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
TABLE OF CONTENTS
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Page
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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
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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
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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
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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.
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(a) Merger Considerations. On the Effective Date, each share of
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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.
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(i) The Merger Consideration shall be increased or decreased by an
amount equal to the difference between (x) Consumers' Net Statutory Surplus (as
defined below) at the end of the month preceding the Effective Date and (y)
$6,710,623. For purposes of this Agreement, Consumers' Net Statutory Surplus
shall mean (x) the total statutory capital and surplus of Consumers Life
Insurance Company ("CLI"), as reported in statutory statements reported to state
regulatory authorities, plus (y) the asset valuation reserve and interest
maintenance reserve of CLI and each of its subsidiaries. In computing any Merger
Consideration adjustments, the effects on total capital and surplus of any
transactions which are not in the ordinary course of business, including (x) any
effects from the sale of assets contemplated by this Agreement and (y) the
effects of severance costs up to $300,000, shall be excluded.
(ii) In the event the business of Interstate Auto Auction, Inc.
("Interstate") is sold prior to the Effective Date, the Merger Consideration
shall be increased or decreased by (A) an amount equal to the difference between
(x) the net sales proceeds (after Federal and state income taxes) received from
the sale of Interstate and (y) $4,900,000, less applicable Federal and state
taxes and (B) an amount equal to the difference between (x) the Non-operating
net assets (defined as all Non-operating assets less liabilities except the
existing bank indebtedness) of Interstate at the end of the month preceding the
date on which Interstate is sold and (y) $899,440. Non-operating net assets, as
used herein, shall not be reduced by any principal payments made after June 30,
1996 pursuant to the PNC Bank Loan Agreement. In the event Interstate is not
sold prior to the Effective Date, the Merger Consideration shall be decreased by
$4,378,000.
(iii) In the event Consumers' universal life business is sold
prior to the Effective Date, the Merger Consideration shall be increased or
decreased by an amount equal to the difference between the purchase commission
(after applicable Federal income taxes) received by Consumers from the sale of
its universal life business and $1,269,000.
(c) Dissenting Shares. Notwithstanding anything herein to the
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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
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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.
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(a) Shareholder Approval. Consumers shall submit the Plan of Merger
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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
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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
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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 Xxxxxx, Xxxxx & Xxxxxxx LLP, Philadelphia, Pennsylvania, or at
such other place or time as the parties hereto may agree. At Closing, LaSalle
shall pay the Merger Consideration to Consumers by wire transfer of immediately
available funds to a segregated account to be specified in writing by Consumers,
and LaSalle shall cause the Articles of Merger to be filed with the Secretary of
State of the Commonwealth of Pennsylvania. The Merger shall become effective
upon the filing of Articles of Merger with the Secretary of State of the
Commonwealth of Pennsylvania in accordance with the provisions of the BCL (the
"Effective Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations and Warranties by Consumers. The
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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:
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(a) Organization and Good Standing of Consumers and Affiliates.
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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
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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
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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.
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(d) Corporate Organization Structure. Consumers owns of record and
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beneficially 100% of the issued and outstanding common stock of each of its
affiliates, as shown on the Organizational and Share Ownership Chart included in
the Disclosure Schedule.
None of the Consumers Companies has issued and outstanding any class
of capital stock other than common stock except for (i) preferred stock of
Consumers, liquidation preference $10.00 per share, of which 632,500 shares are
authorized and 536,500 are issued and outstanding and (ii) preferred stock of
Consumers Re, par value and liquidation preference $1.00 per share, of which
1,000,000 shares are authorized and 65,500 shares are issued and outstanding.
None of the Consumers Companies has any investment in any other entity
(other than portfolio investments made in the ordinary course of business)
except as disclosed in the Disclosure Schedule.
(e) Capitalization. The authorized, issued and outstanding capital
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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
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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;
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(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 Xxxx-Xxxxx-
Xxxxxx 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
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consolidated balance sheets of Consumers and its subsidiaries at December 31,
1994 and 1995, and the related consolidated statements of operations,
consolidated statements of stockholders' equity and consolidated statements of
changes in financial position for each of the two years 1994 and 1995 with the
footnotes and schedules thereto, together with the reports of independent public
accountants with respect thereto. Said audited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles, and fairly present the consolidated financial position of Consumers
and its subsidiaries as of the respective dates thereof and its consolidated
results of operations and changes in consolidated financial position and
stockholders' equity for the years indicated as stated therein.
The annual statements of each of the Insurance Company Subsidiaries,
filed with the state insurance department of its domiciliary state, for each of
the years ended December 31, 1994 and 1995 and delivered to LaSalle, present
fairly the required information, and the audited statutory financial statements
covering each said year, which Consumers has heretofore delivered to LaSalle,
present fairly the financial position of each of the Insurance Company
Subsidiaries, respectively, at the end of each of the years then ended and the
results of its operations for each such year, in conformity with accounting
practices prescribed or permitted by the applicable state insurance laws and
regulations as and to the extent described in such annual statements and related
statutory financial statements.
Consumers has also delivered to LaSalle unaudited consolidated balance
sheets of Consumers and its subsidiaries, at March 31, 1996 and at June 30,
1996, and related unaudited consolidated statements of operations, unaudited
consolidated statements of stockholders' equity and unaudited consolidated
statements of changes in financial position for the three months ended March 31,
1996 and six months ended June 30, 1996, respectively. The said unaudited
consolidated financial statements contain the necessary adjustments, all of
which are of a normal
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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
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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
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(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
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Schedule, since June 30, 1996 there has not been:
(i) any material adverse change in the financial condition,
assets, properties, liabilities, results of operations or prospects of any of
the Consumers Companies;
(ii) any declaration, setting aside or payment of any dividend
(excluding intercompany dividends), or other distribution, in respect of any of
the capital stock of any of the Consumers Companies or any direct or indirect
redemption, purchase or other acquisition by any of the Consumers Companies of
any of its capital stock,
(iii) except for agents' contracts entered into in the ordinary
course of business, any entry into or amendment of any employment or deferred
compensation agreement between any of the Consumers Companies and any of its
officers, directors, employees, agents or consultants;
(iv) any issuance or sale by any of the Consumers Companies of
any of its authorized capital stock, debentures, bonds, notes or other corporate
securities, or any modification or amendment of the rights of the holders of any
of its outstanding capital stock, debentures, bonds, notes or other securities;
(v) any creation of any lien (other than deposits with State
Insurance Departments and liens for current taxes not yet due), including,
without limitation, any deposit for security made of, created on or in any asset
or property of any of the Consumers Companies, or assumed by any of them with
respect to any such asset or property;
(vi) any material indebtedness or other material liability or
obligation (whether absolute, accrued, contingent or otherwise) incurred, or
other material transaction engaged in, by any of the Consumers Companies, except
in the ordinary course of business;
(vii) any material obligation or liability discharged or
satisfied, other than the current liabilities reflected in the consolidated
balance sheet of any of the Consumers Companies as of June 30, 1996 and current
liabilities incurred since the date thereof in the ordinary course of business
and except as contemplated by this Agreement;
(viii) any sale, transfer or other disposition of any assets or
properties of any of the Consumers Companies, except in the ordinary course of
business or as contemplated by this Agreement;
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(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 Xxxxx Xxxxxx; or
(xiv) any transaction which was not in the ordinary course of
business consistent with past practice.
(j) Absence of Defaults. Except as set forth in the Disclosure
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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
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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
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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
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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
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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)
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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
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Consumers Companies are not in default in any material respect under any order,
decree, judgment, award, determination, ruling or regulation of any court,
arbitration tribunal, governmental department, commission, board, bureau, agency
or other instrumentality.
(o) Employee Benefit Plans.
----------------------
(i) The Consumers Companies do not have a collective bargaining
agreement with any labor union or other representative of employees and, to
Consumers' knowledge, there has been no demand or attempt by employees to
organize a union or labor organization. There are no unfair labor practice
charges or complaints pending or, to the knowledge of the executive officers of
Consumers, threatened against the Consumers Companies before the National Labor
Relations Board or any other federal, state, local or foreign court or agency.
There has been no other labor trouble or other occurrence, event or condition of
a similar character, which is occurring or threatened or has occurred or been,
to the knowledge of the executive officers of Consumers, threatened.
(ii) Except for the plans listed in the Disclosure Schedule (the
"Employee Benefit Plans"), the Consumers Companies do not sponsor, maintain or
contribute to, or have not sponsored, maintained or contributed to, any plan,
fund, program, policy, arrangement, contract or commitment, whether or not
qualified for federal income tax purposes, whether or not funded, whether formal
or informal, and whether for the benefit of a single individual or more than one
individual, which is in the nature of (i) an employee pension benefit plan (as
defined in section 3(2) of ERISA), (ii) an employee welfare benefit plan (as
defined in section 3(1) of ERISA), (iii) an incentive current or deferred
compensation, or other benefit or compensation arrangement for employees, former
employees, their dependents and/or their beneficiaries or (iv) an arrangement
that could be characterized as providing for additional compensation,
compensation associated with a change of control, severance benefits,
perquisites, or fringe benefits.
(iii) Except as set forth in the Disclosure Schedule, the
Consumers Companies do not sponsor or maintain, and are not contributing
employers or otherwise parties to, or have any obligation or liability under or
with respect to, and have never maintained or participated in, or been obligated
to contribute to any defined benefit plan (as defined in section 3(35) of ERISA)
or multiemployer plan (as defined in section 3(37) of ERISA). Except as set
forth in the Disclosure Schedule there are no circumstances pursuant to which
the Consumers Companies may be liable to the Pension Benefit Guaranty
Corporation ("PBGC"), to any such defined benefit plan (or to any participant,
beneficiary, trustee or fiduciary thereof), presently or heretofore sponsored or
maintained by the Consumers Companies or any entity other than the Consumers
Companies, including within the concept of "entity other than the Consumers
Companies" any predecessor of the Consumers Companies or any "controlled
company." A "controlled company" is any enterprise which, with the Consumers
Companies, forms or formed at any time since September 2, 1974 a controlled
group of corporations within the meaning of Section 414(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), a group of trades
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or businesses under common control within the meaning of Section 414(c) of the
Code, or any affiliated service group within the meaning of Section 414(m) of
the Code.
(iv) Each Employee Benefit Plan intended to be qualified under
Sections 401(a), 4975(e)(7), and 401(k) of the Code has been determined to be so
qualified by the Internal Revenue Service ("IRS"), and any trust created
pursuant to any such Employee Benefit Plan has been determined by the IRS to be
exempt from federal income tax under Section 501(a) of the Code. To the
knowledge of the executive officers of Consumers, nothing has occurred since the
date of the last such determination which resulted or could result in the
revocation of such determination. As of the Closing, all of the Employee
Benefit Plans comply with all applicable requirements of the Code (including,
for an Employee Benefit Plan which is an "employee stock ownership plan" under
Section 4975(e)(7) of ERISA (the "ESOP"), the requirements of Sections 409 and
4975(e)(7) of the Code), and all amendments and actions required to bring each
Employee Benefit Plan into conformity in all respects with all applicable laws
have been made or taken to the extent that such amendments or actions are
required by law to be made or taken in order to obtain a favorable determination
letter upon termination of the Employee Benefit Plan, if applicable. The
Consumers Companies have properly and timely submitted all qualified Employee
Benefit Plans in a good faith effort to meet the applicable requirements of
ERISA and the Code to the IRS for its determination of their continuing tax-
qualified status within the time prescribed therefor under applicable law. The
Consumers Companies are not presently liable for failure to make contributions
to any such Employee Benefit Plan or for their fiduciary conduct in connection
with such Employee Benefit Plan. There has been no violation of Sections 404,
406 or 407 of ERISA or Section 4975 of the Code, no violation of the reporting
and disclosure provisions of the Code or ERISA, and no termination or partial
termination with respect to any Employee Benefit Plans.
(v) Full payment has been made of all amounts which the
Consumers Companies are required, under applicable law or under any Employee
Benefit Plan or any agreement related to any Employee Benefit Plan to which the
Consumers Companies are a party, to have paid as contributions thereto as of the
last day of the most recent fiscal year of each Employee Benefit Plan ended
prior to the date hereof. The Consumers Companies have made adequate provision
for reserves to meet contributions that have not been made because they are not
yet due under the terms of any Employee Benefit Plan or related agreements.
Benefits under all Employee Benefit Plans are as represented and have not been
increased subsequent to the date of such documents.
(vi) No Employee Benefit Plan provides any health, life or other
welfare benefit coverage to employees of the Consumers Companies beyond
termination of their employment with the Consumers Companies by reason of
retirement or otherwise, other than coverage as may be required under Section
4980B of the Code or Part 6 of ERISA, or under the continuation of coverage
provisions of the laws of any state or locality.
(vii) Except for the Employment Agreement to be entered into with
Xxxxx Xxxxxx, the consummation of the transactions contemplated by this
Agreement will not
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(other than any payment made pursuant to Code Section 401(k)(10) under any
401(k) Plan) accelerate the time of payment or vesting, increase any
compensation due to any current employee or former employee of the Consumers
Companies or entitle any employee to severance pay, unemployment compensation or
any other payment.
(viii) No proceedings, suits or material claims (other than routine
claims for benefits) exist or are, to the knowledge of the executive officers of
Consumers, threatened against the Consumers Companies with respect to any
Employee Benefit Plan.
(ix) The Buying Parties (as defined below) have no obligation to
continue any Employee Benefit Plan as of the Closing and may, in their sole and
absolute discretion, terminate, modify or discontinue any such Employee Benefit
Plan, in whole or in part, without penalty and without prior notice to the
Consumers Companies, any participant, beneficiary or present or former employee
of the Consumers Companies.
(p) Contracts. The Disclosure Schedule contains a list, as of the
---------
date hereof, of each contract, agreement, understanding or other commitment,
whether written or oral (including any and all amendments thereto) relating to
the business of the Consumers Companies, to which any of the Consumers Companies
is a party or by which they are bound (collectively, the "Commitments"),
described below:
(i) contract with any employee, consultant or labor union;
(ii) contract for the future purchase of, or payment for,
supplies or products or services in any single instance exceeding $25,000, or in
the aggregate $100,000, which are not terminable without penalty upon not more
than 30 days' notice;
(iii) representative or sales agency contract;
(iv) contract limiting or restraining such company from engaging
or competing in any lines of business with any person or entity;
(v) contract with any customer or agent providing for a
retrospective price adjustment or retrospective commission or future premium
guarantee;
(vi) commitment to guarantee the obligations of others or
commitment by others to guarantee the obligations of the Consumers Companies;
(vii) real or personal property lease;
(viii) mortgage, indenture, note debenture, bond, letter of credit
agreement, surety agreement, loan agreement or other commitment for the
borrowing or lending of money relating to the Consumers Companies or agreement
for a line of credit;
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(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 xxxx, copyright, trade dress, trade name,
corporate name, graphic work of art, slogan or logo of any person or third party
in connection with their business
-14-
and, to Consumers knowledge, no person or third party is infringing any of the
Names or Trademarks listed. No employee or officer of any of the Consumers
Companies has any interest in any of the Names or Trademarks.
(r) Insurance Policies. All insurance policies or contracts issued by
------------------
the Insurance Company Subsidiaries are valid policies or contracts, the form of
which has been approved, where required, by the applicable state insurance
departments and provided to LaSalle.
(s) Reserves. The reserves for policy liabilities of each of the
--------
Insurance Company Subsidiaries as set forth on its December 31, 1995 statutory
balance sheet have been computed in accordance with generally accepted actuarial
methods and principles consistently applied and, in all cases, have been
properly computed, were based on actuarial assumptions that were in all material
respects in accordance with or more conservative than those called for in the
related policy or contract, and are adequate under the applicable requirements
of the law of the state of its domicile and the law of the states in which it is
licensed to do business to enable the Insurance Company Subsidiaries to conduct
their insurance business in those states, except those states listed on the
Disclosure Schedule. The reserves for policy liabilities of each of the
Insurance Company Subsidiaries as set forth on its June 30, 1996 statutory
balance sheet have been computed in a manner which is consistent with the
methods and principles described above.
(t) Operations Insurance. The Disclosure Schedule contains a
--------------------
description of all property and casualty, liability, directors' and officers'
liability, key man life, group health, group disability, group life and other
insurance policies owned by the Consumers Companies. All such policies are in
full force and effect in accordance with their terms, no notice of cancellation
has been received, and there is no existing default or event which, with the
giving of notice or lapse of time or both, would constitute a default
thereunder. Such policies are in amounts which are adequate in relation to the
business and assets of the Consumers Companies and all premiums to date have
been paid in full. The Consumers Companies have not been refused any insurance,
nor has their coverage been limited, by any insurance carrier to which they have
applied for insurance or with which they have carried insurance during the past
five years. The Disclosure Schedule also sets forth a summary of all past
product liability insurance coverage (primary and excess), including coverage
relating to lines of business or subsidiaries which have been discontinued or
dissolved, which summary shall include the name of insurer, the policy number,
whether the policy was on a claims-made or occurrence basis and the policy
limits for each policy. The Disclosure Schedule also contains a true and
complete description of all outstanding bonds and surety arrangements issued or
entered into in connection with the business, assets and liabilities of the
Consumers Companies.
(u) Real Estate. All of the real estate owned by any of the Consumers
-----------
Companies in the aggregate, has a net value at June 30, 1996 of not less than
the aggregate carrying value of all such real estate on the June 30, 1996
statutory balance sheets of the Insurance Company Subsidiaries. Except as set
forth in the Disclosure Schedule, all buildings, plants, structures, equipment
and other personal property owned or leased by the Consumers Companies are in
good operating condition and repair (ordinary wear and tear excepted) and are
-15-
usable in the ordinary course of business of the Consumers Companies. The
Consumers Companies are not, and have not received notification that they are,
in violation of any applicable building, zoning, anti-pollution, health, safety
or other law, ordinance or regulation in respect of its buildings, plants or
structures or their operations. Except as set forth in the Disclosure Schedule,
each real property lease in which any of the Consumers Companies are landlord or
tenant is, and on the Closing shall be, in full force and effect and has not
been assigned, modified, supplemented or amended and neither the Consumers
Companies, as landlord or tenant under any such lease, nor, to the knowledge of
the executive officers of Consumers, any other party to any such lease, is in
default under any such lease, and no circumstances or state of facts presently
exists which, with the giving of notice or passage of time, or both, would
permit the landlord or tenant to terminate any such lease. Neither the whole
nor any portion of the property or leaseholds owned or held by the Consumers
Companies is subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any governmental body or other
person with or without payment of compensation therefor. There are no
assessments with respect to any of the properties owned or leased by any of the
Consumers Companies which remain unpaid.
(v) Environmental Matters.
---------------------
(i) Except as may be disclosed on the Disclosure Schedule, the
Consumers Companies have conducted their business in material compliance with
all Environmental Laws (as hereinafter defined). For purposes of this
Agreement, the term "Environmental Laws" means any and all federal, state,
provincial, local laws, regulations and ordinances and foreign laws and
requirements relating to health and safety and pollution or protection of the
environment, including laws, regulations and requirements relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or Hazardous Substances (as hereinafter defined)
into the environment (including without limitation ambient air, surface water,
groundwater or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes. For purposes of this Agreement, the term "Hazardous
Substance" means (i) any petroleum products, explosives, alcohols, chemical
solvents, polychlorinated biphenyls ("PCBs") or related or similar materials,
(ii) any substance, waste, material or good defined as hazardous, radioactive,
extremely hazardous, toxic or dangerous, or as a pollutant or contaminant, under
any Environmental Law, or by any federal, state or municipal government or
governmental agency, and (iii) any asbestos, asbestos-containing substances or
urea formaldehyde insulation.
(ii) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against the
Consumers Companies alleging any violation or failure to comply with any
Environmental Law. The Consumers Companies are not parties to any agreement,
consent order or adjudication of any type with any person, including any
government agency, that is authorized under or make reference to any
Environmental Law.
-16-
(iii) The Consumers Companies have obtained and have at all times
possessed all permits, licenses, registrations and other authorizations (the
"Environmental Permits") necessary to conduct their business under the
Environmental Laws and have filed timely and complete applications for renewal
of any such Environmental Permits that are required prior to the Closing. The
Environmental Permits necessary for the Consumers Companies to conduct their
business are currently in effect and are listed on the Disclosure Schedule, and
the Consumers Companies are in material compliance with all terms and conditions
of such Environmental Permits and have not materially violated any of same. The
Consumers Companies have not received any notice of any proposal to amend,
revoke, reissue or replace any Environmental Permit, nor have any events
occurred that could form a reasonable basis for any such action.
(iv) There has not been any spill, release or unauthorized
discharge of any Hazardous Substance in connection with the business of the
Consumers Companies or at any of the properties or facilities occupied by the
Consumers Companies, where such spill, release or discharge was required to be
reported under any Environmental Law or would require abatement or correction
under any Environmental Law. The Consumers Companies have not permitted any
Hazardous Substances to be disposed of, treated or stored on the facility or any
other property used by the Consumers Companies.
(v) There has not been and is not any Environmental Condition
(as hereinafter defined) in connection with the business of the Consumers
Companies at or relating to the properties or facilities used by the Consumers
Companies or any predecessor, or at or relating to any property owned, leased or
operated at any time by the Consumers Companies or any such predecessor, or at
or relating to any property at which wastes have been deposited or disposed by
or at the behest or direction of the Consumers Companies or any such
predecessor, nor have the Consumers Companies received written notice of any
such Environmental Condition. For purposes of this Agreement the term
"Environmental Condition" means any condition or circumstance, that (i) requires
abatement or correction under any Environmental Law, (ii) could give rise to any
civil or criminal liability under any Environmental Law, or (iii) could create a
public or private nuisance, including the presence of Hazardous Substances.
(w) Books and Records. The minute books of each of the Consumers
-----------------
Companies contain the records of all of the official actions of its board of
directors and its shareholders and there are no material omissions therefrom or
misstatements therein. The minutes of the meeting of the board of directors
fully and correctly describe all official actions taken by the executive
committee and other committees of the board of directors except to the extent
fully and correctly set forth in minutes of such committees. The books, records
and accounts of the Consumers Companies accurately and fairly reflect in
reasonable detail the transactions and the assets and liabilities of the
Consumers Companies. The Consumers Companies have not engaged in any
transaction, maintained any bank account or used any funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the business.
-17-
(x) Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried out by Consumers directly
with the Buying Parties, without the intervention of any person in such manner
as to give rise to any valid claim by any person against any of the parties
hereto for a finder's fee, brokerage commission or similar payment.
(y) Transactions with Affiliates. Except as set forth on the
----------------------------
Disclosure Schedule, no shareholder, director, officer, employee or sales
representative of any of the Consumers Companies or any member of his or her
immediate family or any other of its, his or her affiliates, owns or controls
any party which has any material contract, agreement, understanding, business
arrangement or relationship to any of the Consumers Companies.
(z) Full Disclosure. No representation or warranty by Consumers in
---------------
this Agreement nor any certificate, schedule, statement, document or instrument
furnished to the Buying Parties pursuant to this Agreement, or in connection
with the negotiation, execution or performance of this Agreement, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated herein or therein or necessary to
make any statement herein or therein not misleading.
SECTION 2.2 Representations and Warranties by LaSalle and CAC. Each of
-------------------------------------------------
LaSalle and CAC (together, the "Buying Parties") represents and warrants to, and
agrees with, Consumers as follows:
(a) Organization and Good Standing of LaSalle. LaSalle is a
-----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. CAC is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
(b) Corporate Power. Each of the Buying Parties has corporate power
---------------
to own its properties and carry on its business as now conducted.
(c) Articles of Incorporation and Bylaws. The copies of (i) the
------------------------------------
charters of the Buying Parties, and all amendments thereto to date, and (ii) the
bylaws of the Buying Parties, as amended to date, as certified by each company's
respective Corporate Secretary as being complete and correct, have been
delivered to Consumers.
(d) Authorization and Validity of Agreement. The execution, delivery
---------------------------------------
and performance of this Agreement has been duly and validly authorized by all
necessary corporate action on the part of the Buying Parties. This Agreement
has been duly executed and delivered by the Buying Parties, and is the valid and
legally binding obligation of the Buying Parties, enforceable by Consumers in
accordance with its terms, except to the extent that enforcement may be limited
by bankruptcy, insolvency, moratorium or similar laws affecting the rights of
creditors generally and except to the extent that enforcement may be limited by
the application of
-18-
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 Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 requires certain preacquisition notification
of the Federal Trade Commission and the Antitrust Division of the Department of
Justice.
(e) Insurance Department Approvals. The Buying Parties are not aware
------------------------------
of any facts or circumstances relating to the Buying Parties, or any of the
Buying Parties' executive officers, directors or controlling shareholders that
might cause any insurance department whose approval may be required to
consummate the transactions contemplated by this Agreement to refuse to grant
its approval of such transactions.
(f) Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried out by the Buying Parties
directly with Consumers without the intervention of any person in such manner as
to give rise to any valid claim by any person against any of the parties hereto
for a finder's fee, brokerage commission or similar payment.
(g) Litigation. Except as set forth in the Disclosure Schedule,
----------
(i) there is no action, suit or proceeding pending or, to the knowledge of the
executive officers of LaSalle, threatened against the Buying Parties, before any
court, at law or in equity, arbitration tribunal or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality which individually or in the aggregate could have a material
adverse effect on the financial condition or prospects of the Buying Parties,
and (ii) the Buying Parties are not in default in any material respect under any
order, decree, judgment, award, determination, ruling or regulation of any
court, arbitration tribunal, governmental department, commission, board, bureau,
agency or other instrumentality.
- 19 -
(h) Full Disclosure. No representation of warranty of LaSalle in this
---------------
Agreement nor any certificate, schedule, statement, document or instrument
furnished to Consumers pursuant to this Agreement, or in connection with the
negotiation, execution or performance of this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated herein or therein or necessary to make any
statement herein or therein not misleading.
- 20-
ARTICLE III
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 3.1 Shareholder Approval.
--------------------
(a) As soon as reasonably practicable following the date hereof,
Consumers shall take all action necessary in accordance with the Exchange Act,
the laws of the Commonwealth of Pennsylvania and its Articles of Incorporation
and Bylaws to call and give notice of a meeting (the "Meeting") of its
shareholders to consider and vote upon the approval and adoption of the Plan of
Merger and for such other purposes as may be necessary or desirable. The Board
of Directors of Consumers has unanimously determined that the Merger is
advisable and in the best interests of the shareholders of Consumers and,
subject to their fiduciary duties as advised by counsel, shall recommend without
qualification of any nature that Consumers' shareholders vote to approve and
adopt the Plan of Merger and any other matters to be submitted to Consumers'
shareholders in connection therewith. The Board of Directors of Consumers shall
use commercially reasonable efforts to solicit and secure from shareholders of
Consumers such approval and adoption, subject to their fiduciary duties as
advised by counsel, which efforts shall include causing Consumers to solicit
shareholder proxies therefor and advising LaSalle promptly upon its request from
time to time as to the status of the shareholder vote then tabulated. With
regard to any shares of Consumers' Common Stock held by the ESOP, the trustee of
the ESOP shall vote upon the approval and adoption of the Plan of Merger with
regard to all such shares of Common Stock in accordance with the terms of the
ESOP, Sections 404 and 406 of ERISA, and Section 4975 of the Code.
(b) Consumers shall prepare and file with the SEC under the Exchange
Act and the rules and regulations promulgated by the SEC thereunder within 15
days following the date hereof, a preliminary draft of the Proxy Statement.
LaSalle and CAC shall cooperate with Consumers in the preparation and filing of
the Proxy Statement and any amendments and supplements thereto. Neither the
Proxy Statement nor any preliminary draft thereof shall be filed, no amendment
or supplement thereto shall be made, nor shall any communication with the SEC be
initiated, by Consumers, in each case, without prior consultation with LaSalle
and their counsel and without first having sent such materials to LaSalle for
its comments. Consumers will use commercially reasonable efforts to have any
review of the Proxy Statement conducted by the SEC promptly. As soon as
reasonably practicable following completion of any review by, or in the absence
of such review, the termination of any applicable waiting period of, the SEC,
Consumers shall cause to be mailed a definitive Proxy Statement to its
shareholders entitled to vote on the Plan of Merger.
SECTION 3.2 Conduct of Consumers' Business. Consumers covenants and
------------------------------
agrees that, prior to the Effective Date, unless LaSalle shall otherwise agree
in writing or as otherwise expressly contemplated by this Agreement:
- 21-
(a) Consumers shall use commercially reasonable efforts to sell the
business of Interstate, the universal life block of business and Consumers North
Carolina prior to the Effective Date. If the Interstate business is not sold
prior to the Effective Date, Interstate will be spun off to Consumers'
shareholders on or prior to the Effective Date. Consumers shall not directly or
indirectly do any of the following: (i) issue, sell, pledge, dispose of or
encumber any assets of the Consumers Companies other than in the ordinary course
of its business consistent with past practice or as contemplated by this
Agreement, (ii) amend or propose to amend its Articles of Incorporation or
Bylaws, (iii) split, combine or reclassify any outstanding shares of its capital
stock, or declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to such shares, except for dividends with
respect to outstanding shares of Consumers' preferred stock, (iv) redeem,
purchase, acquire or offer to acquire any shares of its capital stock, or (v)
enter into any contract, agreement, commitment or arrangement with respect to
any of the matters set forth in this paragraph (a) except as provided in
paragraph (l) of this Section 3.2.
(b) Except as contemplated herein, Consumers shall not (i) issue,
sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any
additional shares of, or securities convertible or exchangeable for, or any
options, warrants or rights of any kind to acquire any shares of, its capital
stock of any class or other property or assets whether pursuant to any rights
agreement, stock plan or otherwise, (ii) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof, (iii) incur any indebtedness for borrowed
money or issue any debt securities, except in the ordinary course of its
business consistent with past practice, (iv) enter into or modify any material
contract, lease or agreement other than in the ordinary course of business and
consistent with past practice, other than the termination of the Joint Venture
Agreement with Accel and the sale of Consumers' home office building,
(v) terminate, modify, assign, waive, release or relinquish any material
contract rights or amend any material rights or claims not in the ordinary
course of its business consistent with past practice or except as expressly
provided herein, or (vi) dissolve or otherwise alter its corporate existence.
(c) Except for increases in salary to non-executive officers in the
ordinary course of business and the Employment Agreement to be entered into with
Xxxxx Xxxxxx, Consumers shall not grant any increase in the salary or other
compensation of its employees or independent contractors or grant any bonus to
any employee or independent contractors or enter into any employment agreement
or make any loan to or enter into any material transaction of any other nature
with any officer or employee of Consumers.
(d) Consumers shall not take any action to institute any new severance
or termination pay practices with respect to any directors, officers or
employees of Consumers or to increase the benefits payable under its severance
or termination pay practices.
(e) Except for seasonal hires not inconsistent with past practices,
Consumers shall not hire any new employees except for employees having an
annualized salary of less than $30,000, who are terminable at will or who are
hired to replace a former employee.
- 22 -
(f) Consumers shall not (except as provided in Section 3.2(l) or as it
relates to the termination of the Excess Benefit Plan) adopt or amend, in any
respect, except as may be required by applicable law or regulation, any bonus,
profit sharing, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment or other employee benefit plan,
agreement, trust, fund, plan or arrangement for the benefit or welfare of any
directors, officers or employees.
(g) Except for security interests set forth on the Disclosure
Schedule, Consumers shall not mortgage, pledge or otherwise subject to any lien,
security interest, encumbrance or charge of any nature, any of its property or
assets, or become committed so to do, or permit or suffer any of such property
or assets to become subject to any mortgage, pledge, lien, security interest,
encumbrance or charge of any nature, other than liens of current taxes not yet
due and payable, or become committed to do so.
(h) Consumers shall use commercially reasonable efforts to maintain
its relationships with its suppliers, customers and employees, and if and as
requested by LaSalle or CAC, (i) Consumers shall make reasonable arrangements as
reasonably requested by LaSalle or CAC for representatives of LaSalle or CAC to
meet with customers and suppliers of Consumers (provided however that LaSalle
shall give Consumers reasonable notice of such meetings), and (ii) Consumers
shall schedule, and the management of Consumers shall participate in, meetings
of representatives of LaSalle or CAC with employees and customers of Consumers.
(i) Consumers shall not make any capital expenditures or capital
commitments or incur any debt in excess of $50,000 in the aggregate except for
expenditures for maintenance of capital assets in the ordinary course of its
business consistent with past practice.
(j) Consumers shall use commercially reasonable efforts to maintain
all of the assets used or useful to the business of Consumers in good repair,
order and condition, maintain in full force and effect all permits and other
authorizations to do business currently in effect and maintain in full force all
policies of insurance or satisfactory substitute insurance policies insuring
against the risks, damages and losses covered by the insurance policies
currently in force.
(k) Consumers shall not otherwise conduct its business except in the
ordinary course consistent with past practice.
(l) Consumers shall obtain agreements in form and substance reasonably
satisfactory to LaSalle from holders of all stock options outstanding under
Consumers' stock option plans to, on the day prior to the Closing Date, exercise
their stock appreciation rights and waive their right to exercise such options,
and, in consideration therefor, each holder shall be entitled to receive from
Consumers on the Effective Date, for each share of Consumers Common Stock
subject to an option, an amount of cash equal to the excess, if any, of the
Merger Consideration per share, as adjusted pursuant to Section 1.2(b), over the
per share exercise price of such option. Assuming no adjustment pursuant to
Section 1.2(b), the holders of outstanding stock options, each of which has an
exercise price of $2.25 per share, would be entitled to $1.67
- 23 -
per option share or an aggregate $298,930. Appropriate arrangements shall be
made for reduction of the amount to be paid to each holder of a stock option for
any applicable withholding taxes or other amounts required by law to be paid or
withheld through reducing the amount paid to such holder. Prior to the
Effective Date, the Board of Directors of Consumers or the appropriate committee
thereof shall take such action as is necessary to effectuate the foregoing.
SECTION 3.3 Expenses; Break-up Fee. If, prior to the Closing Date,
----------------------
(i) Consumers is offered a transaction by another party that Consumers believes
is a more favorable transaction for its shareholders, and the board of directors
of Consumers, in the exercise of its fiduciary duty, decides to proceed with the
new party or (ii) in the event that the Plan of Merger shall not be approved by
the shareholders of Consumers pursuant to Section 3.1, Consumers shall promptly
(and, in any event, within five days) pay LaSalle a $300,000 break-up fee, which
shall be LaSalle's sole remedy against Consumers for such action. Except as
provided in the immediately preceding sentence, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses. Without the prior consent of LaSalle, which will not be
unreasonably withheld, professional fees incurred since October 1, 1996
including accounting, investment banking and legal fees incurred by Consumers in
connection with the investigation, negotiation, execution and delivery of this
Agreement and the transactions contemplated hereby shall not exceed $100,000 in
the aggregate.
SECTION 3.4 Other Agreements. Subject to the terms and conditions herein
----------------
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
including using commercially reasonable efforts to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and filings,
including, but not limited to, filings required under the Exchange Act; provided
that the foregoing shall not require LaSalle or Consumers to make, or agree to
make, any divestiture of a material asset in order to obtain any waiver, consent
or approval.
SECTION 3.5 No Solicitation of Transactions. Consumers shall not, and
-------------------------------
shall not permit its officers, employees, representatives or agents to, directly
or indirectly, continue, encourage, solicit or initiate discussions or
negotiations with, or provide any nonpublic information to, any person other
than LaSalle or its affiliates or any group in which LaSalle or its affiliates
participates, concerning any sale of assets (other than in the ordinary course
of its business consistent with past practice and other than the sale of assets
contemplated by this Agreement) or shares of capital stock of Consumers, or any
merger, consolidation, recapitalization, liquidation or similar transaction
including Consumers (collectively, an "Acquisition Transaction"). Consumers
will promptly communicate to LaSalle and CAC the terms of any inquiry or
proposal which it may receive in respect of an Acquisition Transaction.
Consumers' notification under this Section 3.5 shall include the identity of the
person making such proposal, the terms of such proposal and any other such
information with respect thereto as LaSalle may reasonably request. Nothing
contained in this Agreement shall be construed to prohibit Consumers or its
Board of Directors
- 24 -
from (i) making any recommendation with respect to any Acquisition Transaction
and related disclosure to shareholders or (ii) disclosing, under protection of
an appropriate confidentiality agreement, non-public information concerning
Consumers to a person who has made a bona fide, binding and firm, fully-financed
offer to acquire all of the outstanding Consumers Common Stock for a price in
excess of the price to be paid to the shareholders in the Merger and on terms
which are higher and better to Consumers' shareholders than the terms of the
Merger, which, in the judgment of Consumers, on the advice in writing of
counsel, shall be required by law.
SECTION 3.6 Third Party Consents. Consumers shall use commercially
--------------------
reasonable efforts to obtain prior to the Effective Date all consents and
approvals to the consummation and performance of the transactions contemplated
hereby, as set forth in the Disclosure Schedule.
SECTION 3.7 Tax Clearance Certificates. Consumers shall use commercially
--------------------------
reasonable efforts to obtain a tax clearance certificate in each state where
Consumers pays taxes, and, in the event that such tax clearance certificates may
not be obtained prior to the Closing, Consumers shall provide LaSalle or CAC a
ledger account of taxes owed and paid in each such state where ledger account
information is available.
SECTION 3.8 Notification of Certain Matters. Consumers shall give prompt
-------------------------------
notice to LaSalle and CAC, and LaSalle and CAC shall give prompt notice to
Consumers, of (i) the occurrence, or failure to occur, of any event which such
party believes would likely cause any of its representations or warranties
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Date and (ii) any material
failure of Consumers, LaSalle or CAC, as the case may be, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that failure to give such notice shall not constitute a
waiver of any defense that may be validly asserted.
SECTION 3.9 Access to Information.
---------------------
(a) Consumers shall, and shall cause its officers, directors,
employees and agents, including attorneys and accountants, to afford, upon
LaSalle or CAC's reasonable request, from the date hereof to the Effective Date,
the officers, employees and agents of LaSalle and CAC complete access at all
reasonable times to its officers, employees, agents, properties, books, records
and work papers, and shall furnish LaSalle and CAC all financial, operating and
other data and information as LaSalle or CAC, through its officers, employees or
agents, may reasonably request.
(b) No investigation pursuant to this Section shall effect, add to or
subtract from any representations or warranties or the conditions to the
obligations of the parties hereto to effect the Merger.
SECTION 3.10 Public Announcements. None of LaSalle, CAC or Consumers
--------------------
will make, issue or release any oral or written public announcement or statement
concerning, or
- 25 -
acknowledgment of the existence of, or reveal the terms, conditions or status
of, the transactions contemplated by this Agreement and the Plan of Merger, or
make any other communication to its shareholders or the investing public,
directly or indirectly (including press releases and statements to securities
analysts), without first making a good faith attempt to obtain the prior
approval of, or concurrence in, the contents of such announcement,
acknowledgment or statement by the other party or parties, which approval or
concurrence shall not be unreasonably withheld or delayed.
SECTION 3.11 Transmittal Letter. Within five business days following the
------------------
Effective Date, Consumers shall send each holder of Consumers Common Stock on
the Effective Date a transmittal letter in substantially the form attached as
Exhibit B.
ARTICLE IV
CONDITIONS TO THE MERGER
SECTION 4.1 Conditions to the Merger Relating to LaSalle and CAC. The
----------------------------------------------------
obligation of LaSalle and CAC to effect the Merger is, at their option, subject
to the satisfaction, on or before the Effective Date, of each of the following
conditions:
(a) Representations, Warranties, and Covenants of Consumers. The
-------------------------------------------------------
representations and warranties of Consumers herein contained and the information
contained in the Disclosure Schedule and other documents delivered by Consumers
in connection with this Agreement shall be true and correct on the Closing Date
in all material respects with the same effect as though made at such time,
except to the extent waived hereunder or affected by the transactions
contemplated herein; Consumers shall have performed in all material respects all
obligations and complied in all material respects with all agreements,
undertakings, covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date; and Consumers
shall have delivered to LaSalle a certificate in form and substance satisfactory
to LaSalle dated the Closing Date and signed by the President and by the Chief
Financial Officer of Consumers to such effect.
(b) Pending Litigation. There shall not be any litigation or other
------------------
proceeding pending or threatened to restrain or invalidate the transactions
contemplated by this Agreement, which, in the sole reasonable judgment of
LaSalle, made in good faith, would make the consummation of the Merger imprudent
in light of applicable law or the defense of which would involve expense that
would be materially adverse to LaSalle. In addition, there shall not be any
other litigation or other proceeding pending or threatened against Consumers not
otherwise set forth in the Disclosure Schedule, the consequences of which, in
the reasonable judgement of CAC and LaSalle's Board of Directors, could be
materially adverse to Consumers.
(c) Shareholder Approval. This Agreement and the Plan of Merger shall
--------------------
have been approved and adopted by the requisite vote of the holders of the
outstanding Consumers
- 26 -
Common Stock in accordance with the BCL and Consumers' Articles of Incorporation
and Bylaws.
(d) No Convertible Securities Outstanding. Consumers shall have
-------------------------------------
canceled, on terms and conditions reasonably satisfactory to LaSalle, all
outstanding stock options issued pursuant to the Consumers Option Plan pursuant
to Section 3.2(l), and no equity securities of Consumers (other than Consumers
Preferred Stock), options, warrants, or other instruments exercisable for equity
securities of Consumers shall be outstanding.
(e) Regulatory Approval. All authorizations, consents and permits
-------------------
required to perform this Agreement and the Plan of Merger shall have been
obtained, including approval by each State Insurance Commission in which an
Insurance Company Subsidiary is domiciled, and shall be in form and substance
satisfactory to LaSalle. The required statutory waiting period under HSR shall
have terminated and no condition with respect thereto shall be unacceptable to
LaSalle.
(f) Material Adverse Changes. From the date hereof to the Closing
------------------------
Date, there shall have been no material adverse change in statutory operating
results or new material information provided to LaSalle. There shall be no
conditions existing or threatened with respect to Consumers or its business or
assets that could reasonably be expected to have a material adverse affect on
Consumers.
(g) Shareholder Vote/Dissenters Rights. The holders of a majority of
----------------------------------
the outstanding shares of Consumers Common Stock shall have approved and adopted
this Agreement and the Plan of Merger at the Meeting to take place in accordance
with Section 3.1 hereof. The holders of not more than 15% of the outstanding
shares of Consumers Common Stock shall have demanded dissenters rights under the
BCL with respect to their shares of Consumers Common Stock.
(h) Opinion of Counsel for Consumers. LaSalle shall have received
---------------------------------
opinions dated the Closing Date of Duane, Morris & Heckscher, counsel for
Consumers, in form and substance reasonably satisfactory to LaSalle and its
counsel, substantially to the effect that:
(i) Consumers is a corporation duly organized, and presently
subsisting under the laws of the Commonwealth of Pennsylvania, with full
corporate power and authority to own its properties and assets and to carry on
its business;
(ii) Consumers has the corporate power and authority to execute
and deliver this Agreement and the Plan of Merger and to consummate the
transactions contemplated thereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by Consumers and constitutes the legal, valid and binding
obligation of Consumers, enforceable against it in accordance with its terms,
except
- 27 -
as may be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and except to the extent that enforceability is subject to
general principles of equity.
(iii) Neither the execution and delivery by Consumers of this
Agreement or the Plan of Merger, nor the consummation by it of the transactions
contemplated thereby will (A) contravene or violate any provisions of the
Articles of Incorporation or Bylaws of Consumers; or (B) result in any violation
of or default under or permit the acceleration of any obligation under, any
contract or authorization listed on the Disclosure Schedule or any judgment,
order, decree, statute, law, ordinance, rule or regulation known to such counsel
and applicable to Consumers or its properties, other than any such violation,
default, or acceleration which would not have a material adverse effect on the
business, financial condition, or operating results of Consumers or assets and
liabilities of Consumers taken as a whole.
(iv) The Plan of Merger was duly and validly approved by Consumers
and its shareholders in accordance with the BCL and the Articles and Bylaws of
Consumers. Assuming that the Plan of Merger was duly and validly approved by CAC
and its shareholders in accordance with the BCL and the Articles of
Incorporation and Bylaws of CAC and that all necessary actions have been taken
to cause the Merger to become effective under the BCL, upon filing of the
Articles of Merger with the appropriate office of the Commonwealth of
Pennsylvania and the issuance thereby of a Certificate of Merger relating to the
Merger, the Merger will become effective under the laws of the Commonwealth of
Pennsylvania.
(v) The authorized capital stock of Consumers consists solely of
10,000,000 shares of Consumers Common Stock, $.01 stated value, of which
[3,025,501] are outstanding and [632,500] shares of Consumers Preferred Stock,
$10.00 liquidation value, of which 536,500 are outstanding. To the knowledge of
such counsel after inquiring of Consumers' officers, there are no existing
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) to purchase or
otherwise acquire from Consumers at any time, or upon the happening of any
stated event, any shares of the capital stock of Consumers whether or not
presently issued or outstanding.
(vi) The transactions contemplated by this Agreement will not give
the holders of Consumers' Preferred Stock any right to accelerate redemption of
the Consumers' Preferred Stock.
(vii) All of the outstanding shares of capital stock of the
subsidiaries of Consumers are owned by Consumers, directly or indirectly,
through wholly-owned subsidiaries, free and clear of any lien, pledge, charge or
encumbrance or any other claim of any third party.
Except as expressly set forth in the opinions, where such opinions are
qualified to the "knowledge of counsel" or "known to such counsel," such terms
shall mean such counsel's actual knowledge as of the date of the opinion without
independent investigation or inquiry.
- 28 -
In addition, such counsel shall advise LaSalle that (A) the Proxy
Statement, as of the date of mailing, complied in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of the
SEC thereunder, and (B) with respect to information relating to Consumers and
its business, properties, management, shareholders or securities, such counsel
has participated in the preparation of the Proxy Statement and no facts have
come to their attention to lead such counsel to believe that the Proxy Statement
on the date of mailing and the Effective Date, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(i) Due Diligence Review. There shall not exist prior to the
--------------------
Effective Date any condition which was not disclosed in writing to LaSalle on or
prior to the date hereof and which materially adversely affects the business,
financial condition, or operating results of Consumers or the assets and
liabilities of Consumers taken as a whole; provided, however, that the foregoing
condition to the Merger shall lapse and be rendered null and void with respect
to any such condition unless LaSalle notifies Consumers that LaSalle is
terminating or intends to terminate this Agreement pursuant to Section 5.1(b)
because of a breach of this Section within fifteen days after such condition is
first disclosed in writing to LaSalle.
(j) Third Party Consents. Consumers shall have obtained all consents
--------------------
and approvals to the consummation and performance of the transactions
contemplated hereby, as set forth in the Disclosure Schedule.
(k) Tax Clearance Certificates. Consumers shall have received tax
--------------------------
clearance certificates in each state in which Consumers pays taxes and in which
such a tax clearance certificate is obtainable, and, in the event that such tax
clearance certificates may not be obtained prior to the Closing, Consumers shall
provide LaSalle or CAC with a ledger account of taxes owed and paid in each such
state where ledger account information is available.
(l) Sale of Interstate. Consumers shall have either sold the business
------------------
of Interstate to third parties (the "Interstate Assets") or distributed the
common stock of Interstate to its shareholders.
(m) Sale of Universal Life Block. Consumers shall have sold its
----------------------------
universal life block of business to a third party.
(n) Employment Agreement. Xxxxx Xxxxxx 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 Xxxxxx, Xxxxx & Bockius, LLP
counsel for LaSalle and CAC, shall reasonably request.
- 29 -
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 Xxxxxx, Xxxxx & Xxxxxxx, LLP counsel
for LaSalle, and Xxxxxx & Whitney, counsel for CAC, as applicable, in form and
substance reasonably satisfactory to Consumers and its counsel, substantially to
the effect that:
(i) Each of LaSalle and CAC is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, with full corporate power and authority to own its properties and
assets and to carry on its business;
(ii) Each of LaSalle and CAC has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate and shareholder action. This Agreement has
been duly executed and delivered by LaSalle and CAC and constitutes the legal,
valid and binding obligation of each such party, enforceable against each in
accordance with its terms, except as may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and except to the extent that
enforceability is subject to general principles of equity.
- 30 -
(iii) Neither the execution and delivery by LaSalle or CAC
of this Agreement or the Plan of Merger, nor the consummation by either of them
of the transactions contemplated hereby will (i) contravene or violate any
provisions of the Charter or Bylaws of LaSalle or CAC or (ii) result in any
violation of or default or loss of a benefit under, or permit the acceleration
of any obligation under, any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation known to such counsel and
applicable to such corporation or its properties, other than any such violation,
default, loss or acceleration which would not have a material adverse effect on
the business, financial condition, or operating results of such corporation or
assets and liabilities of such corporation taken as a whole.
Where such opinions are qualified "known to such counsel," such term
shall mean such counsel's actual knowledge as of the date of the opinion without
independent investigation or inquiry.
(e) Regulatory Approval. All authorizations, consents and permits
-------------------
required to perform this Agreement and the Plan of Merger shall have been
obtained, including approval by each State Commissioner of Insurance in which an
Insurance Company Subsidiary is domiciled, and shall be in form and substance
satisfactory to Consumers. Buyer shall have filed all necessary premerger
notifications pursuant to HSR, and the required statutory waiting period under
HSR, if applicable, shall have terminated.
(f) Closing Documents. Consumers shall have received such
-----------------
certificates and other closing documents as Duane, Morris & Heckscher, counsel
for Consumers, shall reasonably request.
ARTICLE V
TERMINATION AND ABANDONMENT
SECTION 5.1 Termination and Abandonment. This Agreement may be terminated
---------------------------
and the Merger may be abandoned at any time prior to the Effective Date, whether
before or after approval by the shareholders of Consumers:
(a) by mutual action of the Boards of Directors of LaSalle, and
Consumers; or
(b) by the Board of Directors of LaSalle, if the representations
and warranties of Consumers contained in Section 2.1 were materially incorrect
when made or if Consumers shall not have complied in any material respect with
any of the covenants set forth in Article III;
(c) by the Board of Directors of Consumers, if the representations
and warranties of LaSalle and CAC contained in Section 2.2 were materially
incorrect when made or
-31-
if LaSalle or CAC shall not have complied in any material respect with any of
the covenants set forth in Article III.
(d) by either LaSalle, CAC or Consumers, if the Closing has not
occurred by January 31, 1997; provided, however, that this Agreement shall not
terminate if the Closing has not occurred due to a regulatory approval delay
beyond the control of the parties, in which case any of the parties may request
an extension reasonably necessary to obtain regulatory approval, and which
consent may not be unreasonably withheld prior to March 31, 1997 after which
such consent may be withheld in the sole discretion of any party.
SECTION 5.2 Effect of Termination. Except as provided in Section 3.3 with
---------------------
respect to expenses and fees, in the event of the termination of this Agreement
and the abandonment of the Merger, this Agreement shall thereafter become void
and have no effect, and no party hereto shall have any liability to any other
party hereto or its shareholders or directors or officers in respect thereof,
and each party shall be responsible for its own expenses, except that nothing
herein shall relieve any party from liability for any willful breach of this
Agreement.
SECTION 5.3 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that after approval of the Merger by the shareholders of Consumers, no
amendment may be made which decreases the amount of cash to which the
shareholders of Consumers are entitled pursuant to this Agreement or otherwise
materially adversely affects the shareholders of Consumers without the further
approval of the shareholders of Consumers.
SECTION 5.4 Waiver. Any time prior to the Effective Date, whether before
------
or after any meeting of Consumers' shareholders as referred to in Section 3.1,
any party hereto may (a) in the case of LaSalle or CAC, extend the time for the
performance of any of the obligations or other acts of Consumers or, subject to
the provisions contained in Section 5.3, waive compliance with any of the
agreements of Consumers or with any conditions to the respective obligations of
LaSalle or CAC, or (b) in the case of Consumers, extend the time for the
performance of any of the obligations or other acts of LaSalle or CAC, subject
to the provisions contained in Section 5.3, or waive compliance with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party by a duly authorized officer.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Notices. Any notices or other communications required or
-------
permitted hereunder shall be sufficiently given if sent by telecopy or facsimile
transmission (with hard copy to follow), registered or certified mail, postage
prepaid, or Federal Express or similar overnight delivery services addressed, in
the case of Consumers, to it at
-32-
Consumers Financial Corporation
0000 Xxxx Xxxx Xx-Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
with a required copy to:
Duane, Morris & Heckscher
000 X. Xxxxx Xxxxxx, 0xx Floor
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esquire
or, in the case of LaSalle and CAC, to them at:
LaSalle Group, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx, Xx.
-33-
with a required copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esquire
or such other address as shall be furnished in writing by any party to the
others prior to the giving of the applicable notice or communication.
SECTION 6.2 No Survival of Representations and Warranties. The
---------------------------------------------
representations and warranties in this Agreement shall not survive the
consummation of the Merger.
SECTION 6.3 Headings. The headings herein are for convenience of
--------
reference only, do not constitute a part of this Agreement, and shall not be
deemed to limit or affect any of the provisions hereof.
SECTION 6.4 Entire Agreement. This Agreement constitutes the entire
----------------
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties, with respect to the subject matter hereof.
SECTION 6.5 Cooperation. Subject to the terms and conditions of this
-----------
Agreement, each of the parties hereto shall use its commercially reasonable
efforts to take, or cause to be taken, such action, to execute and deliver, or
cause to be executed and delivered, such governmental notifications and
additional documents and instruments and to do, or cause to be done, all things
necessary, proper or advisable under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
SECTION 6.6 No Rights; Etc.. Nothing in this Agreement express or implied
---------------
is intended to confer upon any other person any rights or remedies under or by
reason of this Agreement.
SECTION 6.7 No Assignment. This Agreement shall not be assigned, by
-------------
operation of law or otherwise, except that LaSalle or CAC may assign all of
CAC's rights and obligations hereunder to any wholly-owned subsidiary of
LaSalle.
SECTION 6.8 No Third Party Beneficiaries. No provision of this Agreement
----------------------------
shall create any third-party beneficiary rights in any person or organization,
including, without limitation, any past, current or future employee of the
Company or any successor thereto.
SECTION 6.9 Governing Law. This Agreement shall be governed in all
-------------
respects, including validity, interpretation and effect, by the laws of the
Commonwealth of Pennsylvania applicable to contracts made and to be performed in
that State.
SECTION 6.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-34-
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/ Xxxxx X. Xxxxxxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President
LASALLE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
CONSUMERS ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
-------------------------------------------------
Name: Xxxxxxx X. Xxxxxx, Xx.
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
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
ARTICLE II
Capital Stock
2.1 CAC Common Stock. At the Effective Date, each share of CAC
----------------
Common Stock then issued and outstanding shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
share of the Common Stock of the Surviving Corporation.
2.2 Conversion of Consumers Common Stock.
------------------------------------
(a) Merger Consideration At the Effective Date, except for
--------------------
shares of Consumers Common Stock held by holders of Dissenting Shares (as such
term is defined in Section 2.5), each share of Consumers Common Stock then
issued and outstanding shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive
immediately deliverable cash in an amount equal to $11,859,964 divided by the
number of shares of Consumers Common Stock outstanding on the Effective Date
(the "Merger Consideration"), subject to adjustment prior to the Effective Date
as provided in Section 2.2(b).
(b) Merger Consideration Adjustments.
--------------------------------
(i) The Merger Consideration shall be increased or
decreased by an amount equal to the difference between (x) Consumers' Net
Statutory Surplus (as defined below) at the end of the month preceding the
Effective Date and (y) $6,710,623. For purposes of this Agreement, Consumers'
Net Statutory Surplus shall mean (x) the total statutory capital and surplus of
Consumers Life Insurance Company ("CLI"), as reported in statutory statements
reported to state regulatory authorities, plus (y) the asset valuation reserve
and interest maintenance reserve of CLI and each of its subsidiaries. In
computing any Merger Consideration adjustments, the effects on total capital and
surplus of any transactions which are not in the ordinary course of business,
including (x) any effects from the sale of assets contemplated below and (y) the
effects of any severance costs up to $300,000, shall be excluded.
(ii) In the event the business of Interstate Auto
Auction, Inc. ("Interstate") is sold prior to the Effective Date, the Merger
Consideration shall be increased or decreased by (A) an amount equal to the
difference between (x) the net sales proceeds (after Federal and state income
taxes) received from the sale of Interstate and (y) $4,900,000, less applicable
Federal and state taxes and (B) an amount equal to the difference between (x)
the Non-operating net assets (defined as all Non-operating assets less
liabilities except the existing bank indebtedness) of Interstate at the end of
the month preceding the date on which Interstate is sold and (y) $899,440. Non-
operating net assets, as used herein, shall not be reduced by any principal
payments made after June 30, 1996 pursuant to the PNC Bank Loan Agreement. In
the event Interstate is not sold prior to the Effective Date, the Merger
Consideration shall be decreased by $4,378,000.
A-3
(iii) In the event Consumers' universal life business
is sold prior to the Effective Date, the Merger Consideration shall be increased
or decreased by an amount equal to the difference between the purchase
commission (after applicable Federal income taxes) received by Consumers from
the sale of its universal life business and $1,269,000.
2.3 Consumers Preferred Stock. Each share of Consumers Preferred
-------------------------
Stock shall remain outstanding and unaffected by the Merger.
2.4 No Further Rights or Transfers. On and after the Effective
------------------------------
Date, the holder of a Certificate (as such term is defined in Section 3.2
hereof) representing Consumers Common Stock shall cease to have any rights as a
shareholder of Consumers, except for the right to surrender his or her
Certificate in exchange for payment of the Merger Consideration.
2.5 Dissenting Shares. Notwithstanding anything herein to the
-----------------
contrary, shares of Consumers Common Stock that are outstanding immediately
prior to the Effective Date and that are held by shareholders, if any, who are
entitled to assert a right to dissent from the Merger and who demand and validly
perfect their rights to receive the "fair value" of their shares with respect to
the Merger under Section 1574 of the BCL (the "Dissenting Shares") shall be
entitled solely to the payment of the "fair value" of such shares in accordance
with the provisions of the BCL; except that (i) if such demand to receive "fair
value" shall be withdrawn upon the consent of the Surviving Corporation, (ii) if
this Plan of Merger shall be terminated, or the Merger shall not be consummated,
(iii) if no demand or petition for the determination of "fair value" by a court
shall have been made or filed within the time provided in the provisions of the
BCL or (iv) if a court of competent jurisdiction shall determine that such
holder of Dissenting Shares is not entitled to the relief provided by the
provisions of the BCL, then the right of such holder of Dissenting Shares to be
paid the "fair value" of his shares of Consumers Common Stock shall cease and
with respect to clauses (i), (iii) and (iv) above, such Dissenting Shares shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Date, the right to receive the Merger Consideration
with respect thereto, without any interest thereon, and with respect to clause
(ii) above, the status of such shareholder shall be restored retroactively
without prejudice to any corporate proceeding which may have been taken during
the interim.
ARTICLE III
Merger Payment Procedure
3.1 Exchange Agent. CAC shall deposit the Merger Consideration
--------------
with Consumers Financial Corporation or such other transfer agent as may be
mutually acceptable to both CAC and Consumers (the "Exchange Agent") for the
benefit of holders of Consumers Common Stock, promptly after the Effective Date.
3.2 Transmittal Letter. As soon as practicable after the
------------------
Effective Date, the Exchange Agent shall send a notice and transmittal form to
each holder of record of a certificate
A-4
or certificates theretofore evidencing shares of Consumers Common Stock (such
certificates are collectively referred to herein as the "Certificates"),
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent such Certificates for exchange into the
Merger Consideration. Upon the surrender of a Certificate to the Exchange Agent
together with and in accordance with such transmittal form, the holder thereof
shall be entitled to receive in exchange therefor the Merger Consideration
payable in respect of each share of Consumers Common Stock represented thereby.
Upon such surrender, the Exchange Agent will promptly pay the Merger
Consideration. Each such Certificate shall be deemed for all purposes to
evidence only the right to receive the Merger Consideration.
3.3 Delivery To Person Other Than Registered Holder. If the
-----------------------------------------------
Merger Consideration (or any portion thereof) is to be delivered to a person
other than the person in whose name the Certificates surrendered in exchange
therefor are registered, it shall be a condition to the delivery of the Merger
Consideration that the certificates so surrendered shall be properly endorsed or
accompanied by appropriate stock powers and otherwise be in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay to the Exchange Agent any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not required to be paid.
3.4 Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, the owner of such lost, stolen or destroyed Certificate
shall deliver to the Surviving Corporation a bond in such sum as the Surviving
Corporation may direct as indemnity against any claim that may be made against
the Surviving Corporation with respect to the Certificate alleged to have been
lost, stolen or destroyed.
ARTICLE IV
Surviving Provisions
4.1 Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation of the Surviving Corporation shall survive and be the Articles of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions therein and as provided by the BCL. The bylaws of
the Surviving Corporation shall survive and be the bylaws of the Surviving
Corporation until thereafter amended in accordance with the provisions therein
and as provided in the BCL.
4.2 Directors and Officers. The directors and officers of the
----------------------
Surviving Corporation shall be the directors and officers of the Merging
Corporation.
A-5
Each director and officer shall hold office until the expiration
of his or her term of office or earlier death, resignation or removal in
accordance with the Articles of Incorporation and Bylaws of the Merging
Corporation and applicable law.
A-6
