<PAGE> 1
Prospectus filed pursuant to Rule 424(b)(3)
Registration No. 333-4625
PROSPECTUS
6,834,648 SHARES
ACCEL INTERNATIONAL CORPORATION
COMMON STOCK
---------------
ACCEL International Corporation (the "Company"), a Delaware
corporation, is offering (the "Rights Offering") to holders of record (the
"Rights Holders") of shares of its Common Stock, par value $.10 per share (the
"Common Stock"), non-transferable subscription rights (the "Rights") to
subscribe for and purchase additional shares of the Common Stock for a price of
$2.25 per share (the "Subscription Price"). Such Rights Holders will receive one
Right for every share of Common Stock held by them as of the close of business
on June 18, 1996 (the "Record Date"). Rights Holders may purchase 1.5 shares of
Common Stock (the "Underlying Shares") for each Right held upon payment of the
Subscription Price (the "Basic Subscription Privilege"). No fractional Rights
will be issued and no fractional shares of Common Stock will be issued upon
exercise of the Rights. To the extent that the Basic Subscription Privilege is
not exercised in full, the Company may determine to offer the shares of Common
Stock not subscribed for sale to employees, independent agents and customers
(including automobile dealers) of the Company directly through executive
officers of the Company at a price of $2.25 per share (the "Additional
Offering"). See "Plan of Distribution." The Rights will be evidenced by
non-transferable certificates. Once a Rights Holder has exercised any Rights,
such exercise may not be revoked.
The Rights will expire at 5:00 p.m., Columbus, Ohio time, on August 26,
1996, unless extended (as it may be extended, the "Expiration Date"), provided
that the Expiration Date shall in no event be later than August 28, 1996. Rights
Holders who do not exercise their Rights will experience a decrease in their
proportionate interest in the equity ownership and voting power of the Company.
See "Risk Factors--Decrease in Proportionate Equity Ownership if Rights Not
Exercised."
The Common Stock is traded on the Nasdaq National Market under the
symbol "ACLE." On July 23, 1996, the last reported sale price of the Common
Stock was $2.75.
After the Expiration Date, the Rights will no longer be exercisable and
will have no value. Since the Rights are non-transferable, the Rights may not be
sold and there will be no trading market for the Rights.
POTENTIAL PURCHASERS OF THE COMMON STOCK PURSUANT TO AN EXERCISE OF THE
RIGHTS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE 6.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================
Price to Underwriting Proceeds to
Public Discount Company (1)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $2.25 None $2.25
- ------------------------------------------------------------------------
Total(2) $15,377,958 None $15,377,958
========================================================================
<FN>
(1) Before deducting expenses payable by the Company estimated to
be $96,400.
(2) The Total amount assumes the purchase of all 6,834,648 shares
of Common Stock offered hereby.
</TABLE>
The date of this Prospectus is July 25, 1996
<PAGE> 2
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-2 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") with respect to the Rights and the shares of Common Stock offered
pursuant to this Prospectus. For further information, reference is made to the
Registration Statement and amendments thereof and exhibits thereto.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information are
available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549-1004, as well as the Regional Offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, 14th Floor, Chicago, Illinois 60661-2511. Copies of
the Registration Statement and amendments thereof and the exhibits thereto may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File
No. 0-8162) are incorporated in this Prospectus by reference:
(1) Annual Report on Form 10-K for the year ended December 31, 1995 (a
copy of which accompanies this Prospectus).
(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
(a copy of which accompanies this Prospectus).
Any statement contained in a document which is incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including
beneficial owners, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the foregoing
documents, other than the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests should be
directed to ACCEL International Corporation, 475 Metro Place North, Suite 100,
Dublin, Ohio 43017, Attention: Nicholas Z. Alexander, Senior Vice President,
(614) 764-7000.
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus and in the documents incorporated in this
Prospectus by reference.
The Company
The Company is an insurance holding company incorporated in Delaware in
June 1978 as the successor to an Ohio corporation, formerly Acceleration
Corporation, organized in 1969. The Company, through its subsidiaries, is
engaged in the sale and underwriting of credit life and credit accident and
health insurance, extended service contracts and other specialty casualty
products. The credit insurance and extended service contract products are
offered to consumers principally through automobile dealers, financial
institutions and other business entities. For more detailed information
concerning the business of the Company and its financial statements see the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 (the
"10-K") and Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
(the "10-Q"), copies of which accompany this Prospectus and which are
incorporated herein by reference.
The Company's home office is located at 475 Metro Place North, Suite
100, Dublin, Ohio 43017 and its telephone number is (614) 764-7000.
Risk Factors
There are certain risks in connection with the Rights Offering that
should be considered by Rights Holders prior to determining whether to exercise
the Rights and purchase the Common Stock. The following is a summary of certain
of these risks: (i) The Company has experienced net losses since 1992 and may
incur net losses in the future; (ii) the Company's gross premiums derived from
its credit insurance business are substantially dependent upon consumer credit
transactions involving the purchase of automobiles; (iii) A.M. Best Company
downgraded the Company's life insurance subsidiary's rating from A- to C+ and
the property and casualty insurance subsidiary's rating from A to B in 1991
which ratings have remained unchanged since then. The current ratings may have
an adverse affect on the insurance subsidiaries' ability to market their
products; (iv) the Company does not expect to pay dividends in the foreseeable
future and is limited under a note purchase agreement from doing so; (v) Chase
Insurance Holdings Corporation ("CIHC"), a corporation which is beneficially
owned indirectly by David T. Chase, a director of the Company, his wife, his
children and various family trusts (collectively, the "Chase Stockholders"),
beneficially owns, directly or indirectly, approximately 29.7% of the
outstanding shares of Common Stock of the Company and Mr. Chase's wife
beneficially owns an additional 8.4% of the Common Stock of the Company. It is
possible that the Rights Offering will result in CIHC, either alone or together
with the Chase Stockholders and Mrs. Chase, beneficially owning as much as 60.6%
of the Common Stock, assuming that the Chase Stockholders and Mrs. Chase
exercise their Basic Subscription Privilege in full and that the other Rights
Holders do not exercise their Basic Subscription Privilege, and having actual
control over the Company. The Company has been advised that the Chase
Stockholders and Mrs. Chase do intend to exercise their Basic Subscription
Privilege in full. Mr. Chase disclaims beneficial ownership of the shares of
Common Stock owned by his wife; and (vi) there can be no assurance that the
market price of the Common Stock will not decline.
The Rights Offering
Rights............................... Each record holder of Common Stock at the
close of business on June 18, 1996 (the
"Record Date") is receiving one non-
transferable subscription right ("Right")
for each share of Common Stock held of
record on the Record Date. Each Right
will entitle the holder thereof ("Rights
Holder") to purchase from the Company 1.5
shares of Common Stock (the
3
<PAGE> 4
"Underlying Shares") for a price of $2.25
per share (the "Subscription Price"). An
aggregate of up to 6,834,648 shares of
Common Stock will be sold in the Rights
Offering upon exercise of the Rights. The
Rights will be evidenced by
non-transferable certificates (the
"Subscription Rights Certificates").
Basic Subscription Privilege.......... Rights Holders are entitled to purchase,
at the Subscription Price, 1.5 Underlying
Shares for each Right held (the "Basic
Subscription Privilege"). No fractional
Rights will be issued and no fractional
shares of common stock will be issued
upon exercise of the Rights. See "The
Rights Offering -- Basic Subscription
Privilege." To the extent that the Basic
Subscription Privilege is not exercised
in full, the Company may determine to
offer any or all of the shares of Common
Stock not subscribed for sale to
employees, independent agents and
customers (including automobile dealers)
of the Company directly through executive
officers of the Company. See "The Rights
Offering -- Basic Subscription Privilege"
and "Plan of Distribution."
Subscription Price.................... $2.25 per Underlying Share, payable in
cash. See "The Rights Offering --
Exercise of Rights" and "The Rights
Offering -- Determination of Subscription
Price."
Tender of Subordinated Notes
in Lieu of Cash....................... The Company has decided to permit CIHC
and its affiliate (the "Subordinated
Noteholders") to tender $5,619,046
principal amount of the Company's 10.125%
Subordinated Notes due July 2000 (the
"Subordinated Notes") for cancellation as
consideration (in lieu of cash) for the
purchase of shares of Common Stock
pursuant to the Rights Offering.
Shares of Common Stock Outstanding
After the Rights Offering............. As of the Record Date there were
4,556,432 Shares of Common Stock
outstanding. An aggregate of up to
6,834,648 shares of Common Stock will be
sold in the Rights Offering if all of the
Rights are exercised. If all Rights are
exercised, an aggregate of 11,391,080
shares of Common Stock will be
outstanding upon completion of the Rights
Offering.
Transferability of Rights............. The Rights, including the Basic
Subscription Privilege, are not
transferable.
Expiration Date....................... 5:00 p.m., Columbus, Ohio time,
August 26, 1996, or such later date and
time to which the Rights Offering may be
extended (the "Expiration Date"),
provided that the expiration date shall
in no event be later than August 28,
1996. See "The Rights Offering --
Expiration Date." Rights not exercised
prior to the Expiration Date will expire
and become worthless.
Procedure for Exercising Rights....... The Basic Subscription Privilege may be
exercised by properly completing and
signing the Subscription Certificate
evidencing
4
<PAGE> 5
the Rights (a "Subscription Certificate")
and forwarding such Subscription
Certificate (or following the Guaranteed
Delivery Procedures), with payment of the
Subscription Price for each Underlying
Share subscribed for pursuant to the
Basic Subscription Privilege, to the
Subscription Agent on or prior to the
Expiration Date. If Subscription Rights
are sent by mail, Rights Holders are
urged to use insured, registered mail. No
interest will be paid on funds delivered
in payment of the Subscription Price. See
"The Rights Offering -- Exercise of
Rights."
No Revocation of Exercise............. Once a Rights Holder has exercised the
Basic Subscription Privilege, such
exercise may not be revoked.
Persons Holding Common Stock
or Wishing to Exercise Rights,
Through Others........................ Persons holding shares of Common Stock
beneficially, and receiving the Rights
issuable with respect thereto, through a
broker, dealer, commercial bank, trust
company or other nominee, as well as
persons holding certificates for Common
Stock directly who would prefer to have
such institutions effect transactions
relating to the Rights on their behalf,
should contact the appropriate
institution or nominee and request it to
effect such transactions for them. See
"The Rights Offering -- Exercise of
Rights".
Issuance of Common Stock.............. Certificates representing shares of
Common Stock purchased pursuant to the
exercise of the Basic Subscription
Privilege will be delivered to
subscribers as soon as practicable after
the corresponding Rights have been
validly exercised and payment therefor
has been received by the Company. See
"The Rights Offering -- Basic
Subscription Privilege."
Use of Proceeds....................... The Company intends to use the net cash
proceeds from the Rights Offering for
general corporate purposes, including
investments in, and advances to, its
insurance company subsidiaries and the
redemption of any Subordinated Notes
which are not tendered in the Rights
Offering. The Subordinated Noteholders
have indicated that they intend to tender
$5,619,046 principal amount or 88.7% of
the $6,337,446 principal amount of
Subordinated Notes outstanding as of June
30, 1996, for cancellation as
consideration (in lieu of cash) for the
purchase of shares of Common Stock. The
Subordinated Notes will be accepted by
the Company as consideration in an amount
equal to the full principal amount of
such Subordinated Notes plus accrued
interest from July 1, 1996 through the
date of exercise of the Basic
Subscription Privilege by the
Subordinated Noteholders. Accordingly,
the net cash proceeds of the Rights
Offering assuming all of the Rights are
exercised in full are estimated to be
approximately $9,600,000.
Subscription Agent.................... National City Bank, Cleveland, Ohio. The
Subscription Agent's telephone number is
(800) 622-6757.
5
<PAGE> 6
RISK FACTORS
Prospective investors should consider carefully the following risk
factors, together with other information contained or incorporated by reference
in this Prospectus, in evaluating an investment in the Common Stock offered
hereby. This Prospectus contains or incorporates by reference certain
forward-looking statements reflecting management's current views with respect to
future events and financial performance. These forward-looking statements are
subject to certain risks and uncertainties, all of which are difficult to
predict and many of which are beyond the control of the Company, that could
cause actual results to differ materially from those in the forward-looking
statements, including but not limited to, the following risk factors.
Continuing Net Losses
The Company has experienced net losses since 1992 and may incur net
losses in the future. The Company incurred net losses of $1,460,000, $5,238,000,
$5,281,000 and $22,124,000 or an aggregate of $34,103,000 for the years ended
December 31, 1995, 1994, 1993 and 1992, respectively. There can be no assurance
that the Company will not experience net losses in the future.
Decrease in Gross Premiums Written
Since 1991 gross premiums written have decreased from $130,239,000 to
$55,443,000 principally as a result of the Company's decision to discontinue all
lines of business except for credit insurance and extended service contracts.
See Item 1 of the 10-K for a general discussion of the discontinued lines of
business and Table II on page 15 of the 10-K which sets forth the changes in
gross premiums written for the past three fiscal years for both continuing lines
of business and discontinued lines of business.
Interest Rate Risk
The Company, like all other life and health and property and casualty
insurers, is subject to various risks which are discussed in Note A of the Notes
to Consolidated Financial Statements included in the 10-K. In particular, the
Company is subject to interest rate risk which is the risk that interest rates
will change and cause a decrease in the value of an insurer's investments. The
Company mitigates this risk by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would have to
borrow funds or sell assets prior to maturity and potentially recognize a gain
or loss. At March 31, 1996, the estimated duration of the Company's fixed income
investment portfolio was 2.84 years while the estimated liability duration was
approximately 3.5 years. Currently, an interest rate change of 1% would impact
the market value of the fixed maturity portfolio and stockholders' equity by a
decline of approximately $1.8 million if interest rates rose and an increase of
approximately $1.8 million if interest rates declined.
Dependence Upon Automobile Purchases
The Company sells credit insurance and extended warranty contracts
primarily in connection with consumer credit transactions involving automobile
purchases. Automobile purchases have been and will continue to be affected,
directly and indirectly, by automobile prices, interest rates, the availability
of consumer credit and general economic conditions, all of which are beyond the
Company's control.
6
<PAGE> 7
Effect of Downgrading of Insurance Ratings
Life Insurance
The Company's life insurance subsidiary is rated C+ (Fair) by A.M. Best
Company ("Best"). Best downgraded the life insurance subsidiary's rating from A-
to C+ in 1991 and the rating has remained unchanged since then. The Best rating
is based on factors relevant to policyholders and is not directed toward the
protection of stockholders. The Best rating is based upon its current opinion of
the life insurance subsidiary's lack of consistently profitable operating
results in recent years as well as its concern regarding the weak financial
results, high debt level and poor liquidity position of the Company. The
weaknesses noted by Best are partially offset by the general profitability of
the life insurance subsidiary's core credit life insurance operations and the
high quality of its investment portfolio. Although the Company has not
experienced a material reduction in the level of its sales of credit insurance
products through automobile dealers following Best's downgrading, the insurance
company subsidiary's current rating adversely affects its ability to market
those products through financial institutions.
Property and Casualty Insurance
The Company's property and casualty insurance company subsidiary is
rated B (Adequate) by Best. Best downgraded the property and casualty insurance
company subsidiary's rating from A to B in 1991 and the rating has remained
unchanged since then. The Best rating reflects its analysis of the property and
casualty insurance company subsidiary's continued operating losses and
corresponding decline in surplus and ongoing reserve strengthening for the lines
of business in runoff. The property and casualty insurance company subsidiary's
current rating may have an adverse affect on its ability to market its products
through certain quality agents and brokers.
Uncertain Profitability of New Programs; Dependence Upon Agent
The property and casualty insurance subsidiary has recently introduced
two new insurance programs. See "Recent Developments." Because the property and
casualty insurance company subsidiary has had little or no experience in writing
coverage for the new insurance programs, there can be no assurance that either
of such programs will be profitable. The Company has, however, employed
individuals to develop these programs who have extensive experience. The
Company's new commercial auto program (truck and bus) is being marketed through
an independent agent, Transportation Insurance Specialists, Inc. ("TIS") which
does have limited authority to bind the Company. If the commercial auto program
(truck and bus) becomes material, the loss of TIS as an independent agent could
have a material adverse impact on the Company's financial position or operating
results.
Limitations on Payment of Dividends
The Company has not paid dividends on the Common Stock since 1991 due
to the Company's lack of profitability in recent years and does not expect to
pay dividends until the Company has returned to a level of profitability which
will sustain the payment of cash dividends. In addition, the Company's
outstanding 9.50% Notes due April 1, 2001 (the "Senior Notes"), were issued
pursuant to a note purchase agreement which limits the Company's ability to pay
dividends to 50% of net income computed on a cumulative basis from January 1,
1996 to and including the date of the dividend payment. Even if the Company does
have net income in the future, its principal source of cash flow with which to
pay dividends will be dependent upon the ability of its insurance company
subsidiaries to pay dividends to the Company. Ohio domiciled insurance companies
are subject to laws and regulations which, among other things, limit the amount
of dividends and other payments that can be made by such insurance companies
without prior regulatory approval. See "Price Range of Common Stock and Dividend
Policy" included herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Consolidated Financial Statements and
notes thereto included in the 10-K which accompanies this Prospectus.
7
<PAGE> 8
Claims Asserted by Liquidation Bureau under Certificates of Suretyship
On October 7, 1994, the Liquidation Bureau of the New York State
Insurance Department (the "Liquidation Bureau") took control of Galaxy Insurance
Company ("Galaxy"), which prior to the commencement of liquidation proceedings
had been an indirect wholly-owned subsidiary of the Company, pursuant to an
order of liquidation of the New York Supreme Court. Prior to the liquidation of
Galaxy, Acceleration National Insurance Company ("ANIC"), the property and
casualty insurance company subsidiary of the Company, had issued certain
certificates of suretyship ("Certificates") with respect to certain Galaxy
insurance policies, each of which provided that ANIC would assume the
responsibilities of Galaxy under the specified policy if Galaxy became insolvent
or financially unable to meet its obligations on the underlying policy, but only
if certain conditions were met. In particular, the Certificates provided that
ANIC's assumption of liability was contingent upon the insured's executing and
delivering all agreements, assignments or evidence of subrogation satisfactory
to ANIC respecting payments made or liabilities assumed.
In May 1996, the Liquidation Bureau, acting on behalf of the New York
Property/Casualty Insurance Security Funds (the "Guaranty Fund"), during a
meeting with Company representatives informally advised the Company that on
behalf of the Guaranty Fund it intended to seek indemnification or reimbursement
from ANIC for claims paid by the Guaranty Fund to Galaxy insureds on policies
which may have been covered by the Certificates. The Liquidation Bureau has not
yet completed its response to the Company's request for accounting data and
other information with respect to the Liquidation Bureau's analysis of the
Guaranty Fund's right to indemnification and, accordingly, the Company cannot
quantify the magnitude of the potential claim for indemnification or
reimbursement. The Company has taken the position that the Guaranty Fund has no
right to seek indemnification unless Galaxy insureds who hold properly issued
Certificates have executed assignments and evidence of subrogation. Even if any
Galaxy insured properly made such a claim directly against ANIC, the Company has
been advised by counsel that if ANIC paid any such claim, it would have the
right, under assignment and subrogation agreements with its insureds, to assert
all rights that the insureds could have asserted to recover the loss amounts
from any other source, including the Guaranty Fund.
The Company intends to fully investigate each claim which the
Liquidation Bureau, acting on behalf of the Guaranty Fund, formally asserts is
entitled to the benefits of a Certificate to determine whether such Certificate
was properly endorsed by ANIC and issued with proper authority and if so,
whether proper agreements, assignments and evidence of subrogation have been
executed. The Company intends to vigorously deny liability for any claims for
indemnification or reimbursement made by the Liquidation Bureau, on behalf of
the Guaranty Fund, with respect to the Certificates. Although the Company is not
in a position to estimate the magnitude of the potential claims for
indemnification or reimbursement, it does not believe that the ultimate
resolution of such claims will have a material adverse effect on the financial
condition or results of operations of the Company.
Decrease in Proportionate Equity Ownership if Rights Not Exercised
Rights Holders who do not exercise their Rights will experience a
decrease in their proportionate interest in the equity ownership and voting
power of the Company. In addition, the Chase Stockholders beneficially own,
directly or indirectly, approximately 29.7% of the outstanding shares of Common
Stock of the Company and Mr. Chases's wife beneficially owns an additional 8.4%
of the Common Stock of the Company. It is possible that the Rights Offering will
result in CIHC, either alone or together with the Chase Stockholders and Mrs.
Chase, beneficially owning as much as 60.6% of the Common Stock, assuming that
the Chase Stockholders and Mrs. Chase exercise their Basic Subscription
Privilege in full and that the other Rights Holders do not exercise their Basic
Subscription Privilege, and having actual control over the Company.
8
<PAGE> 9
Potential Conflicts of Interest
CIHC, which is beneficially owned by Mr. Chase and the other Chase
Stockholders, is a principal stockholder of the Company and is one of the
Subordinated Noteholders. The Subordinated Noteholders collectively hold
$5,619,046 principal amount or 88.7% of the $6,337,446 principal amount of
Subordinated Notes outstanding as of June 30, 1996. The Company has decided to
permit the Subordinated Noteholders to tender their respective Subordinated
Notes for cancellation as consideration (in lieu of cash) for the purchase of
the Common Stock and the Subordinated Noteholders have indicated that they
intend to tender all of the Subordinated Notes held by them. In addition, the
Chase Stockholders have indicated that they intend to purchase the balance of
Underlying Shares available to them after giving effect to the tender of the
Subordinated Notes. Assuming that the $5,619,046 principal amount of
Subordinated Notes held by the Subordinated Noteholders are tendered and the
balance of the Underlying Shares are purchased for cash, an aggregate of
2,600,188 shares of Common Stock will be purchased by the Chase Stockholders. If
no other Rights are exercised, the Chase Stockholders would beneficially own
60.6% of the outstanding shares of Common Stock. The remaining outstanding
Subordinated Notes in the principal amount of $718,000 are held by an unrelated
third party who is not a stockholder of the Company (the "Unrelated Subordinated
Noteholder"). Because the Unrelated Subordinated Noteholder is not a stockholder
of the Company, the Board of Directors concluded that the Company could not make
available to the Unrelated Subordinated Noteholder the opportunity to tender
Subordinated Notes held by the Unrelated Subordinated Noteholder for shares of
Common Stock. The Company does intend, however, to retire the Subordinated Notes
held by the Unrelated Subordinated Noteholder if sufficient cash proceeds from
the Rights Offering are available. The Board of Directors was aware that by not
permitting the Unrelated Subordinated Noteholder to participate in the Rights
Offering, the Suboordinated Noteholders were obtaining benefits not being
provided to the Unrelated Subordinated Noteholder, including the ability to
acquire shares of Common Stock of the Company at a potential discount from the
market price and without having to incur any interest costs.
The Board of Directors has felt for some time that the Company must
improve its debt-to-equity ratio and reduce its interest expense, thereby
addressing concerns of both its insurance regulators and rating agencies. By
improving the debt-to-equity ratio and reducing its interest expense, the Board
of Directors believes that the Best ratings of the Company's insurance
subsidiaries may be upgraded thereby creating new market opportunities. Since
the elimination of the debt represented by the Subordinated Notes would
significantly improve the Company's debt-to-equity ratio and reduce its interest
expense, the Board of Directors concluded that it was in the best interest of
the Company and its stockholders to agree to accept the tender of Subordinated
Notes in lieu of cash.
Nature of the Rights Offering
The Company does not have a commitment for the purchase of shares of
Common Stock which may remain unsold at the expiration of the Rights Offering.
Accordingly, there can be no assurance as to the number of shares of Common
Stock which will be sold by the Company in the Rights Offering or in the
Additional Offering.
Market Price Risks Associated With the Common Stock
There can be no assurance that the market price of the Common Stock
will not decline during the period the Rights are outstanding or that, following
the issuance of the Rights and the sale of the Underlying Shares upon exercise
of the Rights, a subscribing Rights Holder will be able to sell shares purchased
in the Rights Offering at a price equal to or greater than the Subscription
Price. Once a Rights Holder has exercised the Basic Subscription Privilege, such
exercise may not be revoked. See "The Rights Offering -- No Revocation."
Moreover, until certificates are delivered, subscribing Rights Holders may not
be able to sell the shares of Common Stock that they have purchased in the
Rights Offering.
9
<PAGE> 10
USE OF PROCEEDS
The Company intends to use the net cash proceeds from the Rights
Offering for general corporate purposes, including investments in, and advances
to, its insurance company subsidiaries and the redemption of any Subordinated
Notes which are not tendered in the Rights Offering. The Subordinated
Noteholders have indicated that they intend to tender $5,619,046 principal
amount or 88.7% of the $6,337,446 principal amount of Subordinated Notes
outstanding as of June 30, 1996, for cancellation as consideration (in lieu of
cash) for the purchase of shares of Common Stock. The Subordinated Notes will be
accepted by the Company as consideration in an amount equal to the full
principal amount of such Subordinated Notes plus accrued interest from July 1,
1996 through the date of exercise of the Basic Subscription Privilege by the
Subordinated Noteholders. Accordingly, the net cash proceeds of the Rights
Offering assuming all of the Rights are exercised in full are estimated to be
approximately $9,600,000. The Subordinated Notes bear interest at 10.125% per
annum and are scheduled to mature in July 2000. No principal payments are
required to be paid on the Subordinated Notes prior to maturity but the
Subordinated Notes may be prepaid at any time without penalty.
RECENT DEVELOPMENTS
The property and casualty insurance subsidiary has recently introduced
two new insurance programs, one is the commercial auto program (truck and bus)
and the other is for automobile dealers. The commercial auto program (truck and
bus) is a limited coverage program while the automobile dealers program is a
multi-peril package program which provides property, liability and related
coverages. During the first two quarters of 1996, the commercial auto program
(truck and bus) produced approximately $9.1 million of annualized premiums.
During the second quarter of 1996, the automobile dealer program produced
approximately $1.0 million of annualized premiums.
On May 16, 1996, the Company publicly announced that it had reached an
agreement to settle its $5.16 million judgment against Homeowners Marketing
Services, Inc. ("HMS") for $4.4 million in cash. Homeowners Group, Inc.
("HOMG"), the parent of HMS, has entered into a definitive merger agreement with
Cross Country Group, Inc. which has agreed to pay the amount of the settlement
at the time of the closing of its acquisition of HOMG. HOMG announced that the
closing of the acquisition, which is subject to regulatory and stockholder
approval, is anticipated in late September. When and if the amount of the
settlement is paid, the Company intends to use such amount to increase the
capital of the two insurance company subsidiaries to enable them to develop
existing and new insurance programs. No part of the settlement will be
recognized as income until received by the Company.
The Company has had an arrangement with a financial institution
pursuant to which it ceded credit life and credit accident and health insurance
originated by the financial institution to a reinsurance company owned by the
financial institution. During the most recent fiscal year, the Company wrote
$1,486,000 in net premiums for which it received a ceding commission. The
financial institution terminated the arrangement effective June 1, 1996.
Although the Company does have the right to recapture the ceded insurance and
retain 100% of the profits and losses thereof during runoff, the Company's
premiums written in the future will be reduced unless it is able to replace the
insurance originated by the financial institution with new business.
10
<PAGE> 11
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the Nasdaq National Market under the
symbol "ACLE." The following table sets forth the high and low sales prices of
the Common Stock for each of the periods indicated through July 23, 1996 as
reported by the Nasdaq National Market. The prices have been rounded up to the
nearest eighth and do not include retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
First Quarter.............................................................. $6.000 $3.750
Second Quarter............................................................. 5.000 3.000
Third Quarter.............................................................. 3.750 2.250
Fourth Quarter............................................................. 3.125 1.750
YEAR ENDED DECEMBER 31, 1995
First Quarter.............................................................. 2.875 1.750
Second Quarter............................................................. 3.125 2.000
Third Quarter.............................................................. 4.875 2.750
Fourth Quarter............................................................. 3.875 2.375
YEAR ENDING DECEMBER 31, 1996
First Quarter.............................................................. 3.375 2.875
Second Quarter............................................................. 3.750 2.500
Third Quarter (through July 23, 1996)...................................... 3.250 2.500
</TABLE>
Prior to 1992 the Company had historically paid stock or cash
dividends. On June 2, 1992, the Board of Directors of the Company decided to
suspend payment of cash dividends on the Common Stock until the Company returned
to a level of profitability which will sustain the payment of cash dividends.
Moreover, the note agreement pursuant to which the Company's $16,500,000
principal amount of Senior Notes were issued restricts the payment of dividends
on the Common Stock to an amount equal to 50% of net income computed on a
cumulative basis from January 1, 1996 to and including the date of the dividend
payment. Accordingly, there is presently no amount available for paying
dividends after giving effect to this restriction. Even if the Company does have
net income in the future, its principal source of cash flow with which to pay
dividends will be dependent upon the ability of its insurance company
subsidiaries to pay dividends to the Company. Ohio domiciled insurance companies
are subject to laws and regulations which, among other things, limit the amount
of dividends and other payments than can be made by such insurance companies
without prior regulatory approval. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Consolidated Financial
Statements and notes thereto included in the 10-K which accompanies this
Prospectus.
THE RIGHTS OFFERING
The Rights
The Company is hereby issuing Rights to each holder of Common Stock as
of the close of business on June 18, 1996 (the "Record Date") at no charge to
such holders. The Company will issue one Right for each share of Common Stock
held on the Record Date. Each Right will entitle the holder thereof (the "Rights
Holder") to subscribe for 1.5 shares of Common Stock. The Rights will be
evidenced by non-transferable Subscription Rights Certificates which are being
distributed to each Rights Holder contemporaneously with the delivery of this
Prospectus. The issuance by the Company of shares of Common Stock pursuant to
the Rights Offering is not
11
<PAGE> 12
conditioned upon the subscription of any minimum number of shares of Common
Stock by the Rights Holders. No fractional Rights will be issued and no
fractional shares of Common Stock will be issued upon exercise of the Rights.
See "The Rights Offering -- Basic Subscription Privilege."
BEFORE EXERCISING ANY RIGHTS, POTENTIAL INVESTORS ARE URGED TO READ CAREFULLY
THE INFORMATION SET FORTH UNDER "RISK FACTORS."
Expiration Date
The Rights will expire at 5:00 p.m., Columbus, Ohio time, on August 26,
1996, subject to extension at the discretion of the Company (as it may be
extended, the "Expiration Date"), provided that the Expiration Date shall in no
event be later than August 28, 1996. After the Expiration Date, unexercised
Rights will be null and void. The Company will not be obligated to honor any
purported exercise of Rights received by the Subscription Agent after 5:00 p.m.,
Columbus, Ohio time, on the Expiration Date, regardless of when the documents
relating to such exercise were sent, except pursuant to the Guaranteed Delivery
Procedures described below. The Company may extend the Expiration Date by giving
oral or written notice to the Subscription Agent on or before the Expiration
Date, followed by a press release no later than 9:00 a.m., Columbus, Ohio time
on the next business day after the previously scheduled Expiration Date.
Basic Subscription Privilege
Each Right will entitle the Rights Holder to receive, upon payment of
the Subscription Price, 1.5 shares of Common Stock (the "Basic Subscription
Privilege"). Each Rights Holder is entitled to subscribe for all, or any
portion, of such Right Holder's Rights subject to the elimination of fractional
shares. Certificates representing Underlying Shares purchased pursuant to the
Basic Subscription Privilege will be delivered to subscribers as soon as
practicable after the corresponding Rights have been validly exercised and full
payment for shares has been received and cleared.
Exercise of Rights
Rights may be exercised by delivering to National City Bank (the
"Subscription Agent"), at or prior to 5:00 p.m., Columbus, Ohio time, on the
Expiration Date, the properly completed and executed Subscription Certificate
evidencing such Rights with any signatures required to be guaranteed so
guaranteed, together with payment in full of the Subscription Price for each
Underlying Share subscribed for pursuant to the Basic Subscription Privilege.
All payments must be by (i) check or bank draft (cashier's check) drawn upon a
U.S. bank or postal or express money order payable to National City Bank, as
Subscription Agent, or (ii) by wire transfer of same-day funds to an account
designated by the Subscription Agent, in which case please contact the
Subscription Agent at (800) 622-6757 for information concerning such account.
Payments will be deemed to have been received by the Subscription Agent only
upon (i) clearance of any uncertified check, (ii) collection by the Subscription
Agent of any certified check or bank draft upon a U.S. bank or of any postal or
express money order or (iii) receipt of good funds in the account designated by
the Subscription Agent. If paying by uncertified personal check, please note
that the funds paid thereby may take up to ten business days to clear.
Accordingly, Rights Holders who wish to pay the Subscription Price by means of
uncertified personal check are urged to make payment sufficiently in advance of
the Expiration Date to ensure that such payment is received and clears by such
date and are urged to consider payment by means of certified or cashier's check,
money order or wire transfer of funds.
12
<PAGE> 13
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
<TABLE>
<CAPTION>
By Mail: By Hand or Overnight Courier:
<S> <C>
National City Bank, Subscription Agent National City Bank, Subscription Agent
Corporate Trust Operations Corporate Trust Operations
P.O. Box 94720 3rd Floor -- North Annex
Cleveland, Ohio 44101-4720 4100 West 150th Street
Cleveland, Ohio 44135-1385
</TABLE>
If a Rights Holder wishes to exercise Rights, but time will not permit
such Rights Holder to cause the Subscription Certificate or Subscription
Certificates evidencing such Rights to reach the Subscription Agent on or prior
to the Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription
Price for each Underlying Share being subscribed for pursuant to the Basic
Subscription Privilege to be received (in the manner set forth above) by the
Subscription Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the
Expiration Date, a guarantee notice ("Notice of Guaranteed Delivery"),
substantially in the form provided with the instructions (the "Instructions")
distributed with the Subscription Certificates, from a member firm of a
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc. ("NASD"), or from a commercial bank or trust company
having an office or correspondent in the United States or from a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program, pursuant to Rule 17Ad-15 of the
Exchange Act (each, an "Eligible Institution"), stating the name of the
exercising Rights Holder, the number of Rights represented by the Subscription
Certificate or Subscription Certificates held by such exercising Rights Holder,
the number of Underlying Shares being subscribed for pursuant to the Basic
Subscription Privilege and guaranteeing the delivery to the Subscription Agent
of any Subscription Certificate evidencing such Rights within five business days
following the Expiration Date; and
(iii) the properly completed Subscription Certificate
evidencing the Rights being exercised, with any signatures required to be
guaranteed so guaranteed, is received by the Subscription Agent within five
business days following the Expiration Date. The Notice of Guaranteed Delivery
may be delivered to the Subscription Agent in the same manner as Subscription
Certificates at the address set forth above, or may be transmitted to the
Subscription Agent by facsimile transmission (telecopy no. (216) 476-8367 ).
Additional copies of the form of Notice of Guaranteed Delivery are available
upon request from the Subscription Agent.
Unless a Subscription Certificate (i) provides that the shares of
Common Stock to be issued pursuant to the exercise of Rights represented thereby
are to be issued in the name of the Rights Holder and/or are to be delivered to
the Rights Holder or (ii) is submitted for the account of an Eligible
Institution, signatures on such Subscription Certificate must be guaranteed by
an Eligible Institution or other eligible guarantor institution which is a
member of or a participant in a medallion guarantee program acceptable to the
Subscription Agent.
Rights Holders who hold shares of Common Stock for the account of
others, such as brokers, trustees or depositories for securities, should notify
the respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial
13
<PAGE> 14
owner so instructs, the nominee holder should complete Subscription Certificates
and submit them to the Subscription Agent with the proper payment. In addition,
beneficial owners of Common Stock or Rights held through such a nominee holder
should contact the nominee holder and request the nominee holder to act in
accordance with such beneficial owner's instructions. If a beneficial owner
wishes to obtain a separate Subscription Right Certificate, such beneficial
owner should contact the nominee holder as soon as possible and request that a
separate Subscription Right Certificate be issued. A nominee holder may request
any Subscription Right Certificate held by it to be split into such smaller
denominations as it wishes, provided that the Subscription Right Certificate is
received by the Subscription Agent, properly endorsed, no later than the
Expiration Date.
The instructions accompanying the Subscription Certificates should be
read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO
THE COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDERS, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00
P.M., COLUMBUS, OHIO TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE UP TO TEN BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY,
OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR
WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Company, whose
determinations will be final and binding. The Company in its sole discretion may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported exercise
of any Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Company determines in its sole discretion. Neither the Company nor the
Subscription Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Subscription Certificates or
incur any liability for failure to give such notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the Form
10-K, the Form 10-Q, the Instructions or the Notice of Guaranteed Delivery
should be directed to the Subscription Agent, at its address set forth under
"Exercise of Rights", above (telephone: (800) 622-6757).
No Revocation
ONCE A RIGHTS HOLDER HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE,
SUCH EXERCISE MAY NOT BE REVOKED.
Non-Transferability of Rights
The Rights are not transferable and will not be traded on any
securities exchange or quoted on any inter-dealer quotation system. Rights may
only be exercised or permitted to expire. Rights Holders who determine not to
exercise their Rights may not transfer their rights and, at the Expiration Date,
Rights which have not been exercised will expire and be null and void and have
no value, provided that Rights may be transferred by operation of law in the
case of death, dissolution, liquidation or bankruptcy of the Rights Holder, or
pursuant to an order of an appropriate court. A Rights Holder may, however,
elect to have the Underlying Shares registered in the name of, and/or delivered
to, a person other than the Rights Holder provided that the signature on the
related Subscription
14
<PAGE> 15
Certificate is guaranteed by an Eligible Institution or other eligible guarantor
institution as more fully described under "-- Exercise of Rights", above, and in
the accompanying Subscription Certificate and Instructions.
Tender of Subordinated Notes in Lieu of Cash
The Company has decided to permit holders of Subordinated Notes to
tender their respective Subordinated Notes to the Company for cancellation as
consideration (in lieu of cash) for the purchase of shares of Common Stock. Upon
receipt of such Subordinated Notes, the Company will direct the Subscription
Agent to accept such Subordinated Notes as consideration for the issuance of the
related Underlying Shares. See "Use of Proceeds."
Determination of Subscription Price
The Subscription Price was determined by the Company. In making this
determination, the material factors considered by the Company were the amount of
proceeds that the Company desires to raise, the average market price of the
Common Stock, the pro rata nature of the offering and pricing policies customary
for transactions of this type. The Subscription Price should not be considered
an indication of the actual value of the Company or the Common Stock.
Foreign and Certain Other Stockholders
Subscription Certificates will not be mailed to Rights Holders whose
addresses are outside the United States or who have an APO or FPO address, but
will be held by the Subscription Agent for their account. To exercise such
Rights, such a Rights Holder must notify the Subscription Agent, and must
establish to the satisfaction of the Subscription Agent and the Company that
such exercise is permitted under applicable law. If the procedures set forth in
the preceding sentence are not followed prior to the Expiration Date, the Rights
will expire.
Other Matters
The Rights Offering is not being made in any state or other
jurisdiction in which it is unlawful to do so, nor is the Company selling or
accepting any offers to purchase any shares of Common Stock from Rights Holders
who are residents of any such state or other jurisdiction. The Company may delay
the commencement of the Rights Offering in certain states or other
jurisdictions, or change the terms of the Rights Offering, in order to comply
with the securities law requirements of such states or other jurisdictions. It
is not anticipated that there will be any changes in the terms of the Rights
Offering. If any such change is made that is material and has an adverse effect
on any Rights Holder that has previously exercised Rights, such Rights Holder
will be provided the opportunity to revoke such exercise. The Company, if it so
determines in its sole discretion, may decline to make modifications to the
terms of the Rights Offering requested by certain states or other jurisdictions,
in which event Rights Holders resident in those states or jurisdictions will not
be eligible to participate in the Rights Offering.
FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material United States federal
income tax considerations applicable to U.S. Rights Holders who hold Common
Stock as a capital asset and who receive Rights in respect of such Common Stock
in the initial issuance of the Rights (the "Issuance"). This summary is based
upon laws, regulations, rulings and decisions currently in effect. This summary
does not discuss all aspects of federal income taxation that may be relevant to
a particular investor or to certain types of investors subject to special
treatment under the federal income tax laws (for example, banks, dealers in
securities, life insurance companies, tax exempt organizations and foreign
taxpayers), nor does it discuss any aspect of state, local or foreign tax laws.
15
<PAGE> 16
Issuance of Rights
Holders of Common Stock will not recognize taxable income in connection
with the receipt of Rights.
Basis and Holding Period of the Rights
Except as provided in the following sentence, the basis of the Rights
received by a stockholder as a distribution with respect to such stockholder's
Common Stock will be zero. If either (i) the fair market value of the Rights on
the date of Issuance is 15% or more of the fair market value (on the date of
Issuance) of the Common Stock with respect to which they are received or (ii)
the stockholder elects, in his or her federal income tax return for the taxable
year in which the Rights are received, to allocate part of the basis of such
Common Stock to the Rights, then upon exercise of the Rights, the stockholder's
basis in such Common Stock will be allocated between the Common Stock and the
Rights in proportion to the fair market values of each on the date of Issuance.
The holding period of a stockholder with respect to the Rights received as a
distribution on such stockholder's Common Stock will include the stockholder's
holding period for the Common Stock with respect to which the Rights were
issued.
Lapse of the Rights
Rights Holders who allow the Rights received by them in the Issuance to
lapse will not recognize any gain or loss, and no adjustment will be made to the
basis of the Common Stock, if any, owned by such Rights Holders.
Exercise of the Rights; Basis and Holding Period of Common Stock
Rights Holders will not recognize any gain or loss upon the exercise of
such Rights. The basis of the Common Stock acquired through exercise of the
Rights will be equal to the sum of the Subscription Price therefor and the
Rights Holder's basis in such Rights (if any) as described above. The holding
period for the Common Stock acquired through exercise of the Rights will begin
on the date the Rights are exercised.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH STOCKHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON HIS OR
HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE
AND LOCAL INCOME AND OTHER TAX LAWS.
DESCRIPTION OF THE CAPITAL STOCK
Common Stock
The Company had 10,000,000 authorized shares of Common Stock, of which
4,456,432 shares were issued and outstanding as of March 31, 1996. At the Annual
Meeting of Stockholders held on June 11, 1996, the stockholders adopted an
amendment to the Company's Restated Certificate of Incorporation (the
"Certificate of Incorporation") which increased the authorized shares of Common
Stock from 10,000,000 to 15,000,000. The holders of the Common Stock are
entitled to one vote per share on all matters requiring stockholder action. The
Certificate of Incorporation does not permit cumulative voting for the election
of directors. The holders of Common Stock have no preemptive or other
subscription rights and there are no redemption, sinking fund or conversion
privileges applicable thereto. The holders of Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors out of
funds legally available therefor. Upon liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of
16
<PAGE> 17
liabilities. All outstanding shares of Common Stock are fully paid and
nonassessable and the shares of Common Stock to be issued in the Rights Offering
will, upon delivery and payment therefor in accordance with the terms of the
Rights Offering, be fully paid and nonassessable.
The Certificate of Incorporation contains a provision which requires
the affirmative vote of not less than 80 percent of the outstanding shares of
the Company entitled to elect directors for the approval of certain business
combinations and other transactions with a corporation or any affiliate thereof
which acquires more than five percent of the beneficial ownership of the
outstanding shares of Common Stock of the Company unless such business
combination or other transaction was approved by resolution of the Board of
Directors of the Company prior to the acquisition by such corporation or
affiliate thereof of the beneficial ownership of more than five percent of the
outstanding Common Stock. This provision could have the effect of delaying,
deferring or preventing a change in control of the Company.
The registrar and transfer agent for the Company's Common Stock is
National City Bank.
Preferred Stock
The Company has 1,000,000 authorized shares of Preferred Stock, par
value $1.00 per share, none of which were issued and outstanding as of March 31,
1996. The Certificate of Incorporation provides that the Board of Directors is
authorized to fix the voting rights, redemption rights, conversion rights,
sinking fund provisions, designations, preferences and the relative,
participating, optional or other rights, if any, and the qualifications,
limitations or restrictions of the Preferred Stock. The Company has no present
intention to issue any shares of Preferred Stock.
PLAN OF DISTRIBUTION
The Rights and Common Stock offered pursuant to the Rights Offering are
being offered by the Company directly to its stockholders. Certain executive
officers of the Company may solicit responses from Rights Holders to the Rights
Offering, but such executive officers will not receive any commissions or
compensation for such services other than their normal employment compensation.
Upon completion of the Rights Offering, any shares of Common Stock that
are not purchased by Rights Holders may be offered by the Company for sale to
employees, independent agents and customers (including automobile dealers) of
the Company at $2.25 per share (the "Additional Offering") for a period
commencing on the Expiration Date and ending not later than September 30, 1996.
The Company will sell such shares of Common Stock directly to any purchaser or
purchasers through its executive officers. No soliciting fee or other
compensation will be paid in connection with the Additional Offering.
LEGAL MATTERS
The validity of the issuance of Common Shares in the Rights Offering will
be passed upon by counsel for the Company, Squire, Sanders & Dempsey, Columbus,
Ohio.
EXPERTS
The Company's consolidated financial statements and schedules as of
December 31, 1995 and 1994, and for each of the years in the two-year period
ended December 31, 1995, included in the Form 10-K, a copy of which accompanies
this Prospectus and which is incorporated by reference in this Prospectus, have
been incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, and in reliance on the report of Ernst
& Young LLP, independent certified public accountants, with respect to the
Company's
17
<PAGE> 18
consolidated financial statements and schedules for the year ended December 31,
1993 and are incorporated herein in reliance upon the authority of said firms as
experts in accounting and auditing.
The report of KPMG Peat Marwick LLP dated March 15, 1996 contains an
explanatory paragraph that states that as discussed in Note D to the
consolidated financial statements, on March 30, 1994, the Company and its
principal lender agreed to waive compliance with certain loan agreement
covenants through January 1, 1995. On February 7, 1995, the Company and the
lender again renegotiated the credit agreement and certain of the covenants. The
amended agreement stated that the loan was payable in full on June 30, 1997. On
December 29, 1995, the Company issued senior notes with a different lender and
retired the aforementioned credit agreement. The most recent loan agreement
requires that during the period the loan is outstanding, the Company maintain
consolidated tangible net worth, as defined. At December 31, 1995, required
tangible net worth was $15,000,000 and the Company's consolidated tangible net
worth, as defined, was $19,738,000.
18
<PAGE> 19
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THIS PROSPECTUS RELATES OR
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 6
Use of Proceeds........................................................... 10
Recent Developments....................................................... 10
Price Range of Common Stock and Dividend Policy........................... 11
The Rights Offering....................................................... 11
Federal Income Tax Consequences........................................... 15
Description of the Capital Stock.......................................... 16
Plan of Distribution...................................................... 17
Legal Matters............................................................. 17
Experts................................................................... 17
</TABLE>
================================================================================
ACCEL INTERNATIONAL
CORPORATION
6,834,648 SHARES OF
COMMON STOCK
--------------------
PROSPECTUS
--------------------
JULY 25, 1996
================================================================================
