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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 ___, 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 ____, 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 ___, 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
___, 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 ___, 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.
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.
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<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.
18
<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.
28
<PAGE>
(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.
29
<PAGE>
All written notices should be addressed to: Consumers Financial
Corporation, 1200 Camp Hill By-Pass, [P. O. Box 26 (17001-0026)], Camp Hill,
Pennsylvania 17011-3744, Attention: Secretary and should be executed by, or with
the consent of, the holder of record. The notice must identify the shareholder
and indicate the intention of such shareholder to demand payment for fair value
for his or her shares of Common Stock. In the notice the shareholder's name
should be stated as it appears on his or her stock certificates. A beneficial
owner of shares of Common Stock who is not the holder of record may assert
Dissenters Rights as to shares held on such person's behalf, provided that such
beneficial owner submits a written consent of the holder of record to the
Company at or before the time such rights are asserted.
A holder of Common Stock may not assert Dissenters Rights as to less
than all of the shares registered in such name except in the situation in which
certain shares are beneficially owned by another person but registered in such
shareholder's name. If a holder of Common Stock wishes to dissent with respect
to shares beneficially owned by another person, such shareholder must dissent
with respect to all of such shares and disclose the name and address of the
beneficial owner on whose behalf the holder is dissenting.
After a vote approving the Merger, and assuming the Merger is to be
consummated, the Company must give written notice that the Merger has been
approved to each shareholder who filed a written notice of intent to demand
payment for such shareholder's shares of Common Stock and who did not vote in
favor of the Merger. The Company's notice shall specify the address to which a
demand for payment and stock certificates must be sent by the dissenting
shareholder in order to obtain payment and shall include a form for demanding
payment to be completed by the shareholder. In order to receive the fair value
of his or her shares, a dissenting shareholder must, within 30 days after the
mailing date of the Company's notice, send his or her stock certificates,
together with certain information pertaining to such stock on the form supplied
by the Company. After a valid demand for payment and the related certificates
are received, the Company must remit to each dissenting shareholder who has
complied with the requirements the amount the Company estimates to be the fair
value of that shareholder's shares of Common Stock, together with a statement of
the method used to determine such estimate and the closing balance sheet and
statement of income of the Company for the period ending December 31, 1995, and
the latest updated interim financial statement of the Company. Based upon the
auction process utilized, the Company believes that the Merger Consideration is
equal to the fair value of the shares of Common Stock.
If a dissenting shareholder believes that the amount remitted by the
Company is less than the fair value of his or her shares of Common Stock, plus
interest, the holder of Common Stock may give written notice to the Company of
his or her own estimate of the fair value of their shares within 30 days after
the mailing date of the remittance and demand payment of the difference. If the
shareholder fails to give written notice of his or her estimate and demand
payment of the difference within the 30-day time period, such shareholder will
be entitled only to the amount remitted by the Company.
If the Company and the dissenting shareholder are unable to settle the
shareholder's demand within 60 days, the Company shall file in court a petition
requesting that the court determine the fair value of the shares of Common
Stock, plus interest. All holders of Common Stock whose demands are not settled
within the applicable 60-day settlement periods shall be made parties to this
proceeding. The court, after determining that the shareholder has complied with
all statutory requirements, may use any valuation method or combination of
methods it deems appropriate, whether or not used by the Company or the
dissenting shareholder, or may appoint appraisers to determine the fair value of
the shares of Common Stock. The court's determination is binding on all holders
of Common Stock and the court must enter judgment for any amount by which the
court determines fair value exceeds the amount remitted to the shareholders by
the Company.
The costs and expenses of such a proceeding, including the expenses
and compensation of any appraisers, will be assessed against the Company, unless
the court, in its discretion, determines that the dissenting shareholder's
action in demanding supplemental payment is dilatory, obdurate, arbitrary,
vexatious or in bad faith, in which event the court may assess all or a part of
such costs against the shareholder. Fees and expenses of counsel for the
dissenting shareholder may be awarded by the court out of the amount, if any,
awarded to such shareholder.
The Board of Directors recommends to any holder of Common Stock
having questions with respect to his or her rights under the PBCL to consult
with his or her legal counsel.
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).
31
<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 ___________, March ___, 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.
<PAGE>
EXHIBIT 2
APPENDIX 1
AGREEMENT AND PLAN OF MERGER
AMONG
CONSUMERS FINANCIAL CORPORATION,
LASALLE GROUP, INC.
AND
CONSUMERS ACQUISITION CORP.
DATED AS OF OCTOBER 30, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I THE MERGER 1
SECTION 1.1 The Merger 1
SECTION 1.2 Terms and Conditions of The Merger. 1
SECTION 1.3 Timing 3
ARTICLE II REPRESENTATIONS AND WARRANTIES 4
SECTION 2.1 Representations and Warranties by Consumers 4
SECTION 2.2 Representations and Warranties by LaSalle and CAC 19
ARTICLE III ADDITIONAL COVENANTS AND AGREEMENTS 21
SECTION 3.1 Shareholder Approval 21
SECTION 3.2 Conduct of Consumers' Business 21
SECTION 3.3 Expenses; Break-up Fee 24
SECTION 3.4 Other Agreements 24
SECTION 3.5 No Solicitation of Transactions 24
SECTION 3.6 Third Party Consents 25
SECTION 3.7 Tax Clearance Certificates. 25
SECTION 3.8 Notification of Certain Matters 25
SECTION 3.9 Access to Information 25
SECTION 3.10 Public Announcements 26
SECTION 3.11 Transmittal Letter 26
ARTICLE IV CONDITIONS TO THE MERGER 26
SECTION 4.1 Conditions to the Merger Relating to LaSalle and CAC 26
SECTION 4.2 Conditions to the Merger Relating to Consumers 30
ARTICLE V TERMINATION AND ABANDONMENT 32
SECTION 5.1 Termination and Abandonment 32
SECTION 5.2 Effect of Termination 32
SECTION 5.3 Amendment 32
SECTION 5.4 Waiver 32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VI MISCELLANEOUS 33
SECTION 6.1 Notices 33
SECTION 6.2 No Survival of Representations and Warranties 34
SECTION 6.3 Headings 34
SECTION 6.4 Entire Agreement 34
SECTION 6.5 Cooperation 34
SECTION 6.6 No Rights; Etc 34
SECTION 6.7 No Assignment 34
SECTION 6.8 No Third Party Beneficiaries 34
SECTION 6.9 Governing Law 34
SECTION 6.10 Counterparts 35
Exhibit A Plan of Merger
Exhibit B Transmittal Letter
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 30, 1996, among CONSUMERS
FINANCIAL CORPORATION, a Pennsylvania corporation ("Consumers"), LASALLE GROUP,
INC., a Delaware corporation ("LaSalle"), and CONSUMERS ACQUISITION CORP., a
Pennsylvania corporation and a wholly-owned subsidiary of LaSalle ("CAC").
B A C K G R O U N D
The respective boards of directors of Consumers, LaSalle and CAC have each
approved the acquisition of Consumers by CAC through a merger (the "Merger") of
CAC with and into Consumers (CAC and Consumers being sometimes hereinafter
collectively referred to as the "Constituent Corporations") pursuant to the
Pennsylvania Business Corporation Law of 1988 ("BCL") and in accordance with the
provisions of this Agreement and Plan of Merger (the "Agreement"), and the Plan
of Merger in substantially the form attached hereto as Exhibit A (the "Plan of
Merger").
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, and in order to set forth
the terms and conditions of the Merger and the mode of carrying the same into
effect, the parties hereto, intending to be legally bound, hereby agree as
follows;
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Subject to the terms and conditions of this
Agreement, on the Effective Date (as hereinafter defined), CAC shall be merged
with and into Consumers pursuant to the Plan of Merger and the separate
corporate existence of CAC shall cease. Consumers shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the Commonwealth
of Pennsylvania, and all rights, privileges, immunities and franchises of the
Constituent Corporations shall vest in the Surviving Corporation and continue
unaffected by the Merger.
SECTION 1.2 Terms and Conditions of The Merger.
(a) Merger Considerations. On the Effective Date, each share of
Common Stock, stated value $.01 per share, of Consumers ("Consumers Common
Stock") issued and outstanding on the Effective Date, subject to Section 1.2(b)
and Section 1.2(c), shall be converted into the right to receive $3.92 per share
or an aggregate $11,859,964 assuming 3,025,501 shares outstanding on the date of
this Agreement (the "Merger Consideration"), subject to adjustment prior to the
Effective Date as provided in Section 1.2(b).
(b) Merger Consideration Adjustments.
(i) The Merger Consideration shall be increased or decreased by an
amount equal to the difference between (x) Consumers' Net Statutory Surplus (as
defined below) at the end of the month preceding the Effective Date and (y)
$6,710,623. For purposes of this Agreement, Consumers' Net Statutory Surplus
shall mean (x) the total statutory capital and surplus of Consumers Life
Insurance Company ("CLI"), as reported in statutory statements reported to state
regulatory authorities, plus (y) the asset valuation reserve and interest
maintenance reserve of CLI and each of its subsidiaries. In computing any
Merger Consideration adjustments, the effects on total capital and surplus of
any transactions which are not in the ordinary course of business, including (x)
any effects from the sale of assets contemplated by this Agreement and (y) the
effects of severance costs up to $300,000, shall be excluded.
(ii) In the event the business of Interstate Auto Auction, Inc.
("Interstate") is sold prior to the Effective Date, the Merger Consideration
shall be increased or decreased by (A) an amount equal to the difference between
(x) the net sales proceeds (after Federal and state income taxes) received from
the sale of Interstate and (y) $4,900,000, less
<PAGE>
applicable Federal and state taxes and (B) an amount equal to the difference
between (x) the Non-operating net assets (defined as all Non-operating assets
less liabilities except the existing bank indebtedness) of Interstate at the end
of the month preceding the date on which Interstate is sold and (y) $899,440.
Non-operating net assets, as used herein, shall not be reduced by any principal
payments made after June 30, 1996 pursuant to the PNC Bank Loan Agreement. In
the event Interstate is not sold prior to the Effective Date, the Merger
Consideration shall be decreased by $4,378,000.
(iii) In the event Consumers' universal life business is sold prior
to the Effective Date, the Merger Consideration shall be increased or decreased
by an amount equal to the difference between the purchase commission (after
applicable Federal income taxes) received by Consumers from the sale of its
universal life business and $1,269,000.
(c) Dissenting Shares. Notwithstanding anything herein to the
contrary, shares of Consumers Common Stock that are outstanding immediately
prior to the Effective Date and that are held by shareholders, if any, who are
entitled to assert a right to dissent from the Merger and who demand and validly
perfect their rights to receive the "fair value" of their shares with respect to
the Merger under Section 1574 of the BCL (the "Dissenting Shares") shall be
entitled solely to the payment of the "fair value" of such shares in accordance
with the provisions of the BCL; except that (i) if such demand to receive "fair
value" shall be withdrawn upon the consent of the Surviving Corporation, (ii) if
the Plan of Merger shall be terminated, or the Merger shall not be consummated,
(iii) if no demand or petition for the determination of "fair value" by a court
shall have been made or filed within the time provided in the provisions of the
BCL or (iv) if a court of competent jurisdiction shall determine that such
holder of Dissenting Shares is not entitled to the relief provided by the
provisions of the BCL, the right of such holder of Dissenting Shares to be paid
"fair value" of his shares of Consumers Common Stock shall cease and with
respect to clauses (i), (iii) and (iv) above, such Dissenting Shares shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Date, the right to receive the Merger Consideration
with respect thereto, without any interest thereon, and with respect to clause
(ii) above, the status of such shareholder shall be restored retroactively
without prejudice to any corporate proceeding which may have been taken during
the interim.
SECTION 1.3 Timing.
(a) Shareholder Approval. Consumers shall submit the Plan of Merger
to its shareholders for approval and adoption at a meeting to be held as soon as
practicable and will use commercially reasonable efforts to hold such meeting on
or before December 31, 1996, subject to the provisions of Section 3.1. In
connection with such meeting, Consumers shall take such reasonable steps as
shall be necessary for the prompt preparation and filing by Consumers of a proxy
statement (the "Proxy Statement"), as contemplated by Rules 14a-1 et. seq. under
the Securities Exchange Act of 1934 (the "Exchange Act"), with the Securities
and Exchange Commission ("SEC") and shall use commercially reasonable efforts to
cause the Proxy Statement to be mailed to the holders of shares of Consumers
Common Stock as soon as practicable. Prior to filing the Proxy Statement with
the SEC, Consumers shall send a draft of the Proxy Statement to LaSalle for
comments.
(b) Closing and Effective Date. Subject to receiving all requisite
shareholder and regulatory approvals relating to the Merger and subject to the
provisions of this Agreement, the parties shall hold a closing (the "Closing")
on (i) the later of (A) ten business days following the meeting of the
shareholders of Consumers to consider and vote upon the Plan of Merger or (B)
ten business days following the date on which the last of the conditions set
forth in Article IV is fulfilled or waived or (ii) at such other date as the
parties hereto may agree (the "Closing Date"), at 10:00 A.M., (local time) at
the offices of Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, or at
such other place or time as the parties hereto may agree. At Closing, LaSalle
shall pay the Merger Consideration to Consumers by wire transfer of immediately
available funds to a segregated account to be specified in writing by Consumers,
and LaSalle shall cause the Articles of Merger to be filed with the Secretary of
State of the Commonwealth of Pennsylvania. The Merger shall become effective
upon the filing of Articles of Merger with the Secretary of State of the
Commonwealth of Pennsylvania in accordance with the provisions of the BCL (the
"Effective Date").
2
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations and Warranties by Consumers. The
representations and warranties set forth in this Section 2.1 shall not pertain
to or reflect the assets of Interstate to be assigned or the liabilities of
Interstate to be assumed pursuant to the contemplated sale of Interstate to a
third party. Consumers represents and warrants to LaSalle and CAC that:
(a) ORGANIZATION AND GOOD STANDING OF CONSUMERS AND AFFILIATES.
Consumers is a corporation duly organized and presently subsisting under the
laws of the Commonwealth of Pennsylvania. CLI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Consumers Life Insurance Company of North Carolina ("Consumers North Carolina")
is a corporation duly organized validly existing and in good standing under the
laws of the State of North Carolina. Interstate is a corporation duly organized
and presently subsisting under the laws of the Commonwealth of Pennsylvania.
Investors Fidelity Life Assurance Corp. ("Investors") is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. CLMC Insurance Agency, Inc. (CLMC") is a corporation duly organized and
presently subsisting under the laws of the Commonwealth of Pennsylvania.
Consumers Reinsurance Company ("Consumers Re") is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arizona.
Consumers Car Care Corporation ("Car Care") is a corporation duly organized and
presently subsisting under the laws of the Commonwealth of Pennsylvania.
Investors Consolidated Reinsurance, Ltd. ("Consolidated Re") is a corporation
duly organized, validly existing and in good standing under the laws of the
Island of Nevis. Consumers Limited ("Consumers Limited") is a corporation duly
organized, validly existing and in good standing under the laws of the Island of
Nevis. Consumers II Limited ("Consumers II") is a corporation duly organized,
validly existing and in good standing under the laws of the Island of Nevis.
Each of CLI, Investors, Consumers North Carolina, Consumers Re, Consolidated Re,
(together hereinafter sometimes referred to as the "Insurance Company
Subsidiaries"), is a legal reserve life insurance company duly organized,
validly existing and in good standing under the laws of the State or Island of
its domicile and duly licensed to sell life insurance under the laws of each
State or Island as set forth in a disclosure schedule of even date herewith
delivered to LaSalle and CAC, incorporated herein by reference (the "Disclosure
Schedule"). Each of Consumers, CLI, Consumers North Carolina, Interstate,
Investors, CLMC, Consumers Re, Car Care, Consumers Limited and Consumers II
(together, the "Consumers Companies") is qualified to do business in each State
where the nature of its business activities and ownership of its properties
require it to be so qualified, as set forth in the Disclosure Schedule. Except
as identified on the Disclosure Schedule, none of the Insurance Company
Subsidiaries is the subject of any supervision, conservation, rehabilitation,
liquidation, receivership, insolvency or other similar proceeding, nor is any of
the Insurance Company Subsidiaries operating under any formal or informal
arrangement or understanding with the licensing authority of any jurisdiction
which restricts its authority to do business or requires it to take, or to
refrain from taking, any action.
(b) CORPORATE POWER. Each of the Consumers Companies has full
corporate power to own its properties and carry on its business as currently
conducted.
(c) CERTIFICATES OF INCORPORATION AND BY-LAWS. The copies of (i) the
charter of each of the Consumers Companies and all amendments thereto to date,
as certified by the applicable State or Island governmental authority, and (ii)
the bylaws of each of the Consumers Companies, as amended to date, and as
certified by each company's respective Corporate Secretary as being complete and
correct, which have been delivered to LaSalle, are complete and correct.
(d) CORPORATE ORGANIZATION STRUCTURE. Consumers owns of record and
beneficially 100% of the issued and outstanding common stock of each of its
affiliates, as shown on the Organizational and Share Ownership Chart included in
the Disclosure Schedule.
None of the Consumers Companies has issued and outstanding any class
of capital stock other than common stock except for (i) preferred stock of
Consumers, liquidation preference $10.00 per share, of which 632,500 shares are
authorized and 536,500 are issued and outstanding and (ii) preferred stock of
Consumers Re, par value and liquidation preference $1.00 per share, of which
1,000,000 shares are authorized and 65,500 shares are issued and outstanding.
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None of the Consumers Companies has any investment in any other entity
(other than portfolio investments made in the ordinary course of business)
except as disclosed in the Disclosure Schedule.
(e) CAPITALIZATION. The authorized, issued and outstanding capital
stock of each of the Consumers Companies is as set forth in the Disclosure
Schedule.
Except for the outstanding options/stock appreciation rights listed on
the Disclosure Schedule issued pursuant to the Consumers Financial Corporation
1989 Stock Incentive Plan, there is no outstanding option, warrant or other
agreement or commitment to which any of the Consumers Companies is a party or by
which it is bound providing for the issuance of any additional shares of its
capital stock or any securities convertible into its capital stock.
No person has demand or other rights to cause any of the Consumers
Companies to file any registration statement under the Securities Act of 1933,
as amended, relating to the stock of any of the Consumers Companies, nor is any
such entity prohibited from granting such rights to any person in the future.
The offer, sale and repurchase of all capital stock and other securities of the
Consumers Companies complied with or were exempt from all applicable federal and
state securities laws at the time such securities were offered and sold.
(f) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution, delivery
and performance of this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Consumers. This Agreement has been
duly executed and delivered by Consumers and is the valid and legally binding
obligation of Consumers, enforceable by LaSalle in accordance with its terms,
except to the extent that enforcement may be limited by bankruptcy, insolvency,
moratorium or similar laws affecting the rights of creditors generally and
except to the extent that enforcement may be limited by the application of
general equitable principles. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
acceleration of any indebtedness or other obligation of the Consumers Companies
and are not prohibited by, do not violate any provision of, and do not result in
a default under:
(i) any of the Consumers Companies' respective Charters or
bylaws;
(ii) any material contract, agreement or other instrument to
which any of the Consumers Companies is a party or by which it is bound, except
as identified on the Disclosure Schedule;
(iii) any regulation, rule, order, decree or judgment of any
court, arbitration tribunal or governmental agency; or
(iv) any law applicable to the Consumers Companies;
except that (A) the Insurance Holding Company Systems Acts of Arizona, Delaware,
North Carolina and Ohio prohibit any person from acquiring control of a domestic
insurance company or a holding company controlling a domestic insurance company
unless such acquisition of control has been approved by the Commissioner of
Insurance of each such state in the manner prescribed and (B) the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 ("HSR") requires certain pre-
acquisition notification of certain transactions by the Federal Trade Commission
and the Antitrust Division of the Department of Justice.
(g) FINANCIAL STATEMENTS. Consumers has delivered to LaSalle audited
consolidated balance sheets of Consumers and its subsidiaries at December 31,
1994 and 1995, and the related consolidated statements of operations,
consolidated statements of stockholders' equity and consolidated statements of
changes in financial position for each of the two years 1994 and 1995 with the
footnotes and schedules thereto, together with the reports of independent public
accountants with respect thereto. Said audited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles, and fairly present the consolidated financial position of Consumers
and its subsidiaries as of the respective dates thereof and its consolidated
results of operations and changes in consolidated financial position and
stockholders' equity for the years indicated as stated therein.
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The annual statements of each of the Insurance Company Subsidiaries,
filed with the state insurance department of its domiciliary state, for each of
the years ended December 31, 1994 and 1995 and delivered to LaSalle, present
fairly the required information, and the audited statutory financial statements
covering each said year, which Consumers has heretofore delivered to LaSalle,
present fairly the financial position of each of the Insurance Company
Subsidiaries, respectively, at the end of each of the years then ended and the
results of its operations for each such year, in conformity with accounting
practices prescribed or permitted by the applicable state insurance laws and
regulations as and to the extent described in such annual statements and related
statutory financial statements.
Consumers has also delivered to LaSalle unaudited consolidated balance
sheets of Consumers and its subsidiaries, at March 31, 1996 and at June 30,
1996, and related unaudited consolidated statements of operations, unaudited
consolidated statements of stockholders' equity and unaudited consolidated
statements of changes in financial position for the three months ended March 31,
1996 and six months ended June 30, 1996, respectively. The said unaudited
consolidated financial statements contain the necessary adjustments, all of
which are of a normal recurring nature for interim period reporting purposes,
for a fair representation of results for the interim periods. The consolidated
balance sheet of Consumers and its subsidiaries as of June 30, 1996 is sometimes
referred to herein as the Interim Balance Sheet.
Consumers has also delivered to LaSalle the quarterly statements of
condition of each of the Insurance Company Subsidiaries filed, where required,
with the state insurance department of its domiciliary state, as of March 31,
1996 and June 30, 1996 including statutory financial statements covering the
three months ended March 31, 1996 and the six months ended June 30, 1996. The
said statutory financial statements contain the necessary adjustments, all of
which are of a normal recurring nature for interim period reporting purposes,
for a fair presentation of results for the interim periods, in conformity with
accounting practices prescribed or permitted by the applicable state insurance
laws and regulations.
Consumers has duly filed all material reports, schedules, forms,
statements and other documents required to be filed by it with the Securities
and Exchange Commission, and each such statement or other document has been
timely filed and when filed was in material compliance with the requirements of
the applicable federal securities law and rules and regulations promulgated
thereunder. Consumers has not received any written or oral communications from
the staff of the Securities and Exchange Commission over the past two years.
As of their respective dates, Consumers' (i) Annual Report on Form
10-K for the fiscal year ended December 31, 1995, as filed with the SEC, (ii)
Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, as filed with
the SEC, and (iii) proxy statements, as filed with the SEC and as mailed to
stockholders (together, the "SEC Filings") did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except any statement
or omission therein which has been corrected or otherwise disclosed or updated
in a subsequent SEC filing.
(h) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the
Disclosure Schedule, there is no direct or indirect, indebtedness, obligation,
expense, claims, deficiency, guaranty or endorsement of or by any person of any
type, whether accrued, absolute, contingent, matured or unmatured, of the
Consumers Companies ("Liabilities"), except:
(i) those Liabilities adequately and specifically set forth or
reserved for on the Interim Balance Sheet and not heretofore paid or discharged
or not required under statutory accounting principles to be so set forth or
reserved on the Interim Balance Sheet and contingencies disclosed in the SEC
filings;
(ii) those Liabilities arising in the ordinary course of business
consistent with past practice under any Commitment specifically disclosed in
Section 2.1(p) of the Disclosure Schedule or not required to be disclosed
therein because of the nature of such Commitment or the term or amount involved;
and
(iii) those Liabilities incurred, consistent with past business
practice, in the ordinary course of business since the date of the Interim
Balance Sheet and not heretofore paid or discharged.
(i) ABSENCE OF CHANGES. Except as reflected in the Disclosure
Schedule, since June 30, 1996 there has not been:
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(i) any material adverse change in the financial condition, assets,
properties, liabilities, results of operations or prospects of any of the
Consumers Companies;
(ii) any declaration, setting aside or payment of any dividend
(excluding intercompany dividends), or other distribution, in respect of any of
the capital stock of any of the Consumers Companies or any direct or indirect
redemption, purchase or other acquisition by any of the Consumers Companies of
any of its capital stock,
(iii) except for agents' contracts entered into in the ordinary
course of business, any entry into or amendment of any employment or deferred
compensation agreement between any of the Consumers Companies and any of its
officers, directors, employees, agents or consultants;
(iv) any issuance or sale by any of the Consumers Companies of any of
its authorized capital stock, debentures, bonds, notes or other corporate
securities, or any modification or amendment of the rights of the holders of any
of its outstanding capital stock, debentures, bonds, notes or other securities;
(v) any creation of any lien (other than deposits with State Insurance
Departments and liens for current taxes not yet due), including, without
limitation, any deposit for security made of, created on or in any asset or
property of any of the Consumers Companies, or assumed by any of them with
respect to any such asset or property;
(vi) any material indebtedness or other material liability or
obligation (whether absolute, accrued, contingent or otherwise) incurred, or
other material transaction engaged in, by any of the Consumers Companies, except
in the ordinary course of business;
(vii) any material obligation or liability discharged or satisfied,
other than the current liabilities reflected in the consolidated balance sheet
of any of the Consumers Companies as of June 30, 1996 and current liabilities
incurred since the date thereof in the ordinary course of business and except as
contemplated by this Agreement;
(viii) any sale, transfer or other disposition of any assets or
properties of any of the Consumers Companies, except in the ordinary course of
business or as contemplated by this Agreement;
(ix) any amendment, termination or waiver of any material right of any
of the Consumers Companies under any material contract, agreement or
governmental license or permit except the termination of the Joint Venture
Agreement with Accel and the termination of the Pennsylvania Automotive
Association endorsement;
(x) any material change in the practices and policies customarily
followed by any of the Consumers Companies (including, without limitation, any
underwriting, actuarial, pricing, financial or accounting practices or
policies);
(xi) with respect to the Insurance Company Subsidiaries, any material
increase or decrease in the percentage of its reinsured business, or any
material increase in its lapse ratio, or any material decrease in the amount of
its in-force business;
(xii) any actual or, to the knowledge of the executive officers of
Consumers, threatened labor trouble, strike, loss of employees or agents;
(xiii) any increase in salaries or other compensation of, or advances
to, any employees, other than advances to non-executive employees in the
ordinary course of business and the Employment Agreement to be entered into with
Ralph Byrnes; or
(xiv) any transaction which was not in the ordinary course of business
consistent with past practice.
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(j) ABSENCE OF DEFAULTS. Except as set forth in the Disclosure
Schedule, none of the Consumers Companies is in default under its respective
charter or bylaws, or under any term or provision of any deed of trust,
mortgage, indenture or security agreement or of any contract or instrument to
which it is a party or by which it or any of its assets or properties is bound,
the result of which default has caused or reasonably might be expected to cause
a material adverse effect on its business, operations, properties, prospects or
assets or its financial condition.
(k) COMPLIANCE WITH LAWS. Except as set forth in the Disclosure
Schedule, there has been no failure by the Consumers Companies to comply in all
material respects with any law or regulation of any applicable jurisdiction in
the conduct of its business and corporate affairs.
(l) TAX STATUS. Each of the Consumers Companies has duly filed all
federal, state, local and foreign tax returns and reports, and all returns and
reports of all other governmental units having jurisdiction, with respect to
taxes imposed upon it or upon its income, assets, properties, licenses or
operations. Since December 31, 1994, except for Consumers Re which files a
separate return, the Insurance Company Subsidiaries file a consolidated federal
income tax return. Except as disclosed in the Disclosure Schedule, all of such
returns or reports reflect the true and correct tax liability of any of the
Consumers Companies, as the case may be, and all taxes shown on such returns or
reports and all assessments received by each of the Consumers Companies have
been paid to the extent that such taxes have become due; and except as disclosed
in the Disclosure Schedule, there are no waivers or agreements by any of the
Consumers Companies for the extension of time for the assessment of taxes as
above described. Except as set forth in the Disclosure Schedule, none of the
federal or other income tax returns of any of the Consumers Companies has been
audited by the Internal Revenue Service or other government agency. Federal and
other income tax returns of each of the Consumers Companies for those years
specified in the Disclosure Schedule are closed by applicable statutes of
limitations. A true, complete and accurate copy of each audit report and other
notices and letters issued by the Internal Revenue Service in connection with
the audit of any federal income tax return of any of the Consumers Companies
relating to any year or period not barred by the applicable statute of
limitations has been or will be made available to LaSalle prior to the Closing.
With respect to the period of time through the date hereof for which tax returns
have not yet been filed, or for which taxes are not yet due or owing, each of
the Consumers Companies has set up reserves which Consumers, after due inquiry,
believe to be adequate to cover all taxes which may become owing by reason of
income earned or activities engaged in prior to the date hereof. Except as
described in the Disclosure Schedule, there is not now, to the knowledge of
Consumers, any proposed assessment of additional taxes against any of the
Consumers Companies which is material. There are no tax liens (other than any
lien for current taxes not yet due and payable) on any of the assets or
properties of the Consumers Companies. The Consumers Companies have made all
deposits required by law to be made with respect to employee withholding and
other employment taxes. Each life insurance or annuity policy issued, sold or
administered by, or on behalf of, any Insurance Company Subsidiary or any trust
created or administered by any Insurance Company Subsidiary has at all relevant
times qualified for, and currently qualifies for, appropriate tax treatment
under Sections 72, 264, 7702 or 7702A of the Code and the treasury regulations
promulgated thereunder or similar provision of state, local or foreign law.
(m) TITLE TO PROPERTIES. Except as set forth in the Disclosure
Schedule, the Consumers Companies have good and marketable title to all of its
properties and assets used or provided for use in their business, including
those reflected on the consolidated balance sheets of Consumers and its
subsidiaries at June 30, 1996, and on the statutory balance sheets of the
Insurance Company Subsidiaries at June 30, 1996, (except as since sold or
otherwise disposed of in the ordinary course of business or as contemplated by
this Agreement), free and clear of all mortgages, pledges, liens, claims,
conditional sale agreements, encumbrances or other charges and title objections
(together, "Liens"), except for Liens securing specific liabilities set forth on
such balance sheets (with respect to which no default exists) and except for
minor imperfections of title and encumbrances, if any, which are not substantial
in amount, which do not materially adversely affect the marketability of a
property or properties or materially impair the operations of any of the
Consumers Companies and have arisen only in the ordinary course of business.
(n) LITIGATION. Except as set forth in the Disclosure Schedule, (i)
there is no action, suit or proceeding pending or, to the knowledge of the
executive officers of Consumers, threatened against the Consumers Companies,
before any court, at law or in equity, arbitration tribunal or any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality which individually or in the aggregate could have a
material adverse effect on the financial condition or prospects of the Consumers
Companies, and (ii) the Consumers Companies are not in
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default in any material respect under any order, decree, judgment, award,
determination, ruling or regulation of any court, arbitration tribunal,
governmental department, commission, board, bureau, agency or other
instrumentality.
(o) EMPLOYEE BENEFIT PLANS.
(i) The Consumers Companies do not have a collective bargaining
agreement with any labor union or other representative of employees and, to
Consumers' knowledge, there has been no demand or attempt by employees to
organize a union or labor organization. There are no unfair labor practice
charges or complaints pending or, to the knowledge of the executive officers of
Consumers, threatened against the Consumers Companies before the National Labor
Relations Board or any other federal, state, local or foreign court or agency.
There has been no other labor trouble or other occurrence, event or condition of
a similar character, which is occurring or threatened or has occurred or been,
to the knowledge of the executive officers of Consumers, threatened.
(ii) Except for the plans listed in the Disclosure Schedule (the
"Employee Benefit Plans"), the Consumers Companies do not sponsor, maintain or
contribute to, or have not sponsored, maintained or contributed to, any plan,
fund, program, policy, arrangement, contract or commitment, whether or not
qualified for federal income tax purposes, whether or not funded, whether formal
or informal, and whether for the benefit of a single individual or more than one
individual, which is in the nature of (i) an employee pension benefit plan (as
defined in section 3(2) of ERISA), (ii) an employee welfare benefit plan (as
defined in section 3(1) of ERISA), (iii) an incentive current or deferred
compensation, or other benefit or compensation arrangement for employees, former
employees, their dependents and/or their beneficiaries or (iv) an arrangement
that could be characterized as providing for additional compensation,
compensation associated with a change of control, severance benefits,
perquisites, or fringe benefits.
(iii) Except as set forth in the Disclosure Schedule, the Consumers
Companies do not sponsor or maintain, and are not contributing employers or
otherwise parties to, or have any obligation or liability under or with respect
to, and have never maintained or participated in, or been obligated to
contribute to any defined benefit plan (as defined in section 3(35) of ERISA) or
multiemployer plan (as defined in section 3(37) of ERISA). Except as set forth
in the Disclosure Schedule there are no circumstances pursuant to which the
Consumers Companies may be liable to the Pension Benefit Guaranty Corporation
("PBGC"), to any such defined benefit plan (or to any participant, beneficiary,
trustee or fiduciary thereof), presently or heretofore sponsored or maintained
by the Consumers Companies or any entity other than the Consumers Companies,
including within the concept of "entity other than the Consumers Companies" any
predecessor of the Consumers Companies or any "controlled company." A
"controlled company" is any enterprise which, with the Consumers Companies,
forms or formed at any time since September 2, 1974 a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of 1986, as amended (the "Code"), a group of trades or businesses under common
control within the meaning of Section 414(c) of the Code, or any affiliated
service group within the meaning of Section 414(m) of the Code.
(iv) Each Employee Benefit Plan intended to be qualified under
Sections 401(a), 4975(e)(7), and 401(k) of the Code has been determined to be so
qualified by the Internal Revenue Service ("IRS"), and any trust created
pursuant to any such Employee Benefit Plan has been determined by the IRS to be
exempt from federal income tax under Section 501(a) of the Code. To the
knowledge of the executive officers of Consumers, nothing has occurred since the
date of the last such determination which resulted or could result in the
revocation of such determination. As of the Closing, all of the Employee
Benefit Plans comply with all applicable requirements of the Code (including,
for an Employee Benefit Plan which is an "employee stock ownership plan" under
Section 4975(e)(7) of ERISA (the "ESOP"), the requirements of Sections 409 and
4975(e)(7) of the Code), and all amendments and actions required to bring each
Employee Benefit Plan into conformity in all respects with all applicable laws
have been made or taken to the extent that such amendments or actions are
required by law to be made or taken in order to obtain a favorable determination
letter upon termination of the Employee Benefit Plan, if applicable. The
Consumers Companies have properly and timely submitted all qualified Employee
Benefit Plans in a good faith effort to meet the applicable requirements of
ERISA and the Code to the IRS for its determination of their continuing tax-
qualified status within the time prescribed therefor under applicable law. The
Consumers Companies are not presently liable for failure to make contributions
to any such Employee Benefit Plan or for their fiduciary conduct in connection
with such Employee Benefit Plan. There has been no violation of Sections 404,
406 or
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407 of ERISA or Section 4975 of the Code, no violation of the reporting and
disclosure provisions of the Code or ERISA, and no termination or partial
termination with respect to any Employee Benefit Plans.
(v) Full payment has been made of all amounts which the Consumers
Companies are required, under applicable law or under any Employee Benefit Plan
or any agreement related to any Employee Benefit Plan to which the Consumers
Companies are a party, to have paid as contributions thereto as of the last day
of the most recent fiscal year of each Employee Benefit Plan ended prior to the
date hereof. The Consumers Companies have made adequate provision for reserves
to meet contributions that have not been made because they are not yet due under
the terms of any Employee Benefit Plan or related agreements. Benefits under
all Employee Benefit Plans are as represented and have not been increased
subsequent to the date of such documents.
(vi) No Employee Benefit Plan provides any health, life or other
welfare benefit coverage to employees of the Consumers Companies beyond
termination of their employment with the Consumers Companies by reason of
retirement or otherwise, other than coverage as may be required under Section
4980B of the Code or Part 6 of ERISA, or under the continuation of coverage
provisions of the laws of any state or locality.
(vii) Except for the Employment Agreement to be entered into with
Ralph Byrnes, the consummation of the transactions contemplated by this
Agreement will not (other than any payment made pursuant to Code Section
401(k)(10) under any 401(k) Plan) accelerate the time of payment or vesting,
increase any compensation due to any current employee or former employee of the
Consumers Companies or entitle any employee to severance pay, unemployment
compensation or any other payment.
(viii) No proceedings, suits or material claims (other than routine
claims for benefits) exist or are, to the knowledge of the executive officers of
Consumers, threatened against the Consumers Companies with respect to any
Employee Benefit Plan.
(ix) The Buying Parties (as defined below) have no obligation to
continue any Employee Benefit Plan as of the Closing and may, in their sole and
absolute discretion, terminate, modify or discontinue any such Employee Benefit
Plan, in whole or in part, without penalty and without prior notice to the
Consumers Companies, any participant, beneficiary or present or former employee
of the Consumers Companies.
(p) CONTRACTS. The Disclosure Schedule contains a list, as of the
date hereof, of each contract, agreement, understanding or other commitment,
whether written or oral (including any and all amendments thereto) relating to
the business of the Consumers Companies, to which any of the Consumers Companies
is a party or by which they are bound (collectively, the "Commitments"),
described below:
(i) contract with any employee, consultant or labor union;
(ii) contract for the future purchase of, or payment for, supplies or
products or services in any single instance exceeding $25,000, or in the
aggregate $100,000, which are not terminable without penalty upon not more than
30 days' notice;
(iii) representative or sales agency contract;
(iv) contract limiting or restraining such company from engaging or
competing in any lines of business with any person or entity;
(v) contract with any customer or agent providing for a retrospective
price adjustment or retrospective commission or future premium guarantee;
(vi) commitment to guarantee the obligations of others or commitment
by others to guarantee the obligations of the Consumers Companies;
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(vii) real or personal property lease;
(viii) mortgage, indenture, note debenture, bond, letter of credit
agreement, surety agreement, loan agreement or other commitment for the
borrowing or lending of money relating to the Consumers Companies or agreement
for a line of credit;
(ix) license, franchise, distributorship or other agreement, including
those which relate in whole or in part to any software, technical assistance or
other know-how of or used in the prior twenty-four months;
(x) commitment or agreement for any capital expenditure or leasehold
improvement in excess of $100,000;
(xi) reinsurance agreement;
(xii) investment in or agreement to invest in derivative securities;
or
(xiii) material contract, agreement or commitment not otherwise
disclosed herein.
True and complete copies of such Commitments have been delivered or made
available to LaSalle prior to the date hereof. Each Commitment is a valid and
binding obligation, which, to the knowledge of Consumers, is in full force and
effect. Except as disclosed on the Disclosure Schedule, the Consumers Companies
are not in default under any of the Commitments, and, to Consumers' knowledge,
no third party is in default under any of the Commitments. The Disclosure
Schedule identifies each Commitment that requires consent by a third party to
give the Consumers Companies all rights under such Commitment following the
consummation of the transactions contemplated by this Agreement.
(q) INTELLECTUAL PROPERTY. The Disclosure Schedule contains a true,
complete and correct list of all of the names and trademarks, whether or not
registered, which are used in or related to the business of the Consumers
Companies (each a "Name" or "Trademark" and collectively the "Names and
Trademarks"), the Consumers Companies own all such Names and Trademarks and have
good title thereto, free and clear of all Liens. The Disclosure Schedule
contains a true, complete and correct list of each jurisdiction where the
Consumers Companies have filed a certificate of assumed name with respect to
their business. As to each of the Names and Trademarks that is registered, or
as to which any application for registration by the Consumers Companies is
pending, the Disclosure Schedule lists each jurisdiction in which such Name or
Trademark is registered and the expiration date for such registration, and each
jurisdiction in which an application to register such Name or Trademark is
pending and the date such application was made. There are no judicial or
administrative actions pending, or, to the knowledge of Consumers' executive
officers, threatened against, the Consumers Companies with respect to any of the
Names or Trademarks, and no right to use any Name or Trademark which is
currently outstanding has been granted by the Consumers Companies or any past or
present subsidiary or affiliate of the Consumers Companies to any person or
third party. No person or third party has any right, title or interest in any
Name or Trademark in the United States, for any use in any class or field which
is the same or similar to any aspect of the Consumers Companies' business. None
of the Consumers Companies have either infringed on, or are alleged to be
infringing on, any trademark, service mark, copyright, trade dress, trade name,
corporate name, graphic work of art, slogan or logo of any person or third party
in connection with their business and, to Consumers knowledge, no person or
third party is infringing any of the Names or Trademarks listed. No employee or
officer of any of the Consumers Companies has any interest in any of the Names
or Trademarks.
(r) INSURANCE POLICIES. All insurance policies or contracts issued by
the Insurance Company Subsidiaries are valid policies or contracts, the form of
which has been approved, where required, by the applicable state insurance
departments and provided to LaSalle.
(s) RESERVES. The reserves for policy liabilities of each of the
Insurance Company Subsidiaries as set forth on its December 31, 1995 statutory
balance sheet have been computed in accordance with generally accepted actuarial
methods and principles consistently applied and, in all cases, have been
properly computed, were based on actuarial assumptions that were in all material
respects in accordance with or more conservative than those called for in the
related
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policy or contract, and are adequate under the applicable requirements of the
law of the state of its domicile and the law of the states in which it is
licensed to do business to enable the Insurance Company Subsidiaries to conduct
their insurance business in those states, except those states listed on the
Disclosure Schedule. The reserves for policy liabilities of each of the
Insurance Company Subsidiaries as set forth on its June 30, 1996 statutory
balance sheet have been computed in a manner which is consistent with the
methods and principles described above.
(t) OPERATIONS INSURANCE. The Disclosure Schedule contains a
description of all property and casualty, liability, directors' and officers'
liability, key man life, group health, group disability, group life and other
insurance policies owned by the Consumers Companies. All such policies are in
full force and effect in accordance with their terms, no notice of cancellation
has been received, and there is no existing default or event which, with the
giving of notice or lapse of time or both, would constitute a default
thereunder. Such policies are in amounts which are adequate in relation to the
business and assets of the Consumers Companies and all premiums to date have
been paid in full. The Consumers Companies have not been refused any insurance,
nor has their coverage been limited, by any insurance carrier to which they have
applied for insurance or with which they have carried insurance during the past
five years. The Disclosure Schedule also sets forth a summary of all past
product liability insurance coverage (primary and excess), including coverage
relating to lines of business or subsidiaries which have been discontinued or
dissolved, which summary shall include the name of insurer, the policy number,
whether the policy was on a claims-made or occurrence basis and the policy
limits for each policy. The Disclosure Schedule also contains a true and
complete description of all outstanding bonds and surety arrangements issued or
entered into in connection with the business, assets and liabilities of the
Consumers Companies.
(u) REAL ESTATE. All of the real estate owned by any of the Consumers
Companies in the aggregate, has a net value at June 30, 1996 of not less than
the aggregate carrying value of all such real estate on the June 30, 1996
statutory balance sheets of the Insurance Company Subsidiaries. Except as set
forth in the Disclosure Schedule, all buildings, plants, structures, equipment
and other personal property owned or leased by the Consumers Companies are in
good operating condition and repair (ordinary wear and tear excepted) and are
usable in the ordinary course of business of the Consumers Companies. The
Consumers Companies are not, and have not received notification that they are,
in violation of any applicable building, zoning, anti-pollution, health, safety
or other law, ordinance or regulation in respect of its buildings, plants or
structures or their operations. Except as set forth in the Disclosure Schedule,
each real property lease in which any of the Consumers Companies are landlord or
tenant is, and on the Closing shall be, in full force and effect and has not
been assigned, modified, supplemented or amended and neither the Consumers
Companies, as landlord or tenant under any such lease, nor, to the knowledge of
the executive officers of Consumers, any other party to any such lease, is in
default under any such lease, and no circumstances or state of facts presently
exists which, with the giving of notice or passage of time, or both, would
permit the landlord or tenant to terminate any such lease. Neither the whole
nor any portion of the property or leaseholds owned or held by the Consumers
Companies is subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any governmental body or other
person with or without payment of compensation therefor. There are no
assessments with respect to any of the properties owned or leased by any of the
Consumers Companies which remain unpaid.
(v) ENVIRONMENTAL MATTERS.
(i) Except as may be disclosed on the Disclosure Schedule, the
Consumers Companies have conducted their business in material compliance with
all Environmental Laws (as hereinafter defined). For purposes of this
Agreement, the term "Environmental Laws" means any and all federal, state,
provincial, local laws, regulations and ordinances and foreign laws and
requirements relating to health and safety and pollution or protection of the
environment, including laws, regulations and requirements relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or Hazardous Substances (as hereinafter defined)
into the environment (including without limitation ambient air, surface water,
groundwater or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes. For purposes of this Agreement, the term "Hazardous
Substance" means (i) any petroleum products, explosives, alcohols, chemical
solvents, polychlorinated biphenyls ("PCBs") or related or similar materials,
(ii) any substance, waste, material or good defined as hazardous, radioactive,
extremely hazardous, toxic or dangerous, or as a pollutant or contaminant, under
any Environmental Law, or by any federal, state or municipal government or
governmental agency, and (iii) any asbestos, asbestos-containing substances or
urea formaldehyde insulation.
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(ii) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against the
Consumers Companies alleging any violation or failure to comply with any
Environmental Law. The Consumers Companies are not parties to any agreement,
consent order or adjudication of any type with any person, including any
government agency, that is authorized under or make reference to any
Environmental Law.
(iii) The Consumers Companies have obtained and have at all times
possessed all permits, licenses, registrations and other authorizations (the
"Environmental Permits") necessary to conduct their business under the
Environmental Laws and have filed timely and complete applications for renewal
of any such Environmental Permits that are required prior to the Closing. The
Environmental Permits necessary for the Consumers Companies to conduct their
business are currently in effect and are listed on the Disclosure Schedule, and
the Consumers Companies are in material compliance with all terms and conditions
of such Environmental Permits and have not materially violated any of same. The
Consumers Companies have not received any notice of any proposal to amend,
revoke, reissue or replace any Environmental Permit, nor have any events
occurred that could form a reasonable basis for any such action.
(iv) There has not been any spill, release or unauthorized discharge
of any Hazardous Substance in connection with the business of the Consumers
Companies or at any of the properties or facilities occupied by the Consumers
Companies, where such spill, release or discharge was required to be reported
under any Environmental Law or would require abatement or correction under any
Environmental Law. The Consumers Companies have not permitted any Hazardous
Substances to be disposed of, treated or stored on the facility or any other
property used by the Consumers Companies.
(v) There has not been and is not any Environmental Condition (as
hereinafter defined) in connection with the business of the Consumers Companies
at or relating to the properties or facilities used by the Consumers Companies
or any predecessor, or at or relating to any property owned, leased or operated
at any time by the Consumers Companies or any such predecessor, or at or
relating to any property at which wastes have been deposited or disposed by or
at the behest or direction of the Consumers Companies or any such predecessor,
nor have the Consumers Companies received written notice of any such
Environmental Condition. For purposes of this Agreement the term "Environmental
Condition" means any condition or circumstance, that (i) requires abatement or
correction under any Environmental Law, (ii) could give rise to any civil or
criminal liability under any Environmental Law, or (iii) could create a public
or private nuisance, including the presence of Hazardous Substances.
(w) BOOKS AND RECORDS. The minute books of each of the Consumers
Companies contain the records of all of the official actions of its board of
directors and its shareholders and there are no material omissions therefrom or
misstatements therein. The minutes of the meeting of the board of directors
fully and correctly describe all official actions taken by the executive
committee and other committees of the board of directors except to the extent
fully and correctly set forth in minutes of such committees. The books, records
and accounts of the Consumers Companies accurately and fairly reflect in
reasonable detail the transactions and the assets and liabilities of the
Consumers Companies. The Consumers Companies have not engaged in any
transaction, maintained any bank account or used any funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the business.
(x) BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Consumers directly
with the Buying Parties, without the intervention of any person in such manner
as to give rise to any valid claim by any person against any of the parties
hereto for a finder's fee, brokerage commission or similar payment.
(y) TRANSACTIONS WITH AFFILIATES. Except as set forth on the
Disclosure Schedule, no shareholder, director, officer, employee or sales
representative of any of the Consumers Companies or any member of his or her
immediate family or any other of its, his or her affiliates, owns or controls
any party which has any material contract, agreement, understanding, business
arrangement or relationship to any of the Consumers Companies.
(z) FULL DISCLOSURE. No representation or warranty by Consumers in
this Agreement nor any certificate, schedule, statement, document or instrument
furnished to the Buying Parties pursuant to this Agreement, or in connection
with the negotiation, execution or performance of this Agreement, contains or
will contain any untrue statement
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of a material fact or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make any statement herein or therein
not misleading.
SECTION 2.2 Representations and Warranties by LaSalle and CAC. Each of
LaSalle and CAC (together, the "Buying Parties") represents and warrants to, and
agrees with, Consumers as follows:
(a) ORGANIZATION AND GOOD STANDING OF LASALLE. LaSalle is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. CAC is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
(b) CORPORATE POWER. Each of the Buying Parties has corporate power
to own its properties and carry on its business as now conducted.
(c) ARTICLES OF INCORPORATION AND BYLAWS. The copies of (i) the
charters of the Buying Parties, and all amendments thereto to date, and (ii) the
bylaws of the Buying Parties, as amended to date, as certified by each company's
respective Corporate Secretary as being complete and correct, have been
delivered to Consumers.
(d) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution, delivery
and performance of this Agreement has been duly and validly authorized by all
necessary corporate action on the part of the Buying Parties. This Agreement
has been duly executed and delivered by the Buying Parties, and is the valid and
legally binding obligation of the Buying Parties, enforceable by Consumers in
accordance with its terms, except to the extent that enforcement may be limited
by bankruptcy, insolvency, moratorium or similar laws affecting the rights of
creditors generally and except to the extent that enforcement may be limited by
the application of general equitable principles. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not result in the acceleration of any indebtedness or other obligation of the
Buying Parties and are not prohibited by, do not violate any provision of, and
do not result in a default under:
(i) The Buying Parties' charters or bylaws;
(ii) any material contract, agreement or other instrument to which the
Buying Parties are a party or by which they are bound;
(iii) any regulation, rule, order, decree or judgment of any court or
governmental agency; or
(iv) any law applicable to the Buying Parties;
except that (A) the Insurance Holding Company Systems Acts of Arizona, Delaware,
North Carolina and Ohio prohibit any person from acquiring control of a domestic
insurance company or a holding company controlling a domestic insurance company
unless such acquisition of control has been approved by the Commissioner of
Insurance of such state in the manner prescribed, and (B) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 requires certain preacquisition notification
of the Federal Trade Commission and the Antitrust Division of the Department of
Justice.
(e) INSURANCE DEPARTMENT APPROVALS. The Buying Parties are not aware
of any facts or circumstances relating to the Buying Parties, or any of the
Buying Parties' executive officers, directors or controlling shareholders that
might cause any insurance department whose approval may be required to
consummate the transactions contemplated by this Agreement to refuse to grant
its approval of such transactions.
(f) BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Buying Parties
directly with Consumers without the intervention of any person in such manner as
to give rise to any valid claim by any person against any of the parties hereto
for a finder's fee, brokerage commission or similar payment.
(g) LITIGATION. Except as set forth in the Disclosure Schedule, (i)
there is no action, suit or proceeding pending or, to the knowledge of the
executive officers of LaSalle, threatened against the Buying Parties, before any
court, at
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law or in equity, arbitration tribunal or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
which individually or in the aggregate could have a material adverse effect on
the financial condition or prospects of the Buying Parties, and (ii) the Buying
Parties are not in default in any material respect under any order, decree,
judgment, award, determination, ruling or regulation of any court, arbitration
tribunal, governmental department, commission, board, bureau, agency or other
instrumentality.
(h) FULL DISCLOSURE. No representation of warranty of LaSalle in this
Agreement nor any certificate, schedule, statement, document or instrument
furnished to Consumers pursuant to this Agreement, or in connection with the
negotiation, execution or performance of this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated herein or therein or necessary to make any
statement herein or therein not misleading.
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ARTICLE III
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 3.1 Shareholder Approval.
(a) As soon as reasonably practicable following the date hereof,
Consumers shall take all action necessary in accordance with the Exchange Act,
the laws of the Commonwealth of Pennsylvania and its Articles of Incorporation
and Bylaws to call and give notice of a meeting (the "Meeting") of its
shareholders to consider and vote upon the approval and adoption of the Plan of
Merger and for such other purposes as may be necessary or desirable. The Board
of Directors of Consumers has unanimously determined that the Merger is
advisable and in the best interests of the shareholders of Consumers and,
subject to their fiduciary duties as advised by counsel, shall recommend without
qualification of any nature that Consumers' shareholders vote to approve and
adopt the Plan of Merger and any other matters to be submitted to Consumers'
shareholders in connection therewith. The Board of Directors of Consumers shall
use commercially reasonable efforts to solicit and secure from shareholders of
Consumers such approval and adoption, subject to their fiduciary duties as
advised by counsel, which efforts shall include causing Consumers to solicit
shareholder proxies therefor and advising LaSalle promptly upon its request from
time to time as to the status of the shareholder vote then tabulated. With
regard to any shares of Consumers' Common Stock held by the ESOP, the trustee of
the ESOP shall vote upon the approval and adoption of the Plan of Merger with
regard to all such shares of Common Stock in accordance with the terms of the
ESOP, Sections 404 and 406 of ERISA, and Section 4975 of the Code.
(b) Consumers shall prepare and file with the SEC under the Exchange
Act and the rules and regulations promulgated by the SEC thereunder within 15
days following the date hereof, a preliminary draft of the Proxy Statement.
LaSalle and CAC shall cooperate with Consumers in the preparation and filing of
the Proxy Statement and any amendments and supplements thereto. Neither the
Proxy Statement nor any preliminary draft thereof shall be filed, no amendment
or supplement thereto shall be made, nor shall any communication with the SEC be
initiated, by Consumers, in each case, without prior consultation with LaSalle
and their counsel and without first having sent such materials to LaSalle for
its comments. Consumers will use commercially reasonable efforts to have any
review of the Proxy Statement conducted by the SEC promptly. As soon as
reasonably practicable following completion of any review by, or in the absence
of such review, the termination of any applicable waiting period of, the SEC,
Consumers shall cause to be mailed a definitive Proxy Statement to its
shareholders entitled to vote on the Plan of Merger.
SECTION 3.2 Conduct of Consumers' Business. Consumers covenants and
agrees that, prior to the Effective Date, unless LaSalle shall otherwise agree
in writing or as otherwise expressly contemplated by this Agreement:
(a) Consumers shall use commercially reasonable efforts to sell the
business of Interstate, the universal life block of business and Consumers North
Carolina prior to the Effective Date. If the Interstate business is not sold
prior to the Effective Date, Interstate will be spun off to Consumers'
shareholders on or prior to the Effective Date. Consumers shall not directly or
indirectly do any of the following: (i) issue, sell, pledge, dispose of or
encumber any assets of the Consumers Companies other than in the ordinary course
of its business consistent with past practice or as contemplated by this
Agreement, (ii) amend or propose to amend its Articles of Incorporation or
Bylaws, (iii) split, combine or reclassify any outstanding shares of its capital
stock, or declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to such shares, except for dividends with
respect to outstanding shares of Consumers' preferred stock, (iv) redeem,
purchase, acquire or offer to acquire any shares of its capital stock, or (v)
enter into any contract, agreement, commitment or arrangement with respect to
any of the matters set forth in this paragraph (a) except as provided in
paragraph (l) of this Section 3.2.
(b) Except as contemplated herein, Consumers shall not (i) issue,
sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any
additional shares of, or securities convertible or exchangeable for, or any
options, warrants or rights of any kind to acquire any shares of, its capital
stock of any class or other property or assets whether pursuant to any rights
agreement, stock plan or otherwise, (ii) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof, (iii) incur any indebtedness for borrowed
money or issue any debt securities, except in the ordinary course of its
business consistent with past practice, (iv)
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enter into or modify any material contract, lease or agreement other than in the
ordinary course of business and consistent with past practice, other than the
termination of the Joint Venture Agreement with Accel and the sale of Consumers'
home office building, (v) terminate, modify, assign, waive, release or
relinquish any material contract rights or amend any material rights or claims
not in the ordinary course of its business consistent with past practice or
except as expressly provided herein, or (vi) dissolve or otherwise alter its
corporate existence.
(c) Except for increases in salary to non-executive officers in the
ordinary course of business and the Employment Agreement to be entered into with
Ralph Byrnes, Consumers shall not grant any increase in the salary or other
compensation of its employees or independent contractors or grant any bonus to
any employee or independent contractors or enter into any employment agreement
or make any loan to or enter into any material transaction of any other nature
with any officer or employee of Consumers.
(d) Consumers shall not take any action to institute any new severance
or termination pay practices with respect to any directors, officers or
employees of Consumers or to increase the benefits payable under its severance
or termination pay practices.
(e) Except for seasonal hires not inconsistent with past practices,
Consumers shall not hire any new employees except for employees having an
annualized salary of less than $30,000, who are terminable at will or who are
hired to replace a former employee.
(f) Consumers shall not (except as provided in Section 3.2(l) or as it
relates to the termination of the Excess Benefit Plan) adopt or amend, in any
respect, except as may be required by applicable law or regulation, any bonus,
profit sharing, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment or other employee benefit plan,
agreement, trust, fund, plan or arrangement for the benefit or welfare of any
directors, officers or employees.
(g) Except for security interests set forth on the Disclosure
Schedule, Consumers shall not mortgage, pledge or otherwise subject to any lien,
security interest, encumbrance or charge of any nature, any of its property or
assets, or become committed so to do, or permit or suffer any of such property
or assets to become subject to any mortgage, pledge, lien, security interest,
encumbrance or charge of any nature, other than liens of current taxes not yet
due and payable, or become committed to do so.
(h) Consumers shall use commercially reasonable efforts to maintain
its relationships with its suppliers, customers and employees, and if and as
requested by LaSalle or CAC, (i) Consumers shall make reasonable arrangements as
reasonably requested by LaSalle or CAC for representatives of LaSalle or CAC to
meet with customers and suppliers of Consumers (provided however that LaSalle
shall give Consumers reasonable notice of such meetings), and (ii) Consumers
shall schedule, and the management of Consumers shall participate in, meetings
of representatives of LaSalle or CAC with employees and customers of Consumers.
(i) Consumers shall not make any capital expenditures or capital
commitments or incur any debt in excess of $50,000 in the aggregate except for
expenditures for maintenance of capital assets in the ordinary course of its
business consistent with past practice.
(j) Consumers shall use commercially reasonable efforts to maintain
all of the assets used or useful to the business of Consumers in good repair,
order and condition, maintain in full force and effect all permits and other
authorizations to do business currently in effect and maintain in full force all
policies of insurance or satisfactory substitute insurance policies insuring
against the risks, damages and losses covered by the insurance policies
currently in force.
(k) Consumers shall not otherwise conduct its business except in the
ordinary course consistent with past practice.
(l) Consumers shall obtain agreements in form and substance reasonably
satisfactory to LaSalle from holders of all stock options outstanding under
Consumers' stock option plans to, on the day prior to the Closing Date,
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exercise their stock appreciation rights and waive their right to exercise such
options, and, in consideration therefor, each holder shall be entitled to
receive from Consumers on the Effective Date, for each share of Consumers Common
Stock subject to an option, an amount of cash equal to the excess, if any, of
the Merger Consideration per share, as adjusted pursuant to Section 1.2(b), over
the per share exercise price of such option. Assuming no adjustment pursuant to
Section 1.2(b), the holders of outstanding stock options, each of which has an
exercise price of $2.25 per share, would be entitled to $1.67 per option share
or an aggregate $298,930. Appropriate arrangements shall be made for reduction
of the amount to be paid to each holder of a stock option for any applicable
withholding taxes or other amounts required by law to be paid or withheld
through reducing the amount paid to such holder. Prior to the Effective Date,
the Board of Directors of Consumers or the appropriate committee thereof shall
take such action as is necessary to effectuate the foregoing.
SECTION 3.3 Expenses; Break-up Fee. If, prior to the Closing Date, (i)
Consumers is offered a transaction by another party that Consumers believes is a
more favorable transaction for its shareholders, and the board of directors of
Consumers, in the exercise of its fiduciary duty, decides to proceed with the
new party or (ii) in the event that the Plan of Merger shall not be approved by
the shareholders of Consumers pursuant to Section 3.1, Consumers shall promptly
(and, in any event, within five days) pay LaSalle a $300,000 break-up fee, which
shall be LaSalle's sole remedy against Consumers for such action. Except as
provided in the immediately preceding sentence, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses. Without the prior consent of LaSalle, which will not be
unreasonably withheld, professional fees incurred since October 1, 1996
including accounting, investment banking and legal fees incurred by Consumers in
connection with the investigation, negotiation, execution and delivery of this
Agreement and the transactions contemplated hereby shall not exceed $100,000 in
the aggregate.
SECTION 3.4 Other Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
including using commercially reasonable efforts to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and filings,
including, but not limited to, filings required under the Exchange Act; provided
that the foregoing shall not require LaSalle or Consumers to make, or agree to
make, any divestiture of a material asset in order to obtain any waiver, consent
or approval.
SECTION 3.5 No Solicitation of Transactions. Consumers shall not, and
shall not permit its officers, employees, representatives or agents to, directly
or indirectly, continue, encourage, solicit or initiate discussions or
negotiations with, or provide any nonpublic information to, any person other
than LaSalle or its affiliates or any group in which LaSalle or its affiliates
participates, concerning any sale of assets (other than in the ordinary course
of its business consistent with past practice and other than the sale of assets
contemplated by this Agreement) or shares of capital stock of Consumers, or any
merger, consolidation, recapitalization, liquidation or similar transaction
including Consumers (collectively, an "Acquisition Transaction"). Consumers
will promptly communicate to LaSalle and CAC the terms of any inquiry or
proposal which it may receive in respect of an Acquisition Transaction.
Consumers' notification under this Section 3.5 shall include the identity of the
person making such proposal, the terms of such proposal and any other such
information with respect thereto as LaSalle may reasonably request. Nothing
contained in this Agreement shall be construed to prohibit Consumers or its
Board of Directors from (i) making any recommendation with respect to any
Acquisition Transaction and related disclosure to shareholders or (ii)
disclosing, under protection of an appropriate confidentiality agreement, non-
public information concerning Consumers to a person who has made a bona fide,
binding and firm, fully-financed offer to acquire all of the outstanding
Consumers Common Stock for a price in excess of the price to be paid to the
shareholders in the Merger and on terms which are higher and better to
Consumers' shareholders than the terms of the Merger, which, in the judgment of
Consumers, on the advice in writing of counsel, shall be required by law.
SECTION 3.6 Third Party Consents. Consumers shall use commercially
reasonable efforts to obtain prior to the Effective Date all consents and
approvals to the consummation and performance of the transactions contemplated
hereby, as set forth in the Disclosure Schedule.
SECTION 3.7 Tax Clearance Certificates. Consumers shall use commercially
reasonable efforts to obtain a tax clearance certificate in each state where
Consumers pays taxes, and, in the event that such tax clearance certificates may
not
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be obtained prior to the Closing, Consumers shall provide LaSalle or CAC a
ledger account of taxes owed and paid in each such state where ledger account
information is available.
SECTION 3.8 Notification of Certain Matters. Consumers shall give prompt
notice to LaSalle and CAC, and LaSalle and CAC shall give prompt notice to
Consumers, of (i) the occurrence, or failure to occur, of any event which such
party believes would likely cause any of its representations or warranties
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Date and (ii) any material
failure of Consumers, LaSalle or CAC, as the case may be, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that failure to give such notice shall not constitute a
waiver of any defense that may be validly asserted.
SECTION 3.9 Access to Information.
(a) Consumers shall, and shall cause its officers, directors,
employees and agents, including attorneys and accountants, to afford, upon
LaSalle or CAC's reasonable request, from the date hereof to the Effective Date,
the officers, employees and agents of LaSalle and CAC complete access at all
reasonable times to its officers, employees, agents, properties, books, records
and work papers, and shall furnish LaSalle and CAC all financial, operating and
other data and information as LaSalle or CAC, through its officers, employees or
agents, may reasonably request.
(b) No investigation pursuant to this Section shall effect, add to or
subtract from any representations or warranties or the conditions to the
obligations of the parties hereto to effect the Merger.
SECTION 3.10 Public Announcements. None of LaSalle, CAC or Consumers
will make, issue or release any oral or written public announcement or statement
concerning, or acknowledgment of the existence of, or reveal the terms,
conditions or status of, the transactions contemplated by this Agreement and the
Plan of Merger, or make any other communication to its shareholders or the
investing public, directly or indirectly (including press releases and
statements to securities analysts), without first making a good faith attempt to
obtain the prior approval of, or concurrence in, the contents of such
announcement, acknowledgment or statement by the other party or parties, which
approval or concurrence shall not be unreasonably withheld or delayed.
SECTION 3.11 Transmittal Letter. Within five business days following the
Effective Date, Consumers shall send each holder of Consumers Common Stock on
the Effective Date a transmittal letter in substantially the form attached as
Exhibit B.
ARTICLE IV
CONDITIONS TO THE MERGER
SECTION 4.1 Conditions to the Merger Relating to LaSalle and CAC. The
obligation of LaSalle and CAC to effect the Merger is, at their option, subject
to the satisfaction, on or before the Effective Date, of each of the following
conditions:
(a) Representations, Warranties, and Covenants of Consumers. The
representations and warranties of Consumers herein contained and the information
contained in the Disclosure Schedule and other documents delivered by Consumers
in connection with this Agreement shall be true and correct on the Closing Date
in all material respects with the same effect as though made at such time,
except to the extent waived hereunder or affected by the transactions
contemplated herein; Consumers shall have performed in all material respects all
obligations and complied in all material respects with all agreements,
undertakings, covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date; and Consumers
shall have delivered to LaSalle a certificate in form and substance satisfactory
to LaSalle dated the Closing Date and signed by the President and by the Chief
Financial Officer of Consumers to such effect.
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(b) Pending Litigation. There shall not be any litigation or other
proceeding pending or threatened to restrain or invalidate the transactions
contemplated by this Agreement, which, in the sole reasonable judgment of
LaSalle, made in good faith, would make the consummation of the Merger imprudent
in light of applicable law or the defense of which would involve expense that
would be materially adverse to LaSalle. In addition, there shall not be any
other litigation or other proceeding pending or threatened against Consumers not
otherwise set forth in the Disclosure Schedule, the consequences of which, in
the reasonable judgement of CAC and LaSalle's Board of Directors, could be
materially adverse to Consumers.
(c) Shareholder Approval. This Agreement and the Plan of Merger shall
have been approved and adopted by the requisite vote of the holders of the
outstanding Consumers Common Stock in accordance with the BCL and Consumers'
Articles of Incorporation and Bylaws.
(d) No Convertible Securities Outstanding. Consumers shall have
canceled, on terms and conditions reasonably satisfactory to LaSalle, all
outstanding stock options issued pursuant to the Consumers Option Plan pursuant
to Section 3.2(l), and no equity securities of Consumers (other than Consumers
Preferred Stock), options, warrants, or other instruments exercisable for equity
securities of Consumers shall be outstanding.
(e) Regulatory Approval. All authorizations, consents and permits
required to perform this Agreement and the Plan of Merger shall have been
obtained, including approval by each State Insurance Commission in which an
Insurance Company Subsidiary is domiciled, and shall be in form and substance
satisfactory to LaSalle. The required statutory waiting period under HSR shall
have terminated and no condition with respect thereto shall be unacceptable to
LaSalle.
(f) Material Adverse Changes. From the date hereof to the Closing
Date, there shall have been no material adverse change in statutory operating
results or new material information provided to LaSalle. There shall be no
conditions existing or threatened with respect to Consumers or its business or
assets that could reasonably be expected to have a material adverse affect on
Consumers.
(g) Shareholder Vote/Dissenters Rights. The holders of a majority of
the outstanding shares of Consumers Common Stock shall have approved and adopted
this Agreement and the Plan of Merger at the Meeting to take place in accordance
with Section 3.1 hereof. The holders of not more than 15% of the outstanding
shares of Consumers Common Stock shall have demanded dissenters rights under the
BCL with respect to their shares of Consumers Common Stock.
(h) Opinion of Counsel for Consumers. LaSalle shall have received
opinions dated the Closing Date of Duane, Morris & Heckscher, counsel for
Consumers, in form and substance reasonably satisfactory to LaSalle and its
counsel, substantially to the effect that:
(i) Consumers is a corporation duly organized, and presently
subsisting under the laws of the Commonwealth of Pennsylvania, with full
corporate power and authority to own its properties and assets and to carry on
its business;
(ii) Consumers has the corporate power and authority to execute and
deliver this Agreement and the Plan of Merger and to consummate the transactions
contemplated thereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action. This Agreement has been duly executed and
delivered by Consumers and constitutes the legal, valid and binding obligation
of Consumers, enforceable against it in accordance with its terms, except as may
be limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and except to the extent that enforceability is subject to general
principles of equity.
(iii) Neither the execution and delivery by Consumers of this
Agreement or the Plan of Merger, nor the consummation by it of the transactions
contemplated thereby will (A) contravene or violate any provisions of the
Articles of Incorporation or Bylaws of Consumers; or (B) result in any violation
of or default under or permit the
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acceleration of any obligation under, any contract or authorization listed on
the Disclosure Schedule or any judgment, order, decree, statute, law, ordinance,
rule or regulation known to such counsel and applicable to Consumers or its
properties, other than any such violation, default, or acceleration which would
not have a material adverse effect on the business, financial condition, or
operating results of Consumers or assets and liabilities of Consumers taken as a
whole.
(iv) The Plan of Merger was duly and validly approved by Consumers and
its shareholders in accordance with the BCL and the Articles and Bylaws of
Consumers. Assuming that the Plan of Merger was duly and validly approved by CAC
and its shareholders in accordance with the BCL and the Articles of
Incorporation and Bylaws of CAC and that all necessary actions have been taken
to cause the Merger to become effective under the BCL, upon filing of the
Articles of Merger with the appropriate office of the Commonwealth of
Pennsylvania and the issuance thereby of a Certificate of Merger relating to the
Merger, the Merger will become effective under the laws of the Commonwealth of
Pennsylvania.
(v) The authorized capital stock of Consumers consists solely of
10,000,000 shares of Consumers Common Stock, $.01 stated value, of which
[3,025,501] are outstanding and [632,500] shares of Consumers Preferred Stock,
$10.00 liquidation value, of which 536,500 are outstanding. To the knowledge of
such counsel after inquiring of Consumers' officers, there are no existing
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) to purchase or
otherwise acquire from Consumers at any time, or upon the happening of any
stated event, any shares of the capital stock of Consumers whether or not
presently issued or outstanding.
(vi) The transactions contemplated by this Agreement will not give the
holders of Consumers' Preferred Stock any right to accelerate redemption of the
Consumers' Preferred Stock.
(vii) All of the outstanding shares of capital stock of the
subsidiaries of Consumers are owned by Consumers, directly or indirectly,
through wholly-owned subsidiaries, free and clear of any lien, pledge, charge or
encumbrance or any other claim of any third party.
Except as expressly set forth in the opinions, where such opinions are
qualified to the "knowledge of counsel" or "known to such counsel," such terms
shall mean such counsel's actual knowledge as of the date of the opinion without
independent investigation or inquiry.
In addition, such counsel shall advise LaSalle that (A) the Proxy
Statement, as of the date of mailing, complied in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of the
SEC thereunder, and (B) with respect to information relating to Consumers and
its business, properties, management, shareholders or securities, such counsel
has participated in the preparation of the Proxy Statement and no facts have
come to their attention to lead such counsel to believe that the Proxy Statement
on the date of mailing and the Effective Date, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(i) Due Diligence Review. There shall not exist prior to the
Effective Date any condition which was not disclosed in writing to LaSalle on or
prior to the date hereof and which materially adversely affects the business,
financial condition, or operating results of Consumers or the assets and
liabilities of Consumers taken as a whole; provided, however, that the foregoing
condition to the Merger shall lapse and be rendered null and void with respect
to any such condition unless LaSalle notifies Consumers that LaSalle is
terminating or intends to terminate this Agreement pursuant to Section 5.1(b)
because of a breach of this Section within fifteen days after such condition is
first disclosed in writing to LaSalle.
(j) Third Party Consents. Consumers shall have obtained all consents
and approvals to the consummation and performance of the transactions
contemplated hereby, as set forth in the Disclosure Schedule.
(k) Tax Clearance Certificates. Consumers shall have received tax
clearance certificates in each state in which Consumers pays taxes and in which
such a tax clearance certificate is obtainable, and, in the event that such tax
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clearance certificates may not be obtained prior to the Closing, Consumers shall
provide LaSalle or CAC with a ledger account of taxes owed and paid in each such
state where ledger account information is available.
(l) Sale of Interstate. Consumers shall have either sold the business
of Interstate to third parties (the "Interstate Assets") or distributed the
common stock of Interstate to its shareholders.
(m) Sale of Universal Life Block. Consumers shall have sold its
universal life block of business to a third party.
(n) Employment Agreement. Ralph Byrnes shall have entered into a
three year employment agreement with Consumers in substantially the form
provided in the Disclosure Schedule.
(o) Closing Documents. LaSalle and CAC shall have received such
certificates and other closing documentation as Morgan, Lewis & Bockius, LLP
counsel for LaSalle and CAC, shall reasonably request.
SECTION 4.2 Conditions to the Merger Relating to Consumers. The
obligation of Consumers to effect the Merger is, at its option, subject to the
satisfaction, on or before the Effective Date, of each of the following
conditions:
(a) Representations, Warranties, and Covenants of LaSalle and CAC.
The representations and warranties of LaSalle and CAC herein contained shall be
true and correct at the Closing Date in all material respects with the same
effect as though made at such time, except to the extent waived hereunder or
affected by the transactions contemplated herein; LaSalle and CAC shall have
performed in all material respects all obligations and complied in all material
respects with all agreements, undertakings, covenants and conditions required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date; and LaSalle and CAC shall have delivered to Consumers a certificate in
form and substance satisfactory to Consumers dated the Closing Date and signed
by the Chairman and Chief Executive Officer and by the President and Chief
Operating Officer of each of LaSalle and CAC to such effect.
(b) Injunctions; Etc. There shall not be any judgment, decree,
injunction, ruling or order of any court, governmental department, commission,
agency or instrumentality outstanding against LaSalle, CAC or Consumers which
prohibits or materially restricts or delays consummation of the Merger.
(c) Shareholder Approval. This Agreement and the Plan of Merger shall
have been approved and adopted by the requisite vote of the holders of Consumers
Common Stock in accordance with the BCL and Consumers' Articles of Incorporation
and Bylaws.
(d) Opinion of Counsel for LaSalle and CAC. Consumers shall have
received opinions dated the Closing Date of Morgan, Lewis & Bockius, LLP counsel
for LaSalle, and Dorsey & Whitney, counsel for CAC, as applicable, in form and
substance reasonably satisfactory to Consumers and its counsel, substantially to
the effect that:
(i) Each of LaSalle and CAC is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, with full corporate power and authority to own its properties and
assets and to carry on its business;
(ii) Each of LaSalle and CAC has the corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate and shareholder action. This Agreement has been duly
executed and delivered by LaSalle and CAC and constitutes the legal, valid and
binding obligation of each such party, enforceable against each in accordance
with its terms, except as may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and except to the extent that
enforceability is subject to general principles of equity.
(iii) Neither the execution and delivery by LaSalle or CAC of this
Agreement or the Plan of Merger, nor the consummation by either of them of the
transactions contemplated hereby will (i) contravene or violate any
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provisions of the Charter or Bylaws of LaSalle or CAC or (ii) result in any
violation of or default or loss of a benefit under, or permit the acceleration
of any obligation under, any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation known to such counsel and
applicable to such corporation or its properties, other than any such violation,
default, loss or acceleration which would not have a material adverse effect on
the business, financial condition, or operating results of such corporation or
assets and liabilities of such corporation taken as a whole.
Where such opinions are qualified "known to such counsel," such term
shall mean such counsel's actual knowledge as of the date of the opinion without
independent investigation or inquiry.
(e) Regulatory Approval. All authorizations, consents and permits
required to perform this Agreement and the Plan of Merger shall have been
obtained, including approval by each State Commissioner of Insurance in which an
Insurance Company Subsidiary is domiciled, and shall be in form and substance
satisfactory to Consumers. Buyer shall have filed all necessary premerger
notifications pursuant to HSR, and the required statutory waiting period under
HSR, if applicable, shall have terminated.
(f) Closing Documents. Consumers shall have received such
certificates and other closing documents as Duane, Morris & Heckscher, counsel
for Consumers, shall reasonably request.
ARTICLE V
TERMINATION AND ABANDONMENT
SECTION 5.1 Termination and Abandonment. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Date, whether
before or after approval by the shareholders of Consumers:
(a) by mutual action of the Boards of Directors of LaSalle, and
Consumers; or
(b) by the Board of Directors of LaSalle, if the representations and
warranties of Consumers contained in Section 2.1 were materially incorrect when
made or if Consumers shall not have complied in any material respect with any of
the covenants set forth in Article III;
(c) by the Board of Directors of Consumers, if the representations and
warranties of LaSalle and CAC contained in Section 2.2 were materially incorrect
when made or if LaSalle or CAC shall not have complied in any material respect
with any of the covenants set forth in Article III.
(d) by either LaSalle, CAC or Consumers, if the Closing has not
occurred by January 31, 1997; provided, however, that this Agreement shall not
terminate if the Closing has not occurred due to a regulatory approval delay
beyond the control of the parties, in which case any of the parties may request
an extension reasonably necessary to obtain regulatory approval, and which
consent may not be unreasonably withheld prior to March 31, 1997 after which
such consent may be withheld in the sole discretion of any party.
SECTION 5.2 Effect of Termination. Except as provided in Section 3.3 with
respect to expenses and fees, in the event of the termination of this Agreement
and the abandonment of the Merger, this Agreement shall thereafter become void
and have no effect, and no party hereto shall have any liability to any other
party hereto or its shareholders or directors or officers in respect thereof,
and each party shall be responsible for its own expenses, except that nothing
herein shall relieve any party from liability for any willful breach of this
Agreement.
SECTION 5.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that after approval of the Merger by the shareholders of Consumers, no
amendment may be made which decreases the amount of cash to which the
shareholders of Consumers are entitled
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pursuant to this Agreement or otherwise materially adversely affects the
shareholders of Consumers without the further approval of the shareholders of
Consumers.
SECTION 5.4 Waiver. Any time prior to the Effective Date, whether before
or after any meeting of Consumers' shareholders as referred to in Section 3.1,
any party hereto may (a) in the case of LaSalle or CAC, extend the time for the
performance of any of the obligations or other acts of Consumers or, subject to
the provisions contained in Section 5.3, waive compliance with any of the
agreements of Consumers or with any conditions to the respective obligations of
LaSalle or CAC, or (b) in the case of Consumers, extend the time for the
performance of any of the obligations or other acts of LaSalle or CAC, subject
to the provisions contained in Section 5.3, or waive compliance with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party by a duly authorized officer.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by telecopy or facsimile
transmission (with hard copy to follow), registered or certified mail, postage
prepaid, or Federal Express or similar overnight delivery services addressed, in
the case of Consumers, to it at
Consumers Financial Corporation
1200 Camp Hill By-Pass
Camp Hill, PA 17001
Attn: James C. Robertson
with a required copy to:
Duane, Morris & Heckscher
305 N. Front Street, 5th Floor
P.O. Box 1003
Harrisburg, PA 17108-1003
Attn: Scott C. Penwell, Esquire
or, in the case of LaSalle and CAC, to them at:
LaSalle Group, Inc.
1822 Spruce Street
Philadelphia, PA 19103
Attn: Robert E. Hancox and Charles E. Miller, Jr.
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with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square,
Philadelphia, Pennsylvania 19103
Attn: Steven M. Cohen, Esquire
or such other address as shall be furnished in writing by any party to the
others prior to the giving of the applicable notice or communication.
SECTION 6.2 No Survival of Representations and Warranties. The
representations and warranties in this Agreement shall not survive the
consummation of the Merger.
SECTION 6.3 Headings. The headings herein are for convenience of
reference only, do not constitute a part of this Agreement, and shall not be
deemed to limit or affect any of the provisions hereof.
SECTION 6.4 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties, with respect to the subject matter hereof.
SECTION 6.5 Cooperation. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its commercially reasonable
efforts to take, or cause to be taken, such action, to execute and deliver, or
cause to be executed and delivered, such governmental notifications and
additional documents and instruments and to do, or cause to be done, all things
necessary, proper or advisable under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
SECTION 6.6 No Rights; Etc.. Nothing in this Agreement express or implied
is intended to confer upon any other person any rights or remedies under or by
reason of this Agreement.
SECTION 6.7 No Assignment. This Agreement shall not be assigned, by
operation of law or otherwise, except that LaSalle or CAC may assign all of
CAC's rights and obligations hereunder to any wholly-owned subsidiary of
LaSalle.
SECTION 6.8 No Third Party Beneficiaries. No provision of this Agreement
shall create any third-party beneficiary rights in any person or organization,
including, without limitation, any past, current or future employee of the
Company or any successor thereto.
SECTION 6.9 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
Commonwealth of Pennsylvania applicable to contracts made and to be performed in
that State.
SECTION 6.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Reorganization to be duly executed as of the date first above written.
CONSUMERS FINANCIAL CORPORATION
By: /s/ James C. Robertson
--------------------------------------
Name: James C. Robertson
Title: President
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LASALLE GROUP, INC.
By: /s/ Robert E. Hancox
--------------------------------------
Name: Robert E. Hancox
Title: Chairman and Chief Executive Officer
CONSUMERS ACQUISITION CORP.
By: /s/ Charles E. Miller, Jr.
--------------------------------------
Name: Charles E. Miller, Jr.
Title: President and Chief Operating Officer
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EXHIBIT A
PLAN OF MERGER
MERGING
CONSUMERS ACQUISITION CORPORATION
(A PENNSYLVANIA CORPORATION)
WITH AND INTO
CONSUMERS FINANCIAL CORPORATION
(A PENNSYLVANIA CORPORATION)
RECITALS
A. Consumers Acquisition Corporation (the "Merging Corporation") is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania, which is authorized to issue 1,000 shares
of Common Stock, par value $.01 per share ("CAC Common Stock"), of which 1,000
shares are issued and outstanding, all of which are owned of record and
beneficially by LaSalle Group, Inc., a Delaware corporation ("LaSalle").
B. Consumers Financial Corporation (the "Surviving Corporation") is a
corporation duly organized and validly existing under the laws of the
Commonwealth of Pennsylvania, which is authorized to issue 10,000,000 shares of
Common Stock, stated value $.01 per share ("Consumers Common Stock"), of which
[3,025,501] shares are issued and outstanding and 632,500 shares of Preferred
Stock, liquidation preference $10.00 per share ("Consumers Preferred Stock"), of
which 536,500 shares are issued and outstanding.
C. The Board of Directors of the Merging Corporation has adopted
resolutions approving this Plan of Merger in accordance with the Pennsylvania
Business Corporation Law of 1988 ("BCL"), and directing that it be submitted to
the sole shareholder of the Merging Corporation for adoption.
D. The Board of Directors of the Surviving Corporation has adopted
resolutions approving this Plan of Merger in accordance with the BCL and
directing that it be submitted to the shareholders of the Surviving Corporation
for adoption.
A-1
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ARTICLE I
The Merger
1.1 The Merger. The Merging Corporation and the Surviving Corporation
shall effect a merger (the "Merger") in accordance with and subject to the terms
and conditions of this Plan of Merger (the "Plan"). On the Effective Date (as
such term is defined in Section 1.2 hereof), the Merging Corporation shall be
merged with and into the Surviving Corporation, and the separate existence of
the Merging Corporation, except insofar as it may be continued by law, shall
cease, all with the effect provided in Section 1929 of the BCL.
1.2 Effective Date. Articles of Merger, and such other documents and
instruments as are required by, and complying in all respects with, the BCL
shall be delivered to the Department of State of the Commonwealth of
Pennsylvania. The Merger shall become effective upon the filing of the Articles
of Merger with the Department of State of the Commonwealth of Pennsylvania (the
"Effective Date").
1.3 Further Assurances. If at any time the Surviving Corporation, or its
successors or assigns, shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable to (a) vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation its
rights, title or interest in, to or under any of the rights, properties or
assets of the Merging Corporation acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger, or (b) otherwise
carry out the purposes of this Plan, the Merging Corporation and its proper
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Plan; and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of the Merging Corporation or
otherwise to take any and all such action.
1.4 Amendment or Termination. Notwithstanding shareholder approval of
this Plan, this Plan may be amended or terminated at any time on or before the
Effective Date by agreement of the Boards of Directors of the Merging
Corporation and the Surviving Corporation, provided that no amendment may be
made which decreases the amount of Merger Consideration (as such term is defined
in Section 2.2 hereof) payable to holders of Consumers Common Stock.
A-2
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ARTICLE II
Capital Stock
2.1 CAC Common Stock. At the Effective Date, each share of CAC Common
Stock then issued and outstanding shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into one share of the
Common Stock of the Surviving Corporation.
2.2 Conversion of Consumers Common Stock.
(a) Merger Consideration At the Effective Date, except for shares of
Consumers Common Stock held by holders of Dissenting Shares (as such term is
defined in Section 2.5), each share of Consumers Common Stock then issued and
outstanding shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive immediately
deliverable cash in an amount equal to $11,859,964 divided by the number of
shares of Consumers Common Stock outstanding on the Effective Date (the "Merger
Consideration"), subject to adjustment prior to the Effective Date as provided
in Section 2.2(b).
(b) Merger Consideration Adjustments.
(i) The Merger Consideration shall be increased or decreased by an amount
equal to the difference between (x) Consumers' Net Statutory Surplus (as defined
below) at the end of the month preceding the Effective Date and (y) $6,710,623.
For purposes of this Agreement, Consumers' Net Statutory Surplus shall mean (x)
the total statutory capital and surplus of Consumers Life Insurance Company
("CLI"), as reported in statutory statements reported to state regulatory
authorities, plus (y) the asset valuation reserve and interest maintenance
reserve of CLI and each of its subsidiaries. In computing any Merger
Consideration adjustments, the effects on total capital and surplus of any
transactions which are not in the ordinary course of business, including (x) any
effects from the sale of assets contemplated below and (y) the effects of any
severance costs up to $300,000, shall be excluded.
(ii) In the event the business of Interstate Auto Auction, Inc.
("Interstate") is sold prior to the Effective Date, the Merger Consideration
shall be increased or decreased by (A) an amount equal to the difference between
(x) the net sales proceeds (after Federal and state income taxes) received from
the sale of Interstate and (y) $4,900,000, less applicable Federal and state
taxes and (B) an amount equal to the difference between (x) the Non-operating
net assets (defined as all Non-operating assets less liabilities except the
existing bank indebtedness) of Interstate at the end of the month preceding the
date on which Interstate is sold and (y) $899,440. Non-operating net assets, as
used herein, shall not be reduced by any principal payments made after June 30,
1996 pursuant to the PNC Bank Loan Agreement. In the event Interstate is not
sold prior to the Effective Date, the Merger Consideration shall be decreased by
$4,378,000.
(iii) In the event Consumers' universal life business is sold prior to the
Effective Date, the Merger Consideration shall be increased or decreased by an
amount equal to the difference between the purchase commission (after applicable
Federal income taxes) received by Consumers from the sale of its universal life
business and $1,269,000.
2.3 Consumers Preferred Stock. Each share of Consumers Preferred Stock
shall remain outstanding and unaffected by the Merger.
2.4 No Further Rights or Transfers. On and after the Effective Date, the
holder of a Certificate (as such term is defined in Section 3.2 hereof)
representing Consumers Common Stock shall cease to have any rights as a
shareholder of Consumers, except for the right to surrender his or her
Certificate in exchange for payment of the Merger Consideration.
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2.5 Dissenting Shares. Notwithstanding anything herein to the contrary,
shares of Consumers Common Stock that are outstanding immediately prior to the
Effective Date and that are held by shareholders, if any, who are entitled to
assert a right to dissent from the Merger and who demand and validly perfect
their rights to receive the "fair value" of their shares with respect to the
Merger under Section 1574 of the BCL (the "Dissenting Shares") shall be entitled
solely to the payment of the "fair value" of such shares in accordance with the
provisions of the BCL; except that (i) if such demand to receive "fair value"
shall be withdrawn upon the consent of the Surviving Corporation, (ii) if this
Plan of Merger shall be terminated, or the Merger shall not be consummated,
(iii) if no demand or petition for the determination of "fair value" by a court
shall have been made or filed within the time provided in the provisions of the
BCL or (iv) if a court of competent jurisdiction shall determine that such
holder of Dissenting Shares is not entitled to the relief provided by the
provisions of the BCL, then the right of such holder of Dissenting Shares to be
paid the "fair value" of his shares of Consumers Common Stock shall cease and
with respect to clauses (i), (iii) and (iv) above, such Dissenting Shares shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Date, the right to receive the Merger Consideration
with respect thereto, without any interest thereon, and with respect to clause
(ii) above, the status of such shareholder shall be restored retroactively
without prejudice to any corporate proceeding which may have been taken during
the interim.
ARTICLE III
Merger Payment Procedure
3.1 Exchange Agent. CAC shall deposit the Merger Consideration with
Consumers Financial Corporation or such other transfer agent as may be mutually
acceptable to both CAC and Consumers (the "Exchange Agent") for the benefit of
holders of Consumers Common Stock, promptly after the Effective Date.
3.2 Transmittal Letter. As soon as practicable after the Effective Date,
the Exchange Agent shall send a notice and transmittal form to each holder of
record of a certificate or certificates theretofore evidencing shares of
Consumers Common Stock (such certificates are collectively referred to herein as
the "Certificates"), advising such holder of the effectiveness of the Merger and
the procedure for surrendering to the Exchange Agent such Certificates for
exchange into the Merger Consideration. Upon the surrender of a Certificate to
the Exchange Agent together with and in accordance with such transmittal form,
the holder thereof shall be entitled to receive in exchange therefor the Merger
Consideration payable in respect of each share of Consumers Common Stock
represented thereby. Upon such surrender, the Exchange Agent will promptly pay
the Merger Consideration. Each such Certificate shall be deemed for all purposes
to evidence only the right to receive the Merger Consideration.
3.3 Delivery To Person Other Than Registered Holder. If the Merger
Consideration (or any portion thereof) is to be delivered to a person other than
the person in whose name the Certificates surrendered in exchange therefor are
registered, it shall be a condition to the delivery of the Merger Consideration
that the certificates so surrendered shall be properly endorsed or accompanied
by appropriate stock powers and otherwise be in proper form for transfer, that
such transfer otherwise be proper and that the person requesting such transfer
pay to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such taxes
have been paid or are not required to be paid.
3.4 Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, the owner of such lost, stolen or destroyed Certificate shall deliver
to the Surviving Corporation a bond in such sum as the Surviving Corporation may
direct as indemnity against any claim that may be made against the Surviving
Corporation with respect to the Certificate alleged to have been lost, stolen or
destroyed.
A-4
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ARTICLE IV
Surviving Provisions
4.1 Articles of Incorporation and Bylaws. The Articles of Incorporation
of the Surviving Corporation shall survive and be the Articles of Incorporation
of the Surviving Corporation until thereafter amended in accordance with the
provisions therein and as provided by the BCL. The bylaws of the Surviving
Corporation shall survive and be the bylaws of the Surviving Corporation until
thereafter amended in accordance with the provisions therein and as provided in
the BCL.
4.2 Directors and Officers. The directors and officers of the Surviving
Corporation shall be the directors and officers of the Merging Corporation.
Each director and officer shall hold office until the expiration of his or
her term of office or earlier death, resignation or removal in accordance with
the Articles of Incorporation and Bylaws of the Merging Corporation and
applicable law.
A-5
<PAGE>
LETTER OF TRANSMITTAL EXHIBIT B
THIS LETTER OF TRANSMITTAL MUST ACCOMPANY CERTIFICATES FOR COMMON STOCK, STATED
VALUE $.01 PER SHARE, OF CONSUMERS FINANCIAL CORPORATION SURRENDERED IN
CONNECTION WITH THE MERGER OF CONSUMERS ACQUISITION CORP. (A WHOLLY OWNED
SUBSIDIARY OF LASALLE GROUP, INC.) WITH AND INTO CONSUMERS FINANCIAL
CORPORATION.
SEND TO: PETER KRAMER, ESQUIRE
Consumers Financial Corporation
1200 Camp Hill By-Pass
Camp Hill, PA 17011-3744
THE INSTRUCTIONS ON THE REVERSE SIDE OF THIS LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE YOU COMPLETE THIS LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
In accordance with the terms of the Agreement and Plan of Merger dated as of
___________ ___, 1996, among Consumers Financial Corporation, a Pennsylvania
corporation ("Consumers"), LaSalle Group, Inc., a Delaware corporation
("LaSalle"), and Consumers Acquisition Corp., a Pennsylvania corporation and the
plan of merger attached as Exhibit A thereto (the "Plan of Merger"), the
undersigned hereby surrenders to Consumers, which will also be acting as paying
agent (when acting in such capacity, the "Paying Agent"), the certificates
described below formerly representing shares of Common Stock, stated value $.01
per share, (the "Common Stock"), of Consumers. The certificates accompanying
this Letter of Transmittal are being surrendered pursuant to the Plan of Merger
in exchange for the Merger Consideration (as defined in the Plan of Merger)
payable with regard thereto.
The undersigned hereby warrants that the undersigned has full power and
authority to surrender the certificates delivered herewith, that the Common
Stock represented thereby is free and clear of all liens, charges, encumbrances,
pledges, security interests, or other obligations and that such certificates and
Common Stock will not be subject to any adverse claim. Upon request, the
undersigned hereby agrees to execute and deliver any additional documents deemed
necessary or desirable by the Paying Agent to complete the surrender of the
certificates.
If a notice of intent to dissent and demand payment of "fair value" has been
filed with Consumers with respect to the Common Stock formerly represented by
the certificate(s) surrendered herewith, the undersigned hereby revokes such
notice and elects not to demand payment of "fair value."
Unless otherwise indicated below in Box B (labeled "Special Payment
Instructions"), the undersigned requests payment by check made payable to the
name of the registered holder appearing in Box A (labeled "Description of Common
Stock Tendered"). Similarly, unless otherwise indicated in Box B (labeled
"Special Payment Instructions"), or Box C (labeled "Special Delivery
Instructions"), please mail the check to the address of the registered holder
appearing under "Description of Common Stock Tendered." If Box D is filled in,
payments of more than $300,000 are to be made by wire transfer.
<TABLE>
<S> <C> <C>
DESCRIPTION OF COMMON STOCK TENDERED
- ------------------------------------------------------------------------------------------------------------------------------------
BOX A Certificate(s) Enclosed:
(Attach signed separate list
Name and Address of Holder of Record if space below is inadequate.)
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Shares of Common
Stock Represented by
Certificate Number Certificate
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Shares
- ------------------------------------------------------------------------------------------------------------------------------------
BOX B BOX C
SPECIAL PAYMENT INSTRUCTIONS
(See Instruction 4) SPECIAL DELIVERY INSTRUCTIONS
Fill in ONLY if the check is to be issued in a name Fill in ONLY if the check is to be sent to an address OTHER than to
OTHER than the name appearing in Box A above. the address appearing in Box A or B.
(Unless otherwise indicated in Box C, the check will
be mailed to the address indicated in Box A or B.)
Name Name
______________________________________________________ ____________________________________________________________
(Please Print) (Please Print)
Address Address
______________________________________________________ ____________________________________________________________
______________________________________________________ ____________________________________________________________
(include Zip Code) (include Zip Code)
Tax Identification or Social Security
Number of person named above _________________________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Daytime Phone No. (_____) ____________ Date___________ BOX D
WIRE TRANSFER INSTRUCTIONS
SIGN
HERE ___________________________________________________ Fill in ONLY if payments exceeding $300,000 are to be made by
wire transfer.
__________________________________________________________
SIGNATURE(S) OF OWNER(S) Bank Name: ________________________________________________
Must be signed by registered holder(s), exactly as name Bank Telephone Number: _____________________________________
appears on stock certificate(s), or by person(s)
authorized to become registered holder(s) by certificates Account Name: _____________________________________________
and documents transmitted herewith. If signature is by
an agent, attorney, administrator, executor, guardian, Account Number: ____________________________________________
trustee or others acting in a fiduciary or representative
capacity, or by an officer of a corporation on behalf of Routing Number: ____________________________________________
the corporation, please set forth full title and furnish
appropriate supporting evidence. (See Instructions 2, 4
and 5.)
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY: _____________________________
(Required only as provided in Instruction 4.)
- ----------------------------------------------------------------------
</TABLE>
A-7
<PAGE>
INSTRUCTIONS
5. COMPLETION AND DELIVERY OF LETTER OF TRANSMITTAL. This Letter of
Transmittal or a photocopy or facsimile should be properly filled in, dated and
signed, and delivered or sent with your Common Stock certificate(s) to the
Paying Agent at the address listed on the first page hereof. The method of
delivery is at your option and risk; but if sent by mail, it is strongly
recommended that you use registered mail, with return receipt requested, and
properly insure the package. A return envelope addressed to the Paying Agent is
enclosed for your convenience. Additional copies of this Letter of Transmittal
may be obtained from the Paying Agent at the address and telephone number
referred to above.
6. SIGNATURES. The signature on the Letter of Transmittal must correspond
exactly with the name that appears on the face of Common Stock certificate(s)
surrendered unless the Common Stock represented thereby has been assigned by the
registered holder prior to the effective date of the merger, in which event the
Letter of Transmittal should be signed in exactly the same form as the name of
the transferee indicated on the transfers attached to or endorsed on the
certificate(s). (See Instruction 4 below.) If any certificate(s) surrendered are
registered in different names, a separate Letter of Transmittal must be
completed, signed and submitted for each of the different names.
7. ISSUANCE OF CHECK IN THE SAME NAME. If the check is to be issued in the
name of the record holder as inscribed on the surrendered certificate(s), the
surrendered certificate(s) need not be endorsed. For corrections in name or
changes in name not involving changes in ownership, see Instruction 4(d).
8. ISSUANCE OF CHECK IN A DIFFERENT NAME. If the check is to be issued in a
name different from the name of the record holder as inscribed on the
certificate(s), please follow these instructions:
a. ENDORSEMENT AND GUARANTEE. The certificate(s) surrendered must be
properly endorsed or accompanied by appropriate stock power(s) properly executed
by the record holder of such certificate(s) to the person who is to receive the
check. The signature of the record holder on the endorsement(s) or stock
power(s) must correspond with the name that appears on the face of the
certificate(s) in every particular and must be guaranteed by an eligible
guarantor institution with membership in an approved medallion signature
guaranty program pursuant to SEC Rule 17Ad-15 ("Qualified Guarantor"). Notaries
Public cannot execute acceptable guarantees of signatures.
b. TRANSFEREE'S SIGNATURE. If a certificate has been properly
transferred and the transfer has not yet been recorded on the books of
Consumers, this Letter of Transmittal must be signed by the transferee or by his
agent and should not be signed by the transferor. The signature of such
transferee or agent on this Letter of Transmittal must be guaranteed by a
Qualified Guarantor as defined in Instruction 4(a).
c. TRANSFER TAXES. In the event that any transfer or other tax becomes
payable by reason of the issuance of the check in any name other than of the
record holder, such transferee or assignee must pay such tax to the Paying Agent
or must establish to the satisfaction of the Paying Agent that such tax has been
paid.
d. CORRECTION OF OR CHANGE IN NAME. For a correction of name or for a
change in name which does not involve a change of ownership, proceed as follows:
For a change in name by marriage, etc., the surrendered certificate(s) should be
endorsed, e.g., "Mary Doe, now by marriage Mrs. Mary Jones," with the signature
guaranteed by a Qualified Guarantor as defined in Instruction 4(a). For a
correction in name, the surrendered certificate(s) should be endorsed, e.g.,
"James E. Brown, incorrectly inscribed as James S. Brown," with the signature
guaranteed by a Qualified Guarantor as defined in Instruction 4(a).
9. SUPPORTING EVIDENCE. In case any Letter of Transmittal, certificate
endorsement or stock power is executed by an agent, attorney, administrator,
executor, guardian, trustee or another acting in a fiduciary or representative
capacity, or by an officer of a corporation on behalf of the corporation, such
person should so indicate when signing and must submit with the Letter of
Transmittal, surrendered certificate(s) and stock power(s) documentary evidence
of appointment and authority to act in such capacity (including court orders and
corporate resolutions where necessary) as well as evidence of the authority of
the person making such execution to assign, sell or transfer the shares. Such
documentary evidence of authority must be in form satisfactory to the Paying
Agent.
10. LOST OR DESTROYED CERTIFICATE(S). If any Common Stock certificate has
been lost, stolen or destroyed, notify the Paying Agent in writing immediately
for instructions on how to replace the missing certificate. Your letter should
be forwarded along with your properly completed Letter of Transmittal and any
other certificates you may have in your possession. The exchange cannot be
processed until the missing certificate has been replaced.
11. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check to be issued
for certificate(s) formerly representing Common Stock surrendered herewith is to
be issued in the name of a person other than the signer of this Letter of
Transmittal or if such check is to be sent to someone other than the Shareholder
of record, then Box B and/or Box C, as appropriate, should be completed.
12. VALIDITY OF SURRENDER. A surrender of certificate(s) will not be deemed
to have been made until all irregularities and defects have been cured or
waived. All questions as to validity, form and eligibility of any surrender of
the certificate(s) will be determined by the Paying Agent, and such
determination will be final and binding.
13. FEDERAL TAX WITHHOLDING. Under federal income tax law, the Paying Agent
is required to file a report with the Internal Revenue Service ("IRS")
disclosing the payments being made to you as an exchanging Shareholder. Federal
law also requires each Shareholder to provide the Paying Agent with a correct
Taxpayer Identification Number ("TIN") on a Substitute Form W-9 set forth in the
box below. If the Paying Agent is not provided with the correct TIN, you may be
subject to a $50 penalty by the IRS and payments that are made to you with
respect to surrendered Common Stock may be subject to backup withholding. If you
are an individual, your TIN is your social security number. Your TIN should be
included in Part I of the Substitute Form W-9 provided below.
If you are not subject to backup withholding, you should also check the box
in Part 2 of the W-9 Form. By checking this box you are certifying that you have
not been notified by the IRS that you are subject to backup withholding as a
result of failure to report all interest and dividend income or that the IRS has
notified you that you are no longer subject to backup withholding. To prevent
backup withholding you must check the box in Part 2 of the Substitute Form W-9.
If backup withholding applies, the Paying Agent is required to withhold 20%
of any payments to be made to the Shareholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained by filing a tax
return with the IRS. The Paying Agent cannot refund amounts withheld by reason
of backup withholding. Certain Shareholders, such as corporations and certain
foreign individuals, are exempt from backup withholding and should so indicate
by writing exempt on the Substitute Form W-9 below.
The box in Part 3 of the Form W-9 may be checked if you have not been
issued a TIN, but you have either applied for one or intend to apply for one in
the near future. If the box in Part 3 is checked, payments made by the Paying
Agent within 60 days of the date this Form is signed will not be subject to
backup withholding. If the TIN is not provided to the Paying Agent within 60
days, future payments, if any, will be subject to backup withholding.
A-8
<PAGE>
<TABLE>
<S> <C> <C>
SUBSTITUTE PART 1 - PLEASE PROVIDE YOUR TIN TIN, Social Security
FORM W-9 IN THE BOX AT THE RIGHT AND number
CERTIFY BY SIGNING AND DATING BELOW
Department of the Treasury ________________________
Internal Revenue Service
PART 2 - Check this box [ ] if you are NOT subject to withholding under the provisions of the
Payer's Request for Internal Revenue Code of 1986 because (1) you have not been notified that you are subject to
Taxpayer backup withholding as a result of failure to report all interest or dividends or (2) the
Identification Number (TIN) Internal Revenue Service has notified you that you are no longer subject to backup
withholding.
----------------------------------------------------------------------------------------------
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY PART 3 -
THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT
AND COMPLETE
Awaiting TIN [ ]
SIGNATURE: DATE:
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THE INFORMATION REQUESTED ON THE SUBSTITUTE FORM W-9
ABOVE MAY RESULT IN BACKUP WITHHOLDING OF 20% OF ANY PAYMENTS MADE TO YOU.
All inquiries with respect to the surrender of Common Stock of Consumers should
be made directly to Peter Kramer, Esquire, telephone number 717-761-4230.
A-9
<PAGE>
EXHIBIT 4
APPENDIX 2
DISSENTERS RIGHTS PROVISIONS OF THE
PENNSYLVANIA BUSINESS CORPORATION LAW
Section 1930. Dissenters rights.
(a) General rule. If any shareholder of a domestic business corporation
that is to be a party to a merger or consolidation pursuant to a plan of merger
or consolidation objects to the plan of merger or consolidation and complies
with the provisions of Subchapter D of Chapter 15 (relating to dissenters
rights), the shareholder shall be entitled to the rights and remedies of
dissenting shareholders therein provided, if any. See also section 1906(c)
(relating to dissenters rights upon special treatment).
(b) Plans adopted by directors only. Except as otherwise provided pursuant
to section 1571(c) (relating to grant of optional dissenters rights), Subchapter
D of Chapter 15 shall not apply to any of the shares of a corporation that is a
party to a merger or consolidation pursuant to section 1924(1)(i) (relating to
adoption by board of directors).
(c) Cross references. See sections 1571(b) (relating to exceptions) and
1904 (relating to de facto transaction doctrine abolished).
SUBCHAPTER D
DISSENTERS RIGHTS
Section 1571. Application and effect of subchapter.
(a) General rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
<PAGE>
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such shares
under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted
solely into shares of the acquiring, surviving, new or other
corporation or solely into such shares and money in lieu of fractional
shares.
(ii) Shares of any preferred or special class unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class to vote thereon and require for the adoption
of the plan or the effectuation of the transaction the affirmative
vote of a majority of the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the liabilities
of the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(c) Grant of optional dissenters rights. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(d) Notice of dissenters rights. Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) A statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) A copy of this subchapter.
(e) Other statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective. This subchapter may not be
relaxed by any provision of the articles.
(g) Cross references. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
Section 1572. Definitions.
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have the sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
<PAGE>
"Fair value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors including the average
rate currently paid by the corporation on its principal bank loans.
Section 1573. Record and beneficial holders and owners.
(a) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that
event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
(b) Beneficial owners of shares. A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
Section 1574. Notice of intention to dissent.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed
corporate action shall constitute the written notice required by this section.
Section 1575. Notice to demand payment.
(a) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action
is to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment. The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
Section 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
<PAGE>
(b) Restriction on uncertificated shares. If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
Section 1577. Release of restrictions or payment for shares.
(a) Failure to effectuate corporate action. Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment. When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(c) Payment of fair value of shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair market value
of the shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment. If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenters had
after making demand for payment of their fair value.
Section 1578. Estimate by dissenter of fair value of shares.
(a) General rule. If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of failure to file estimate. Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.
Section 1579. Valuation proceedings generally.
(a) General rule. Within 60 days after the latest of:
(1) Effectuation of the proposed corporate action;
<PAGE>
(2) Timely receipt of any demand for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
If any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(b) Mandatory joinder of dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
Section 1580. Costs and expenses of valuation proceedings.
(a) General rule. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.
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(c) Award of fees for benefits to other dissenters. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
