or segments of the
Company. On May 22, 1996, the Company received an offer from LaSalle which was
structured as a stock purchase. E&Y assisted the Company's management in
analyzing the offers, facilitating negotiations between management and
interested buyers, and provided counseling on deal structuring, tax issues and
communications. The four highest offers were selected and a series of meetings
with each buyer were held during May 1996 to review their bids, clarify the
offers and negotiate further when it was determined that certain aspects of the
offers were not competitive with the 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 from the end of May to the beginning of July 1996, and
submitted revised offers.
From mid-July 1996 to early August 1996, E&Y reviewed with management
and the Board of Directors the contents of each potential buyer's letter of
intent, the impact of each
11
<PAGE>
offer on the Company and the tax effect of each offer with regard to the
Company. 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. On August 12, 1996, at a special meeting of the
Board of Directors, the Board accepted the LaSalle offer and authorized the
signing of the letter of intent with LaSalle, subject to further negotiations
regarding certain financial information and price adjustments. A subsequent
letter of intent was signed by the parties on September 27, 1996, providing that
LaSalle would acquire the Company in a merger transaction whereby the holders of
the Common Stock would receive the Merger Consideration. On October 22, 1996 the
Board of Directors met for a regularly scheduled meeting to consider the
proposed merger and unanimously approved the recommendation of management and
E&Y to enter into a definitive agreement with LaSalle and authorized the signing
of the Merger Agreement. The Merger Agreement was signed on October 30, 1996 and
the Company issued a press release publicly announcing the proposed merger with
LaSalle on October 31, 1996.
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 consideration to be distributed to those shareholders.
Further, the LaSalle offer is a cash offer which will be paid at the time the
common stock certificates are surrendered, whereas each of the three competing
offers not only would have delayed a portion of the cash distribution to the
holders of Common Stock over a 5-year period but there was also the uncertainty
as to the total cash distribution available to the holders of Common Stock. Each
of the three competing offers involved other alternatives for distributing cash
to the holders of Common Stock.
E&Y reviewed the Company's calculations of the estimated ultimate
consideration to be received by the holders of Common Stock if the Company
retained and earned off its existing credit insurance business, in accordance
with the first alternative discussed below. E&Y also reviewed a similar
calculation prepared by the Company computing the estimated ultimate
consideration to be received if the Company sold its existing credit insurance
business pursuant to the second alternative discussed below. E&Y did not
provide advice with respect to the third alternative considered by the Board, as
discussed below, to continue to operate the Company while attempting to return
its operations to profitable levels.
One alternative considered by the Board of Directors involved
retaining and earning off the Company's existing credit insurance business,
selling its credit insurance accounts in return for payments based upon the
credit insurance premiums produced by those accounts over a 5-year period, and
liquidating its remaining assets. This alternative would produce a greater risk
than the LaSalle offer since the Company would remain liable for all mortality
and morbidity risks (i.e., life and disability claims) associated with the
Company's credit insurance policies. In addition, any payments to the holders of
Common Stock would be conditioned upon the realization of the profits or losses
associated with the existing credit insurance business, the receipt over a
5-year period of the fees generated from the sale of the credit insurance
accounts and the liquidation of the remaining assets of the Company.
A second alternative considered by the Board of Directors involved the
sale of the Company's existing credit insurance business and its credit
insurance accounts to a third party purchaser and the liquidation of the
remaining assets of the Company. While the Company would no longer be
responsible for the mortality and morbidity risks associated with the credit
insurance policies under this alternative, the uncertainty of the amount of
consideration to be received over the 5-year period from the fees produced from
the sale of the credit insurance accounts made this alternative significantly
less attractive than the LaSalle offer. There would also be more risk than
associated with the LaSalle offer in that the remaining assets of the Company
would have to be liquidated before final distribution could be made to the
holders of Common Stock. In addition, because there would be greater Federal and
state corporate income taxes incurred under both of these
12
<PAGE>
alternatives, there would be less consideration available to the holders of
Common Stock as compared to the LaSalle offer.
The Board of Directors also considered a third alternative in which
the Company would continue in business and attempt to return its operations to
profitability. However, the Board of Directors determined that it was not
feasible to become profitable in the near future and the possibility existed
that the Company would become insolvent and/or would be subject to regulatory
supervision by various state insurance departments. In that event, any
distribution of the Company's assets to its shareholders would be upon the
liquidation of the Company by the insurance department regulators and would
almost certainly result in the holders of Common Stock receiving less than the
Merger Consideration offered by LaSalle. This was likewise 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.
While the Board of Directors and Management have determined that it is
in the best interests of the Company and its shareholders to accept the offer
from LaSalle, certain officers may not have continued employment under the other
offers received by the Company; therefore, those officers may have a conflict of
interest in recommending the LaSalle offer. However, since the LaSalle offer
produced the highest consideration for all holders of Common Stock, and because
all holders of Common Stock, including directors and officers, will receive the
same price for their shares, the Company does not believe this potential
conflict has any effect on the holders of Common Stock.
13
<PAGE>
See "Interests of Certain Persons in the Merger".
Because of the financial advisory services provided by E&Y to the
Company, E&Y advised the Company on November 26, 1996 that it could no longer
remain as the Company's independent auditors for 1996 and recommended that the
Company retain new auditors to re-audit the Company's 1995 financial statements
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. E&Y's
decision that it could not perform the audit of the Company's 1996 financial
statements was acknowledged on the same date by the Audit Committee of the
Company's Board of Directors, and Arthur Andersen, LLP was retained to perform
the re-audit of the Company's 1995 financial statements and to perform the audit
of the 1996 financial statements. E&Y has agreed to reimburse the Company for
the costs associated with the re-audit of the Company's 1995 financial
statements. See "Independent Auditors".
The sale of the auto auction business in November 1996 resulted in a
$1.9 million after-tax gain, which, if included on a pro forma basis in the
September 30, 1996 financial statements, would increase book value per share by
$.73. The pending sale of the universal life insurance business will result in
an after-tax loss of about $886,000. If this loss was included on a pro forma
basis in the September 30, 1996 statements, book value per share would decrease
by $.34. Giving effect to these two sale transactions as of September 30, 1996
would increase the Company's pro forma book value from $3.38 per share to $3.77
per share. The $3.92 price per share represents a 4% premium above the pro
forma book value per share at September 30, 1996.
RECOMMENDATION OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER.
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.
The principal factors considered by the Board of Directors in its
evaluation of the Merger were:
a. The desire of the Board of Directors to maximize the value to
be received by the holders of the Common Stock.
b. The desire of the Board of Directors to maintain or improve
the interests of the holders of the Preferred Stock with respect to the relative
financial condition of the Company immediately before and after the proposed
Merger.
c. The conclusion by the Board of Directors that the best
alternative for maximizing value was to sell or merge the Company with a
strategic buyer or partner rather than continuing independent operations. In
light of the operating loss incurred by the Company in recent years, the Board
of Directors determined that rebuilding the Company's revenues to return the
Company to profitability would require a protracted period of time and could
create significant risk for the shareholders.
14
<PAGE>
d. The determination by the Board of Directors that the alternative
of selling the Company's credit insurance accounts, retaining its existing
credit insurance business until all profits from that business had earned and
liquidating the Company's other assets (1) would require approximately five
years before the full amount of cash could be distributed, since the offers
other than LaSalle's all involved at least a five-year pay-out for the value of
the new credit insurance accounts, (2) would involve substantially more
uncertainty regarding the amount to be ultimately distributed to the holders of
Common Stock, primarily because of the potential for adverse claims experience
for which the Company would be responsible until the existing credit insurance
business had completely earned, and (3) would ultimately result in a
distribution which would be lower than the Merger Consideration even if there
was no adverse claims experience.
e. The determination by the Board of Directors that while the second
alternative of selling both the credit insurance accounts and the existing
credit insurance business and liquidating the other assets would eliminate the
adverse claims risk associated with retaining existing business, this
alternative (1) would still require five years before the full amount of cash
could be distributed, (2) would still involve some uncertainty with respect to
the amount to be ultimately distributed to the holders of Common Stock, because
the installment pay-out for the value of the credit insurance accounts under all
of the competing offers would have been dependent upon the level of premiums
produced by those accounts during the five-year period and (3) would ultimately
result in a distribution which would be lower than the Merger Consideration.
f. The conclusion by the Board of Directors that the LaSalle offer
produced the highest value for the holders of Common Stock and is a cash offer
which will be paid at the time the Common Stock certificates are surrendered.
The three competing offers not only would have delayed a portion of the cash
distribution to the holders of the Common Stock over a period of five years but
also would have resulted in a lower ultimate distribution.
g. The Merger Consideration was higher than both the market value and
book value of the Common Stock.
h. The receipt of advice from 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.
i. LaSalle's "start-up company" status and its availability of funds
necessary to complete the Merger transaction. The Board of Directors requested
and received copies of the documents in which the investors of LaSalle committed
to provide the funds necessary to complete the Merger.
In view of the variety of factors considered in connection with the
evaluation of the Merger, the Board of Directors did not find it practicable to
and did not quantify or otherwise assign weights to the specific factors
considered in reaching its determination. In making its determination, the
Board of Directors also considered the risks and likelihood of achieving the
results discussed above.
THE BOARD OF DIRECTORS HAS APPROVED THE TERMS OF THE MERGER AND 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.
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."
15
<PAGE>
16
<PAGE>
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 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.
17
<PAGE>
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.
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.
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<PAGE>
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.
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<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
20
<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 material provisions of the Merger Agreement provide that, subject
to approval of the Plan of Merger by the holders of 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
21
<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.
22
<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 Anti-
Trust 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.
23
<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.
24
<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
25
<PAGE>
either the 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.
<TABLE>
<CAPTION>
YEAR QUARTER HIGH LOW
-------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
26
<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.
<TABLE>
<CAPTION>
(Not covered by Independent Auditor's Report)
Nine months ended
(dollar amounts in September 30, Year ended December 31,
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)
- --------------------------------------------------------------------------------------------------------------------------------
December 31,
September --------------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ------- ------- ------- ------- -------
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.
27
<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 (ESOP), (1) 1200 Camp Hill By-Pass, Camp Hill, PA 17011 261,338 8.6 %
Common Consumers Life Insurance Company of North Carolina, Consumers Reinsurance
Company and Interstate Auto Auction, Inc., affiliates of Consumers
Financial Corporation, 1200 Camp Hill By-Pass, Camp Hill, PA 17011 409,964 13.6 %
</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.
Amount and
Nature of Percent
TITLE OF Name of Beneficial of
CLASS Beneficial Owner Ownership (1) Class
=======================================================================
(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)
* Denotes less than 1%
- ------------------
(1) Except where otherwise indicated, the beneficial owner of the shares
exercises sole voting and investment power.
(2) Includes 42,542 shares owned by Mr. Groninger's wife.
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(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.
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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.
30
<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/A 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/A 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).
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<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/A as of
December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995 are incorporated by reference in this Proxy Statement.
Such financial statements are incorporated by reference herein in reliance upon
the report of Arthur Anderson LLP ("AA") with respect to the financial
statements for 1995 and the report of E&Y with respect to the financial
statements for 1994 and 1993, and upon the authority of said firms as experts in
accounting and auditing. Representatives of both AA and 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.
32
<PAGE>
The foregoing Notice and Proxy Statement are sent by order of the
Board of Directors.
PETER J. KRAMER
GENERAL COUNSEL
- ------------------------------------------------------------- AND SECRETARY
Dated: February 18, 1997
33
<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
- --------------------------------------------------------------------------------
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 Tuesday, March 25, 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 [ ] ABSTAIN [ ]
(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.
