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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ACCEL INTERNATIONAL CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(1)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$40,500,000
-------------------------------------------------
5) Total fee paid:
$8,100
-------------------------------------------------
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------
2) Form Schedule or Registration Statement No.:
---------------------------------------------------------
3) Filing Party:
---------------------------------------------------------
4) Date Filed:
---------------------------------------------------------
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ACCEL INTERNATIONAL CORPORATION
475 METRO PLACE NORTH, SUITE 100
DUBLIN, OHIO 43017
614-764-7000
November _, 1997
DEAR STOCKHOLDER:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of Stockholders (the "Special Meeting") of ACCEL International
Corporation (the "Company"), to be held at 10:00 A.M. local time, on December _,
1997, at _____________ , _____________ , _____________, Ohio. Formal Notice of
the Special Meeting and the Proxy Statement are attached.
At the Special Meeting, you will be asked to approve and authorize (i) the
sale by the Company to Lyndon Insurance Group, Inc. and Lyndon Life Insurance
Company (collectively, "Lyndon") of all of the outstanding capital stock of the
Company's wholly owned subsidiaries, Acceleration Life Insurance Company,
Acceleration National Service Corporation and Dublin International Limited, for
the consideration and upon the terms set forth in the Stock Acquisition
Agreement dated October 20, 1997 by and between the Company and Lyndon attached
as Annex I to the accompanying Proxy Statement, (ii) the sale by the Company's
wholly owned subsidiary, Acceleration National Insurance Company ("ANIC"), to
Lyndon Property Insurance Company ("Lyndon Property"), of ANIC's vehicle
extended service contract business, for the consideration and upon the terms
set forth in the Asset Purchase Agreement dated October 20, 1997 among Lyndon
Property, the Company and ANIC attached as Annex II to the accompanying Proxy
Statement, and (iii) certain transactions related thereto (collectively, the
"Transaction"). The Transaction must be authorized by a resolution adopted by
the holders of a majority of the outstanding stock of the Company entitled to
vote thereon.
The Company shall use a portion of the proceeds from the Transaction to
retire certain senior notes of the Company held by an unaffiliated company (the
"Senior Notes"). The Company will use the balance of the net proceeds to make a
capital contribution to ANIC, the Company's wholly-owned property and casualty
insurance subsidiary, and for general corporate purposes. Upon consummation of
the Transaction, the Company will cease to be engaged in the auto aftermarket
credit insurance and extended service contract businesses.
Your Board of Directors believes that the Transaction is in the best
interests of the Company and its stockholders because it will enable the
Company to retire its outstanding indebtedness under the Senior Notes and to
use its remaining resources to seek to develop and expand its property and
casualty insurance business. The Board of Directors has unanimously approved
the Transaction and recommends that you vote FOR the proposal to approve and
authorize the Transaction. The Board's approval of the Transaction was based on
a number of factors described in the enclosed Proxy Statement, including the
opinion of CreditRe Corporation, an actuarial consulting firm engaged by the
Board, attached as Annex III to the accompanying Proxy Statement. The opinion
of CreditRe Corporation states that the consideration to be received by the
Company pursuant to the Stock Acquisition Agreement and the Asset Purchase
Agreement is fair and reasonable.
Details of the proposed Transaction and the other items of business
scheduled for the Special Meeting appear in the accompanying Proxy Statement.
Please give this material your careful attention.
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Whether or not you plan to attend the Special Meeting, please complete,
sign and date the accompanying proxy card and return it in the enclosed prepaid
envelope. If you attend the Special Meeting, you may vote in person even if you
have previously returned your proxy card. Your prompt cooperation will be
greatly appreciated.
Sincerely yours,
Thomas H. Friedberg
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 4
ACCEL INTERNATIONAL CORPORATION
475 METRO PLACE NORTH, SUITE 100
DUBLIN, OHIO 43017
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER _, 1997
TO THE STOCKHOLDERS OF ACCEL INTERNATIONAL CORPORATION:
A Special Meeting of Stockholders (the "Special Meeting") of ACCEL
International Corporation, a Delaware corporation (the "Company"), will be held
at ____________________, ________________, ______________, Ohio on December _,
1997, at 10:00 A.M. local time, to consider and vote on the following matters:
1. The adoption of a resolution approving and authorizing (i) the sale
of all of the outstanding capital stock of Acceleration Life
Insurance Company, Acceleration National Service Corporation and
Dublin International Limited by the Company to Lyndon Insurance
Group, Inc. and Lyndon Life Insurance Company pursuant to the Stock
Acquisition Agreement dated October 20, 1997 attached as Annex I to
the accompanying Proxy Statement, (ii) the sale of the vehicle
extended service contract business of the Company's wholly owned
subsidiary, Acceleration National Insurance Company, by the Company
to Lyndon Property Insurance Company pursuant to the Asset Purchase
Agreement dated October 20, 1997 attached as Annex II to the
accompanying Proxy Statement, and (iii) certain transactions related
thereto (collectively, the "Transaction"); and
2. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
November _, 1997 has been fixed as the record date for determining
stockholders entitled to notice of and to vote at the Special Meeting. Only
stockholders of record at the close of business on that date are entitled to
notice of and to vote at the meeting or at any adjournments thereof. A complete
list of stockholders entitled to vote at the meeting will be available for
examination by any stockholder at the Company's offices from December 12, 1997
until the day before the Special Meeting. Under Delaware law, stockholders do
not have dissenters' rights in connection with the Transaction.
By Order of the Board of Directors
Nicholas Z. Alexander, Secretary
Dublin, Ohio
November _, 1997
IF YOU ARE UNABLE TO BE PRESENT AT THE MEETING, WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ADDRESSED ENVELOPE WHICH IS INTENDED FOR
YOUR CONVENIENCE AND WHICH REQUIRES NO POSTAGE IF MAILED IN THE U.S.A. THE
PROXY IS REVOCABLE AT ANY TIME AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
IN THE EVENT YOU ATTEND THE MEETING.
<PAGE> 5
ACCEL INTERNATIONAL CORPORATION
475 METRO PLACE NORTH, SUITE 100
DUBLIN, OHIO 43017
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER _, 1997
FURNISHED BY THE BOARD OF DIRECTORS OF THE COMPANY
November _, 1997
This proxy statement (the "Proxy Statement") is being furnished in
connection with the solicitation of proxies by the Board of Directors of ACCEL
International Corporation, a Delaware corporation (the "Company"), for use at a
special meeting of stockholders (the "Special Meeting") to be held on December
__, 1997, at __________, __________, ____________, Ohio, at 10:00 A.M. local
time, and at any adjournments or postponements thereof.
At the Special Meeting, the stockholders will be asked to consider and
vote upon the approval and authorization of (i) the sale by the Company to
Lyndon Insurance Group, Inc. and Lyndon Life Insurance Company (collectively
"Lyndon") of all of the outstanding capital stock of the Company's wholly owned
subsidiaries, Acceleration Life Insurance Company ("ALIC"), Acceleration
National Service Corporation ("ANSC") and Dublin International Limited
("Dublin"), for the consideration and upon the terms set forth in the Stock
Acquisition Agreement dated October 20, 1997 (the "Stock Acquisition
Agreement") by and between the Company and Lyndon attached as Annex I hereto,
(ii) the sale by the Company's wholly owned subsidiary, Acceleration National
Insurance Company ("ANIC"), to Lyndon Property Insurance Company ("Lyndon
Property"), of ANIC's vehicle extended service contract business, for the
consideration and upon the terms set forth in the Asset Purchase Agreement
dated October 20, 1997 (the "Asset Purchase Agreement") among Lyndon Property,
the Company and ANIC attached as Annex II hereto, and (iii) certain
transactions related thereto (collectively, the "Transaction").
The Transaction is subject to the approval of the holders of a majority of
the outstanding shares of Common Stock, $.10 par value, of the Company (the
"Common Stock"), entitled to vote thereon and to the satisfaction of certain
other conditions, including obtaining various regulatory approvals. Under
Delaware law, stockholders do not have dissenters' rights in connection with
the Transaction.
This Proxy Statement is first being mailed to stockholders on or about
November _, 1997.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION..................................................................................... 1
INCORPORATION BY REFERENCE................................................................................ 1
SUMMARY ................................................................................................. 2
Date, Time and Place of Special Meeting of Stockholders................................................ 2
Record Date; Stockholders Entitled to Vote............................................................. 2
Purpose of Special Meeting............................................................................. 2
Vote Required.......................................................................................... 2
Parties to the Transaction............................................................................. 2
Terms of Transaction................................................................................... 3
Use of Proceeds from Transaction....................................................................... 3
Operation of the Company After the Transaction......................................................... 3
Recommendation of the Board of Directors............................................................... 4
Reasons for the Transaction............................................................................ 4
Opinion of Actuarial Consulting Firm................................................................... 4
Federal Income Tax Consequences........................................................................ 4
Accounting Treatment................................................................................... 4
No Dissenter's Rights.................................................................................. 4
Regulatory Approvals................................................................................... 5
THE SPECIAL MEETING ...................................................................................... 5
General .............................................................................................. 5
Matters to be Considered at the Special Meeting........................................................ 5
Voting at the Meeting; Record Date..................................................................... 5
THE TRANSACTION........................................................................................... 6
Background of the Transaction.......................................................................... 6
Reasons for the Transaction............................................................................ 7
Opinion of Consulting Firm............................................................................. 8
Use of Proceeds........................................................................................ 9
Operations of the Company After the Transaction........................................................ 9
Federal Income Tax Consequences........................................................................ 9
Accounting Treatment................................................................................... 10
THE STOCK ACQUISITION AGREEMENT........................................................................... 10
Terms of the Stock Acquisition Agreement............................................................... 10
Closing; Termination................................................................................... 11
Representations and Warranties......................................................................... 11
Conduct of Business Prior to Closing................................................................... 12
No "Shopping" Covenant; Break-up Fee................................................................... 13
Covenants of Lyndon.................................................................................... 13
Employee Benefit Plans................................................................................. 13
Conditions to Consummation of the Transactions Contemplated by the Stock Acquisition
Agreement..................................................................................... 13
Survival of Representations and Warranties............................................................. 14
Covenant Not to Compete................................................................................ 14
Indemnification........................................................................................ 15
</TABLE>
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<TABLE>
<S> <C>
Tax Matters............................................................................................ 15
Amendment; Waiver...................................................................................... 16
Expenses; Liquidated Damages........................................................................... 16
ASSET PURCHASE AGREEMENT.................................................................................. 17
Purchase Price and Acquired Assets..................................................................... 17
Reinsurance Agreements and Liabilities Assumed......................................................... 17
Closing .............................................................................................. 17
Representations and Warranties......................................................................... 17
Additional Agreements of the Company, ANIC and Lyndon Property......................................... 18
Covenant Not to Compete................................................................................ 18
Survival of Representations and Warranties............................................................. 19
Indemnification........................................................................................ 19
Amendment; Waiver...................................................................................... 19
Expenses .............................................................................................. 19
REGULATORY APPROVALS REQUIRED............................................................................. 20
Ohio Department of Insurance........................................................................... 20
Missouri Department of Insurance....................................................................... 20
HSR Act and Antitrust.................................................................................. 20
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION.................................................... 21
Introduction........................................................................................... 21
Pro Forma Unaudited Consoidated Balance Sheets......................................................... 22
Pro Forma Unaudited Consolidated Statement of Operations............................................... 24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................ 27
Beneficial Ownership of Certain Beneficial Owners...................................................... 27
Beneficial Ownership of Management..................................................................... 29
INDEPENDENT AUDITORS...................................................................................... 30
STOCKHOLDER PROPOSALS..................................................................................... 30
ANNEX I -- STOCK ACQUISITION AGREEMENT
ANNEX II -- ASSET PURCHASE AGREEMENT
ANNEX III -- OPINION OF CREDITRE CORPORATION
</TABLE>
ii
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AVAILABLE INFORMATION
The Company is subject to the information 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
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Public Reference Section of the Commission, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at certain regional
offices of the Commission located at Suite 1400, Northwestern Atrium Center,
500 West Madison Street, Chicago, Illinois 60661 and at 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such information can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may
also be accessed electronically by means of the Commission's home page on the
Internet (http://www.sec.gov).
INCORPORATION BY REFERENCE
The following documents filed with the Commission by the Company (File No.
0-8162) are incorporated in this Proxy Statement by reference:
(1) Annual Report on Form 10-K for the year ended December 31, 1996 (a
copy of which accompanies this Proxy Statement).
(2) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997 (a copy of which accompany this Proxy Statement).
The information relating to the Company contained in this Proxy Statement
does not purport to be comprehensive and should be read together with all
information in the documents incorporated by reference herein. All documents
filed by the Company pursuant to Section 13(a), 13(c), 14 and 15(d) of the
Exchange Act subsequent to the date hereof and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference herein and to be a part
hereof from the date any such document is filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so
modified or superseded. All information appearing in this Proxy Statement is
qualified in its entirety by the information and consolidated financial
statements (including notes thereto) appearing in the documents which accompany
this Proxy Statement and are incorporated herein by reference, except to the
extent set forth in the immediately preceding statement.
No person is authorized to give any information or to make any
representations with respect to the matters described in this Proxy Statement
other than those contained herein or in the documents which accompany this
Proxy Statement or are incorporated by reference herein. Any information or
representations with respect to such matters not contained herein or therein
must not be relied upon as having been authorized by the Company. The delivery
of this Proxy Statement shall not under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information in this Proxy Statement or in the
documents which accompany this Proxy Statement or are incorporated by reference
herein is correct as of any time subsequent to the date hereof or thereof.
The Company will provide without charge to each person, including
beneficial owners, to whom a copy of this Proxy Statement is delivered, upon
the written or oral request of such person, a copy of any and all of the
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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.
SUMMARY
The following summary is not intended to be complete and is qualified in
its entirety by reference to the more detailed information contained elsewhere
in this Proxy Statement and the Annexes hereto in their entirety.
DATE, TIME AND PLACE OF SPECIAL MEETING OF STOCKHOLDERS
The Special Meeting of Stockholders of the Company will be held on
December _, 1997, at 10:00 A.M., local time, at ______________,
________________, ______________ Ohio.
RECORD DATE; STOCKHOLDERS ENTITLED TO VOTE
Only holders of record of the Common Stock at the close of business on the
Record Date, November _, 1997, will be entitled to notice of and to vote at the
Special Meeting. On the Record Date, there were o shares of Common Stock
outstanding, each of which will be entitled to one vote on each matter properly
submitted for vote to stockholders at the Special Meeting. See "THE SPECIAL
MEETING -- Voting at the Meeting; Record Date."
PURPOSE OF SPECIAL MEETING
The purpose of the Special Meeting will be to consider and vote upon the
adoption of a resolution approving and authorizing the Transaction pursuant to
the terms of the Stock Acquisition Agreement and the Asset Purchase Agreement
(collectively, the "Agreements").
VOTE REQUIRED
A majority of the outstanding shares of Common Stock entitled to vote
thereon must vote in favor of the resolution approving and authorizing the
Agreements.
PARTIES TO THE TRANSACTION
The Company is an insurance holding company incorporated under the laws of
Delaware in June 1978. The Company is engaged through its operating
subsidiaries, Acceleration Life Insurance Company ("ALIC") and Acceleration
National Insurance Company ("ANIC"), in the sale and underwriting of selected
life and property/casualty insurance products. ALIC holds licenses to conduct
business in 40 states and the District of Columbia and ANIC holds licenses to
conduct business in 47 states and the District of Columbia. ALIC offers credit
life and credit accident and health insurance. ANIC offers commercial auto
insurance to operators of long haul trucks and charter buses and also offers a
program for vehicle extended service contracts as a complementary product to
the credit insurance products marketed by automobile dealerships. The principal
office of the Company is 475 Metro Place North, Suite 100, Dublin, Ohio 43017
and its telephone number is (614) 764-7000.
Lyndon Property, Lyndon Insurance Group, Inc. and Lyndon Life Insurance
Company (collectively, the "Lyndon Group") are direct or indirect subsidiaries
of Frontier Insurance Group, Inc. ("Frontier"), which Frontier acquired on June
3, 1997. Frontier is an insurance holding company which, through its
subsidiaries, conducts business on an admitted and non-admitted basis as a
specialty property and casualty insurer. Frontier currently underwrites in
excess of 130 specialty insurance programs, including (i) malpractice insurance
for physicians, dentists, psychiatrists and chiropractors, (ii) general
liability, (iii) surety (performance bonds, bail bonds, customs
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bonds and license and permit bonds), (iv) commercial earthquake, (v) workers'
compensation and (vi) other miscellaneous lines. Frontier's alternative risk
division underwrites excess workers' compensation and excess medical stop loss
coverages, and provides custom designed insurance programs through captive and
rent-a-captive facilities for both Frontier's workers' compensation and other
insurance lines. At June 30, 1997, Frontier's total assets were approximately
$1.62 billion, its total investments were approximately $1.06 billion and its
total shareholders' equity was $295 million.
The Lyndon Group is based in St. Louis, Missouri and provides
credit-related and specialty insurance products for financial institutions and
specialty insurance markets through a variety of distribution channels,
including other companies, general agents, third-party administrators, and
joint venture relationships, with the particular channel designed to fit the
specific product. Credit-related products include collateral protection, credit
property, involuntary unemployment insurance, auto physical damage, credit
life, and credit accident and health coverages. Specialty insurance products
include residual value, non-standard auto and mechanical breakdown. For the
year ended December 31, 1996, the Lyndon Group's revenues were $96.8 million
and its net income was $27.0 million. At June 30, 1997, the Lyndon Group's
total assets were $395.8 million and its total investments were $214.8 million.
TERMS OF TRANSACTION
The Company will sell to Lyndon all of the capital stock of each of ALIC,
ANSC and Dublin (collectively, the "Target Corporations") pursuant to the terms
of the Stock Acquisition Agreement, and the Company and ANIC will sell to
Lyndon Property ANIC's vehicle extended service contract business pursuant to
the terms of the Asset Purchase Agreement. Upon the closing of the Transaction
(the "Closing"), Lyndon Property will own ANIC's vehicle extended service
contract business and Lyndon will own the Target Corporations and all of their
respective assets, including all of the in-force credit premiums of ALIC (the
"In-Force Business") and all of the licenses to conduct business presently held
by ALIC in 40 states and the District of Columbia. The Agreements provide that
Lyndon and Lyndon Property shall pay the Company $40.5 million in cash at the
Closing for all of the capital stock of the Target Corporations and ANIC's
vehicle extended service contract business. The Stock Acquisition Agreement
provides that, prior to the Closing, the Target Corporations may elect to
declare and pay to the Company a special distribution (the "Special
Distribution") equal to the estimated amount by which the Target Corporations
combined stockholders' equity as of December 31, 1997, as determined in
accordance with GAAP, is expected to exceed $31.6 million. The estimated amount
of the Special Distribution will be based on the Target Corporations' combined
GAAP unaudited Financial Statements as of September 30, 1997. Within 125 days
after the Closing, the amount of the Special Distribution will be adjusted by
the parties to reflect the actual combined stockholders' equity of the Target
Corporations based upon the combined GAAP audited financial statements of the
Target Corporations as of December 31, 1997 to be obtained by the Company by
March 16, 1998.
USE OF PROCEEDS FROM TRANSACTION
The Company will use the cash proceeds from the Transaction, which are
estimated to be approximately $40.5 million, to retire all of the outstanding
Senior Notes held by Lincoln National Life Insurance Company in the amount of
$15 million (the "Senior Notes") and to make a capital contribution to ANIC in
an amount necessary to increase its statutory capital and surplus (being
approximately $13 million at June 30, 1997) to at least $25 million. The
Company will use the balance of the proceeds for general corporate purposes.
OPERATION OF THE COMPANY AFTER THE TRANSACTION
Following consummation of the Transaction, (i) the Company's stockholders
will remain stockholders of the Company, (ii) ANIC's vehicle extended service
contract business will be owned by Lyndon Property and all of the shares of
capital stock of each of the Target Corporations will be owned by Lyndon, (iii)
the Company will cease to be engaged in the auto aftermarket credit insurance
and extended service contract businesses, and (iv) ANIC
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will continue to be owned by the Company. The Company intends to use its
remaining resources to seek to develop and expand the business of ANIC, which
is the Company's property and casualty insurance subsidiary.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously approved the
Transaction pursuant to the terms of the Agreements, believes that the
Transaction is in the best interests of the Company and its stockholders and
recommends that the stockholders vote FOR the approval and authorization of the
Transaction pursuant to the terms of the Agreements. See "THE TRANSACTION --
Background of the Transaction" and "-- Reasons for the Transaction."
REASONS FOR THE TRANSACTION
The Board of Directors of the Company believes that the terms of the
Transaction are fair to, and in the best interests of, the Company and its
stockholders because, among other things, the Board believes that the
Transaction will (i) enable the Company to eliminate its outstanding
indebtedness under the Senior Notes, and (ii) enable ANIC to expand its
property and casualty insurance business, which the Company believes has the
potential to provide higher returns than the lines of business to be sold
pursuant to the Transaction. Accordingly, the Board unanimously approved the
Transaction and the Agreements and recommends that the Company's stockholders
vote in favor of the approval and authorization of the Agreements. For a
discussion of the factors considered by the Board in reaching its decision with
respect to the Transaction, see "THE TRANSACTION -- Reasons for the
Transaction."
OPINION OF ACTUARIAL CONSULTING FIRM
On October 15, 1997, CreditRe Corporation delivered its written opinion to
the Company's Board of Directors that the aggregate purchase price of $40.5
million to be received by the Company pursuant to the Agreements is fair and
reasonable and equals or exceeds the value that other likely participants in
the marketplace would pay for the business and assets being sold. The full text
of the written opinion of CreditRe Corporation is attached to this Proxy
Statement as Annex III. Stockholders of the Company are urged to, and should,
read such opinion in its entirety. See "THE TRANSACTION -- Opinion of Financial
Advisor."
FEDERAL INCOME TAX CONSEQUENCES
The Company will recognize a taxable gain upon the consummation of the
Transaction but the stockholders will not recognize any gain or loss upon
consummation of the Transaction nor will such consummation result in any change
in the tax basis of the shares of Common Stock held by them.
ACCOUNTING TREATMENT
The Transaction will be treated by the Company as a disposal of a segment
of a business within the meaning of Accounting Principles Board Opinion No. 30.
Accordingly, upon approval of the Transaction by the requisite vote of the
Company's stockholders, the operating results of the Company's auto aftermarket
credit insurance business will be accounted for by the Company as discontinued
operations. See "THE TRANSACTION - - Accounting Treatment."
NO DISSENTER'S RIGHTS
Under Delaware Law, a stockholder who does not vote his or her shares in
favor of the authorization of the Agreements is not entitled to any dissenters'
rights.
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REGULATORY APPROVALS
The consummation of the Transaction is subject to prior approval by the
Ohio and Missouri Departments of Insurance and to the expiration or termination
of the relevant waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to the Company's stockholders in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of Company to be voted at the Special Meeting to be held at
________________, ________________, _______________, Ohio on December _, 1997,
at 10:00 A.M., local time, and any and all adjournments or postponements
thereof. This Proxy Statement and the accompanying proxy are first being
mailed to shareholders on or about November _, 1997.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the Company's stockholders will be asked to (i)
consider and vote upon the Transaction pursuant to the terms of the Agreements
and (ii) to act on such other matters as may properly come before the Special
Meeting or any adjournment or postponements thereof.
The Board has unanimously approved the Agreements and the Transaction and
recommends a vote FOR the approval and authorization of the Transaction
pursuant to the terms of the Agreements.
VOTING AT THE MEETING; RECORD DATE
The Board has fixed November _, 1997 as the Record Date for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting. Accordingly, only holders of record of Common Stock on the Record Date
will be entitled to notice of, and to vote at, the Special Meeting. As of the
Record Date, there were _ shares of Common Stock of the Company outstanding and
entitled to vote. Each holder of record of shares of Common Stock on the Record
Date is entitled to cast one vote per share, exercisable in person or by
properly executed proxy, on each matter properly submitted for the vote of the
stockholders at the Special Meeting. The presence, in person or by properly
executed proxy, of the holders of a majority of the outstanding Common Stock
entitled to vote at the Special Meeting is necessary to constitute a quorum at
the Special Meeting. Approval and authorization of the Transaction pursuant to
the terms of the Agreements will require the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock.
As of October 31, 1997, directors and executive officers of the Company
and their affiliates may be deemed to be beneficial owners of approximately
52% (or approximately 60% if the Borrowed Shares described in footnote 4 to
the table under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT -- Beneficial Ownership of Certain Beneficial Owners" are
included) of the outstanding Common Stock. Each of the current directors
and executive officers of the Company has indicated that the shares of Common
Stock beneficially owned by him will be voted in favor of the approval and
authorization of the Transaction pursuant to the terms of the Agreements.
Accordingly, stockholder approval of the Transaction is assured.
So far as the Company is aware, no matters other than those described in
this Proxy Statement will be presented to the meeting for action on the part of
the stockholders. However, the enclosed proxy gives discretionary authority in
the event any additional matters should be presented.
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The cost of soliciting proxies will be borne by the Company. Officers,
directors and regular employees of the Company may communicate with
stockholders personally or by mail, telephone, telegram or otherwise for the
purpose of soliciting such proxies, but the Company will pay no additional
compensation for such solicitation. The Company and any authorized agent of the
Company will request brokers and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of shares held of
record by such persons and will reimburse the reasonable out-of-pocket expenses
in forwarding such material.
Any stockholder giving a proxy has the power to revoke it at any time
before it is voted by a later appointment received by the Secretary of the
Company or by giving notice of such revocation to the Secretary of the Company
in writing or in open meeting. All duly executed proxies received prior to the
meeting and not revoked will be voted at the meeting. The enclosed proxy
contains space in which the stockholder may insert instructions as to the way
the stockholder wishes his shares to be voted. When such proxy is properly
executed and returned, the shares it represents will be voted at the meeting as
directed. If no specification is indicated, the shares will be voted "For" the
proposal to approve and authorize the Transaction pursuant to the terms of the
Agreement.
Pursuant to applicable law, broker non-votes and abstaining votes will not
be counted in favor of the proposal to approve and authorize the Transaction
pursuant to the terms of the Agreements. Any stockholder who abstains from
voting on the proposal will in effect be voting against such proposal.
THE TRANSACTION
BACKGROUND OF THE TRANSACTION
Thomas H. Friedberg, Chairman of the Board, President and Chief Executive
Officer of the Company, initially approached Walter Rhulen, Chief Executive
Officer of Frontier, in the spring of 1997 after Frontier had announced its
intention to acquire the insurance operations of Mercury Financial Group (the
"Mercury Transaction"). Mr. Friedberg's purpose in contacting Frontier was to
inquire as to whether or not Frontier would be interested in discussing the
possibility of the Company acquiring from Frontier the credit insurance
business of Lyndon Life Insurance Company, which business Frontier acquired in
the Mercury Transaction. Mr. Friedberg had hoped that Frontier would consider
selling such business because, prior to the Mercury Transaction, Frontier was
principally a property and casualty insurance company. In the course of these
preliminary discussions with Frontier, Mr. Rhulen, after being advised by Mr.
Friedberg that he believed it was necessary for the Company to increase the
"critical mass" of its credit life insurance business in order to continue to
be successful, inquired of Mr. Friedberg whether the Company would instead
consider selling to Frontier the Company's Auto Aftermarket Group, which
consists of the Target Corporations and the Acquired Assets (as defined in the
Asset Purchase Agreement). These initial discussions led to Frontier's proposal
to acquire the Company's entire Auto Aftermarket Group, which proposal was
first communicated to Mr. Friedberg in a letter dated July 8, 1997.
A special telephonic meeting of the Board of Directors of the Company was
held on July 29, 1997 at the request of Mr. Friedberg for the sole purpose of
presenting to the Board of Directors the Transaction. At the meeting, Mr.
Friedberg outlined for the Board of Directors the general terms of the proposal
which were set forth in several letters between Mr. Friedberg and Peter H.
Foley, Executive Vice President of Frontier, dated various dates in July 1997.
Following the completion of the negotiation of the terms of the Agreements
between Mr. Friedberg and Mr. Foley, a second special telephonic meeting of the
Board of Directors of the Company was held on October 22, 1997 in order to
further consider the Transaction and the Agreements. At this meeting, Mr.
Friedberg summarized for the Board of Directors the advice he had received from
the Company's counsel concerning the directors' fiduciary duties in connection
with the Transaction. Mr. Friedberg also outlined for the directors the
material terms of the Agreements and reviewed the conclusions set forth in the
written opinion and appraisal received by the Company from CreditRe
Corporation, which opinion and appraisal was theretofore delivered to each
director. See
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"-- Opinion of Financial Advisor." Finally, Mr. Friedberg briefly advised the
Board of Directors regarding the unaudited consolidated pro forma financial
statements of the Company which would be included in this Proxy Statement.
After Mr. Friedberg completed his presentation and the directors questioned him
at length, the Board of Directors unanimously approved the Transaction and
authorized Mr. Friedberg to execute the Agreements on behalf of the Company.
REASONS FOR THE TRANSACTION
The Board of Directors has determined that the terms of the Transaction
are fair to, and in the best interests of, the Company and its stockholders and
has recommended that the stockholders vote FOR approval and authorization of
the Transaction pursuant to the terms of the Agreements. In reaching its
determination to approve the Transaction, the Board of Directors considered
various factors. The principal factors considered included:
(i) The desire of the Board of Directors to maximize the value of the
Company's Common Stock.
(ii) The determination by the Board of Directors that the Transaction will
allow the Company to eliminate its outstanding indebtedness under the Senior
Notes and to increase the statutory surplus of ANIC to a level which will
enable ANIC to seek a higher rating from A.M. Best Company ("A.M. Best") than
its current rating of "B" (Fair). The Company's management believes that an
increase in ANIC's A.M. Best rating should permit ANIC to market its products
through a larger group of quality agents and brokers. In addition, the
Transaction will provide the Company with approximately $5 million to $6
million of cash at the holding company level, and increase the Company's net
book value per share.
(iii) The determination by the Board of Directors that the Transaction is
consistent with the Company's plans to increase its revenues and profits from
its property and casualty insurance business.
(iv) The determination by the Board of Directors that it is necessary for
the Company to either increase the "critical mass" of its credit life insurance
business in order to continue to be successful or to sell such business in
light of the fact that the sales of the Company's Auto Aftermarket Group have
been steadily declining as a result of the size of ALIC's statutory surplus and
its A.M. Best rating of "B-" (Fair), which have adversely affected ALIC's
ability to market its credit insurance products through financial institutions.
(v) The aggregate consideration to be received by the Company pursuant to
the Agreements substantially exceeds all other recent offers received by the
Company and represents roughly the sum of the book value of the Company's
credit business plus ten times the annual after-tax earnings of ANIC's vehicle
extended service contract business (including fee income). In addition, prior
valuations of the Company's Auto Aftermarket Group indicated that any likely
sale price would result in a loss of value to the Company.
(vi) The opinion and appraisal of CreditRe Corporation to the Company
indicates that the aggregate purchase price to be received by the Company
pursuant to the Agreements is fair and reasonable, exceeds CreditRe
Corporation's appraised value of $39.3 million, and equals or exceeds the value
that other likely participants in the marketplace would pay for the business
and assets being sold. In addition, the opinion of CreditRe Corporation states
that the Company's credit life and disability insurance business has little
value in the marketplace because it does not provide a competitive return and
makes reference to the fact that over 50 insurers have left the credit life and
disability industry since 1990, with no new entrants. See " -- Opinion of
Financial Advisor."
(vii) The determination by the Board of Directors that the employees of
the Company's Auto Aftermarket Group would benefit by becoming part of a much
larger and financially stronger organization.
In view of the variety of factors considered in connection with the
evaluation of the Transaction, the Board of Directors did not find it
practicable to and did not quantify or otherwise assign weights to the specific
factors
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<PAGE> 15
considered in reaching its determination. In making its determination, the
Board of Directors also considered the risks and likelihood of achieving the
results discussed above.
OPINION OF FINANCIAL ADVISOR
As described under "--Background of the Transaction" and "--Reasons for
the Transaction," the Company engaged CreditRe Corporation, an actuarial
consulting firm, to provide a fairness opinion in connection with the
Transaction. In this connection, on October 15, 1997, CreditRe Corporation
delivered its written opinion to the Company's Board of Directors that the
aggregate purchase price of $40.5 million to be received by the Company
pursuant to the Agreements was fair and reasonable and equals or exceeds the
value that other likely participants in the marketplace would pay for the
business and assets being sold. The written opinion of CreditRe Corporation
further states that, based solely on (i) the statutory accounting annual
financial statements of ALIC as of and for the year ended December 31, 1996,
(ii) the consolidated GAAP financial statements of the Company as of and for
the six months ended June 30, 1997 and (iii) the valuations performed by
CreditRe Corporation, the estimated market value of the Company's auto
aftermarket book of business was $39.3 million. CreditRe Corporation relied,
without independent verification, upon the accuracy and completeness of all of
the financial and other information reviewed by it for purposes of its opinion.
CreditRe was not requested to, and did not, prepare a current actuarial
appraisal. In the opinion of CreditRe Corporation, aside from the book value of
the assets of ALIC and the value of the stock licenses held by ALIC, most, if
not all, of the value of such business relates to the Company's extended
service contract business because the Company's auto aftermarket credit life
and disability insurance businesses have little value in the current
marketplace. The full text of CreditRe Corporation's written opinion is
attached hereto as Annex III and is incorporated herein by reference. The
Company's stockholders are urged to, and should, read this opinion in its
entirety.
In connection with its opinion, CreditRe Corporation reviewed, among other
things: (i) the actuarial appraisals previously prepared by CreditRe
Corporation as of December 31, 1994 and June 30, 1995; (ii) the results of the
various consulting projects CreditRe Corporation had previously undertaken for
the Company subsequent to such appraisals; (iii) the financial statements of
the Company referenced above; (iv) information relating to recent sales of
credit related insurance lines of business by other insurers; and (v)
information concerning the Company's overall loss experience during the periods
covered by CreditRe Corporation's prior actuarial valuations and periods
subsequent thereto. Based on the foregoing information, CreditRe Corporation
determined that there had not been a material change in the Company's overall
loss experience since the prior valuations. Because a current actuarial
appraisal was not prepared, CreditRe's opinion is based on more limited data
and review than would be necessary to perform an actuarial appraisal that
conforms with Actuarial Standard of Practice No. 19.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its fairness determination, CreditRe Corporation considered the results of
certain analyses which were prepared solely for purposes of CreditRe
Corporation's providing its opinion to the Board of Directors of the Company as
to the fairness of the consideration to be received by the Company pursuant to
the Agreements. Such analyses do not purport to necessarily reflect the prices
at which businesses or securities actually may be sold. Because such analyses
are inherently subject to uncertainty, being based upon numerous factors or
events beyond the control of the parties or their respective advisors, none of
the Company, the Lyndon Group, the Target Corporations, CreditRe Corporation or
any other person assumes responsibility if future results are materially
different from those forecast.
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<PAGE> 16
As described below, CreditRe Corporation's opinion to the Board of
Directors of the Company was one of many factors taken into consideration by
the Board of Directors of the Company in making its determination to approve
the Agreements. The foregoing summary does not purport to be a complete
description of the analysis performed by CreditRe Corporation and is qualified
by reference to the written opinion of CreditRe Corporation set forth in Annex
III hereto.
CreditRe Corporation, as part of its actuarial consulting business, is
continually engaged in the valuation of insurance companies that participate in
the sale of credit-related insurance products. The Company selected CreditRe
Corporation to render a fairness opinion because it is a nationally recognized
actuarial consulting firm specializing in credit-related insurance that has
substantial experience in transactions similar to the Transaction. In addition,
CreditRe Corporation had previously performed valuations of the Company's
automobile aftermarket business as of December 31, 1994 and June 30, 1995, and
therefore, already possessed significant information regarding the Company's
operations. Since 1990, in addition to rendering its opinion in connection with
the Transaction, CreditRe Corporation has performed certain consulting services
for the Company in connection with various matters for which the Company paid
CreditRe Corporation a total of $128,000.
On or about October 1, 1997, the Company engaged CreditRe Corporation to
undertake a study to enable it to render its opinion with respect to the
fairness of the consideration to be received by the Company in a possible sale
of its auto aftermarket business to the Lyndon Group. The Company agreed to pay
CreditRe Corporation consulting fees for its services in rendering such opinion
at CreditRe Corporation's standard hourly rates. The total amount of such fees
was $9,700.
USE OF PROCEEDS
The Company will use the cash proceeds from the Transaction, which are
estimated to be approximately $40.5 million, to retire all of the outstanding
Senior Notes held by Lincoln National Life Insurance Company in the amount of
$15 million and to make a capital contribution to ANIC in an amount necessary
to increase its statutory capital and surplus (being approximately $13 million
at June 30, 1997) to at least $25 million. The Company will use the balance of
the proceeds for general corporate purposes.
OPERATIONS OF THE COMPANY AFTER THE TRANSACTION
Following consummation of the Transaction, (i) the Company's stockholders
will remain stockholders of the Company, (ii) ANIC's vehicle extended service
contract business will be owned by Lyndon Property and all of the shares of
capital stock of each of the Target Corporations will be owned by Lyndon, (iii)
the Company will cease to be engaged in the auto aftermarket credit insurance
and extended service contract businesses, and (iv) ANIC will continue to be
owned by the Company. The Company intends to use its remaining resources to
seek to develop and expand the business of ANIC. ANIC is the Company's property
and casualty insurance subsidiary which holds licenses to conduct business in
47 states and the District of Columbia. In 1996, ANIC began offering commercial
automobile coverage to operators of long haul trucks and charter buses. This
program is marketed by an unaffiliated general agent with extensive experience
in this product line. In 1997, ANIC commenced new marketing initiatives for
certain products including a package policy for crane operators consisting of
general liability, inland marine and commercial auto coverages.
FEDERAL INCOME TAX CONSEQUENCES
The consummation of the Transaction will not be a taxable event for
federal income tax purposes for the stockholders of the Company. The following
is a summary of federal income tax consequences to the Company of consummation
of the Transaction.
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<PAGE> 17
Pursuant to the Stock Acquisition Agreement, upon consummation of the
Transaction, (i) the Company will sell all of the stock of each of the Target
Corporations to Lyndon and (ii) the Company will join with Lyndon in the filing
of an election under Section 338(g) and Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended (the "Code"), and any comparable election
under state, local or foreign tax law, to the extent requested by Lyndon. As a
result of these elections, the Transaction will be deemed to be a sale of the
Company's assets for federal income tax purposes with the Company being deemed
to have sold its assets while still a member of the Company's "affiliated
group" (as defined in the Code). Accordingly, the economic burden of taxation
resulting from the deemed asset sale by the Company will be borne by the
Company. The Company expects to pay federal income taxes of approximately $5.25
million as a result of consummation of the Transaction. The amount of federal,
state and local taxes for which the Company will be liable as a result of the
elections under Sections 338(g) and 338(h)(10) of the Code (and any comparable
elections under state or local tax law) are anticipated to be higher than the
amount of taxes that would have been payable if the Company had sold all of the
stock of the Target Corporations without any such elections being made. The
payment of such additional taxes by the Company was considered by the parties
in their negotiations regarding the purchase price payable by Lyndon under the
Stock Acquisition Agreement.
The Company will recognize a taxable gain upon the consummation of the
Transaction but the stockholders will not recognize any gain or loss upon
consummation of the Transaction nor will such consummation result in any change
in the tax basis of the shares of Common Stock held by them.
ACCOUNTING TREATMENT
The Transaction will be treated by the Company as a disposal of a
segment of business within the meaning of Accounting Principles Board Opinion
No. 30. Accordingly, upon approval of the Transaction by the requisite vote of
the Company's stockholders (see "THE SPECIAL MEETING -- Voting at the Meeting;
Record Date"), the operating results of the Company's auto aftermarket credit
insurance business will be accounted for by the Company as discontinued
operations. See "UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS." The
Company expects to record a net gain of approximately $2.7 million on the
Transaction.
THE STOCK ACQUISITION AGREEMENT
The descriptions in this Proxy Statement of the terms of the Stock
Acquisition Agreement are summaries only and are qualified in their entirety by
reference to the Stock Acquisition Agreement which is attached as Annex I to
this Proxy Statement and is incorporated herein by reference. Terms which are
not otherwise defined in this summary have the meanings set forth in the Stock
Acquisition Agreement.
TERMS OF THE STOCK ACQUISITION AGREEMENT
Pursuant to the terms and conditions of the Stock Acquisition Agreement,
the Company will sell to Lyndon, for an aggregate purchase price of $30.2
million payable in cash upon the closing of the transaction (the "Closing"),
all of the capital stock of the Target Corporations. Upon the Closing, Lyndon
will own the Target Corporations and all of their respective assets including
all of ALIC's In-Force Business and all of the licenses to conduct business
presently held by ALIC in 40 states and the District of Columbia. In addition
to the cash consideration payable by Lyndon to the Company, the Target
Corporations may elect to declare and pay to the Company prior to the Closing a
Special Distribution equal to the estimated amount by which their combined
stockholders' equity as of December 31, 1997, as determined in accordance with
GAAP, exceeds $31.6 million. The estimated amount of the Special Distribution
will be based on the Target Corporation's combined GAAP unaudited financial
statements as of September 30, 1997. Within 125 days after the Closing, the
amount of the Special Distribution will be adjusted by the parties to reflect
the actual combined stockholders' equity of the Target Corporations based upon
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<PAGE> 18
the combined GAAP audited financial statements of the Target Corporations as of
December 31, 1997 to be obtained by the Company by March 16, 1998.
CLOSING; TERMINATION
The Stock Acquisition Agreement provides that the Closing shall occur
effective as of December 31, 1997 (the "Closing Date"). The actual Closing,
however, shall take place within five business days after the satisfaction or
waiver of the last condition to Closing, unless otherwise agreed by the
parties, and in no event later than March 31, 1998. See "-- Conditions to
Consummation of the Transactions Contemplated by the Stock Acquisition
Agreement." If the actual Closing does not occur by March 31, 1998, either
party may terminate the Stock Acquisition Agreement, without liability or
penalty. See "-- Tax Matters" for a discussion of the parties' obligations to
reimburse each other for Taxes related to timing differences between the deemed
Closing Date and the actual Closing Date for tax purposes.
REPRESENTATIONS AND WARRANTIES
The Stock Acquisition Agreement contains various customary representations
and warranties of the parties for transactions of this type. These include,
among other things, representations of the Company as to: (i) the organization
and good standing of each of the Target Corporations; (ii) the authority of
ALIC to transact business as an insurance company; (iii) the capitalization of
each of the Target Corporations; (iv) the nonexistence of any subsidiaries of
the Target Corporations; (v) the correctness and completeness of the articles
of incorporation, regulations, bylaws, stock transfer records, minute books and
corporate records of each of the Target Corporations delivered to Lyndon; (vi)
the obtainment of all consents, orders, licenses, approvals and exemptions and
the making of all governmental filings necessary for the Target Corporations'
consummation of the contemplated transactions; (vii) the non-contravention of
the performance of the Stock Acquisition Agreement with the articles of
incorporation, regulations, by-laws, material contracts and agreements of the
Target Corporations and with any material applicable laws, judgments, orders or
decrees; (viii) the accuracy of certain GAAP and SAP financial statements of
the Target Corporations; (ix) the ownership or lease of real and personal
property of the Target Corporations; (x) the intellectual property of the
Target Corporations; (xi) various tax matters relating to the Target
Corporations; (xii) compliance by the Target Corporations with material
applicable law; (xiii) the obtainment and holding by the Target Corporations of
all material permits and licenses necessary in the conduct of their respective
businesses; (xiv) the contracts, agreements and commitments of the Target
Corporations; (xv) certain pension plan and employee benefit matters of the
Target Corporations; (xvi) certain matters related to insurance policies owned
and maintained by the Target Corporations; (xvii) the accounts payable of the
Target Corporations; (xviii) the liabilities of the Target Corporations; (xix)
litigation involving or affecting the Target Corporations; (xx) matters
relating to the bank accounts, borrowing and payment guarantees of the Target
Corporations; (xxi) the premium sources of ALIC and ANSC; (xxii) the absence of
material adverse changes or events in the business of the Target Corporations;
(xxiii) matters related to the Target Corporations' employee relations; (xxiv)
matters related to transactions between the Company or any Target Corporation
and any of their respective Affiliates; (xxv) the absence of any brokers having
been retained by the Company in connection with the contemplated transactions;
(xxvi) the full and complete disclosure by the Company to Lyndon in connection
with the contemplated transactions; (xxvii) the employees of the Target
Corporations and their salaries and employment arrangements; (xxviii) the
authorization, execution and delivery of the Stock Acquisition Agreement by the
Company; and (xxviv) the Company's ownership of the capital stock of the Target
Corporations.
The representations and warranties by Lyndon to the Company include, among
other things, representations of Lyndon as to: (a) the organization and good
standing of Lyndon Life Insurance Company and Lyndon Insurance Group, Inc.; (b)
the authorization, execution and delivery of the Stock Acquisition Agreement by
Lyndon Life Insurance Company and Lyndon Insurance Group, Inc., and the
validity and enforceability thereof against such corporations; (c) Lyndon's
purchase of the Target Shares for the purpose of investment only; (d) the
noncontravention of the execution, delivery and performance of the Stock
Acquisition Agreement by Lyndon Life
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<PAGE> 19
Insurance Company and Lyndon Insurance Group, Inc. with their respective
certificates of incorporation, by-laws, material contracts and agreements and
with any material laws, judgments, orders or decrees; (e) the availability of
funds sufficient to enable Lyndon to consummate the proposed sale; (f) required
governmental or other consents, approvals or authorizations; (g) the absence of
actions, proceedings or claims likely to materially affect Lyndon's ability to
consummate the proposed sale; and (h) the absence of any brokerage, finder's or
other fee or commission incurred by Lyndon.
For additional information concerning representations and warranties, see
"-- Survival of Representations and Warranties."
CONDUCT OF BUSINESS PRIOR TO CLOSING
The Company has agreed that, during the period from the date of the Stock
Acquisition Agreement until the Closing Date, the Company shall cause each of
the Target Corporations to conduct its business in the ordinary course
consistent with past practice and to: (i) maintain adequate insurance; (ii)
preserve intact its business organization and employees; (iii) maintain
satisfactory relationships with its independent agents, reinsurers and other
persons with which it has a business relationship; (iv) maintain its books and
records in its usual manner; (v) not make any change in its financial reporting
or accounting and reserving practices or policies; and (vi) duly and timely
file all filings, declarations, reports or returns required to be filed with
all government authorities and promptly pay all taxes, assessments and
governmental charges.
The Company has further agreed that, during such period prior to Closing,
none of the Target Corporations shall: (a) issue, sell or deliver, or agree to
issue, sell or deliver, any shares of its capital stock or any options or other
rights with respect thereto; (b) declare or pay any dividend (except for the
Special Distribution); (c) purchase, redeem or otherwise acquire any shares of
its capital stock; (d) make any change in any pension or employee benefit plan
or modify any employment agreements or arrangements; (e) incur or guarantee any
indebtedness for borrowed money; (f) make any capital expenditure or purchase
or lease any property in excess of $50,000; (g) dispose of or pledge any assets
or cancel any debts or claims except in the ordinary course of business; (h)
enter into any acquisitions, mergers or consolidations; (i) alter the manner of
keeping its books, accounts or records; (j) amend its articles of
incorporation, regulations or by-laws (except as otherwise contemplated in the
Stock Acquisition Agreement); (k) settle any claim, action, suit or proceeding
(other than the payment of insured claims in the ordinary course of business)
involving the payment or receipt by a Target Corporation of more than $25,000
individually, or $100,000 in the aggregate; (l) enter into any other
transaction or agreement outside of the ordinary and usual course of business;
or (m) agree or commit to do any of the foregoing.
In addition, the Company has agreed to: (i) afford Lyndon full access to
the offices, properties, books and records of the Company and each of the
Target Corporations and to furnish to Lyndon such financial and operating data
and other information relating to the Target Corporations as Lyndon may
reasonably request; (ii) promptly notify Lyndon of all material proposed
adjustments contained in any tax examination reports received by the Company;
(iii) promptly prepare, file and diligently pursue with the appropriate
governmental agencies all documentation required to consummate the transactions
contemplated by the Stock Acquisition Agreement; (iv) cause certain forms of
non-piracy agreements attached to the Stock Acquisition Agreement to be
distributed to all of the Target Corporations' employees for execution by such
employees; (v) use its reasonable best efforts to cause all of the conditions
to Lyndon's obligation to consummate the Transaction to be satisfied; (vi)
terminate (or, at the Company's election, employ), at the Company's expense,
any employees of the Target Corporations not designated by Lyndon prior to the
Closing for continued employment by Lyndon or one of the Target Corporations
following the Closing; and (viii) diligently work towards the completion of the
Year 2000 work and other clean-up work on the Credit Life System prior to
Closing and, thereafter, to continue such work until completion at the
Company's expense.
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<PAGE> 20
NO "SHOPPING" COVENANT; BREAK-UP FEE
Until the earlier of the Closing or the termination of the Stock
Acquisition Agreement, the Company has agreed not to: (i) sell or arrange for
the acquisition of any capital stock or any other security of, or the business
or all or any substantial portion of, the assets of any of the Target
Corporations; (ii) negotiate, solicit or encourage any proposals relating to
the disposition of the business or assets of any of the Target Corporations, to
the acquisition of securities of any of the Target Corporations, or to a merger
or combination of any of the Target Corporations with any other Person; or
(iii) make available to any other Person any information concerning any of the
Target Corporations for the purpose of disposing of all or any substantial
portion of the assets of any of the Target Corporations or any securities
thereof.
Notwithstanding the foregoing, the Company may furnish information to, and
participate in discussions or negotiations with, any third party who submits a
good faith, unsolicited purchase offer to acquire the Target Corporations, if
the Company's Board of Directors determines in good faith, after consulting
with legal counsel, that such furnishing of information and participation in
discussions are required in the exercise of the Board of Directors' fiduciary
duties under applicable law. The Company will be entitled to execute a
definitive agreement with such a third party relating to the acquisition
proposal of such third party and to terminate the Stock Acquisition Agreement
so long as the Company pays Lyndon a fee of $750,000.
COVENANTS OF LYNDON
Lyndon has agreed to: (i) keep confidential all information provided by
the Company and the Target Corporations to Lyndon and its agents; (ii) promptly
prepare and file all documents to obtain state regulatory approvals and use all
reasonable efforts to obtain such regulatory approvals as are necessary to
consummate the transactions contemplated by the Stock Acquisition Agreement;
and (iii) use its reasonable best efforts to cause all of the conditions to the
Company's obligation to consummate the transaction to be satisfied.
EMPLOYEE BENEFIT PLANS
The Company and Lyndon have each agreed to cooperate in causing such
actions to be taken as of the Closing Date as would result in the Target
Corporations to cease to be participating employers as of the Closing Date in
the Company's and its ERISA Affiliate's Employee Benefit Plans in accordance
with the requirements of ERISA. The Company and Lyndon have further agreed
that, except for the Target Corporations' post-Closing Date contributions (and
liabilities therefor) to such Employee Benefit Plans for the time periods
preceding the Closing Date, none of the Target Corporations shall thereafter be
responsible for making any contributions to, or have any other liability with
respect to, such Employee Benefit Plans.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY
THE STOCK ACQUISITION AGREEMENT
The obligation of Lyndon to consummate the transactions contemplated by
the Stock Acquisition Agreement is subject to the satisfaction or waiver by
Lyndon of certain conditions, including, without limitation, the following: (i)
all representations and warranties of the Company shall be true and correct in
all material respects as of the Closing Date; (ii) the Company shall have
performed and complied with all of the covenants and agreements required to be
performed or complied with by the Company; (iii) as of the Closing, there shall
not be any pending or threatened suit, action, investigation, proceeding or
court order relating to the contemplated transactions; (iv) all governmental
authorities shall have consented to and approved the contemplated transactions
to the extent required by law; (v) all documents delivered and action taken
pursuant to the Stock Acquisition Agreement shall be reasonably satisfactory in
form and substance to Lyndon and its counsel; (vi) the ALIC, Dublin and ANSC
unaudited September 30, 1997 GAAP Financial Statements and the unaudited ALIC
September 30, 1997 SAP Financial Statements shall have been delivered to Lyndon
at least fifteen days prior to the Closing Date, and in no event later than
November 30, 1997; (vii) the Company's Board of Directors and stockholders
shall have approved
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the Agreements; (viii) all of the independent agents of the Target Corporations
shall have agreed to maintain their relationships with such corporations
following the Closing unless the Company notifies Lyndon of any indication
otherwise; (ix) Lyndon shall be satisfied with the results of its due diligence
review with respect to certain matters relating to Dublin and the assets being
purchased pursuant to the Asset Purchase Agreement, and the unaudited September
30, 1997 GAAP Financial Statements of each of the Target Corporations shall
indicate no material adverse change in the results of operations or financial
condition of such companies taken as a whole from the June 30, 1997 unaudited
financial statements previously provided to Lyndon; (x) the Company and the
Target Corporations shall have conveyed to Lyndon all of their rights to the
servicemarks "Costguard" and "Loanguard" and shall have granted to Lyndon a
license to use the "Acceleration" name and logo in connection with their
respective businesses; (xi) the Target Corporation's combined GAAP Equity shall
be not less than $31.6 million at December 31, 1997; (xii) all intercompany
service agreements and tax sharing agreements between any of the Target
Corporations and the Company shall have been terminated; (xiii) the Lincoln
National Life Insurance Company treaty for reinsurance policies with effective
dates of December 31, 1995 and prior shall have been terminated; (xiv) the
articles of incorporation and regulations of ALIC shall have been amended to
eliminate the provisions requiring director share ownership and Ohio residential
requirements; (xv) the Company shall have entered into a Systems Use Agreement
with the Target Corporations pursuant to which the Target Corporations shall be
entitled to utilize the IBM AS 400 system of the Company as the Target
Corporations' mainframe computer and programming support; (xvi) the Lincoln
National Life Insurance Company Reinsurance Agreement with ALIC dated January 1,
1996, reinsuring policies with effective dates of January 1, 1996 and
thereafter, shall not have been terminated; (xvii) ALIC shall have entered into
a lease for the premises located in Dublin, Ohio which it currently leases on
terms comparable to its current lease for the remaining term of the current
lease, in form and substance acceptable to Lyndon; (xviii) the Company shall
have assumed the obligations of ALIC and ANSC to indemnify their respective
officers; (xix) the Company shall have agreed to provide continued cooperation
after Closing on any litigation matters relating to any of the Target
Corporations; (xx) the waiting period applicable under the HSR Act shall have
expired or been terminated; and (xxi) the transactions contemplated by the Asset
Purchase Agreement shall have closed concurrently with the transactions
contemplated by the Stock Acquisition Agreement. See "ASSET PURCHASE AGREEMENT."
The obligation of the Company to consummate the transactions contemplated
by the Stock Acquisition Agreement is subject to the satisfaction or waiver by
Lyndon of certain conditions, including, without limitation, the following: (i)
all representations and warranties of Lyndon shall be true and correct in all
material respects as of the Closing Date; (ii) Lyndon shall have performed and
complied with all of the covenants and agreements required to be performed or
complied with by Lyndon; (iii) as of the Closing, there shall not be any
pending or threatened suit, action, investigation, proceeding or court order
relating to the contemplated transactions; (iv) all governmental authorities
shall have consented to and approved the contemplated transactions to the
extent required by law; (v) all documents delivered and action taken pursuant
to the Stock Acquisition Agreement shall be reasonably satisfactory in form and
substance to the Company and its counsel; (vi) the waiting period applicable
under the HSR Act shall have expired or been terminated; and (vii) the
transactions contemplated by the Asset Purchase Agreement shall have closed
concurrently with the transactions contemplated by the Stock Acquisition
Agreement. See "ASSET PURCHASE AGREEMENT."
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
In general, the representations and warranties contained in the Stock
Acquisition Agreement shall survive the Closing until December 31, 1999.
However, Lyndon shall be permitted to make claims against the Company with
respect to Taxes until 60 days following the expiration of the applicable
statute of limitations (See "-- Tax Matters") and to assert claims based on
fraud, willful misrepresentation or with respect to certain representations and
warranties set forth in the agreement relating to the capitalization of the
Target Corporations and the Company's ownership of all of the Target Shares,
free and clear of all Liens, within one year after Lyndon learns of such fraud,
willful misrepresentation or breach.
14
<PAGE> 22
COVENANT NOT TO COMPETE
The Company has agreed for a period of three years from the Closing Date
not to, and to cause each of its controlled affiliates not to, directly or
indirectly: (i) engage in activities or businesses which are substantially in
competition with the current business of the Target Corporations; or (ii)
perform any action, activity or course of conduct which is substantially
detrimental to the business or business reputation of the Target Corporations,
including soliciting, recruiting or hiring any employees of any of the Target
Corporations and soliciting or encouraging any employee of any of the Target
Corporations to leave the employment of any of the Target Corporations.
INDEMNIFICATION
The Company has agreed to indemnify and hold harmless Lyndon from and
against all losses, liabilities, damages, obligations, costs and expenses
("Damages") in excess of $100,000 incurred by Lyndon relating to or arising out
of the inaccuracy of any representation or warranty in the Stock Acquisition
Agreement by the Company or the breach of any covenant by the Company. The
Company will not be liable for any such indemnification unless the aggregate
amount of all Damages exceeds $100,000 and then only to the extent of any such
excess, except for indemnification against certain Damages with respect to
certain Taxes and related matters for which the Company shall indemnify and
hold harmless Lyndon and its affiliates (including the Target Corporations)
from liability from the first dollar or any such Damages to the full amount
thereof (except as reflected on the Combined Audited December 31, 1997 Balance
Sheet). See "-- Tax Matters." The Company's and ANIC's liability to indemnify
Lyndon and Lyndon Property under the Agreements is limited to a maximum amount
of $8 million, except that there is no limitation on indemnification for (i)
Taxes, (ii) breaches of certain representations and warranties relating to the
capitalization of the Target Corporations and the Company's ownership of all of
the Target Shares, free and clear of all Liens, and (iii) actual fraud by the
Company or ANIC.
Lyndon has agreed to indemnify and hold harmless the Company from and
against any and all Damages incurred by the Company resulting from, relating to
or arising out of the inaccuracy of any representation or warranty in the Stock
Acquisition Agreement by Lyndon or the breach of any covenant contained therein
by Lyndon. In addition, Lyndon has agreed to indemnify and hold harmless, and
cause the Target Corporations to indemnify and hold harmless, the Company and
its affiliates with respect to certain Taxes and related matters. See "-- Tax
Matters." The liability of Lyndon to indemnify the Company under the Agreements
is limited to a maximum amount of $8 million.
TAX MATTERS
Lyndon has agreed to: (i) timely make an election under Section 338(g) of
the Code (and any comparable election under state or local tax law) with
respect to each of the Target Corporations; (ii) join with the Company in
timely making an election under Section 338(h)(10) of the Code (and any
comparable election under state or local tax law); and (iii) cooperate with the
Company in the completion and timely filing of such elections. Not later than
three months following the Closing Date, Lyndon shall prepare and deliver to
the Company a Price Allocation Schedule allocating the modified ADSP (as such
term is defined in Treasury Regulations Section 1.338(h)(10)-1) among the
assets of the Target Corporations in accordance with Treasury Regulations
promulgated under Section 338(h)(10). Any objection by the Company to the Price
Allocation Schedule prepared by Lyndon shall be raised within 60 business days
after receipt by the Company of the Price Allocation Schedule. If Lyndon and
the Company are unable to resolve any differences within 60 days thereafter,
such dispute shall be resolved by Ernst & Young LLP and KPMG Peat Marwick LLP.
If such accounting firms are unable to resolve any differences within 30 days
thereafter, such dispute shall be resolved by another national accounting firm
selected by Ernst & Young LLP and KPMG Peat Marwick LLP which has not performed
any services for or received any revenues from either of such parties or their
respective affiliates within the prior two years. Lyndon and the Company shall
each pay one-half of the costs, fees and expenses of said accounting firm.
15
<PAGE> 23
The Company has agreed to timely prepare and file with the appropriate
authorities all tax returns of the Target Corporations that are required to be
filed for the tax periods ending prior to the Closing Date, and the Company has
agreed to pay all taxes due with respect to such tax returns. Lyndon has agreed
to timely prepare and file all other tax returns of the Target Corporations
that are required to be filed, and Lyndon will pay all taxes due with respect
to such tax returns. All transfers, documentary, sales, use, registration and
other such Taxes and related fees incurred in connection with the Stock
Acquisition Agreement and the transactions contemplated thereby shall be paid
by the Company. The Company and Lyndon will cooperate in timely making all
filings, returns, reports and forms as may be required to comply with the
provisions of applicable tax laws.
The parties have agreed that for all financial purposes the Closing shall
be deemed to occur on December 31, 1997, notwithstanding the actual Closing
Date. See "-- Closing; Termination." Accordingly, any profit or loss incurred
by the Target Corporations on or prior to December 31, 1997 shall remain for
the account of the Company and any profit or loss incurred by the Target
Corporations after such date shall be for the account of Lyndon. The parties
have agreed to reimburse each other for the amount of any Taxes actually paid
by the other party solely as a function of the timing difference of the deemed
Closing Date of December 31, 1997 and the actual Closing Date for tax purposes.
The Company has agreed to indemnify and hold harmless from liability
Lyndon and its affiliates for all Damages (except as reflected on the Combined
Audited December 31, 1997 Balance Sheet) incurred in connection with: (i) Taxes
of the Target Corporations for the Pre-Closing Tax Period; (ii) Taxes of the
Company or any other corporation which is or has been affiliated with the
Company; (iii) Taxes resulting from the Section 338(g) and 338(h)(10) elections
contemplated by Section 12.1 of the Stock Acquisition Agreement; (iv) Taxes
with respect to any pre-closing period resulting from the Target Corporations'
ceasing to be included in the consolidated Federal income tax return filed by
the Company; (v) Taxes imposed on the Target Corporations on or prior to the
Closing Date; and (vi) reasonable legal fees and expenses for any item
attributable to any of the foregoing items. Notwithstanding the foregoing, the
Company shall not be obligated to indemnify and hold harmless Lyndon and its
affiliates from Taxes attributable to any action taken after the Closing by
Lyndon or its affiliates (a "Lyndon Tax Act") or attributable to a breach by
Lyndon of its obligations under the Stock Acquisition Agreement.
Lyndon has agreed to indemnify and hold harmless, and to cause the Target
Corporations to indemnify and hold harmless, the Company and its affiliates
from: (a) all liability for taxes of the Target Corporations for the period
prior to the Closing Date; (b) all liability for taxes attributable to a Lyndon
Tax Act or to a breach by Lyndon of its obligations under the Stock Acquisition
Agreement; and (c) all liability for reasonable legal fees and expenses
attributable to any of the foregoing items.
AMENDMENT; WAIVER
The Stock Acquisition Agreement may be amended at any time by written
agreement of the parties and the conditions to the consummation of the
contemplated transactions may be waived at any time by the party for whose
benefit they were created.
EXPENSES; LIQUIDATED DAMAGES
The Stock Acquisition Agreement provides that each of the parties shall
pay its own expenses incident to the preparation and execution of the Stock
Acquisition Agreement and the consummation of the transactions contemplated
thereby. However, if the Closing does not occur as a result of an intentional
material breach of a covenant of the Company which prevents satisfaction of a
Closing condition, then the Company shall pay Lyndon the sum of $650,000 as
liquidated damages.
16
<PAGE> 24
ASSET PURCHASE AGREEMENT
The descriptions in this Proxy Statement of the terms of the Asset
Purchase Agreement are summaries only and are qualified in their entirety by
reference to the Asset Purchase Agreement which is attached as Annex II to this
Proxy Statement and is incorporated herein by reference. Terms which are not
otherwise defined in this summary have the meanings set forth in the Asset
Purchase Agreement.
PURCHASE PRICE AND ACQUIRED ASSETS
Pursuant to the terms and conditions of the Asset Purchase Agreement, ANIC
will sell to Lyndon Property, for an aggregate purchase price of $10.3 million
payable in cash on the Closing Date, certain of the assets of ANIC which
comprise all of its vehicle extended service contract (or "warranty") book of
business (the "Acquired Assets"). The Acquired Assets will include: (i) all of
ANIC's rights to and interest in the expirations and renewals on all insurance
policies in force as of the Closing Date issued and insured by ANIC covering
extended service contract warranties (subject to all of the related
obligations) (the "Acquired Policies"); (ii) all expiration files, customer
account records and underwriting, claims and processing manuals related to the
Acquired Policies; (iii) all rights (subject to the related obligations), under
the contracts and commitments related to the Acquired Assets; (iv) all rights
to and interest in (subject to the related obligations with respect to) certain
computer hardware and any software used in ANIC's operation of its warranty
book of business; (v) certain furniture, fixtures and equipment; and (vi)
copies of all policy forms, rate filings related to such policy forms, and all
other regulatory filings related to the Acquired Policies.
REINSURANCE AGREEMENTS AND LIABILITIES ASSUMED
Pursuant to the Asset Purchase Agreement, Lyndon Property and ANIC will
enter into two reinsurance agreements pursuant to which ANIC will cede to
Lyndon Property and Lyndon Property will assume and reinsure the Acquired
Policies and all insurance policies issued after the Closing Date by Lyndon
Property in the name of ANIC or on ANIC's forms. Except to the extent set forth
in the Reinsurance Agreements, Lyndon Property will not be liable for any debt,
obligations or liability of ANIC relating to the Acquired Assets.
CLOSING
The Closing for the transactions contemplated by the Asset Purchase
Agreement will take place effective as of December 31, 1997, as long as the
Ohio Department of Insurance has approved the transactions contemplated by the
Asset Purchase Agreement. The Closing shall occur concurrently with, and shall
be conditional upon, the Closing of the transactions contemplated by the Stock
Acquisition Agreement.
REPRESENTATIONS AND WARRANTIES
The Asset Purchase Agreement includes representations of the Company and
ANIC as to: (i) the organization and good standing of ANIC and its
qualifications to do business as a foreign corporation; (ii) the authorization,
execution and delivery of the Asset Purchase Agreement by the Company and ANIC;
(iii) the absence of any consents, orders, licenses, approvals, authorizations,
exemptions, registrations, declarations or filings with any governmental
authority or person which are required to be obtained or made in connection
with the performance by the Company or ANIC of the Asset Purchase Agreement,
except for the approval of the Ohio Department of Insurance; (iv) ANIC's title
to the Acquired Assets; (v) the non-contravention of the consummation of the
transactions contemplated by the agreement with the articles of incorporation,
regulations, material contracts and agreements of ANIC and with any applicable
laws, judgments, orders or decrees; (vi) the absence of any violations by ANIC
of any applicable law, rule or regulation which could materially and adversely
affect the Acquired Assets; (vii) the obtainment by ANIC and continuing
validity of all Permits that are material or necessary with respect to ANIC's
operations of any of the Acquired Assets; (viii) material litigation involving
or affecting the Acquired
17
<PAGE> 25
Assets; (ix) the employees of ANIC engaged in the operation of ANIC's warranty
book of business and their compensation and employment arrangements; (x) the
absence of any brokers having been retained by the Company or ANIC in
connection with the transaction; (xi) the sufficiency of the Acquired Assets,
together with the assets owned by the Target Corporations, for the conduct of
ANIC's warranty book of business by Lyndon Property and the conduct of the
Target Corporations' respective business; and (xii) the absence of any reason
for the Company and ANIC to believe that the Acquired Policies will be
terminated before their stated expiration dates, except in the ordinary course,
or will not be renewed.
The representations and warranties by Lyndon Property to the Company and
ANIC include, among other things, representations of Lyndon Property as to: (a)
its organization and good standing; (b) the authorization, execution and
delivery of the Asset Purchase Agreement by Lyndon Property and the validity
and enforceability thereof against Lyndon Property; (c) the noncontravention of
the execution, delivery and performance of the Asset Purchase Agreement by
Lyndon Property with its certificate of incorporation, by-laws and agreements.
ADDITIONAL AGREEMENTS OF THE COMPANY, ANIC AND LYNDON PROPERTY
During the period from the date of the Asset Purchase Agreement until the
Closing Date, ANIC has agreed to carry on its warranty insurance business in
the usual, regular and ordinary course, and the Company has agreed to cause
ANIC to maintain in force its current stop loss reinsurance program, at Lyndon
Property's expense, after the Closing Date. In addition, ANIC has agreed to
complete prior to May 1, 1998 the following work related to its Cost Guard
Service Contract System: (i) the resolution of all "Year 2000" issues; (ii)
system clean up; (iii) construction of a redesigned rate system module and a
laser check system module; and (iv) an on-line claims update.
ANIC has granted Lyndon Property the right and authority to utilize ANIC's
forms and to place insurance policies in the name of ANIC in each of the states
in which ANIC is currently licensed to do business for a maximum of eighteen
months following the Closing Date ("New Business"). All such New Business
written by Lyndon Property utilizing ANIC's forms or issued in ANIC's name
shall be automatically reinsured by Lyndon Property under the Reinsurance
Agreements, and Lyndon Property shall indemnify ANIC and hold ANIC harmless
from and against all liability arising under such New Business. See "---
Reinsurance Agreements and Liabilities Assumed."
After the Closing, ANIC has agreed to provide Lyndon Property with
reasonable assistance in litigating claims arising under any Acquired Policies,
subject to the payment by Lyndon Property to ANIC of reasonable compensation
for any depositions or testimony given by ANIC personnel.
In the event that the Internal Revenue Service ("IRS") takes the position
that the Acquired Assets constitute a "trade or business" within the meaning of
Code Section 1060 and requires Lyndon Property and the Company to prepare and
file a Form 8594 with the IRS, Lyndon and the Company have agreed to cooperate
in determining the allocation of the Purchase Price among the Acquired Assets.
COVENANT NOT TO COMPETE
The Company and ANIC have agreed that, during the three year period
following the Closing Date, they each will not, without the prior written
consent of Lyndon Property, directly or indirectly, sell, underwrite, place or
write warranty insurance policies or solicit, accept or place for itself and/or
any other entity, any warranty insurance business from existing customers of
ANIC.
18
<PAGE> 26
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
In general, the representations and warranties contained in the Asset
Purchase Agreement shall survive the Closing for a period of two years.
However, each party shall be permitted to make claims against the other party
based on fraud or willful misrepresentation at any time within one year after
the party learns of such fraud or willful misrepresentation. In addition,
claims for indemnification under the agreement shall survive the second
anniversary of the Closing Date if prior to such date the party seeking
indemnification in good faith gives notice to the other party of the specific
inaccuracy or breach giving rise to such claim for indemnification.
INDEMNIFICATION
The Company and ANIC each have agreed to indemnify, defend and hold
harmless Lyndon Property, its officers, directors, employees and agents from
and against all losses, fines, civil penalties, judgments, claims, damages,
liabilities or expenses (including reasonable attorneys' fees) of every kind in
excess of $100,000 in the aggregate (including any such damages incurred by
Lyndon under the Stock Acquisition Agreement) imposed upon, incurred or paid by
Lyndon Property by reason of the breach by the Company and ANIC of any
representation and warranty made by the Company and ANIC in the Asset Purchase
Agreement or, except as otherwise provided in the Reinsurance Agreements, any
losses under the Acquired Policies. The liability of the Company and ANIC to
indemnify Lyndon under the Asset Purchase Agreement is subject to the same $8
million limitation set forth in the Stock Acquisition Agreement. See "STOCK
ACQUISITION AGREEMENT -- Indemnification."
Lyndon Property has agreed to indemnify, defend and hold harmless the
Company and ANIC from and against all losses, fines, civil penalties,
judgments, claims, damages, liabilities or expenses (including reasonable
attorneys' fees) of every kind imposed upon, incurred or paid by the Company
and ANIC by reason of (i) the breach by Lyndon Property of any representation
and warranty made by it in the Asset Purchase Agreement or (ii) any claims made
against ANIC relating to the Acquired Policies or the New Business other than
for losses under the Acquired Policies (except as otherwise provided in the
Reinsurance Agreements) or arising out of or relating in any way to the conduct
of the warranty book of business being acquired by Lyndon Property on and after
the Closing Date. The liability of Lyndon Property to indemnify the Company
under the Agreements is limited to a maximum amount of $8 million.
Claims for indemnification under the Asset Purchase Agreement must be
asserted prior to the second anniversary of the Closing Date, except for claims
by Lyndon Property related to the breach by the Company and ANIC of their
representations and warranties concerning ANIC's title to the Acquired Assets.
See "-- Survival of Representations and Warranties."
AMENDMENT; WAIVER
The Asset Purchase Agreement may be amended at any time by written
agreement of the parties and the conditions to the consummation of the
contemplated transactions may be waived at any time by the party for whose
benefit they were created.
EXPENSES
The Asset Purchase Agreement provides that each of the parties shall pay
its own expenses incident to the preparation and execution of the Asset
Purchase Agreement and the consummation of the transactions contemplated
thereby.
19
<PAGE> 27
REGULATORY APPROVALS REQUIRED
The Transaction is subject to the approval of the Ohio and Missouri
Departments of Insurance and to the expiration of or termination of the
applicable waiting period under the HSR Act. Certain aspects of the Transaction
will require notifications to, and filings with, certain authorities in certain
states in jurisdictions where ALIC currently operates.
OHIO DEPARTMENT OF INSURANCE
As an Ohio chartered life insurance company, ALIC is subject to the
provisions of the Ohio Revised Code. Section 3901.321 of the Ohio Revised Code
provides that a person may acquire control of an Ohio insurance company only if
the acquisition of control is submitted to and receives advance approval from
the Ohio Superintendent of Insurance (the "Ohio Superintendent"). Section
3901.321(F)(1) provides that the Ohio Superintendent may disapprove any such
acquisition of control, after a public hearing, for any of the following
reasons: (i) after the change of control, the insurer would not be able to
satisfy the requirements for the issuance of a license to write the line or
lines of insurance for which it is presently licensed; (ii) the effect thereof
would be substantially to lessen competition in insurance in Ohio or tend to
create a monopoly therein; (iii) the financial condition of any acquiring party
is such as might jeopardize the financial stability of the insurer, or prejudice
the interests of its policyholders; (iv) the plans or proposals of the acquiring
party to make changes in the insurer's business or corporate structure or
management are unfair and unreasonable to policyholders of the insurer and not
in the public interest; (v) the competence, experience and integrity of those
persons who would control the operation of the insurer are such that it would
not be in the interest of policyholders of the insurer and of the public to
permit the acquisition of control; or (vi) the acquisition is likely to be
hazardous or prejudicial to the insurance-buying public.
Lyndon has submitted an application to the Ohio Superintendent seeking
approval of the Transaction. The application is pending before the Ohio
Superintendent. While the Company has no reason to believe that the Ohio
Superintendent will not approve the Transaction, no assurances can be made with
respect thereto.
MISSOURI DEPARTMENT OF INSURANCE
As a Missouri chartered insurance company, Lyndon is subject to the
provisions of the Revised Statutes of the State of Missouri. Section 375.355 of
the Missouri Revised Statutes provides that a Missouri chartered insurance
company may acquire control of another insurance company only if the
acquisition of control is submitted to and receives advance approval from the
Missouri Director of Insurance (the "Missouri Director") after notice thereof
to the stockholders of the acquiring insurance company and a public hearing
thereon. Section 375.355 provides that the Missouri Director may disapprove
any such acquisition of control for any of the following reasons: (i) the
interests of the policyholders of the company are not protected; (ii) a
reasonable objection exists as to the acquisition; or (iii) the acquisition
will tend to substantially lessen competition or create a monopoly.
Lyndon has submitted an application to the Missouri Director seeking
approval of the Transaction. The application is pending before the Missouri
Director and it is anticipated that a hearing will be held prior to the Special
Meeting. While the Company has no reason to believe that the Missouri Director
will not approve the Transaction, no assurances can be made with respect
thereto.
HSR ACT AND ANTITRUST
Under the HSR Act and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Transaction may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "DOJ") and the
applicable waiting
20
<PAGE> 28
period has expired or been terminated. The Company and Frontier filed
notification and report forms under the HSR Act with the FTC and the DOJ on
October 31, 1997. The waiting period has not been terminated by the FTC and the
DOJ and will expire on November 30, 1997. At any time before or after
consummation of the Transaction, the FTC or the DOJ could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Transaction. At any time
before or after the Closing Date, and notwithstanding that the waiting period
under the HSR Act has expired, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Transaction.
Private parties may also seek to take legal action under the antitrust laws
under certain circumstances.
Based on information available to it, the Company believes that the
Transaction can be effected in compliance with Federal and state antitrust
laws. However, there can be no assurance that a challenge to the consummation
of the Transaction on antitrust grounds will not be made or that, if such a
challenge were made, the Company would prevail or would not be required to
accept certain adverse conditions in order to consummate the Transaction. The
expiration or termination of the HSR Act waiting period is a condition to the
closing of the Transaction. See "STOCK ACQUISITION AGREEMENT -- Conditions to
Consummation of the Transactions."
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
INTRODUCTION
The following unaudited pro forma consolidated financial statements are
based on the Company's Consolidated Financial Statements. The unaudited pro
forma consolidated balance sheet is based on the June 30, 1997 unaudited
consolidated balance sheet of the Company included in the Company's Quarterly
Report on Form 10-Q for the six months ended June 30, 1997 which accompanies
this Proxy Statement and is incorporated herein by reference (the "Form 10-Q"),
and assumes that the Transaction was consummated on June 30, 1997. The unaudited
pro forma consolidated statement of income for the six months ended June 30,
1997 is based on the unaudited consolidated statement of income for the six
months ended June 30, 1997, which is included in the Form 10-Q, and assumes that
the Transaction was consummated on January 1, 1997. The unaudited pro forma
consolidated statement of income for the year ended December 31, 1996 is based
on the consolidated statement of income for the year ended December 31, 1996
included in the Company's Annual Report on Form 10-K which accompanies this
Proxy Statement and is incorporated herein by reference (the "Form 10-K"), and
assumes that the Transaction was consummated on January 1, 1996. The unaudited
pro forma consolidated financial statements and related notes should be read in
conjunction with the Company's Consolidated Financial Statements and the notes
thereto included in the Form 10-K and Form 10-Q.
The unaudited pro forma consolidated financial statements of the Company
do not purport to represent what the consolidated financial position or results
of operations of the Company would have been if the Transaction had in fact
been consummated on such dates or at the beginning of such periods or to
project the financial position or results of operations for any future date or
period. The pro forma adjustments are based upon available information and upon
certain assumptions that the Company's management believes are reasonable under
the circumstances.
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<PAGE> 29
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS REF.
AS REPORTED ADJUSTMENTS NO. PRO FORMA
------------- ------------ --- -------------
<S> <C> <C> <C> <C>
Investments:
Investments Available For Sale
Fixed Maturities $ 54,323,520 $ 31,936,770 1. $ 22,386,750
Equity Securities 5,802,852 5,802,852 1. --
Short Term Investments 13,206,086 10,356,523 1. 2,849,563
Other Invested Assets 313,769 313,769 1. --
------------- ------------- -------------
73,646,227 48,409,914 25,236,313
Cash 718,738 (18,911,893) 2. 19,630,631
Receivables:
Premiums in Process of Transmittal, Less Allowance 13,424,068 2,003,021 1. 11,421,047
Amounts Due from Reinsurers, Less Allowance 18,980,351 11,627,423 1. 7,352,928
------------- ------------- -------------
32,404,419 13,630,444 18,773,975
Accrued Investment Income 606,480 344,809 1. 261,671
Prepaid Reinsurance Premiums 18,672,720 11,701,144 1. 6,971,576
DEFERRED Policy Acquisition Costs 30,542,433 27,977,798 1. 2,564,635
Reinsurance Premium Deposits 31,110,618 31,110,618 1. --
Furniture, Fixtures, & Equipment-Net 542,610 322,401 1. 220,209
Leasehold Improvements 148,127 89,868 1. 58,259
Other Assets:
Cost in Excess of Equity 662,755 662,755 3. --
Funds Held Under Reinsurance Treaties 6,167,347 6,167,347 1. --
Other 882,367 573,197 1. 309,170
------------- ------------- -------------
7,712,469 7,403,299 309,170
------------- ------------- -------------
$ 196,104,841 $ 122,078,402 $ 74,026,439
============= ============= =============
</TABLE>
22
<PAGE> 30
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEETS--(CONTINUED)
JUNE 30, 1997
<TABLE>
<CAPTION>
REF.
AS REPORTED ADJUSTMENTS NO. PRO FORMA
------------- ------------ --- -------------
<S> <C> <C> <C> <C>
Liabilities & Common Stockholders' Equity
Policy Reserves and Liabilities:
Unearned Premium Reserves $ 84,070,234 $ 70,686,449 1. $13,383,785
Insurance Claims 24,926,889 14,140,236 1. 10,786,653
Other 6,690 6,690 1. --
------------ ------------ -----------
109,003,813 84,833,375 24,170,438
Other Liabilities:
Funds Held Under Reinsurance Agreements 2,854,793 2,375,962 1. 478,831
Deferred Reinsurance Commissions 14,046,926 12,598,883 1. 1,448,043
Amounts Due Reinsurers 11,284,772 5,955,876 1. 5,328,896
Notes Payable 15,000,000 15,000,000 4. --
Commissions Payable 5,353,228 2,737,449 1. 2,615,779
Accounts Payable & Other Liabilities 1,781,532 942,305 1. 839,227
Federal Income Taxes:
Current 283,022 (4,972,193) 5. 5,255,215
Deferred 4,231,834 4,231,834 5. --
------------ ------------ -----------
54,836,107 38,870,116 15,965,991
------------ ------------ -----------
163,839,920 123,703,491 40,136,429
------------ ------------ -----------
Common Stockholders' Equity:
Common Stock 940,116 -- 940,116
Additional Paid-In Capital 32,507,719 -- 32,507,719
Treasury Stock (6,599,581) -- (6,599,581)
Retained Earnings 6,005,812 (1,121,384) 6. 7,127,196
Net Unrealized Depreciation on
Stock Available For Sale (4,436) (4,436) 1. --
Net Unrealized Depreciation on
Investment Securities (584,709) (499,269) 1. (85,440)
------------ ------------ -----------
32,264,921 (1,625,089) 33,890,010
------------ ------------ -----------
$196,104,841 $122,078,402 $74,026,439
============ ============ ===========
</TABLE>
23
<PAGE> 31
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
JUNE 30, 1997
<TABLE>
<CAPTION>
REF.
AS REPORTED ADJUSTMENTS NO. PRO FORMA
------------- ------------ --- -------------
<S> <C> <C> <C> <C>
REVENUE
Gross Premiums Written $32,545,013 $17,378,768 7. $15,166,245
Less Reinsurance Ceded 10,138,218 2,889,067 7. 7,249,151
----------- ----------- -----------
Net Premiums Written 22,406,795 14,489,701 7,917,094
Decrease (Increase) in Unearned Premium
Reserves 751,517 3,732,781 7. (2,981,264)
----------- ----------- -----------
Premiums Earned 23,158,312 18,222,482 4,935,830
Net Investment Income:
Interest and Dividends 2,330,536 1,817,337 7. 513,199
Realized Gains 65,195 (1,978) 7. 67,173
Service Fees on Extended Service Contracts 1,516,628 1,516,628 7. --
Other Income 150,064 41,078 7. 108,986
----------- ----------- -----------
27,220,735 21,595,547 5,625,188
----------- ----------- -----------
BENEFITS AND EXPENSES:
Policy Benefits 12,242,043 8,507,505 7. 3,734,538
Commissions and Selling Expenses 11,197,412 8,375,217 2,822,195
Reinsurance Expense Recovery (2,881,773) (1,761,795) 7. (1,119,978)
General and Administrative 3,814,356 2,148,029 7. 1,666,327
Taxes, Licenses and Fees 1,089,971 656,519 7. 433,452
Interest 712,500 712,500 8. --
Decrease (Increase) in Deferred Policy
Acquisition Costs 403,088 1,819,532 7. (1,416,444)
----------- ----------- -----------
26,577,597 20,457,507 6,120,290
----------- ----------- -----------
OPERATING INCOME (LOSS)
BEFORE FEDERAL INCOME TAXES 643,138 1,138,040 (494,902)
FEDERAL INCOME TAXES:
Current 486,000 486,000 9. --
Deferred (446,000) (446,000) 9. --
----------- ----------- -----------
40,000 40,000 --
----------- ----------- -----------
OPERATING INCOME (LOSS) $ 603,138 $ 1,098,040 $ (494,902)
=========== =========== ===========
Operating Income Per Common Share $ 0.07 $ (0.06)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 8,603,742 8,603,742
=========== ===========
</TABLE>
24
<PAGE> 32
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
REF.
AS REPORTED ADJUSTMENTS NO. PRO FORMA
------------- ------------ --- -------------
<S> <C> <C> <C> <C>
REVENUE
Gross Premiums Written $58,412,065 $41,158,310 7. $17,253,755
Less Reinsurance Ceded 12,860,141 4,747,887 7. 8,112,254
----------- ----------- -----------
Net Premiums Written 45,551,924 36,410,423 9,141,501
Decrease (Increase) in Unearned Premium
Reserves 404,655 3,707,793 7. (3,303,138)
----------- ----------- -----------
Premiums Earned 45,956,579 40,118,216 5,838,363
Net Investment Income:
Interest and Dividends 4,415,793 3,448,365 7. 967,428
Realized Gains 484,407 221,556 7. 262,851
Service Fees on Extended Service Contracts 2,450,031 2,450,031 7. --
Other Income 4,512,932 61,774 7. 4,451,158
----------- ----------- -----------
57,819,742 46,299,942 11,519,800
----------- ----------- -----------
BENEFITS AND EXPENSES:
Policy Benefits 24,338,323 18,939,966 7. 5,398,357
Commissions and Selling Expenses 22,145,465 19,583,930 7. 2,561,535
Reinsurance Expense Recovery (2,670,023) (1,297,734) 7. (1,372,289)
General and Administrative 7,485,727 4,673,124 7. 2,812,603
Taxes, Licenses and Fees 1,879,911 967,181 7. 912,730
Interest 1,969,202 1,563,146 8. 406,056
Decrease (Increase) in Deferred Policy
Acquisition Costs 893,319 1,725,359 7. (832,040)
----------- ----------- -----------
56,041,924 46,154,972 9,886,952
----------- ----------- -----------
OPERATING INCOME BEFORE
FEDERAL INCOME TAXES 1,777,818 144,970 1,632,848
FEDERAL INCOME TAXES:
Current 152,000 152,000 9. --
Deferred (346,412) (346,412) 9. --
----------- ----------- -----------
(194,412) (194,412) --
----------- ----------- -----------
OPERATING INCOME $ 1,972,230 $ 339,382 $ 1,632,848
=========== =========== ===========
Operating Income per Common Share $ 0.34 $ 0.28
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,904,398 5,904,398
=========== ===========
</TABLE>
25
<PAGE> 33
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL DATA
NOTE--PRO FORMA ADJUSTMENTS AND ADDITIONAL INFORMATION
BALANCE SHEET ADJUSTMENTS: June 30, 1997
1. Reflects elimination of balance sheet amounts related to the Target
Corporations and ANIC's vehicle extended service contract business being
sold. In addition, accounts payable and other liabilities include accruals
for expenses related to the Transaction.
2. Reflects proceeds to be received from the sale ($40.5 million) less
repayment of the Company's outstanding notes payable and related interest,
settlement of intercompany amounts, and the elimination of balance sheet
amounts related to the Target Corporations and ANIC's vehicle extended
service contract business being sold.
3. Reflects elimination of the Company's cost in excess of equity for ALIC.
4. Reflects pay-off of notes payable which is required as a condition of the
sale.
5. Reflects adjustment necessary at the statutory tax rate for the pro forma
adjustments considering the net operating loss position of the Company
after giving effect to the sale and for the elimination of deferred tax
assets of the Company resulting from the sale.
6. Reflects proceeds to be received from the sale ($40.5 million) less the
combined equity of the sold subsidiaries being $31.6 million, cost in
excess of equity of $.66 million, related income taxes of $5.26 million,
elimination of deferred tax assets of $1.0 million, and other pro forma
adjustments directly related to the sale of the subsidiaries of $.86
million
INCOME STATEMENT ADJUSTMENTS: December 31, 1996 and June 30, 1997
7. Reflects elimination of income statement amounts related to the Target
Corporations and ANIC's vehicle extended service contract business being
sold.
8. Reflects elimination of interest expense related to notes payable which
are required to be paid off as a condition of the sale.
9. Reflects adjustment necessary at the statutory tax rate for the pro forma
adjustments considering the net operating loss position of the Company
after giving effect to the sale and for the elimination of deferred tax
assets of the Company resulting from the sale.
COMMENTS: Although accounting rules related to Pro Forma Financials do not
allow for the inclusion of anticipated investment income, the Company estimates
that investment income of $852,000 and $454,000 would have been earned for the
twelve months ended December 31, 1996 and the six months ended June 30, 1997,
respectively, had the Transaction taken place on January 1, 1996. The estimated
investment income calculation assumes the Company has approximately $13.1
million available for investment (with an estimated yield of 6.5%) after paying
income taxes and expenses related to the Transaction.
26
<PAGE> 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of October 31, 1997
(except as otherwise noted) with respect to stockholders known to the Company
to be the beneficial owners of more than five percent (5%) of the Company's
Common Stock:
<TABLE>
<CAPTION>
Amount and
Nature of
NAME AND ADDRESS OF Beneficial Percent
BENEFICIAL OWNER Ownership of Class
- ---------------- --------- --------
<S> <C> <C>
David T. Chase 3,672,148 (1) 42.7%
D.T. Chase Enterprises, Inc.
One Commercial Plaza
Hartford, Connecticut 06103
Arnold L. Chase 1,167,824 (2) 13.6%
D.T. Chase Enterprises, Inc.
One Commercial Plaza
Hartford, Connecticut 06103
The Darland Trust 1,167,824 (3) 13.6%
P.O. Box 472
St. Peter's House, Le Bordage
Guernsey GYI 6AY
Channel Islands
Rhoda L. Chase 2,000,000 (4) 23.3%
c/o Chase Enterprises, Inc.
One Commercial Plaza
Hartford, Connecticut 06103
Insurance Holdings Limited 670,000 (5) 7.8%
Partnership
One Commercial Plaza
Hartford, Connecticut 06103
Sptizer Profit Sharing and 712,250 (6) 8.3%
Savings Plan
150 East Bridge Street
Elyria, Ohio 44035
</TABLE>
- ------------------
(1) Includes 6,500 shares of Common Stock subject to immediately exercisable
options. According to a Schedule 13D filed with the Commission, Mr. David
T. Chase shares the power to dispose or to direct the disposition of
3,665,648 shares of Common Stock (the "Chase Family Shares") but does not
have the sole or shared power to vote or direct the vote of any Chase
Family Shares. Mr. Chase shares the power to dispose or direct the
disposition of (i) 1,330,000 Chase Family Shares beneficially owned by
Rhoda L. Chase, his wife, (ii) 1,167,824 Chase Family Shares beneficially
owned by Arnold L. Chase, his son, and (iii) 1,167,824 Chase Family Shares
27
<PAGE> 35
beneficially owned by The Darland Trust (the "Trust"), a trust whose
beneficiaries are Cheryl A. Chase, his daughter and her children.
(2) According to a Schedule 13D filed with the Commission, Mr. Arnold L. Chase
shares the power to dispose or to direct the disposition of 1,167,824
Chase Family Shares with Mr. David T. Chase and has sole power to vote or
direct the vote of such shares. Such shares are also included in the above
table in Mr. David T. Chase's Chase Family Shares.
(3) According to a Schedule 13D filed with the Commission, the Trust shares
the power to dispose or to direct the disposition of 1,167,824 Chase
Family Shares with Mr. David T. Chase and has sole power to vote or direct
the vote of such shares. Such shares are also included in the above table
in Mr. David T. Chase's Chase Family Shares.
(4) According to a Schedule 13D filed with the Commission, Rhoda L. Chase has
sole power to vote or to direct the vote of all such shares except to the
extent that she may be deemed to have temporarily transferred beneficial
ownership to Insurance Holdings Limited Partnership (the "Partnership") of
670,000 shares of Common Stock (the "Borrowed Shares," and, together with
the Chase Family Shares, the "Chase Shares"). In the aggregate, the Chase
Shares total 4,342,148 shares of Common Stock or approximately 50.4% of
the outstanding shares of Common Stock. The general partner of the
Partnership is Chase Insurance Corporation ("CIC"). David T. Chase is the
President and a Director of CIC, Arnold L. Chase is an Executive Vice
President and a Director of CIC and Cheryl A. Chase is an Executive Vice
President and a Director of CIC. Mrs. Chase shares the power to dispose or
to direct the disposition of 1,330,000 Chase Family Shares with Mr. David
T. Chase and has sole power to dispose or direct the disposition of the
Borrowed Shares except to the extent that Mrs. Chase may be deemed to have
temporarily transferred to the Partnership the sole power to dispose of
the Borrowed Shares. The 1,330,000 Chase Family Shares are also included
in the above table in Mr. David T. Chase's Chase Family Shares. David T.
Chase disclaims beneficial ownership of the Borrowed Shares.
(5) The Partnership may be deemed to beneficially own 670,000 Borrowed Shares
which it has borrowed from Rhoda L. Chase pursuant to a loan agreement.
The Borrowed Shares are included in Rhoda L. Chase's holdings in the above
table but are not included in David T. Chase's holdings in the above
table.
(6) Spitzer Profit Sharing and Savings Plan under agreement dated December 31,
1973, is an Employee Benefit Plan, Pension Fund subject to the provisions
of the Employee Retirement Income Security Act of 1974.
28
<PAGE> 36
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of October 31, 1997,
with respect to the beneficial ownership by each director, each named executive
and by all of the directors and executive officers as a group of the Common
Stock of the Company. Unless otherwise noted, the nature of beneficial
ownership consists of sole voting and dispositive power.
<TABLE>
<CAPTION>
AMOUNT OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS
- ------------------------ -------------------- --------
<S> <C> <C>
Robert Betagole 115,491 (2) 1.3%
David T. Chase 3,672,148 (3) 42.7%
Douglas J. Coats 55,190 *
Raymond H. Deck 241,287 2.8%
Richard Desich 34,350 *
Thomas H. Friedberg 265,158 3.1%
Kermit G. Hicks 63,314 (4) *
Stephen M. Qua 38,358 *
John P. Redding --- ---
All Directors and Executive Officers 4,572,429 (5) 52.5%
as a group (15 persons)
</TABLE>
(1) On October 31, 1997, there were 8,603,742 shares of the Company's Common
Stock issued and outstanding. Except as noted, includes shares owned by
spouse, minor children or certain other family members, or held as
custodian or trustee for the benefit of spouse or children, or owned by
corporations of which such person is an officer or principal stockholder,
over which shares such directors have sole or shared voting or investment
power. With respect to each non-employee Director, includes an aggregate
of 27,500 shares which are subject to immediately exercisable options.
(2) Includes 20,092 shares as to which Mr. Betagole disclaims beneficial
ownership.
(3) See the table under the caption "-- Beneficial Ownership of Certain
Beneficial Owners" and the footnotes thereto which explanations also apply
here.
(4) Includes 9,696 shares as to which Mr. Hicks claims beneficial ownership on
an indirect basis.
29
<PAGE> 37
(5) This amount includes 107,500 shares which are subject to immediately
exercisable options and approximately 53,700 shares owned by officers in
their Acceleration Retirement Savings and Stock Ownership Plan accounts
as of June 30, 1997.
* Less than 1% of outstanding Common Stock.
INDEPENDENT AUDITORS
The consolidated financial statements and schedules of the Company and its
subsidiaries included in the Company's Annual Report on Form 10-K as of
December 31, 1996 and 1995 and for each of the years in the three-year period
ended December 31, 1996 are incorporated by reference in this Proxy Statement.
Such financial statements are incorporated by reference herein in reliance upon
the report of KPMG Peat Marwick LLP, and upon the authority of said firm as an
expert in accounting and auditing. Representatives of KPMG Peat Marwick LLP are
expected to be present at the Special Meeting and will have an opportunity to
make a statement if they desire to do so and are also expected to be available
to respond to appropriate shareholder questions.
STOCKHOLDER PROPOSALS
Stockholders wishing to submit proposals for the Company's 1998 Proxy
Statement may do so prior to December 22, 1997 by letter addressed to the
Company in care of the Secretary.
<PAGE> 38
ANNEX I
STOCK ACQUISITION AGREEMENT
STOCK ACQUISITION AGREEMENT (the "Agreement") made as of this 20th day of
October, 1997 by and between Lyndon Life Insurance Company, a Missouri
corporation and Lyndon Insurance Group, Inc., a Missouri corporation, each with
offices at 645 Maryville Centre Drive, St. Louis, Missouri 63141 ( collectively
"Lyndon"), and Accel International Corporation, a Delaware corporation
("Accel") with its executive offices at 12603 S.W. Freeway, Suite 315, P.O. Box
1949, Stafford, Texas 77497-1949.
R E C I T A L S
WHEREAS, Accel is the owner of all of the issued and outstanding shares of
capital stock of (i) Acceleration Life Insurance Company ("ALIC"), (ii) Dublin
International Limited, ("Dublin"); and (iii) Acceleration National Service
Corporation ("ANSC") (collectively, the "Target Corporations"); and
WHEREAS, Lyndon is desirous of acquiring and Accel is desirous of selling
all of the issued and outstanding shares of the capital stock of each of the
Target Corporations (the "Target Shares") for a total purchase price of $30.2
million in cash;
NOW, THEREFORE, Lyndon and Accel agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE TARGET SHARES
1.1 Purchase and Sale of the Target Shares. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties and covenants herein contained, on the date of closing specified in
Section 8.1 (the "Closing Date"), Accel hereby agrees to assign, transfer and
deliver to Lyndon Life Insurance Company all of the Shares of ALIC and to
assign, transfer and deliver to Lyndon Insurance Group, Inc., all of the shares
of Dublin and of ANSC, more specifically set forth on Schedule 1.1 hereto, and,
in exchange therefor, Lyndon hereby agrees to make a cash payment to Accel in
accordance with the terms set forth in Section 1.2 hereto.
1.2 Purchase Price. (a) At the Closing, Lyndon shall pay Accel the sum of
$30.2 Million Dollars (the "Purchase Price") for the Target Shares by wire
transfer of immediately available funds to a banking institution designated by
Accel.
<PAGE> 39
(b) The parties hereto agree that the Purchase Price shall be
allocated among the Target Shares of each Target Corporation as follows: (i)
the amount of the Purchase Price allocated to the Dublin shares shall be equal
to Dublin's total shareholders' equity as of December 31, 1997, as determined
in accordance with GAAP; (ii) the amount of the Purchase Price allocated to the
ANSC shares shall be equal to ANSC's total shareholders' equity as of December
31, 1997, as determined in accordance with GAAP; and (iii) the balance of the
Purchase Price shall be allocated to the ALIC shares. The foregoing allocation
of the Purchase Price among the Target Corporations' respective shares
represents the parties' best estimate of the relative fair market values of the
Target Corporations as of the Closing Date based upon the nature of their
respective assets and businesses.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ACCEL
Accel represents and warrants to Lyndon that:
2.1 Organization and Authority.
(a) ALIC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, has all requisite corporate power
and authority to own, lease and operate its properties and carry on its
business as now conducted, is duly qualified and authorized to transact
business as an insurance company in the State of Ohio, and is qualified as a
foreign corporation in each jurisdiction where the failure to do so would have
a material adverse effect on its business as now conducted.
(b) Dublin is a corporation duly organized, validly existing and in
good standing under the laws of the Turks and Caicos Islands, has all requisite
corporate power and authority to own, lease and operate its properties and
carry on its business as now conducted and is qualified as a foreign
corporation in each jurisdiction where the failure to do so would have a
material adverse effect on its business as now conducted.
(c) ANSC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, has all requisite corporate power
and authority to own, lease and operate its properties and carry on its
business as now conducted and is qualified as a foreign corporation in each
jurisdiction where the failure to do so would have a material adverse effect on
its business as now conducted.
I-2
<PAGE> 40
2.2 Capitalization.
(a) The authorized capital stock of ALIC consists of 500 shares, of
which 400 are issued and outstanding (the "ALIC Shares"). The ALIC Shares have
been duly authorized and are validly issued, fully paid and nonassessable
constitute the only shares of ALIC outstanding, are owned by Accel, and there
are no outstanding rights, subscriptions, warrants, calls, preemptive rights,
options or other agreements or commitments of any kind or character to purchase
or otherwise to acquire from ALIC any shares of its capital stock or any other
security, and no security or obligation of any kind convertible into the
capital stock or other security of ALIC exists in favor of any Person.
(b) The authorized capital stock of Dublin consists of 5,000 shares,
of which 5,000 are issued and outstanding (the "Dublin Shares"). The Dublin
Shares have been duly authorized, are validly issued, fully paid and
nonassessable, constitute the only shares of Dublin outstanding, are owned by
Accel and there are no outstanding rights, subscriptions, warrants, calls,
preemptive rights, options or other agreements or commitments of any kind or
character to purchase or otherwise to acquire from Dublin any shares of its
capital stock or any other security, and no security or obligation of any kind
convertible into the capital stock or other security of Dublin exists in favor
of any Person.
(c) The authorized capital stock of ANSC consists of 500 shares, of
which 5 are issued and outstanding (the "ANSC Shares"). The ANSC Shares have
been duly authorized, are validly issued, fully paid and nonassessable,
constitute the only shares of ANSC outstanding, are owned by Accel and there
are no outstanding rights, subscriptions, warrants, calls, preemptive rights,
options or other agreements or commitments of any kind or character to purchase
or otherwise to acquire from ANSC any shares of its capital stock or any other
security, and no security or obligation of any kind convertible into the
capital stock or other security of ANSC exists in favor of any Person.
2.3 No Subsidiaries.
(a) ALIC has no subsidiaries.
(b) Dublin has no subsidiaries.
(c) ANSC has no subsidiaries.
2.4 Articles of Incorporation, By-Laws, Corporate Records and Committees.
(a) The copies of the Articles of Incorporation and Code of
Regulations of ALIC attached as Schedule 2.4(a) are correct and complete. The
stock transfer, minute books and corporate records of ALIC which have been made
available to Lyndon are correct and complete and constitute the only written
records and minutes of the meetings, proceedings, and other actions of the
shareholders and the Board of Directors of ALIC from the date of its
organization to the date hereof.
I-3
<PAGE> 41
(b) The copies of the Articles of Incorporation and By-Laws of Dublin
attached as Schedule 2.4(b) are correct and complete. The stock transfer,
minute books and corporate records of Dublin which have been made available to
Lyndon are correct and complete and constitute the only written records and
minutes of the meetings, proceedings, and other actions of the shareholders and
the Board of Directors of Dublin from the date of its organization to the date
hereof.
(c) The copies of the Articles of Incorporation and Code of
Regulations of ANSC attached as Schedule 2.4(c) are correct and complete. The
stock transfer, minute books and corporate records of ANSC which have been made
available to Lyndon are correct and complete and constitute the only written
records and minutes of the meetings, proceedings, and other actions of the
shareholders and the Board of Directors of ANSC from the date of its
organization to the date hereof.
2.5 Governmental Authorizations and Other Consents.
(a) Except as set forth on Schedule 2.5(a), no consent, order,
license, approval or authorization of, or exemption by, or registration or
declaration or filing with, any governmental authority, bureau or agency, and
no consent or approval of any other Person, is required to be obtained or made
in connection with the performance by Accel of this Agreement or the
consummation of the transactions relating to ALIC contemplated to be performed
by them hereunder.
(b) Except as set forth on Schedule 2.5(b), no consent, order,
license, approval or authorization of, or exemption by, or registration or
declaration or filing with, any governmental authority, bureau or agency, and
no consent or approval of any other Person, is required to be obtained or made
in connection with the performance by Accel of this Agreement or the
consummation of the transactions relating to Dublin contemplated to be
performed by them hereunder.
(c) Except as set forth on Schedule 2.5(c), no consent, order,
license, approval or authorization of, or exemption by, or registration or
declaration or filing with, any governmental authority, bureau or agency, and
no consent or approval of any other Person, is required to be obtained or made
in connection with the performance by Accel of this Agreement or the
consummation of the transactions relating to ANSC contemplated to be performed
by them hereunder.
2.6 Non-Contravention. Except as set forth on Schedule 2.6, the
performance of this Agreement will not (i) violate any provision of the
Articles of Incorporation, Code of Regulations or By-Laws of any of the Target
Corporations; (ii) violate, conflict with or result in the breach or
termination of, or constitute an amendment to, or otherwise give any Person the
right to terminate, or constitute (or with notice or lapse of time or both
would constitute) a default (by way of substitution, novation or otherwise)
under the terms of, any material contract, mortgage, lease, bond, indenture,
agreement, franchise or other instrument or obligation to which any of the
Target Corporations is a party
I-4
<PAGE> 42
or by which any of the Target Corporations or any of their respective assets or
properties are bound or affected; (iii) result in the creation of any lien,
mortgage, claim, charge, security interest, encumbrance, restriction or
limitation (collectively, "Liens") upon any material properties or assets of
any of the Target Corporations pursuant to the terms of any contract, mortgage,
lease, bond, indenture, agreement, franchise or other instrument or obligation;
(iv) violate any judgment, order, injunction, decree or award of any court,
arbitrator, administrative agency or governmental or regulatory body
("Governmental Order") against, or binding upon, any of the Target Corporations
or any of their securities, properties, assets or business; (v) constitute a
violation by any of the Target Corporations of any material statute, law, rule
or regulation of any jurisdiction as such statute, law, rule or regulation
relates to any of the Target Corporations or to any of its securities,
properties, assets or business; or (vi) violate any Permit (as defined in
Section 2.13(a).
2.7 Financial Statements.
(a) ALIC Financial Statements.
(i) ALIC GAAP Financial Statements. The unaudited balance sheet of
ALIC as at September 30, 1997 (the "ALIC September 30, 1997 GAAP Balance
Sheet") and the related unaudited statement of income for the nine months then
ended (together with the ALIC September 30, 1997 GAAP Balance Sheet, the "ALIC
September 30, 1997 GAAP Financial Statements"), to be delivered to Lyndon, will
be prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied and will be true and correct in all
material respects and present fairly the financial condition and the results of
operations of ALIC as at the respective dates and for the respective periods
covered thereby and shall show no material adverse change from the ALIC June
30, 1997 GAAP Financial Statements previously delivered to Lyndon.
(ii) ALIC Statutory Financial Statements. Prior to the Closing,
there will be delivered to Lyndon (i) the unaudited statutory balance sheets of
ALIC as at September 30, 1997 (the "ALIC September 30, 1997 Statutory Balance
Sheet") and the related unaudited statement of income for the nine months then
ended (together with the ALIC September 30, 1997 Statutory Balance Sheets, the
"ALIC September 30, 1997 Statutory Financial Statements") prepared in
accordance with statutory accounting principles ("SAP") and consistently
applied in conformity with the audited statutory financial statements,
certified as correct in all material respects by ALIC's chief financial officer
and (ii) the audited SAP balance sheets of ALIC as at December 31, 1994,
December 31, 1995 and December 31, 1996 and the related audited SAP statements
of income, changes in capital and surplus and cash flows for each of the years
then ended (the "ALIC Audited Statutory Financial Statements"), which statutory
financial statements are true and correct in all materials respects and present
fairly the admitted assets, liabilities, loss and loss adjustment reserves,
capital and surplus, and cash flows of ALIC as at the respective dates and for
the respective periods covered thereby in conformity with SAP consistently
applied and shall show no material adverse change from the ALIC June 30, 1997
SAP Financial Statements previously delivered to Lyndon.
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(b) Dublin GAAP Financial Statements. The unaudited balance sheet of
Dublin as at September 30, 1997 (the "Dublin September 30, 1997 GAAP Balance
Sheets") and the related unaudited statement of income for the nine months then
ended (together with the Dublin September 30, 1997 GAAP Balance Sheet, the
Dublin September 30, 1997 GAAP Financial Statements") to be delivered to
Lyndon, will be prepared in accordance with GAAP consistently applied and will
be true and correct in all material respects and present fairly the financial
condition and the results of operations of Dublin as at the respective dates
and for the respective periods covered thereby and shall show no material
adverse change from the Dublin June 30, 1997 GAAP Financial Statements
previously delivered to Lyndon.
(c) ANSC GAAP Financial Statements. The unaudited balance sheets of
ANSC as at September 30, 1997 (the "ANSC September 30, 1997 GAAP Balance
Sheets") and the related unaudited statement of income for the nine months then
ended (together with the ANSC September 30, 1997 GAAP Balance Sheet, the "ANSC
September 30, 1997 GAAP Financial Statements") to be delivered to Lyndon, will
be prepared in accordance with GAAP consistently applied and will be true and
correct in all material respects and present fairly the financial condition and
the results of operations of ANSC as at the respective dates and for the
respective periods covered thereby and shall show no material adverse change
from the ANSC June 30, 1997 GAAP Financial Statements previously delivered to
Lyndon.
(d) Combined Audited GAAP Financial Statements. The combined audited
balance sheet of ALIC, Dublin and ANSC as at December 31, 1997 (the "Combined
Audited December 31, 1997 GAAP Balance Sheet") and the related audited
statement of income for the year then ended (together with the Combined Audited
December 31, 1997 GAAP Balance Sheet, the "Combined Audited GAAP Financial
Statements"), to be audited by KPMG Peat Marwick LLP, independent certified
public accountants, whose unqualified opinion shall be attached thereto, to be
delivered to Lyndon by March 16, 1998, will be prepared in accordance with GAAP
consistently applied and will be true and correct in all material respects and
present fairly the financial condition and the results of operations of the
combination of ALIC, Dublin and ANSC as at the respective dates and for the
respective periods covered thereby and shall show no material adverse change
from the unaudited September 30, 1997 Financial Statements of the Target
Corporations taken as a whole.
2.8 Tangible Property.
Except for accounts payable, general ledger, fixed asset accounting,
investment accounting and annual statement preparation software, there are no
significant assets which the Target Corporations use in their businesses (as
heretofore conducted) which are not either (i) owned by, or leased or licensed
to, one of Target Corporations and are being conveyed to Lyndon pursuant to
this Agreement; or (ii) owned by, or leased or licensed to, Acceleration
National Insurance Company ("ANIC") and are being conveyed to Lyndon Property
Insurance Company pursuant to the Asset Purchase Agreement between Lyndon
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Property Insurance Company, Accel and ANIC of even date herewith in connection
with the sale of ANIC's warranty book of business (the "Asset Purchase
Agreement").
(a) ALIC has good and marketable title to all of the assets reflected
on its books and records and on the ALIC September 30, 1997 Statutory Balance
Sheet and on the ALIC September 30, 1997 GAAP Balance Sheet, free and clear of
all Liens, except for those assets leased by ALIC under leases listed on
Schedule 2.8(a). All furniture, fixtures and equipment owned or used by ALIC
(the "ALIC Fixed Assets") will be in substantially the same condition on the
Closing Date as existed on the date of this Agreement, reasonable wear and tear
excepted. SUCH REPRESENTATION IS ACCEL'S SOLE WARRANTY WITH RESPECT TO THE ALIC
FIXED ASSETS AND THE ALIC FIXED ASSETS ARE SOLD AS IS, WHERE IS, WITH ALL
FAULTS AND WITH NO WARRANTIES, EXCEPT THOSE EXPRESSLY STATED HEREIN, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, WHICH IMPLIED WARRANTIES ARE EXPRESSLY
EXCLUDED.
(b) Dublin has good and marketable title to all of the assets
reflected on its books and records and on the Dublin September 30, 1997 GAAP
Balance Sheet, free and clear of all Liens, except for those assets leased by
Dublin under leases listed on Schedule 2.8(b). All furniture, fixtures and
equipment owned or used by Dublin (the "Dublin Fixed Assets") will be in
substantially the same condition on the Closing Date as existed on the date of
this Agreement, reasonable wear and tear excepted. SUCH REPRESENTATION IS
ACCEL'S SOLE WARRANTY WITH RESPECT TO THE DUBLIN FIXED ASSETS AND THE DUBLIN
FIXED ASSETS ARE SOLD AS IS, WHERE IS, WITH ALL FAULTS AND WITH NO WARRANTIES,
EXCEPT THOSE EXPRESSLY STATED HEREIN, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, WHICH IMPLIED WARRANTIES ARE EXPRESSLY EXCLUDED.
(c) ANSC has good and marketable title to all of the assets reflected
on its books and records and on the ANSC September 30, 1997 GAAP Balance Sheet,
free and clear of all Liens, except for those assets leased by ANSC under
leases listed on Schedule 2.8(c). All furniture, fixtures and equipment owned
or used by ANSC (the "ANSC Fixed Assets") will be in substantially the same
condition on the Closing Date as existed on the date of this Agreement,
reasonable wear and tear excepted. SUCH REPRESENTATION IS ACCEL'S SOLE WARRANTY
WITH RESPECT TO THE ANSC FIXED ASSETS AND THE ANSC FIXED ASSETS ARE SOLD AS IS,
WHERE IS, WITH ALL FAULTS AND WITH NO WARRANTIES, EXCEPT THOSE EXPRESSLY STATED
HEREIN, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WHICH IMPLIED
WARRANTIES ARE EXPRESSLY EXCLUDED.
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2.9 Real Property and Leases.
(a) Schedule 2.9(a) sets forth a true and correct list of all leases,
subleases or other agreements under which ALIC is lessee or lessor of any real
property or has any interest in real property and, except as set forth in
Schedule 2.9(a), there are no rights or options held by ALIC, or any
contractual obligations on its part, to purchase or otherwise acquire
(including by way of lease or sublease) any interest in or use of any real
property, nor any rights or options granted by ALIC, or any contractual
obligations entered into by it, to sell or otherwise dispose of (including by
way of lease or sublease) any interest in or use of any real property. All such
leases, subleases and other agreements are in full force and effect and
constitute legal, valid and binding obligations of the respective parties
thereto, with no existing or claimed default or event of default, or event
which with notice or lapse of time or both would constitute a default or event
of default, by ALIC or, to the knowledge of the Accel, by any other party
thereto, which would materially and adversely affect ALIC, and grant the
leasehold estates or other interests they purport to grant with the right to
quiet possession. ALIC is not in material violation of any building, zoning,
health, safety, environmental or other law, rule or regulation and no notice
from any Person has been served upon ALIC claiming any such violation.
(b) Schedule 2.9(b) sets forth a true and correct list of all leases,
subleases or other agreements under which Dublin is lessee or lessor of any
real property or has any interest in real property and, except as set forth in
Schedule 2.9(b), there are no rights or options held by Dublin, or any
contractual obligations on its part, to purchase or otherwise acquire
(including by way of lease or sublease) any interest in or use of any real
property, nor any rights or options granted by Dublin, or any contractual
obligations entered into by it, to sell or otherwise dispose of (including by
way of lease or sublease) any interest in or use of any real property. All such
leases, subleases and other agreements are in full force and effect and
constitute legal, valid and binding obligations of the respective parties
thereto, with no existing or claimed default or event of default, or event
which with notice or lapse of time or both would constitute a default or event
of default, by Dublin or, to the knowledge of the Accel, by any other party
thereto, which would materially and adversely affect Dublin, and grant the
leasehold estates or other interests they purport to grant with the right to
quiet possession. Dublin is not in material violation of any building, zoning,
health, safety, environmental or other law, rule or regulation and no notice
from any Person has been served upon Dublin claiming any such violation.
(c) Schedule 2.9(c) sets forth a true and correct list of all leases,
subleases or other agreements under which ANSC is lessee or lessor of any real
property or has any interest in real property and, except as set forth in
Schedule 2.9(c), there are no rights or options held by ANSC, or any
contractual obligations on its part, to purchase or otherwise acquire
(including by way of lease or sublease) any interest in or use of any real
property, nor any rights or options granted by ANSC, or any contractual
obligations entered into by it, to sell or otherwise dispose of (including by
way of lease or sublease) any interest in or use of any real property. All such
leases, subleases and other agreements are in full force and effect and
constitute legal, valid and binding obligations of the respective parties
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thereto, with no existing or claimed default or event of default, or event
which with notice or lapse of time or both would constitute a default or event
of default, by ANSC or, to the knowledge of the Accel, by any other party
thereto, which would materially and adversely affect ANSC, and grant the
leasehold estates or other interests they purport to grant with the right to
quiet possession. ANSC is not in material violation of any building, zoning,
health, safety, environmental or other law, rule or regulation and no notice
from any Person has been served upon ANSC claiming any such violation.
2.10 Intellectual Property.
(a) Schedule 2.10(a) sets forth all material trademarks, trade names,
trade secrets, patents, inventions, processes, copyrights, copyright rights or
other intellectual property rights (or applications therefor) used by ALIC in
connection with its business. Except as set forth in Schedule 2.10(a), ALIC
owns, or has the irrevocable right to use, all trademarks, trade names, trade
secrets, patents, inventions, processes, copyrights, copyright rights or other
intellectual property rights (or applications therefor) used in or necessary
for the conduct of ALIC's existing business as heretofore indicated, and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. Except as provided in Schedule 2.10(a), (i) no claims are
pending or, to Accel's knowledge, overtly threatened in writing by any person
respecting the use by ALIC of any such property rights (or applications
therefore) or challenging or questioning the validity or effectiveness of any
license or agreement relating to the same, (ii) to Accel's knowledge, there is
no valid basis for any such claim and (iii) to Accel's knowledge, use of such
trademarks, trade names, trade secrets, patents, inventions, processes,
copyrights, copyright rights or other intellectual property rights (or
applications therefor) does not infringe on the rights of any Person.
(b) Schedule 2.10(b) sets forth all material trademarks, trade names,
trade secrets, patents, inventions, processes, copyrights, copyright rights or
other intellectual property rights (or applications therefor) used by Dublin in
connection with its business. Except as set forth in Schedule 2.10(b), Dublin
owns, or has the irrevocable right to use, all trademarks, trade names, trade
secrets, patents, inventions, processes, copyrights, copyright rights or other
intellectual property rights (or applications therefor) used in or necessary
for the conduct of Dublin's existing business as heretofore indicated, and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. Except as provided in Schedule 2.10(b), (i) no claims are
pending or, to Accel's knowledge, overtly threatened in writing by any person
respecting the use by Dublin of any such property rights (or applications
therefore) or challenging or questioning the validity or effectiveness of any
license or agreement relating to the same, (ii) to Accel's knowledge, there is
no valid basis for any such claim and (iii) to Accel's knowledge, use of such
trademarks, trade names, trade secrets, patents, inventions, processes,
copyrights, copyright rights or other intellectual property rights (or
applications therefor) does not infringe on the rights of any Person.
(c) Schedule 2.10(c) sets forth all material trademarks, trade names,
trade secrets, patents, inventions, processes, copyrights, copyright rights or
other intellectual property rights (or applications therefor) used by ANSC in
connection with its business.
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Except as set forth in Schedule 2.10(c), ANSC owns, or has the irrevocable
right to use, all trademarks, trade names, trade secrets, patents, inventions,
processes, copyrights, copyright rights or other intellectual property rights
(or applications therefor) used in or necessary for the conduct of ANSC's
existing business as heretofore indicated, and the consummation of the
transactions contemplated hereby will not alter or impair any such rights.
Except as provided in Schedule 2.10(a), (i) no claims are pending or, to
Accel's knowledge, overtly threatened in writing by any person respecting the
use by ANSC of any such property rights (or applications therefore) or
challenging or questioning the validity or effectiveness of any license or
agreement relating to the same, (ii) to Accel's knowledge, there is no valid
basis for any such claim and (iii) to Accel's knowledge, use of such
trademarks, trade names, trade secrets, patents, inventions, processes,
copyrights, copyright rights or other intellectual property rights (or
applications therefor) does not infringe on the rights of any Person.
2.11 Tax Matters.
(a) ALIC has timely filed all federal, state, county and local tax
returns, estimates and reports (collectively, "Returns") required to be filed
by it through the date hereof, copies of which have been delivered to Lyndon,
which Returns accurately reflect the taxes due for the periods indicated, and
ALIC has paid in full all income, gross receipts, value added, excise,
property, franchise, sales, use, employment, payroll and other taxes of any
kind whatsoever (collectively, "Taxes") shown to be due by such Returns, and
has accrued in accordance with GAAP liabilities for Taxes accrued through
September 30, 1997 which are reflected on its September 30, 1997 GAAP Balance
Sheet. Accel has no knowledge of any unassessed deficiency for Taxes proposed
or threatened against ALIC, and no taxing authority has raised any issue with
respect to ALIC which, if adversely determined, would result in a liability for
any Tax which has not been reserved against on its September 30, 1997 GAAP
Balance Sheet. No extensions with respect to the dates on which any Return was
or is due to be filed by ALIC nor any waivers or agreements by ALIC for the
extension of time for the assessment or payment of any Taxes are in force.
Except as set forth in Schedule 2.11, ALIC has not been during the last six
years for which tax returns have been filed, and currently is not being,
audited by any federal, state or local tax authority. ALIC life insurance
policies, if any, qualify as life insurance policy products under applicable
tax law.
(b) Dublin has timely filed all Returns required to be filed by it
through the date hereof, copies of which have been delivered to Lyndon, which
Returns accurately reflect the taxes due for the periods indicated, and Dublin
has paid in full all Taxes shown to be due by such Returns, and has accrued in
accordance with GAAP liabilities for Taxes accrued through September 30, 1997
which are reflected on its September 30, 1997 GAAP Balance Sheet. Accel has no
knowledge of any unassessed deficiency for Taxes proposed or threatened against
Dublin, and no taxing authority has raised any issue with respect to Dublin
which, if adversely determined, would result in a liability for any Tax which
has not been reserved against on its September 30, 1997 GAAP Balance Sheet. No
extensions with respect to the dates on which any Return was or is due
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to be filed by Dublin nor any waivers or agreements by Dublin for the extension
of time for the assessment or payment of any Taxes are in force. Except as set
forth in Schedule 2.11, Dublin has not been during the last six years for which
tax returns have been filed, and currently is not being, audited by any
federal, state or local tax authority.
(c) ANSC has timely filed all Returns required to be filed by it
through the date hereof, copies of which have been delivered to Lyndon, which
Returns accurately reflect the taxes due for the periods indicated, and ANSC
has paid in full all Taxes shown to be due by such Returns, and has accrued in
accordance with GAAP liabilities for Taxes accrued through September 30, 1997
which are reflected on its September 30, 1997 GAAP Balance Sheet. Accel has no
knowledge of any unassessed deficiency for Taxes proposed or threatened against
ANSC, and no taxing authority has raised any issue with respect to ANSC which,
if adversely determined, would result in a liability for any Tax which has not
been reserved against on its September 30, 1997 GAAP Balance Sheet. No
extensions with respect to the dates on which any Return was or is due to be
filed by ANSC nor any waivers or agreements by ANSC for the extension of time
for the assessment or payment of any Taxes are in force. Except as set forth in
Schedule 2.11, ANSC has not been during the last six years for which tax
returns have been filed, and currently is not being, audited by any federal,
state or local tax authority.
2.12 Compliance with Laws. Except as set forth on Schedule 2.12, to
Accel's knowledge, none of the Target Corporations are in violation of any
applicable law, rule or regulation, the violation of which could materially and
adversely affect its assets, properties, liabilities, business, results of
operations, condition (financial or otherwise) or prospects, nor does Accel
know of the enactment, promulgation or adoption of any such law, rule or
regulation which is not yet effective.
2.13 Permits and Licenses.
(a) Except as set forth on Schedule 2.13(a), ALIC (including, without
limitation, its employees) has duly obtained and holds in full force and effect
all consents, authorizations, permits, licenses, orders or approvals of, and
has made all declarations and filings with, all federal, state or local
governmental or regulatory bodies that are material or necessary in the conduct
of its business (collectively, the "Permits"); all the Permits were duly
obtained and are in full force and effect; no violations are or have been
recorded in respect of any such Permit and, to Accel's knowledge, no proceeding
is pending or threatened to revoke, deny or limit any such Permit.
(b) Except as set forth on Schedule 2.13(b), Dublin (including,
without limitation, its employees) has duly obtained and holds in full force
and effect all the necessary Permits; all the Permits were duly obtained and
are in full force and effect; no violations are or have been recorded in
respect of any such Permit and, to Accel's knowledge, no proceeding is pending
or threatened to revoke, deny or limit any such Permit.
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(c) Except as set forth on Schedule 2.13(c), ANSC (including, without
limitation, its employees) has duly obtained and holds in full force and effect
necessary Permits; all the Permits were duly obtained and are in full force and
effect; no violations are or have been recorded in respect of any such Permit
and, to Accel's knowledge, no proceeding is pending or threatened to revoke,
deny or limit any such Permit.
2.14 Contracts and Agreements.
(a) Schedule 2.14(a) lists and briefly describes all written or oral
contracts, agreements, leases, mortgages and commitments to which ALIC is a
party or by which it may be bound involving in excess of $25,000 (other than
insurance policies issued by ALIC), including, without limitation, all
reinsurance agreements, insurance underwriting agreements, agency agreements,
brokerage agreements, management agreements, joint venture agreements, leases,
guarantees and indemnifications, employment and consulting agreements and
instruments of indebtedness (individually, an "ALIC Contract" and,
collectively, the "ALIC Contracts"), true and correct copies of which have been
made available to Lyndon. All ALIC Contracts constitute legal, valid and
binding obligations of ALIC and, to the knowledge of Accel, of the other
parties thereto, and are in full force and effect on the date hereof, and ALIC
has paid in full all amounts due thereunder which are due and payable and is
not in default under any such ALIC Contract nor, to the knowledge of Accel, is
any other party to any such ALIC Contract in default thereunder, nor, to the
knowledge of Accel, does any condition exist that with notice or lapse of time
or both would constitute a default or event of default thereunder by ALIC or,
to the knowledge of Accel, by any other Person. Except as set forth in Schedule
2.5(a), no ALIC Contract requires the consent or approval of a third party in
connection with the performance by ALIC of this Agreement or the transactions
contemplated to be performed by it hereunder.
(b) Schedule 2.14(b) lists and briefly describes all written or oral
contracts, agreements, leases, mortgages and commitments to which Dublin is a
party or by which it may be bound involving in excess of $25,000 (other than
insurance policies issued by Dublin) including without limitation, reinsurance
agreements, insurance underwriting agreements, agency agreements, brokerage
agreements, management agreements, joint venture agreements, leases, guarantees
and indemnifications, employment and consulting agreements and instruments of
indebtedness (individually, a "Dublin Contract" and, collectively, "Dublin
Contracts"), true and correct copies of which have been made available to
Lyndon. All Dublin Contracts constitute legal, valid and binding obligations of
Dublin and, to the knowledge of Accel, of the other parties thereto, and are in
full force and effect on the date hereof, and Dublin has paid in full all
amounts due thereunder which are due and payable and is not in default under
any such Dublin Contract nor, to the knowledge of Accel, is any other party to
any such Dublin Contract in default thereunder, nor does any condition exist
that with notice or lapse of time or both would constitute a default or event
of default thereunder by Dublin or, to the knowledge of Accel, by any other
Person. Except as set forth in Schedule 2.5(b), no Dublin Contract requires
the consent or approval of a
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third party in connection with the performance by Dublin of this Agreement or
the transactions contemplated to be performed by it hereunder.
(c) Schedule 2.14(c) lists and briefly describes all written or oral
contracts, agreements, leases, mortgages and commitments, to which ANSC is a
party or by which it may be bound involving in excess of $25,000, including,
without limitation, all insurance underwriting agreements, agency agreements,
brokerage agreements, management agreements, joint venture agreements, leases,
guarantees and indemnifications, employment and consulting agreements and
instruments of indebtedness (individually, an "ANSC Contract" and,
collectively, "ANSC Contracts"), true and correct copies of which have been
made available to Lyndon. All ANSC Contracts constitute legal, valid and
binding obligations of ANSC and, to the best knowledge of Accel, of the other
parties thereto, and are in full force and effect on the date hereof, and ANSC
has paid in full all amounts due thereunder which are due and payable and is
not in default under any such ANSC Contract nor, to the knowledge of Accel, is
any other party to any such ANSC Contract in default thereunder, nor, to the
knowledge of Accel, does any condition exist that with notice or lapse of time
or both would constitute a default or event of default thereunder by ANSC or,
to the knowledge of Accel, by any other Person. Except as set forth in Schedule
2.5(c), no ANSC Contract requires the consent or approval of a third party in
connection with the performance by ANSC of this Agreement or the transactions
contemplated to be performed by it hereunder.
2.15 Employee Benefits.
(a) (i) Except as set forth on Schedule 2.15(a), ALIC has no, and
during the previous five fiscal years has had no pension, retirement, savings,
disability, medical, dental or other health plans, retiree medical plans, life
insurance (including any individual life insurance policy as to which ALIC
makes premium payments whether or not ALIC is the owner, beneficiary or both of
such policy) or other death benefit plans, profit sharing, deferred
compensation, stock option, bonus or other incentive plans, vacation benefit
plans, severance plans, or other employee benefit plans or arrangements
(whether written or arising from custom), and ALIC has no employee pension
benefit plan as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any employee welfare benefit
plan as defined in Section 3(1) of ERISA, or any Multiemployer Plan as defined
in Section 3(37) of ERISA.
(ii) ALIC has in all material respects complied with the
requirements, to the extent applicable, of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") with respect to the continuation of
employer-provided health benefits following a "qualifying event" which would
otherwise terminate such benefits, as provided in Section 4980B of the Internal
Revenue Code of 1986 (the "Code"), as amended, and applicable regulations and
Internal Revenue Service rulings, notices and other pronouncements.
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(b) (i) Except as set forth on Schedule 2.15(b), Dublin has no, and
during the previous five fiscal years has had no pension, retirement, savings,
disability, medical, dental or other health plans, retiree medical plans, life
insurance (including any individual life insurance policy as to which Dublin
makes premium payments whether or not Dublin is the owner, beneficiary or both
of such policy) or other death benefit plans, profit sharing, deferred
compensation, stock option, bonus or other incentive plans, vacation benefit
plans, severance plans, or other employee benefit plans or arrangements
(whether written or arising from custom), and Dublin has no, and during the
previous five fiscal years has had no employee pension benefit plan as defined
in Section 3(2) of ERISA, or any employee welfare benefit plan as defined in
Section 3(1) of ERISA or any Multiemployer Plan as defined in Section 3(37) of
ERISA.
(ii) Dublin has in all material respects complied with the
requirements, to the extent applicable, of COBRA with respect to the
continuation of employer-provided health benefits following a "qualifying
event" which would otherwise terminate such benefits, as provided in Section
4980B of the Code and applicable regulations and Internal Revenue Service
rulings, notices and other pronouncements.
(c) (i) Except as set forth on Schedule 2.15(c), ANSC has no, and
during the previous five fiscal years has had no pension, retirement, savings,
disability, medical, dental or other health plans, retiree medical plans, life
insurance (including any individual life insurance policy as to which ANSC
makes premium payments whether or not ANSC is the owner, beneficiary or both of
such policy) or other death benefit plans, profit sharing, deferred
compensation, stock option, bonus or other incentive plans, vacation benefit
plans, severance plans, or other employee benefit plans or arrangements
(whether written or arising from custom), and ANSC has no employee pension
benefit plan as defined in Section 3(2) of ERISA, or any employee welfare
benefit plan as defined in Section 3(1) of ERISA or any Multiemployer Plan as
defined in Section 3(37) of ERISA.
(ii) ANSC has in all material respects complied with the requirements,
to the extent applicable, of COBRA with respect to the continuation of
employer-provided health benefits following a "qualifying event" which would
otherwise terminate such benefits, as provided in Section 4980B of the Code and
applicable regulations and Internal Revenue Service rulings, notices and other
pronouncements.
2.16 Insurance.
(a) Schedule 2.16(a) lists and provides a summary description of all
policies of property, theft, fire, liability, workers' compensation, title,
professional liability or life insurance or reinsurance or any other insurance
owned or maintained by ALIC or in which ALIC is a named insured or on which
ALIC is paying any premiums, other than with respect to reinsurance. Except as
set forth on Schedule 2.16(a), all such policies are in full force and effect
at the date hereof, and, to Accel's knowledge, each of the insured parties
thereunder is not in default with respect to any provision contained in any
such insurance policy nor failed to give any notice or present any claim
thereunder in due and timely
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fashion. Schedule 2.16(a) sets forth a summary of the claims history for ALIC
under such policies since January 1, 1994 and, except as set forth on Schedule
2.16(a), there are no claims outstanding by ALIC under any such policies.
(b) Schedule 2.16(b) lists and provides a summary description of all
policies of property, theft, fire, liability, workers' compensation, title,
professional liability or life insurance or reinsurance or any other insurance
owned or maintained by Dublin or in which Dublin is a named insured or on which
Dublin is paying any premiums, other than with respect to reinsurance. Except
as set forth on Schedule 2.16(b), all such policies are in full force and
effect at the date hereof, and, to Accel's knowledge, each of the insured
parties thereunder is not in default with respect to any provision contained in
any such insurance policy nor failed to give any notice or present any claim
thereunder in due and timely fashion. Schedule 2.16(b) sets forth a summary of
the claims history for Dublin under such policies since January 1, 1994 and,
except as set forth on Schedule 2.16(b ), there are no claims outstanding by
Dublin under any such policies.
(c) Schedule 2.16(c) lists and provides a summary description of all
policies of property, theft, fire, liability, workers' compensation, title,
professional liability or life insurance or reinsurance or any other insurance
owned or maintained by ANSC or in which ANSC is a named insured or on which
ANSC is paying any premiums, other than with respect to reinsurance. Except as
set forth on Schedule 2.16(c), all such policies are in full force and effect
at the date hereof, and, to Accel's knowledge, each of the insured parties
thereunder is not in default with respect to any provision contained in any
such insurance policy nor failed to give any notice or present any claim
thereunder in due and timely fashion. Schedule 2.16(c) sets forth a summary of
the claims history for ANSC under such policies since January 1, 1994 and,
except as set forth on Schedule 2.16(c), there are no claims outstanding by
ANSC under any such policies.
2.17 Accounts Payable.
(a) Except for accounts payable in the ordinary course of business and
except as set forth on Schedule 2.17(a), no accounts payable of ALIC have
arisen subsequent to September 30, 1997 that exceeds $25,000 for any one payee
or $100,000 in the aggregate, other than claims payable and premiums payable to
reinsurance companies.
(b) Except for accounts payable in the ordinary course of business and
except as set forth on Schedule 2.17(b), no accounts payable of Dublin have
arisen subsequent to September 30, 1997 that exceeds $25,000 for any one payee
or $100,000 in the aggregate, other than claims payable and premiums payable to
reinsurance companies.
(c) Except for accounts payable in the ordinary course of business and
except as set forth on Schedule 2.17(c), no accounts payable of ANSC have
arisen subsequent to September 30, 1997 that exceeds $25,000 for any one payee
or $100,000
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in the aggregate, other than claims payable and premiums payable to reinsurance
companies.
2.18 Liabilities.
(a) There are no material liabilities or obligations of ALIC, either
accrued, absolute, contingent or otherwise, whether or not of a kind required
by GAAP to be set forth on a financial statement ("Liabilities"), except (a)
those accrued, reflected or otherwise provided for on the ALIC September 30,
1997 Statutory Balance Sheet and the ALIC September 30, 1997 GAAP Balance
Sheet, (b) those incurred in the ordinary course of ALIC's business since
September 30, 1997, consistent with past practices, and which in the aggregate
do not exceed $100,000 and (c) those listed on Schedule 2.18(a).
(b) There are no material Liabilities of Dublin, except (a) those
accrued, reflected or otherwise provided for on the Dublin September 30, 1997
GAAP Balance Sheet, (b) those incurred in the ordinary course of Dublin's
business since September 30, 1997, consistent with past practices, and which in
the aggregate do not exceed $100,000 and (c) those listed on Schedule 2.18(b).
(c) There are no material Liabilities of ANSC, except (a) those
accrued, reflected or otherwise provided for on the ANSC September 30, 1997
GAAP Balance Sheet, (b) those incurred in the ordinary course of ANSC's
business since September 30, 1997, consistent with past practices, and which in
the aggregate do not exceed $100,000 and (c) those listed on Schedule 2.18(c).
2.19 Actions and Proceedings.
(a) Except as provided on Schedule 2.19(a), there are no claims,
actions, suits, arbitrations, proceedings, investigations or inquiries, whether
at law or in equity and whether or not before any court, private body or group,
governmental department, commission, board, agency or instrumentality
(collectively, "Actions"), pending or, to the knowledge of Accel, threatened
against, involving or affecting ALIC or any of its assets, whether or not fully
or partially covered by insurance (other than in the ordinary course of ALIC's
business with respect to claims under policies of insurance issued by ALIC,
which, in the judgment of Accel, have been adequately reserved in the
aggregate) or which would give rise to any right of indemnification by any
Person from ALIC, and there are no outstanding orders, writs, injunctions,
awards, sentences or decrees of any court, private body or group, governmental
department, commission, board, agency or instrumentality against, involving or
affecting ALIC.
(b) Except as provided on Schedule 2.19(b), there are no Actions,
pending or, to the knowledge of Accel, threatened against, involving or
affecting Dublin or any of its assets, whether or not fully or partially
covered by insurance (other than in the ordinary course of Dublin's business
with respect to claims under policies of insurance issued by Dublin, which, in
the judgment of Accel, have been adequately reserved in the
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aggregate) or which would give rise to any right of indemnification by any
Person from Dublin, and there are no outstanding orders, writs, injunctions,
awards, sentences or decrees of any court, private body or group, governmental
department, commission, board, agency or instrumentality against, involving or
affecting Dublin.
(c) Except as provided on Schedule 2.19(c), there are no Actions,
pending or, to the knowledge of Accel, threatened against, involving or
affecting ANSC or any of its assets, whether or not fully or partially covered
by insurance or which would give rise to any right of indemnification by any
Person from ANSC, and there are no outstanding orders, writs, injunctions,
awards, sentences or decrees of any court, private body or group, governmental
department, commission, board, agency or instrumentality against, involving or
affecting ANSC.
2.20 Bank Accounts, Guarantees and Powers.
(a) Schedule 2.20(a) sets forth (i) a list of all accounts, borrowing
resolutions and deposit boxes maintained by ALIC at any bank or other financial
institution and the names of the persons authorized to effect transactions in
such accounts, to borrow pursuant to such resolutions and with access to such
boxes; (ii) all agreements or commitments of ALIC guaranteeing the payment of
money or the performance of other contracts by any third persons; and (iii) the
names of all persons, firms, associations, corporations, or business
organizations holding general or special powers of attorney from ALIC, together
with a summary of the terms thereof.
(b) Schedule 2.20(b) sets forth (i) a list of all accounts, borrowing
resolutions and deposit boxes maintained by Dublin at any bank or other
financial institution and the names of the persons authorized to effect
transactions in such accounts, to borrow pursuant to such resolutions and with
access to such boxes; (ii) all agreements or commitments of Dublin guaranteeing
the payment of money or the performance of other contracts by any third
persons; and (iii) the names of all persons, firms, associations, corporations,
or business organizations holding general or special powers of attorney from
Dublin, together with a summary of the terms thereof.
(c) Schedule 2.20(c) sets forth (i) a list of all accounts, borrowing
resolutions and deposit boxes maintained by ANSC at any bank or other financial
institution and the names of the persons authorized to effect transactions in
such accounts, to borrow pursuant to such resolutions and with access to such
boxes; (ii) all agreements or commitments of ANSC guaranteeing the payment of
money or the performance of other contracts by any third persons; and (iii) the
names of all persons, firms, associations, corporations, or business
organizations holding general or special powers of attorney from ANSC, together
with a summary of the terms thereof.
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2.21 Sources of Premiums.
(a) Schedule 2.21(a) sets forth a computer print-out of ALIC's
accounts sequentially listed by volume generated during the period from January
1, 1996 through September 30, 1997. Accel has no knowledge that any such
account intends to terminate or not renew or otherwise modify its relationship
with ALIC, provided, however, that Lyndon acknowledges that accounts routinely
are added and terminated in the regular course of ALIC's business.
(b) Schedule 2.21(b) sets forth a computer print-out of ANSC's
accounts sequentially listed by volume generated during the period from January
1, 1996 through September 30, 1997. Accel has no knowledge that any such
account intends to terminate or not renew or otherwise modify its relationship
with ANSC, provided, however, that Lyndon acknowledges that accounts routinely
are added and terminated in the regular course of ANSC's business.
2.22 Absence of Changes. Except as set forth in Schedule 2.22, since
September 30, 1997, each of the Target Corporations has carried on its business
in the ordinary course, and there has not been:
(i) any material adverse change in its
business condition (financial or
otherwise), results of operations or
liabilities;
(ii) any pending or, to Accel's knowledge,
threatened amendment, modification, or
termination of any agreement, license or
permit which is material to its business;
(iii) any disposition or acquisition of any
of its assets or properties other than in
the ordinary course which exceed $50,000 in
the aggregate;
(iv) any damage, destruction or other
casualty loss (whether or not covered by
insurance) materially adversely affecting
or that could reasonably be expected to
materially adversely affect its business or
assets;
(v) any increase in the compensation of any
of its employees other than in the ordinary
course of business consistent with past
practice; or
(vi) except in the ordinary course, the
incurrence of any obligation or liability
(whether matured,
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unmatured, absolute, accrued, contingent or
otherwise) which exceed $50,000 in the
aggregate.
2.23 Employee Relations. None of the Target Corporations has at any time
during the last five years had, or, to the knowledge of Accel, is there now
threatened, a strike, picket, work stoppage, work slowdown, or other material
labor dispute, and Accel has no knowledge of any Target Corporation's
employee's proposed resignation whose annual salary exceeds $25,000.
2.24 Affiliated Transactions. For purposes of this Section, an "Affiliate"
means any shareholder or any employee, officer or director of Accel or any of
the Target Corporations or any spouse or family member (including in-laws) of,
or any corporation or other entity "controlled by" (as such term is defined in
Rule 405 of the General Rules and Regulations under the Securities Act of 1993,
as amended (the "Securities Act")), any such persons or in which any such
person has an equity or ownership interest exceeding five percent.
(a) Except as specifically set forth (including dollar amounts) on
Schedule 2.24, as of the date hereof, no Affiliate is indebted to, or is a
creditor of, Accel or any of the Target Corporations.
(b) During the past three (3) years, except as set forth on Schedule
2.24, Accel has not, directly or indirectly, purchased, leased from or
otherwise acquired any property or obtained any services from, or sold, leased
to or otherwise disposed of any property or furnished any services to, or
otherwise dealt with, any Affiliate nor is Accel or any of the Target
Corporations a party to any contract, agreement, license, commitment or other
arrangement, written or oral, express or implied, with an Affiliate except as
disclosed on such schedule.
2.25 Brokers' Fees. There is no broker, finder or other intermediary
retained by Accel who might be entitled to a fee or commission in connection
with the transactions contemplated hereby.
2.26 Full Disclosure. All documents, schedules and other materials
delivered or made available by or on behalf of Accel in connection with any of
the Target Corporations to Lyndon in connection with this Agreement and the
transactions contemplated hereby are true and complete in all material
respects. The information furnished by or on behalf of Accel to Lyndon in
connection with this Agreement and the transactions contemplated hereby does
not, in light of the circumstances under which the statements contained in the
information so furnished were made, contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
contained therein not false or misleading.
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2.27 Employee Compensation. Schedule 2.27 lists all employees of ALIC,
Dublin and ANSC (other than employees who are expected to continue to be
employed by Accel or ANIC following the Closing) setting forth their respective
salaries, whether they are employed under contract or at will, and the
expiration date of each contract.
2.28 Authority of Accel. Accel has the right, power and authority to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby to be performed by Accel. The execution and
delivery of this Agreement by Accel, the performance by Accel of its
obligations hereunder and the consummation by Accel of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of Accel other than approval by its stockholders. This Agreement
has been duly executed and delivered by Accel and (assuming due authorization,
execution and delivery by Lyndon) upon receipt of the requisite approval by its
stockholders, and the necessary approvals by governmental authorities, bureaus
and agencies, this Agreement will constitute a legal, valid and binding
obligation of Accel enforceable against Accel in accordance with its terms
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors of
insurance companies, rights of creditors generally or by general principles of
equity.
2.29 Title to Target Shares. Accel owns of record and beneficially, all of
the Target Shares, free and clear of all Liens and, upon delivery to Lyndon of
the certificates evidencing such Target Shares duly endorsed for transfer to
Lyndon, Lyndon will acquire good, valid, indefeasible and marketable title
thereto, free and clear of any and all liens.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LYNDON
Lyndon represents and warrants to Accel that:
3.1 Organization. Lyndon Life Insurance Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Missouri and Lyndon Insurance Group, Inc. is a corporation duly organized,
validly existing and in good standing under the laws of the State of Missouri.
Each such corporation has all requisite corporate power and authority to enter
into this Agreement, to own, lease and operate its properties, to carry on its
business as now being conducted and to consummate the transactions contemplated
hereby, and is duly qualified and licensed as a foreign corporation to transact
business and is in good standing in each jurisdiction in which it is required
to be so qualified or authorized.
3.2 Authority. This Agreement has been duly authorized, executed and
delivered by Lyndon and is a valid and binding agreement of Lyndon enforceable
against Lyndon in accordance with its terms, except as enforceability may be
limited by applicable
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bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
rights of creditors of insurance companies, rights of creditors generally, or
by general principles of equity.
3.3 Investment Purposes. Lyndon is acquiring the Target Shares for its own
account solely for the purpose of investment within the contemplation of the
Securities Act and not with a view to any distribution thereof. Lyndon is aware
and understands that the Target Shares have not been registered under the
Securities Act or under the securities laws of any state, that any transfer of
the Target Shares by Lyndon shall be restricted under the provisions of such
act and such state laws, and that the certificates representing the Target
Shares will bear legends to such effect. Lyndon possesses such knowledge and
experience in financial and business matters generally and with respect to the
businesses of the Target Corporations so as to enable it to evaluate the risks
and merits of its purchase of the Target Shares.
3.4 No Breach or Conflict. The authorization, execution, delivery and
performance of this Agreement by Lyndon will not (a) violate any provision of
its certificate of incorporation, by-laws or other organizational documents,
(b) violate, conflict with or result in the breach or termination of, or
otherwise give any Person the right to terminate, any agreement to which it is
a party, or (c) conflict with or violate any statute, law, rule or regulation
or Governmental Order applicable to Lyndon which would have a material adverse
effect on the ability of Lyndon to consummate the transactions contemplated by
this Agreement.
3.5 Ability to Perform. Lyndon has, and will continue to have at the time
of Closing, adequate cash resources or financing commitments from third parties
to enable Lyndon to pay the Purchase Price at Closing.
3.6 Governmental and Other Authorizations; Notices and Consents. (a) The
execution, delivery and performance of this Agreement by Lyndon do not and will
not require any consent, approval, authorization or other order of, action by,
filing with, or notification to, any governmental authority, bureau or agency
or any other third party except (a) as required by the insurance laws of the
State of Ohio, the State of Missouri and any other state in which Accel, Lyndon
or the Target Corporations are doing business, (b) the notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act") and (c) as set forth in Schedule 2.5(a), (b) and (c).
(b) Lyndon does not have knowledge of any facts or circumstances
pertaining to Lyndon or its affiliates which are reasonably likely to prevent
the parties hereto from obtaining the governmental consents and approvals
contemplated by Sections 2.5 and 3.6.
3.7 Litigation. Except as disclosed in a writing given to Accel by Lyndon
on a date prior to the execution of this Agreement, no claim, action,
proceeding or investigation is pending or, to the best knowledge of Lyndon
after due inquiry, threatened,
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which seeks to delay or prevent the consummation of, or which could reasonably
be expected to materially adversely affect Lyndon's ability to consummate, or
which could otherwise affect the legality, validity or enforceability of, the
transactions contemplated by this Agreement.
3.8 Brokers' Fees. There is no broker, finder or other intermediary
retained by Lyndon or any of its affiliates who might be entitled to a fee or
commission in connection with the transactions contemplated hereby.
ARTICLE 4
CONDUCT PENDING CLOSING
From the date hereof and until the Closing Date, except as otherwise
provided by this Agreement or as agreed by Lyndon in writing, Accel hereby
covenants and agrees that it shall comply and it shall cause ALIC, Dublin and
ANSC to comply with each of the following covenants:
4.1 Conduct of the Business. ALIC, Dublin and ANSC shall each, consistent
with past practice, conduct its business in the ordinary course, maintain
adequate insurance, preserve intact its business organization and employees,
maintain satisfactory relationships with its independent agents, reinsurers and
others having business relationships with it, maintain its books and records in
its usual manner and not make any change in its financial reporting, or
accounting practices or policies unless required by GAAP or SAP, or in its
reserving practices or policies.
4.2 Certain Prohibited Activities. Neither ALIC, Dublin nor ANSC shall (i)
issue, sell or deliver, or agree or take any steps towards an agreement to
issue, sell or deliver, any shares of its capital stock or any other security
(whether authorized and unissued or held in treasury), or grant or issue, or
agree to grant or issue, any subscription, option, warrant or other right
calling for the issue, sale or delivery thereof; (ii) except as permitted by
Section 4.11 hereof, declare or pay any dividend or distribution on any shares
of its capital stock; (iii) purchase, redeem or otherwise acquire any shares of
its capital stock; (iv) make any change in any pension or employee benefit plan
or arrangement, or any collective bargaining agreement, or enter into, amend,
modify or terminate any arrangement or agreement with any officer, director,
employee, independent contractor, representative or agent thereof; (v) create,
incur, assume or guarantee any indebtedness for borrowed money; (vi) make any
capital expenditure, or purchase, lease or license any real or personal
property which exceed $50,000 in the aggregate; (vii) sell or otherwise dispose
of or pledge any of its assets (tangible or intangible) or cancel any debts or
claims (including, without limitation, accounts receivable) owing to it, except
in the ordinary course of business which does not otherwise violate this
Agreement; (viii) merge or consolidate with any other Person or acquire control
of all or any substantial portion of the assets of any other Person or take any
steps incident to, or in furtherance of, merging or consolidating with or
acquiring
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control of all or any substantial portion of the assets of any other Person,
whether by entering into an agreement providing therefor or otherwise; (ix)
make or cause to be made any alteration in the manner of keeping its books,
accounts or records or in the accounting practices and principles therein and
theretofore reflected, including its reserving practices and policies, except
as required by law or changes in the Insurance Law of each applicable state;
(x) effect or agree to any change in its Articles of Incorporation, Code of
Regulations or By-Laws (except with respect to ALIC as described in Section
7.1(r)); (xi) settle or agree to settle any claim, action, suit or proceeding
(other than the payment of insured claims in the ordinary course of business)
involving the payment or receipt by the applicable corporation of more than
$25,000, individually, or $100,000, in the aggregate; (xii) enter into any
other transaction or agreement which is not in the ordinary and usual course of
business; or (xiii) agree or commit to do any of the foregoing.
4.3 Reports; Taxes; Etc. ALIC, Dublin and ANSC shall each duly and timely
file, or cause to be duly and timely filed, all filings, declarations, reports
or returns required to be filed with federal, state and local authorities and
pay, when due all federal and state, foreign and local taxes, assessments and
governmental charges lawfully levied or assessed.
4.4 Access to Information. Accel, ALIC, Dublin and ANSC shall each afford
Lyndon, its counsel, financial advisors, auditors and other authorized
representatives full access, upon reasonable prior notice and during normal
business hours and subject to reasonable supervision by Accel and its agents,
to the offices, properties, books and records of each of ALIC, Dublin and ANSC
and to each of ALIC, Dublin and ANSC employees, agents and independent
accountants (provided that Lyndon shall use reasonable efforts to minimize any
disruption to the business of Accel and the Target Corporations), and shall
furnish to Lyndon, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to each of ALIC, Dublin and ANSC as may reasonably be
requested, and shall instruct its employees, counsel and financial advisors to
cooperate with Lyndon in its investigation of each of ALIC, Dublin and ANSC.
4.5 Further Assurances. Each of Accel, ALIC, Dublin and ANSC shall do or
cause to be done such further acts and things and deliver or cause to be
delivered to Lyndon such additional assignments, agreements, powers and
instruments as Lyndon may reasonably require or deem reasonably advisable to
carry into effect the purposes of this Agreement or the other agreements to be
entered into in connection with the transactions contemplated hereby or to
better assure and confirm the rights, powers and remedies of Lyndon hereunder
and thereunder.
4.6 Tax Adjustments. Each of ALIC, Dublin and ANSC shall promptly notify
Lyndon of all proposed adjustments contained in examination reports received by
the Company from the Internal Revenue Service or any state, local or foreign
tax authority to any Return relating to adjustment for tax years prior to and
including the Closing Date which could materially adversely affect each of
ALIC, Dublin or ANSC or Lyndon and shall provide to Lyndon and its
representatives such information and records as they may
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reasonably request with respect to such adjustments. Lyndon shall have the
right to require and to participate in, and to pay its own expenses relating
to, the contest of all such proposed adjustments which might adversely affect
Lyndon by the creation of adverse precedent or otherwise.
4.7 No "Shopping". Each of Accel, ALIC, Dublin and ANSC, shall not, except
as permitted below, (i) sell or arrange for the acquisition of any capital
stock or any other security of, or the business or all or any substantial
portion of the assets of, each of ALIC, Dublin and ANSC, (ii) negotiate,
solicit or encourage, or authorize any Person to solicit from any other Person,
any proposals relating to the disposition of the business or assets of each of
ALIC, Dublin and ANSC or the acquisition of securities of each of ALIC, Dublin
and ANSC or a merger or combination of each of ALIC, Dublin and ANSC with any
Person other than Lyndon or an affiliate of Frontier Insurance Group, Inc., or
(iii) make available, or permit to be made available, any information
concerning each of ALIC, Dublin and ANSC to any Person for the purpose of
effecting or causing, or assisting with, a disposition of all or any
substantial portion of the assets of each of ALIC, Dublin and ANSC, or any of
the securities of each of ALIC, Dublin and ANSC (other than to Lyndon).
Notwithstanding anything to the contrary contained in this Section 4.7 or in
any other provision of this Agreement, Accel, its Board of Directors and its
officers, representatives and agents may furnish information to, and
participate in discussions or negotiations with, a third party (the "Third
Party") who submits any good faith purchase offer which was not directly or
indirectly solicited after the date of this Agreement by Accel, the Target
Companies or any of their respective affiliates to acquire the capital stock,
business or assets of the Target Companies pursuant to a merger, consolidation
or other business combination, sale of shares of capital stock or similar
transaction, if Accel's Board of Directors determines in good faith, after
consulting with legal counsel, that such furnishing of information and
participation in discussions are required in the exercise of the Board of
Directors' fiduciary duties under applicable law. Accel shall promptly advise
Lyndon when it determines that it will have negotiations with a Third Party,
including providing Lyndon such information concerning the Third Party as shall
not be inconsistent with the terms of any agreement with the Third Party with
respect to the subject of discussions or negotiations. To the extent this
Agreement has not otherwise been terminated, Accel shall be entitled to execute
a definitive agreement with a Third Party relating to the acquisition proposal
of such Third Party and to terminate this Agreement so long as Accel pays
Lyndon a fee of $750,000.
4.8 Governmental Notification and Approvals. Each of ALIC, Dublin and ANSC
shall promptly prepare, file and diligently pursue with the appropriate
governmental agencies all documentation and information required by law or
requested by each such agency to be filed by each of ALIC, Dublin and ANSC to
permit the consummation of the transactions contemplated hereby, including any
filings required to be made or documentation and further information requested
under the insurance laws of Ohio.
4.9 Regulatory Matters. Each of ALIC, Dublin and ANSC shall prepare and
file promptly, with Lyndon's cooperation, all applications and notices to
obtain all state regulatory approvals required to be obtained by ALIC, Dublin
and ANSC and shall use all
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reasonable efforts to process such applications and notices and obtain the
requisite consents necessary to consummate the transactions contemplated
hereby.
4.10 Cause Conditions to be Satisfied. Accel will use its reasonable best
efforts to cause all of the conditions described in Section 7.1 of the
Agreement to be satisfied.
4.11 Special Distribution
(i) Prior to Closing, the Target Corporations shall declare and pay
their shareholders, as they shall determine (in the exercise of their
reasonable judgment), a special distribution (the "Special Distribution") equal
to the estimated amount (the "Estimated GAAP Surplus Amount") by which the
Target Corporations' Combined GAAP Equity (as defined below) as of the Closing
Date is expected to exceed $31.6 million. The term "Target Corporations'
Combined GAAP Equity" shall mean the total stockholders' equity of each of the
Target Corporations as determined in accordance with GAAP, consistent with past
practices, as of December 31, 1997. Accel shall base the amount of such Special
Distribution on the combined September 30, 1997 unaudited balance sheets of the
Target Companies (without giving effect to the Special Distribution) and a
written statement, certified by the President and Chief Financial Officer of
Accel, setting forth that the Estimated GAAP Surplus Amount has been determined
in accordance with the provisions of this Section 4.11 and setting forth the
components of the Special Distribution and stating that the Special
Distribution is equal to the Estimated GAAP Surplus Amount. There shall be no
goodwill or other intangible assets reflected in the Target Corporations'
Combined GAAP Equity.
(ii) Accel shall, by March 31, 1997, obtain from KPMG Peat Marwick LLP
and provide to Lyndon an audited balance sheet (the "Closing Date Balance
Sheet") as of December 31, 1997 for the Target Corporations (giving effect to
the Special Distribution) and a written statement of such firm setting forth
the Target Corporations' Combined GAAP Equity as of December 31, 1997 as set
forth on the Closing Date Balance Sheet (the "Target Corporations' Combined
GAAP Equity"). The Closing Date Balance Sheet shall be based on GAAP and
accounting practices consistent with the Combined Audited GAAP Financial
Statements (as defined in Section 2.7(d)).
(iii) If the Target Corporations' Combined GAAP Equity exceeds $31.6
million, the Purchase Price shall be increased by, and Lyndon shall pay Accel
125 days after the Closing Date, an amount equal to the amount by which the
Target Corporations' Combined GAAP Equity exceeds $31.6 million, by wire
transfer to a bank account designated in writing by Accel, in immediately
available funds. If the Target Corporations' Combined GAAP Equity is less than
$31.6 million, the Purchase Price shall be decreased by, and Accel shall pay
Lyndon 125 days after the Closing Date, an amount equal to the difference
between $31.6 million and the Target Corporations' Combined GAAP Equity, by
wire transfer to a bank account designated in writing by Lyndon, in immediately
available funds.
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4.12 Non-Piracy Agreements. Accel shall cause the non-piracy agreements
attached hereto as Exhibit A to be distributed to all employees of the Target
Companies for execution by such employees.
4.13 Employee List. Four weeks prior to the Closing Date, Lyndon will
forward a list to Accel setting forth the employees of the Target Corporations
that will continue to be employed by Lyndon or one of the Target Corporations
following the Closing. Accel shall either terminate or employ any employees of
the Target Corporations that are not included on the aforementioned list at
Accel's sole discretion and expense.
4.14 Credit Life System. Accel shall diligently work towards the
completion of the Year 2000 work and other clean-up work on the Credit Life
System (the "Credit Life Work") prior to Closing, and shall continue the Credit
Life Work until it is completed, at Accel's expense, after the Closing. Such
work shall be completed prior to May 1, 1998. Any costs incurred by Lyndon in
causing such work to be completed after May 1, 1998 shall be reimbursed by
Accel within fifteen (15) days of Lyndon's invoice therefor, and shall not be
limited by the "indemnity basket" described in Section 11.1.
ARTICLE 5
COVENANTS OF LYNDON
Lyndon hereby covenants and agrees that:
5.1 Confidentiality. Lyndon shall, and shall cause its employees,
officers, directors, accountants, attorneys, agents and affiliates to: (i)
treat as confidential all information provided by Accel or any Target
Corporation to Lyndon or its agents with respect to Accel or any Target
Corporation, including, without limitation, information concerning their
respective assets, properties, liabilities, employees, customers, agents,
businesses, contracts, agreements, results of operations, conditions (financial
or otherwise), prospects, business plans, etc., which are not otherwise
publicly available (the "Confidential Information"); (ii) not disclose any
Confidential Information to any Person or use, permit or assist any Person in
using any Confidential Information, except to the extent necessary as a benefit
to Lyndon in the performance of its due diligence in connection with the
transactions contemplated by this Agreement, and not for any other purpose; and
(iii) in the event that the transactions contemplated hereby are not
consummated for any reason whatsoever, promptly deliver to Accel all
Confidential Information and promptly deliver or destroy all analyses,
compilations, studies or other documents or records prepared by Lyndon or its
employees, officers, directors, accountants, attorneys, agents and affiliates
using Confidential Information without retaining any copies thereof. Upon
destruction of the aforementioned analyses, compilations, studies or other
documents, Lyndon agrees to give Accel a written certification signed by its
President to the effect that to the best of his knowledge such destruction has
been accomplished and is complete. It is understood and agreed that money
damages will not be a sufficient remedy for any breach of this Section
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5.1 and that Accel shall be entitled to specific performance and injunctive or
other equitable relief as a remedy for any breach of this Section 5.1. In the
event of litigation relating to this Section 5.1, if a court of competent
jurisdiction determines in a final nonappealable order that Lyndon has breached
this Section 5.1, then Lyndon shall be liable and pay to Accel the reasonable
legal fees Accel has incurred in connection with such litigation, including any
appeal therefrom, and otherwise, Accel shall be liable and pay to Lyndon the
reasonable legal fees Lyndon has incurred in defending any such litigation,
including any appeal therefrom.
5.2 Regulatory Matters. Lyndon, with Accel's cooperation will promptly
prepare and file all applications, notices, consents and other documents
necessary or advisable to obtain all state regulatory approvals, promptly file
all supplements or amendments thereto, and use all reasonable efforts to obtain
such regulatory approvals, as promptly as practicable, necessary to consummate
the transactions contemplated hereby.
5.3 Cause Conditions to be Satisfied. Lyndon will use its reasonable best
efforts to cause all of the conditions described in Section 7.2 of the
Agreement to be satisfied.
ARTICLE 6
COVENANTS OF ACCEL AND LYNDON
Accel hereby covenants and agrees to use reasonable efforts fulfill the
following covenants, and shall cause ALIC, Dublin and ANSC to fulfill the
following in covenants, and Lyndon hereby covenants and agrees to use
reasonable efforts fulfill the following covenants:
6.1 Necessary Assurances. To take, or cause to be taken, all actions and
to do, or cause to be done, all things reasonably necessary or desirable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement expeditiously, including executing and delivering such further
documents, certificates, applications and agreements as may be reasonably
necessary or desirable.
6.2 Filings and Consents. To cooperate (i) with respect to any filing with
any governmental body, agency, official or authority required in connection
with this Agreement or the consummation of the transactions contemplated hereby
and (ii) with respect to any actions, consents, approvals or waivers required
to be obtained from parties to any material contracts in connection with this
Agreement or the consummation of the transactions contemplated hereby.
6.3 Employee Benefit Plans. As of the Closing Date, Accel and Lyndon each
agree to cooperate in causing such actions to be taken as would result in ALIC,
Dublin, and ANSC ceasing to be participating employers as of the Closing Date
in Accel's and its
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ERISA Affiliates' Employee Benefit Plans in accordance with the requirements of
ERISA. Accel and Lyndon further agree that, except for ALIC, Dublin and ANSC
post-Closing Date contributions (and liabilities therefor) to such Employee
Benefit Plans for the time periods preceding the Closing Date, neither ALIC,
Dublin, nor ANSC shall thereafter be responsible for making any contributions
to, or have any other liability with respect to, such Employee Benefit Plans.
As used herein, the term "Employee Benefit Plan" means any (a) deferred
compensation or retirement bonus, stock option or similar plan or arrangement,
(b) defined contribution retirement plan or arrangement which is an Employee
Pension Benefit Plan, (c) defined benefit retirement plan or arrangement which
is an Employee Pension Benefit Plan, (d) any Multiemployer Plan, or (e)
Employee Welfare Plan; "ERISA Affiliate" means each entity which is treated as
a single employer with a party for purposes of Code ss.414; "Employee Pension
Benefit Plan" has the meaning set forth in ERISA ss.3(2), but excludes a
Multiemployer Plan; "Employee Welfare Benefit Plan" has the meaning set forth
in ERISA ss.3(1); and "Multiemployer Plan" has the meaning set forth in ERISA
ss.3(37).
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Lyndon. The obligations of Lyndon
hereunder are conditioned upon the following:
(a) All warranties and representations of Accel contained in this
Agreement or in any Schedule or instrument delivered hereunder or otherwise
made in connection with the transactions contemplated hereby shall be true and
correct in all material respects, on and as of the Closing Date, with the same
force and effect as if made on and as of the Closing Date.
(b) Accel shall have performed and complied in all material respects
with all of the covenants and agreements required by or pursuant to this
Agreement, and any Schedule or instrument delivered hereunder, to be performed
or complied with by Accel on or prior to the Closing Date.
(c) No suit, action, investigation or proceeding before or by any
federal or state court or governmental or regulatory authority shall have been
commenced, and no suit, action or proceeding by any governmental or regulatory
authority shall have been threatened, against Accel or Lyndon seeking to
restrain, prevent or modify the transactions contemplated hereby or seeking
material damages in connection with any of such transactions and no order of
any court or administrative agency to restrain, prohibit or nullify the
consummation of the transactions contemplated herein shall be outstanding as of
the Closing Date.
(d) All governmental authorities (including, without limitation, the
Ohio Department of Insurance) having jurisdiction, to the extent required by
law, shall have
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consented to or approved the consummation of the transactions contemplated by
this Agreement.
(e) All documents delivered and action taken pursuant hereto shall be
reasonably satisfactory in form and substance to Lyndon and its counsel.
(f) The ALIC, Dublin and ANSC September 30, 1997 GAAP Financial
Statements and the ALIC September 30, 1997 SAP Financial Statements shall have
been delivered to Lyndon at least fifteen days prior to the Closing Date, and
in no event later than November 30, 1997.
(g) The Board of Directors of Accel, ALIC, Dublin and ANSC shall have
approved the transactions contemplated by this Agreement and the stockholders
of Accel shall have approved the sale of the Target Shares and ANIC assets
contemplated by this Agreement and the Asset Purchase Agreement.
(h) [Not Used].
(i) All of the independent agents of each of ALIC and ANSC shall have
agreed to maintain their relationships with each applicable entity following
the Closing Date unless notice has been given by Accel to Lyndon of any
indication otherwise. Lyndon acknowledges that independent agencies are
routinely added and terminated in the regular course of each of ALIC's and
ANSC's businesses.
(j) Lyndon shall have been satisfied with the results of its due
diligence review of Dublin and of the assets to be purchased from ANIC, and
that the September 30, 1997 GAAP Financial Statements of each of ALIC, Dublin
and ANSC shall indicate no material adverse change in the results of operations
or financial condition of such companies taken as a whole from the June 30,
1997 unaudited financial statements previously provided to Lyndon.
(k) Each of Accel, ALIC, Dublin and ANSC shall have made any and all
filings required by applicable law or regulation to be made with any and all
governmental authorities and state insurance departments in connection with the
consummation of the transactions contemplated herein, including the
notification required by the HSR Act and any requested or supplementary filings
thereto in such manner and at such places as are specified in the HSR Act and
the applicable rules and regulations thereunder, and any other notifications
to, or filings with, regulatory authorities.
(l) Accel and the Target Corporations shall have conveyed to Lyndon
all the right, title and interest they each possess to use the servicemarks
"Costguard" and "Loanguard" pursuant to two Assignments of Federal Mark
Registration substantially in forms of Exhibit B hereto and have licensed to
Lyndon the right to use the servicemarks ACCELERATION, the Inverted "V" Design,
and ACCELERATION and the Inverted "V" Design
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heretofore used in connection with the businesses of each of the Target
Corporations to Lyndon pursuant to a License Agreement, substantially in the
form of Exhibit C hereto.
(m) Accel shall have made a timely election under Section 338(h)(10)
of the Code, if required to be made prior to Closing.
(n) [Not Used]
(o) The Target Corporations' Combined GAAP Equity shall be not less
than Thirty One Million Six Hundred Thousand Dollars ($31,600,000) as of
December 31, 1997 in accordance with the provisions of Section 4.11 hereof.
(p) Any and all intercompany service agreements and tax-sharing
agreements between any of Accel, ALIC, Dublin, and ANSC shall have been
terminated.
(q) The Lincoln National Treaty for insurance policies with effective
dates of December 31, 1995 and prior, shall have been terminated.
(r) The ALIC Articles of Incorporation and Code of Regulations shall
have been amended to eliminate the provisions requiring director share
ownership and Ohio residential requirements.
(s) Accel shall have entered into a Systems Use Agreement with the
Target Corporations pursuant to which the Target Corporations shall be entitled
to utilize the IBM AS 400 system of Accel as the Target Corporations' mainframe
computer and programming support, at commercially reasonable rates to be agreed
upon by Lyndon and Accel.
(t) The Light Pen system, including all relevant documentation, shall
have been delivered to Lyndon or one of the Target Corporations, as directed by
Lyndon.
(u) The Lincoln National Reinsurance Agreement with ALIC dated January
1, 1996, reinsuring policies with effective dates of January 1, 1996 and
thereafter, shall not have been terminated.
(v) Accel shall have delivered to Lyndon the Normalized Line of
Business Results Report for the nine months ended September 30, 1997, prepared
on a basis consistent with the Normalized Line of Business Results Report
previously delivered to Lyndon, which shall show no material adverse change
from the results reported as of June 30, 1997.
(w) Accel shall have caused ALIC to enter into a lease for the
premises it currently leases on terms comparable to its current lease for the
remaining term of the current lease, in form and substance reasonably
acceptable to Lyndon and its counsel.
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(x) [Not Used].
(y) Any ALIC and ANSC obligations to indemnify their respective
officers shall have been expressly assumed by Accel on or before the Closing
Date for actions occurring prior to the Closing Date.
(z) Accel shall have agreed to provide continued cooperation after
Closing on any litigation matters relating to any of the Target Corporations.
(aa) Lyndon shall have received at the Closing the opinion of Nicholas
Z. Alexander, Esq., Senior Vice President and General Counsel for Accel, dated
as of the Closing Date, in form and substance reasonably satisfactory to
counsel for Lyndon, to the effect that (a) ALIC is a corporation duly
organized, validly existing and in good standing under the laws of Ohio and is
duly qualified to do business and is in good standing in each jurisdiction in
which the ownership of its properties or the conduct of its business makes such
qualification necessary, Dublin is a corporation duly organized, validly
existing and in good standing under the laws of the Turks and Caicos Islands
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business makes such qualification necessary, and ANSC is a corporation duly
organized, validly existing and in good standing under the laws of Ohio and is
duly qualified to do business and is in good standing in each jurisdiction in
which the ownership of its properties or the conduct of its business makes such
qualification necessary; (b) the authorized capital stock of ALIC consists of
500 shares, of which 400 are issued and outstanding, the authorized capital
stock of Dublin consists of 5,000 shares, of which 5,000 are issued and
outstanding and the authorized capital of ANSC consists of 500 shares, of which
5 are authorized and outstanding; (c) all of the issued and outstanding shares
of capital stock of ALIC, Dublin and ANSC are owned by Accel; (d) Accel has all
the requisite corporate power and authority to enter into and perform this
Agreement; (e) this Agreement has been duly authorized, executed and delivered
by Accel, and is a valid and binding obligation of Accel, and each document
attached hereto as an Exhibit has been duly authorized, executed and delivered
by Accel or each of the Target Corporations, as applicable, and each such
agreement is a valid and binding obligation of Accel, subject to general
principles of equity and applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors rights
generally from time to time in effect; (f) the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not as of the Closing Date (i) violate any judicial or administrative
order, judgement or decree entered against Accel or any of the Target
Corporations, (ii) conflict with any judgment or decree entered against Accel
or any of the Target Corporations, or (iii) conflict with, result in a breach
of, constitute a default under or accelerate or permit the acceleration of the
performance required by any material mortgage, indenture, loan agreement, other
debt instrument or any other material instrument or agreement known to such
counsel to which any of Accel or any of the Target Corporations is a party or
to which any of its assets is subject; (g) to such counsel's knowledge there
are no pending legal proceedings to which any of Accel or any of the Target
Corporations is a party or of which property of Accel or any of the Target
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Corporations is subject and, insofar as is known to such counsel, no such
proceeding is threatened. In rendering such opinion, such counsel may
reasonably rely on certificates of officers of Accel opinions of other counsel
and such other evidence as he may deem necessary or desirable, provided that
counsel for Accel shall state that such certificates and opinions are
satisfactory in form and substance for such purpose.
(ab) The HSR Act waiting period shall have expired or been terminated.
(ac) The transactions contemplated by the Asset Purchase Agreement
shall have closed concurrently with the closing of the transactions
contemplated by this Agreement.
7.2 Conditions to Obligations of Accel. The obligations of Accel hereunder
are conditioned upon the following:
(a) All warranties and representations of Lyndon contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
(b) Lyndon shall have performed and complied with all of the covenants
and agreements required by or pursuant to this Agreement, and any Schedule or
instrument delivered hereunder, to be performed or complied with by Lyndon on
or prior to the Closing Date.
(c) No suit, action, investigation or proceeding before or by any
federal or state court or governmental or regulatory authority shall have been
commenced, and no suit, action or proceeding by any governmental or regulatory
authority shall have been threatened, against Accel or Lyndon seeking to
restrain, prevent or modify the transactions contemplated hereby or seeking
material damages in connection with any of such transactions and no order of
any court or administrative agency to restrain, prohibit, or nullify the
consummation of the transactions contemplated herein shall be outstanding as of
the Closing Date.
(d) All governmental authorities (including without limitation the
Missouri Department of Insurance and the Ohio Department of Insurance) having
jurisdiction, to the extent required by law, shall have consented to or
approved the consummation of the transactions contemplated by this Agreement
and by the Asset Purchase Agreement.
(e) All documents delivered and action taken pursuant hereto and
pursuant to the Asset Purchase Agreement shall be reasonably satisfactory in
form and substance to Accel, and its counsel.
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(f) Accel shall have received at the Closing the opinion of Epstein
Becker & Green, P.C., counsel to Lyndon, dated as of the Closing Date, in form
and substance reasonably satisfactory to counsel for Accel, to the effect that
(a) Lyndon is duly authorized to enter into and perform this Agreement and (b)
this Agreement has been duly authorized, executed and delivered by Lyndon, and
is a valid and binding obligation of Lyndon, and each agreement attached hereto
as an Exhibit has been duly authorized, executed and delivered by Lyndon, and
each such agreement is a valid and binding obligation of Lyndon enforceable
against Lyndon in accordance with its terms, subject to general principles of
equity and applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of the rights of creditors of insurance
companies or creditors rights generally from time to time in effect.
(g) The HSR Act waiting period shall have expired or been terminated.
(h) The transactions contemplated by the Asset Purchase Agreement
shall have closed concurrently with the closing of the transactions
contemplated by this Agreement.
(i) Lyndon shall have made any and all filings required by applicable
law to be made with any and all governmental authorities and state insurance
departments in connection with the consummation of the transactions
contemplated herein, including the notification required by the HSR Act and any
requested or supplementary filings thereto in such manner and at such places as
are specified in the HSR Act and the applicable rules and regulations
thereunder, and any other notifications to, or filings with, regulatory
authorities.
ARTICLE 8
CLOSING
8.1 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place effective as of December 31, 1997
(the "Closing Date") at the offices of Epstein Becker & Green, P.C., 250 Park
Avenue, New York, New York 10177-0077. The actual Closing shall take place
within five (5) business days after the satisfaction or waiver of the last
condition to Closing, unless otherwise agreed by the parties, and in no event
later than March 31, 1998. If Closing shall not have occurred by March 31,
1998, then either party may terminate this Agreement by written notice to the
other, without liability or penalty.
8.2 Deliveries by Accel. At the Closing, Accel shall deliver to Lyndon the
following:
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(a) Certificates representing the Target Shares, duly endorsed for
transfer to Lyndon or its designee.
(b) The minute book, stock book and stock ledger of each of ALIC,
Dublin and ANSC.
(c) A copy of the Articles of Incorporation of each of ALIC and ANSC
certified as of a date not more than fourteen (14) days prior to the Date of
Closing by the Secretary of State of the State of Ohio and of the Articles of
Incorporation of Dublin certified by the appropriate government official of the
Turks and Caicos Islands as of a date not more than thirty (30) days prior to
the Closing Date.
(d) Good standing certificates, (i) dated as of a date not more than
fourteen (14) days prior to the Closing Date, as to the corporate existence and
good standing of ALIC and ANSC certified by the Secretary of State of the State
of Ohio for ALIC and ANSC; (ii) dated not more than thirty (30) days prior to
the Closing Date certified by the appropriate government official of the Turks
and Caicos Islands for Dublin; (iii) as to each of ALIC, Dublin and ANSC's
authorization to conduct business as a foreign corporation in good standing
certified by the appropriate authorities of each applicable jurisdiction if
any; and (iv) as to ALIC, the existing insurance licenses or certificates of
authority issued by the department of insurance of each jurisdiction in which
ALIC is authorized to transact business as an insurance company.
(e) The written resignations of the directors and officers of each of
ALIC, Dublin and ANSC as requested by Lyndon.
(f) The License Agreement and Servicemark Assignments referred to in
Section 7.1(l), executed by Accel.
(g) Systems Use Agreement executed by Accel and the Target
Corporations.
(h) The opinion of Nicholas Z. Alexander, General Counsel of Accel.
8.3 Deliveries by Lyndon. At the Closing, Lyndon shall deliver to Accel
the following:
(a) The Purchase Price by wire transfer of immediately available
funds.
(b) The opinion of Epstein Becker & Green, P.C., counsel to Lyndon.
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(c) A true and complete copy, certified by the Secretary or an
Assistant Secretary of Lyndon, of the resolutions duly and validly adopted by
the Board of Directors of Lyndon evidencing its authorization of the execution
and delivery of this Agreement and the other agreements to be executed by
Lyndon as contemplated hereby and the consummation of the transactions
contemplated hereby.
(d) A certificate of the Secretary or an Assistant Secretary of Lyndon
certifying the names and signatures of the officers of Lyndon authorized to
sign this Agreement and the other documents to be delivered hereunder.
(e) The License Agreement and Servicemark Assignments referred to in
Section 7.1(l), executed by Lyndon.
ARTICLE 9
CERTAIN COVENANTS
9.1 Cooperation and Records Retention. Lyndon shall cause each of ALIC,
Dublin and ANSC to retain, following the Closing Date and until the applicable
statutes of limitations (including any extensions) have expired, copies of all
Returns, supporting work schedules, and other records or information that may
be relevant to such Returns for all tax periods or portions thereof ending
before or including the Closing Date hereof and shall not destroy or otherwise
dispose of any such records without first providing Accel with a reasonable
opportunity to review and copy the same. In the event of any audit or
examination by the Internal Revenue Service or other taxing authority or any
judicial or administrative proceedings with respect to the tax liability of
each of ALIC, Dublin and ANSC for a period that includes the date hereof or any
prior date, Lyndon or Accel, as the case may be, shall notify the other
promptly thereof and each shall provide the other with such assistance as may
reasonably be requested, any records or other information that may be relevant
thereto and copies of any final determination thereof.
9.2 Financial Accounting Matters. Accel shall provide Lyndon with access
to Accel's general ledger and accounts payable system for a reasonable
transition period, not to exceed nine months, following the Closing for the
purpose of allowing Lyndon to maintain the Target Companies' financial records
in an orderly fashion. Lyndon shall provide Accel and its auditors with access
to all books and records of the Target Companies for the purpose of allowing
Accel to prepare the Combined Audited GAAP Financial Statements and the Closing
Date Balance Sheet.
9.3 Non-Competition. For a period of three years from the Closing Date,
Accel and its subsidiaries shall not, and shall cause each of its controlled
affiliates not to, directly or indirectly (i) engage in activities or
businesses which are substantially in competition with the current business of
the Target Corporations; or (ii) perform any action, activity, or course of
conduct which is substantially detrimental to the business or
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businessreputation of the Target Corporations, including (A) soliciting,
recruiting or hiring any employees of any of the Target Corporations or persons
who have worked for any of the Target Corporations (except as contemplated by
this Agreement) and (B) soliciting or encouraging any employee of any of the
Target Corporations to leave the employment of any of the Target Corporations;
provided, however, that nothing herein shall prohibit Accel (or any subsidiary
or affiliate) from owning not more than 1% of the stock or other securities of
any such corporation, which securities are publicly traded over-the-counter or
on a national securities exchange, provided neither Accel nor any subsidiary or
affiliate directly or indirectly renders any services or engage in any
activities of any kind for or on behalf of the issuer of such securities or any
affiliate thereof. Lyndon may proceed against Accel and/or any such subsidiary
or affiliate for breach of this covenant by injunction in addition to any other
claim for relief Lyndon may have in law or in equity.
9.4 Use of Former Employees. Lyndon shall make employees of the Target
Corporations available to assist Accel by providing historical information and
data and other information required by Accel to complete financial statements
and other reports and to perform other accounting and reporting functions.
9.5 Delivery of Year-End Financial Statements. Lyndon shall cause the
employees of the Target Corporations to prepare the financial statements of
ALIC, Dublin and ANSC on a GAAP basis for the year ended December 31, 1997 and
the SAP financial statements for ALIC for the year ended December 31, 1997, at
its expense, and to make all the SAP financial statements available for Accel's
review on or before February 18, 1997 and the GAAP financial statements on or
before March 4, 1997.
ARTICLE 10
SURVIVAL
10.1 Survival. All representations and warranties made in this Agreement
shall survive the delivery of this Agreement until December 31, 1999, except,
however, that (i) claims with respect to Taxes may be made by Lyndon until
sixty (60) days following the expiration of the applicable statute of
limitations and (ii) claims based on fraud, willful misrepresentation or with
respect to the representations and warranties set forth in Sections 2.2 and
2.29 may, in each case, be asserted at any time within one year after Lyndon
learns of such fraud, willful misrepresentation or breach.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification.
(a) Indemnification by Accel.
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(i) Accel hereby agrees to indemnify and hold harmless Lyndon from
and against any and all losses, liabilities, damages, obligations, costs and
expenses, including, without limitation, amounts paid in settlement and
reasonable costs and expenses of investigating, preparing to defend and
defending any claim, action, suit, proceeding, inquiry or investigation in
respect thereof (such losses, liabilities, damages, obligations, costs and
expenses as hereinabove set forth, collectively, "Damages") in excess of
$100,000 incurred by Lyndon resulting from, relating to, or arising out of the
inaccuracy of any representation or warranty herein by ALIC, Dublin, ANSC or
Accel or the breach of any covenant herein by ALIC, Dublin, ANSC or Accel;
provided, however, that notwithstanding any provision of this Agreement to the
contrary, the aggregate indemnification obligations and liability of Accel and
ANIC under this Section 11.1(a)(i) and under Section 7.1 of the Asset Purchase
Agreement shall in no event exceed $8 million, and Accel shall have no
obligation whatsoever to further indemnify Lyndon, its affiliates or any other
Person after and in the event that Accel has paid a total of $8 million to
Lyndon or any other Person pursuant to this Section 11.1(a)(i) and/or Section
7.1 of the Asset Purchase Agreement. There shall be no limitation on
indemnification for (i) tax liabilities set forth in Section 11.1(a)(ii), (ii)
breach of the warranties of title set forth in Sections 2.2 and 2.29, or (iii)
actual fraud by Accel or ANIC.
(ii) Accel shall indemnify Lyndon and its affiliates (including the
Target Corporations) and each of their respective officers, directors,
employees, stockholders, agents and representatives and hold them harmless from
all liability (except as reflected on the Closing Date Balance Sheet) (i) for
Taxes of the Target Corporations for the taxable periods ending on or before
the Closing Date and the portion ending on the Closing Date of any taxable
period that includes (but does not end on) such day (the "Pre-Closing Tax
Period"), (ii) for Taxes of Accel or any other corporation (as a result of
Treasury Regulation ss. 1.1502-6(a) or otherwise) which is or has been
affiliated with Accel, (iii) for Taxes resulting from the Section 338(g) and
338(h)(10) elections (or any comparable elections under state or local Taxes)
contemplated by Section 12.1 of this Agreement, (iv) for Taxes with respect to
any pre-Closing period resulting from the Target Corporations ceasing to be
included in the consolidated Federal income Tax return filed by Accel
including, without limitation, any Taxes attributable to the restoration of a
"deferred intercompany transaction" within the meaning of Treasury Regulations
Section 1.1502.13(a)(2) and the recognition of excess loss accounts, (v) for
Taxes imposed on the Target Corporations or any transaction contemplated by
this Agreement to be performed by Accel or the Target Corporations on or prior
to the Closing Date, including but not limited to the Section 338(h)(10)
election and the Special Distribution, and (vi) for reasonable legal fees and
expenses for any item attributable to any item in clause (i), (ii), (iii), (iv)
or (v) above. Notwithstanding the foregoing, Accel shall not indemnify and
hold harmless Lyndon and its affiliates, and each of their respective officers,
directors, employees and agents, from any liability for Taxes attributable to
any action taken after the Closing by Lyndon, any of its affiliates, and each
of their respective officers, directors, employees and agents, (other than any
such action expressly required by applicable law or by this Agreement) (a
"Lyndon Tax Act") or attributable to a breach by Lyndon of its obligations
under this Agreement.
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Lyndon shall, and shall cause the Target Corporations to, indemnify Accel
and its affiliates and each of their respective officers, directors, employees,
stockholders, agents and representatives and hold them harmless from (i) all
liability for Taxes of the Target Corporations for any taxable period ending
after the Closing Date (except to the extent such taxable period began before
the Closing Date, in which case Lyndon's indemnity will cover only that portion
of any such Taxes that are not for the Pre-Closing Tax Period), (ii) all
liability for Taxes attributable to a Lyndon Tax Act or to a breach by Lyndon
of its obligations under this Agreement, and (iii) all liability for reasonable
legal fees and expenses attributable to any item in clause (i) or (ii) above.
In the case of any taxable period that includes (but does not end on) the
Closing Date (a "Straddle Period"):
(i) real, personal and intangible property Taxes ("Property Taxes")
of the Target Corporations for the Pre-Closing Tax Period shall be
equal to the amount of such property Taxes for the entire Straddle
Period multiplied by a fraction, the numerator of which is the number
of days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in the
Straddle Period; and
(ii) the Taxes of the Target Corporations (other than Property
Taxes) for the Pre-Closing Tax Period shall be computed as if such
taxable period ended as of the close of business on the Closing Date.
(b) Indemnification by Lyndon. Lyndon hereby agrees to indemnify and
hold harmless Accel from and against any and all Damages including, without
limitation, amounts paid in settlement and reasonable costs and expenses of
investigating, preparing to defend and defending any claim, action, suit,
proceeding, inquiry or investigation in respect thereof incurred by Accel
resulting from, relating to, or arising out of the inaccuracy of any
representation or warranty herein by Lyndon or the breach of any covenant
contained herein by Lyndon; provided, however, that the aggregate
indemnification obligations and liability of Lyndon to Accel for Damages shall
in no event exceed $8 million.
(c) Procedure. If any action, suit, proceeding or claim shall be
brought against the party to be indemnified by any third party, which action,
suit, proceeding or claim, if determined adversely to the interest of the party
to be indemnified and which would entitle the party to be indemnified to
indemnity pursuant to this Section 11.1(a)(i), the party to be indemnified
shall promptly notify the indemnifying party of the same in writing and, if the
indemnifying party so elects, the indemnifying party shall assume the defense
thereof, including the employment of counsel satisfactory to the party to be
indemnified and the payment of all reasonable costs and expenses in respect
thereof. The party to be indemnified shall have the right to employ counsel
separate from any counsel employed by the indemnifying party in any action,
suit, proceeding or claim and to control
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(or, if the party to be indemnified has elected to allow the indemnifying party
to assume the defense thereof, participate in) the defense thereof and the fees
and expenses of such counsel employed by the party to be indemnified shall be
at the expense of the party to be indemnified. The indemnifying party shall not
be liable for any settlement of any such action, suit, proceeding or claim
effected without his or its written consent (which shall not be unreasonably
withheld), but if settled with the written consent of the indemnifying party,
or if there shall be a final judgment for plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless the party to be
indemnified from and against any loss, liability, obligation, damage, cost or
expense by reason of such settlement or judgment.
(d) Procedures Relating to Indemnification of Tax Claims. If a claim
shall be made by any taxing authority, which, if successful, might result in an
indemnity payment to Lyndon, one of its affiliates or any of their respective
officers, directors, employees, stockholders, agents or representatives
pursuant to Section 11.1(a)(ii), Buyer shall notify Accel in writing of such
claim (a "Tax Claim"). If notice of a Tax Claim is not given to Accel within a
sufficient period of time to allow Accel to effectively contest such Tax Claim,
or in reasonable detail to apprise Accel of the nature of the Tax Claim, Accel
shall not be liable to Lyndon, any of its affiliates or any of their respective
officers, directors employees, stockholders, agents or representatives to the
extent that Accel's position is actually prejudiced as a result thereof.
With respect to any Tax Claim (other than a Tax Claim relating solely to
Taxes of any Target Corporation for a Straddle Period), Accel shall control all
proceedings taken in connection with such Tax Claim (including selection of
counsel) and, without limiting the foregoing, may in its sole discretion pursue
or forego any and all administrative appeals, proceedings hearings and
conferences with any taxing authority with respect thereto, and may, in its
sole discretion, either pay the Tax claimed and sue for a refund where
applicable law permits such refund suits or contest the Tax Claim in any
permissible manner. However, Lyndon can participate in any such Tax Claim at
its own expense. Accel cannot enter any settlement or compromise which affects
the post-closing period without Lyndon's consent, which will not be
unreasonably withheld. Accel and Lyndon shall jointly control all proceedings
taken in connection with any Tax Claim relating solely to Taxes of any Target
Corporation for a Straddle Period.
In no case shall Lyndon, any of the Target Corporations or any of their
respective officers, directors, employees, stockholders, agents or
representatives settle or otherwise compromise any Tax Claim without Accel's
prior written consent, which will not be unreasonably withheld. Neither party
shall settle a Tax Claim relating solely to Taxes of any Target Corporations
for a Straddle Period without the other party's prior written consent.
11.2 Access. In the event that Lyndon delivers to Accel notice of a claim
for indemnification, Lyndon shall provide reasonable access to the books and
records of ALIC, Dublin and ANSC (and of Lyndon in the event Lyndon has
possession of the requisite books and records) with respect to any matters
giving rise to such claim.
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ARTICLE 12
TAX MATTERS
12.1 Tax Election. Lyndon shall (i) timely make an election under Section
338(g) of the Code (and any comparable election under state or local Tax law)
with respect to each of the Target Corporations, (ii) join Accel in timely
making an election under Section 338(h)(10) of the Code (and any comparable
election under state or local Tax law) with respect thereto and (iii) cooperate
with Accel in the completion and timely filing of such elections in accordance
with the provisions of Temporary Regulation ss. 1.338(h)(10) (or any comparable
provisions of state or local Tax law) or any successor provision. Such
cooperation shall include, but not be limited to (a) the determination of the
fair market value of the assets of the Target Corporations, and the calculation
of the adjusted gross-up basis, within the meaning of Treasury Regulation
Section 1.338(b)-1; (b) the allocation of the deemed purchase price among the
acquired assets in accordance with all applicable rules and regulations under
Section 338 of the Code; and (c) the preparation and timely filing of all tax
returns, including all forms or schedules necessary or appropriate to the
Section 338(h)(10) election. No later than three months following the Closing
Date, Lyndon shall prepare and deliver to Accel a schedule (the "Price
Allocation Schedule") allocating the modified ADSP (as such term is defined in
Treasury Regulations Section 1.338(h)(10)-1) among the assets of the Target
Corporations in accordance with Treasury Regulations promulgated under Section
338(h)(10). Any objection by Accel to the Price Allocation Schedule prepared by
Lyndon shall be raised within 60 business days after receipt by Accel of the
Price Allocation Schedule. If Lyndon and Accel are unable to resolve any
differences within 60 business days thereafter, such dispute shall be resolved
by Ernst & Young LLP and KPMG Peat Marwick LLP. If such accounting firms are
unable to resolve any differences within 30 days thereafter, such dispute shall
be resolved by another national accounting firm selected by Ernst & Young LLP
and KPMG Peat Marwick LLP which has not performed any services for or received
any revenues from Lyndon, Accel or their respective affiliates within the two
years prior to the Closing Date or thereafter. If necessary, a revised Price
Allocation Schedule consistent with the determination made by Ernst & Young LLP
and KPMG Peat Marwick LLP or by the other national accounting firm selected by
them, if any, shall be prepared by Lyndon as soon as possible thereafter and
shall, subject to Accel's reasonable approval thereof, be binding on both
parties. In all events, the Price Allocation Schedule shall be finally prepared
and agreed upon prior to eight months from the Closing Date. Lyndon shall pay
the costs, fees and expenses of Ernst & Young LLP. Accel shall pay the costs,
fees and expenses of KPMG Peat Marwick LLP, and Lyndon and Accel shall each pay
one-half of the costs, fees and expenses of any third accounting firm selected
by such two accounting firms pursuant to this Section 12.1. The Price
Allocation Schedule shall be binding (except to the extent items reflected
thereon are adjusted pursuant to an examination by the Internal Revenue
Service) on the parties hereto, and Accel and Lyndon agree to act in accordance
with such Schedule in the preparation, filing and audit of any Tax Return.
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12.2 Preparation of Returns. For any taxable period of any of the Target
Corporations that includes (but does not end on) the Closing Date, Lyndon shall
timely prepare and file with the appropriate authorities all Returns required
to be filed and shall pay all Taxes due with respect to such Returns, provided
that Accel shall reimburse Lyndon (in accordance with the procedures set forth
in Section 11.1(a)(ii)) for any amount owed by Accel pursuant to Section
11.1(a)(ii) with respect to the taxable periods covered by such Returns. For
any taxable period of any of the Target Corporations that ends on or before the
Closing Date (including the final return that reflects the 338(h)(10)
election), Accel shall timely prepare and file with the appropriate authorities
all Returns required to be filed and shall pay all Taxes due with respect to
such Returns. If an Accel Return is required to be filed by a Target
Corporation, Accel shall deliver such return to Lyndon within 10 days of its
due date and Lyndon shall cause such Accel Return to be timely filed; provided,
however, that Lyndon shall not assume any liability with respect to the content
of any such Accel Return. Lyndon and Accel agree to cause the Target
Corporations to file all Returns for the period including the Closing Date on
the basis that the relevant taxable period ended as of the close of business on
the Closing Date, unless the relevant taxing authority will not accept a
return, report or form filed on that basis.
12.3 Cooperation. Accel and each of the Target Corporations and Lyndon
shall reasonably cooperate, and shall cause their respective affiliates,
officers, employees, agents, auditors and representatives reasonably to
cooperate, in preparing and filing all Returns relating to Taxes, including
maintaining and making available to each other all records necessary in
connection with Taxes. Lyndon and Accel recognize that Accel and its affiliates
will need access, from time to time, after the Closing Date, to certain
accounting and Tax records and information held by the Target Corporations to
the extent such records and information pertain to events occurring prior to
the Closing Date, and that Lyndon and the Target Corporations may need access,
from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Accel to the extent such records and
information pertain to events occurring prior to the Closing Date; therefore,
Lyndon agrees, and agrees to cause each of the Target Corporations (i) to use
its best efforts to properly retain and maintain such records until such time
as Accel agrees that such retention and maintenance is no longer necessary, and
(ii) to allow Accel and its agents and representatives (and agents or
representatives or any of its affiliates), at times and dates mutually
acceptable to the parties to inspect, review and make copies of such records as
Accel may deem necessary or appropriate from time to time, such activities to
be conducted during normal business hours and at Accel's expense; and Accel
agrees (i) to use its best efforts to properly retain and maintain its records
until such time as Lyndon agrees that such retention and maintenance is no
longer necessary, and (ii) to allow Lyndon, the Target Corporations and their
respective agents and representatives (and agents or representatives of any of
their respective affiliates), at times and dates mutually acceptable to the
parties, to inspect, review and make copies of such records as Lyndon may deem
necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at Lyndon's expense.
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12.4 Refunds or Credits. Any refunds or credits of Taxes of any of the
Target Corporations for any taxable period ending on or before the Closing Date
shall be for the account of Accel unless such refunds or credits are reflected
on the Combined Closing Date Balance Sheet. Any refunds or credits of Taxes of
any of the Target Corporations for any taxable period beginning after the
Closing Date shall be for the account of Lyndon. Any refunds or credits of
Taxes of any of the Target Corporations for any Straddle Period shall be
equitably apportioned between Accel and Lyndon. Lyndon shall, if Accel so
requests and at Accel's expense, cause any of the Target Corporations to file
for and obtain any refunds or credits to which Accel is entitled under this
Section 12.4. Lyndon shall permit Accel to control the prosecution of any such
refund claim and, where deemed appropriate by Accel, shall cause the each of
the Target Corporations to authorize by appropriate powers of attorney such
persons as Accel shall designate to represent such Target Corporation with
respect to such refund claim. Lyndon shall cause each of the Target
Corporations to forward to Accel any such credit within 10 days after the
credit is allowed or applied against other Tax liability; provided, however,
that any such amounts payable to Accel shall be (i) net of any future tax cost
to Lyndon or any Target Corporation attributable to the turnaround of a
temporary difference created or changed by the refund claim and such turnaround
occurs in any period which begins after the Closing Date, and (ii) net of any
Tax cost or benefit to Lyndon or such Target Corporation, as the case may be,
attributable to the receipt of such refund and/or the payment of such amounts
to Accel. Accel and Lyndon shall treat any payments under the preceding
sentence that Accel shall receive pursuant to this Section 12.4 as an
adjustment to the Purchase Price, unless a final determination (which shall
include the execution of a Form 870-AD or successor form) with respect to
Lyndon or any of its affiliates causes any such payment not to be treated as an
adjustment to the Purchase Price for United States Federal Income Tax purposes.
Notwithstanding the foregoing, the control of the prosecution of a claim for
refund of Taxes paid pursuant to a deficiency assessed subsequent to the
Closing Date as a result of an audit shall be governed by the provisions of
Section 12.5.
12.5 Internal Revenue Service Examinations. Accel shall be responsible for
filing any amended, consolidated, combined or unitary Returns for taxable years
ending on or prior to the Closing Date which are required as a result of
examination adjustments made by the Internal Revenue Service or by the
applicable state, local or foreign taxing authorities for such taxable years as
finally determined. For those jurisdictions in which separate Tax returns are
filed by any of the Target Corporations, any required amended returns resulting
from such examination adjustments, as finally determined, shall be prepared by
Accel and furnished to such Target Corporation, as the case may be, for
approval (which approval shall not be unreasonably withheld), signature and
filing at least 30 days prior to the due date for filing such returns.
12.6 Other Taxes. All transfer, documentary, sales, use, registration and
other such Taxes (including all applicable real estate transfer or gains Taxes)
and related fees (including any penalties, interest and additions to Tax)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by Accel, and Accel and
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<PAGE> 80
Lyndon shall cooperate in timely making all filings, returns, reports and forms
as may be required to comply with the provisions of such Tax laws.
12.7 No Extraordinary Transactions. Accel shall deliver to Lyndon at the
Closing a certificate in form and substance satisfactory to Lyndon, duly
executed and acknowledged, certifying any facts that would exempt the
transactions contemplated hereby from withholding pursuant to the provisions of
the Foreign Investment in Real Property Tax Act.
12.8 Tax Conduct; Sharing Agreement. (a) Until the Closing Date, Accel
shall cause each of the Target Corporations to conduct its business in the
ordinary course in substantially the same manner as presently conducted and on
the Closing Date shall not permit any of the Target Corporations to effect any
extraordinary transactions (other than any such transactions expressly required
by applicable law or by this Agreement) that could result in Tax liability to
any of the Target Corporations in excess of Tax liability associated with the
conduct of its business in the ordinary course.
(b) Accel shall cause the provisions of any Tax sharing agreement
between Accel and any of its affiliates (other than the Target Corporations),
on the one hand, and any of the Target Corporations, on the other hand, to be
terminated on or before the Closing Date.
12.9 Tax Reimbursement if Closing Occurs After December 31, 1997.
The parties agree and acknowledge that the actual Closing may not
occur on December 31, 1997, despite the parties' mutual intention to do so. The
parties agree that for all financial purposes, the Closing shall be deemed to
have occurred on December 31, 1997, notwithstanding the actual closing date,
and accordingly, any profit or loss incurred by the Target Companies on or
prior to December 31, 1997 shall remain for the account of Accel (subject to
the GAAP Equity requirements of Section 7.1(o)) and any profit or loss incurred
by the Target Companies after December 31, 1997 shall be for the account of
Lyndon. The parties further agree and acknowledge that the Internal Revenue
Service will only recognize the actual closing date for federal tax purposes,
and that accordingly, either party may be required to pay additional Taxes on
income not actually received by it. The parties agree to reimburse each other
for the amount of any Taxes actually paid by the other party solely as a
function of the timing difference of the deemed Closing Date of December 31,
1997 and the actual closing date for tax purposes.
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<PAGE> 81
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 Amendment and Modification. This Agreement may be amended, modified
and supplemented only by a writing signed by Lyndon and Accel.
13.2 Waiver of Compliance. Any failure of Lyndon or Accel to comply with
any obligation, covenant, agreement or condition herein contained may be
expressly waived, in writing only, by (i) Lyndon in the case of any failure of
Accel or (ii) Accel in the case of any failure of Lyndon. Such waiver shall be
effective only in the specific instance and for the specific purpose for which
made or given.
13.3 Expenses. Accel and Lyndon shall each pay their own respective
expenses incurred in connection with this Agreement or any transaction
contemplated by this Agreement. The foregoing shall not be construed as
limiting any other rights which any party may have as a result of
misrepresentation of or breach by any other party. Accel shall pay all fees and
expenses of KPMG Peat Marwick in connection with their preparation of the
Combined Audited GAAP Financial Statements and the Closing Date Balance Sheet.
Further, if the transactions contemplated hereby shall not close due to an
intentional material breach of any covenant of Accel hereunder which prevents
satisfaction of a closing condition, then Accel shall pay Lyndon the sum of
$650,000 as liquidated damages.
13.4 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, or when mailed by certified or
registered mail (return receipt requested), postage prepaid or when delivered
by fax (evidenced by confirmation of successful transmission), as follows:
A. If to Lyndon:
Lyndon Life Insurance Company
645 Maryville Center Drive
St. Louis, Missouri 63141
Fax # (314) 275-5255
Attn: Mr. Roland G. Anderson, President
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<PAGE> 82
With a copy to:
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Fax # (212) 661-0989
Attn: Sidney Todres, Esq.
or to such other person or place as Lyndon shall designate by notice in the
manner provided in this Section 13.4;
B. If to Accel:
Accel International Corporation
12603 SW Freeway, Suite 315
P.O. Box 1949
Stafford, Texas 77497-1949
Fax # 281-565-8011
Attn: Thomas H. Friedberg
With copies to:
Accel International Corporation
475 Metro Place North
Dublin, Ohio 43017
Attn: Nicholas Z. Alexander, Esq.
and
Squire, Sanders & Dempsey LLP
1300 Huntington Center
41 South High Street
Columbus, Ohio 43215
Attn: Fred A. Summer, Esq.
13.5 Assignment. This Agreement shall be binding upon and inure to the
benefit of Lyndon and Accel and their respective successors and assigns, but
neither this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by Lyndon or Accel prior to Closing without the
prior written consent of the other party.
13.6 Third Parties. This Agreement is not intended to and shall not be
construed to give any Person other than the parties hereto any interest or
rights (including, without limitation, any third party beneficiary rights) with
respect to or in connection with any agreement or provision contained herein or
contemplated hereby.
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13.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws.
13.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
13.9 Headings. The headings of the sections, schedules and articles of
this Agreement are inserted for the sake of convenience only and shall not
constitute a part hereof.
13.10 Entire Agreement. This Agreement, including the schedules and
exhibits, contains the entire understanding of the parties in respect of the
subject matter contained herein and therein and there are no other terms or
conditions, representations or warranties, written or oral, express or implied,
except as set forth herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
LYNDON LIFE INSURANCE COMPANY
By: /s/ Peter H. Foley
-----------------------------------------
Peter H. Foley, Authorized Signatory
LYNDON INSURANCE GROUP, INC.
By: /s/ Peter H. Foley
-----------------------------------------
Peter H. Foley, Authorized Signatory
ACCEL INTERNATIONAL CORPORATION
By: /s/ Thomas H. Friedberg
-----------------------------------------
Thomas H. Friedberg, President
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<PAGE> 84
ANNEX II
ASSET PURCHASE AGREEMENT
by and between
LYNDON PROPERTY INSURANCE COMPANY
and
ACCEL INTERNATIONAL CORPORATION
and
ACCELERATION NATIONAL INSURANCE COMPANY
Dated: As of October 20, 1997
<PAGE> 85
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I ASSETS BEING SOLD............................................................................. 3
1.1 Assets Being Sold.................................................................... 3
1.2 Assets Excluded from Sale............................................................ 4
1.3 No Liabilities Assumed............................................................... 4
1.4 Purchase Price....................................................................... 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ACCEL AND ANIC.............................................. 6
2.1 Organization......................................................................... 6
2.2 Authorization........................................................................ 6
2.3 No Consent........................................................................... 6
2.4 Title to Acquired Assets............................................................. 7
2.5 No Breach............................................................................ 7
2.6 Compliance with Laws................................................................. 8
2.7 Permits.............................................................................. 8
2.8 Actions and Proceedings.............................................................. 8
2.9 Employee Relations................................................................... 9
2.10 No Brokers........................................................................... 9
2.11 Assets Necessary to Conduct Business. ............................................. 10
2.12 Policies of Insurance. .............................................................. 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LYNDON...................................................... 11
3.1 Organization. ...................................................................... 11
3.2 Authority. ......................................................................... 11
3.3 No Breach. ......................................................................... 11
ARTICLE IV DELIVERIES.................................................................................... 11
4.1 Closing. ........................................................................... 11
4.2 Deliveries to Buyer at Closing. .................................................... 12
4.3 Deliveries by Lyndon at Closing. ................................................... 12
ARTICLE V ADDITIONAL AGREEMENTS......................................................................... 13
5.1 Restrictive Covenant................................................................. 13
5.2 Use of Name and Forms. ............................................................. 13
</TABLE>
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<TABLE>
<S> <C> <C>
5.3 Ordinary Course. ................................................................... 14
5.4 Post-Closing Litigation Assistance................................................... 14
5.5 Cost Guard Service Contract System................................................... 14
5.6 Stop-Loss Reinsurance................................................................ 15
5.7 Tax Matters.......................................................................... 15
ARTICLE VI SURVIVAL...................................................................................... 15
6.1 Survival. ........................................................................... 15
ARTICLE VII INDEMNIFICATION............................................................................... 16
7.1 Indemnification...................................................................... 16
ARTICLE VIII MISCELLANEOUS PROVISIONS...................................................................... 18
8.1 Amendment and Modification. ......................................................... 18
8.2 Waiver of Compliance. .............................................................. 18
8.3 Expenses............................................................................. 18
8.4 Notices. ............................................................................ 18
8.5 Assignment. ........................................................................ 20
8.6 Third Parties. ...................................................................... 20
8.7 Governing Law. ...................................................................... 20
8.8 Counterparts. ...................................................................... 20
8.9 Headings. .......................................................................... 20
8.10 Entire Agreement. .................................................................. 20
8.11 Further Assurances. ................................................................. 21
</TABLE>
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<PAGE> 87
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of the 20th day of October, 1997, by and between LYNDON
PROPERTY INSURANCE COMPANY, a Missouri corporation, with offices at 645
Maryville Centre Drive, St. Louis, Missouri 63141 ("Lyndon") and ACCEL
INTERNATIONAL CORPORATION, a Delaware corporation ("Accel"), with its executive
offices at 12603 S.W. Freeway, Suite 315, P.O. Box 1949, Stafford, Texas
77497-1949, and ACCELERATION NATIONAL INSURANCE COMPANY ("ANIC"), an Ohio
corporation, with offices at 475 Metro Place North, Suite 100, Dublin, Ohio
43017-0701.
R E C I T A L
WHEREAS, Lyndon is desirous of purchasing and ANIC is
desirous of selling certain of ANIC's assets comprising all of ANIC's warranty
book of business upon the terms and conditions hereinafter set forth; and
WHEREAS, contemporaneously with the closing of the
transactions contemplated by this Agreement, Lyndon and ANIC shall enter into
two reinsurance agreements, substantially in the forms attached hereto as
Exhibits A-1 and A-2 (the "Reinsurance Agreements") respecting the transfer of
the loss reserves portfolio and the transfer of unearned premium reserves and
new business losses, respectively; and
WHEREAS, Accel is the owner of all of the issued and
outstanding shares of capital stock of ANIC;
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<PAGE> 88
NOW, THEREFORE, Lyndon, Accel and ANIC hereby agree as
follows:
ARTICLE I
ASSETS BEING SOLD
1.1 Assets Being Sold. ANIC hereby agrees to sell, convey,
transfer, assign and deliver to Lyndon or an entity designated by Lyndon and
Lyndon hereby agrees to purchase (or cause its designee to purchase) from ANIC
the following assets comprising ANIC's warranty (extended service contracts)
book of business (collectively, the "Acquired Assets"):
(a) All of ANIC's rights to and interest in the
expirations and renewals on all insurance policies in force
as of the close of business on the closing date as determined
under Article IV hereof (the "Closing Date") issued and
insured by ANIC covering extended service contract
warranties, including, but not limited to, automobiles,
boats, motorcycles, and recreational vehicles during the
covered periods, including all rights to complete processing
and to bill and/or receive premiums, commissions or other
revenues whether as additional, contingent or bonus
commissions or otherwise with respect thereto (the "Acquired
Policies"), subject to all of the related obligations under
the Acquired Policies other than ANIC's obligations as the
issuer and insurer thereof, but excluding the Fuller-Stolle
book of business (and the reserves related thereto);
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<PAGE> 89
(b) all expiration files, customer account records
and underwriting, claims and processing manuals relating to
the Acquired Policies;
(c) all rights, subject to the related obligations,
under the contracts and commitments, whether written or oral,
relating to the Acquired Assets, all of which contracts and
commitments are listed on Schedule 1.1(c);
(d) all rights to and interest in, subject to the
related obligations with respect to, all computer hardware
and software listed on Schedule 1.1(d);
(e) all furniture, fixtures and equipment listed on
Schedule 1.1(e); and
(f) copies of all policy forms, rate filings related
to such policy forms, and all other regulatory filings
relating to the Acquired Policies.
1.2 Assets Excluded from Sale. Only the Acquired Assets as
described in Section 1.1 are being sold and purchased pursuant to this
Agreement.
1.3 No Liabilities Assumed. Except to the extent set forth in
the Reinsurance Agreements, Lyndon shall not be liable for any debt, obligation
or liability of ANIC of any kind whatsoever, relating to the Acquired Assets,
whether known or unknown, absolute or contingent, unless expressly assumed by
Lyndon under the Reinsurance Agreements, including, but not limited to:
(a) any local, state or federal income, excise,
property, sales, franchise or payroll tax liability of ANIC
incurred prior to the Closing Date or incurred in respect of
events occurring prior to the Closing Date;
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<PAGE> 90
(b) any claims, causes of action or obligations,
wherever asserted, that relate to or are in any way connected
with the employment or claimed employment of any person by
ANIC arising from events occurring on or before the Closing
Date, or relating to services rendered to or for the benefit
of ANIC by any employee or agent of ANIC through the Closing
Date, including without limitation any attorneys' fees and
collection agency fees for in-force or expired claims or any
person otherwise employed or engaged in ANIC's operation of
its warranty book of business;
(c) any severance pay claim by any employee of ANIC
arising under any severance pay plan, agreement or program of
ANIC, or otherwise, by reason of the consummation of the
transactions contemplated hereby;
(d) any pension, health, welfare or similar
liability to or on account of employees or former employees
of ANIC for any periods of employment on or prior to the
Closing Date; and
(e) any liability for errors or omissions of ANIC
prior to the Closing Date.
1.4 Purchase Price. The purchase price payable by Lyndon in
full consideration for the Acquired Assets shall be Ten Million Three Hundred
Thousand ($10,300,000), payable on the Closing Date by wire transfer or by
certified or official bank check payable to the order of ANIC, as directed by
Accel.
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<PAGE> 91
ARTICLE II
REPRESENTATIONS AND
WARRANTIES OF ACCEL AND ANIC
Accel and ANIC jointly and severally represent and warrant to
Lyndon that:
2.1 Organization. ANIC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio with
full power and authority to own its properties and carry on its business as now
being conducted. ANIC is duly qualified to do business as a foreign corporation
in all jurisdictions where the failure to qualify would have a material adverse
effect on any of the Acquired Assets.
2.2 Authorization. The execution and delivery of this
Agreement by Accel and ANIC and the consummation of the transactions
contemplated hereby have been authorized and approved by all requisite
corporate action of each of Accel and ANIC and this Agreement and all
instruments being delivered by each of Accel and ANIC hereunder represent
legal, valid and binding obligations of each of Accel and ANIC enforceable
against each of Accel and ANIC in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors of
insurance companies, rights of creditors generally, or by general principles of
equity.
2.3 No Consent. No consent, order, license, approval or
authorization or exemption by, or registration or declaration or filing with,
any governmental authority, bureau or agency, and no consent or approval of any
other person, corporation, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company,
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<PAGE> 92
government (or any agency or political subdivision thereof) or other entity of
any kind ("Person"), is required to be obtained or made in connection with the
performance by Accel or ANIC of this Agreement or the consummation of the
transactions contemplated to be preformed by it hereunder, except for the
approval of the Ohio Department of Insurance.
2.4 Title to Acquired Assets. ANIC has good and marketable
title to the Acquired Assets, free and clear of any adverse claims, mortgages,
liens or other burdens or encumbrances, except the related obligations of ANIC
with respect to the contracts being assigned, and the instruments of transfer
to be executed and delivered by ANIC at Closing will be valid and binding
obligations of ANIC and will be sufficient to transfer to Lyndon all right,
title and interest of ANIC in and to the Acquired Assets.
2.5 No Breach. The consummation of the transactions
contemplated by this Agreement will not (i) contravene any provision of the
Articles of Incorporation or Code of Regulations of ANIC, (ii) violate,
conflict with or result in a material breach or the termination of, or
constitute an amendment to, or otherwise give any Person the right to
terminate, or constitute (or with notice or lapse of time or both would
constitute) a default (by way of substitution, novation or otherwise) under the
terms of, any material contract, mortgage, lease, bond, indenture, agreement,
franchise or other instrument or obligation relating to the Acquired Assets to
which ANIC is a party or by which ANIC or any of the Acquired Assets are bound
or affected; (iii) result in the creation of any lien, mortgage, claim, charge,
security interest, encumbrance, restriction or limitation (collectively,
"Liens") upon any of the Acquired Assets pursuant to the terms of any contract,
mortgage, lease, bond, indenture, agreement, franchise or other instrument or
obligation; (iv) violate any
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judgment, order, injunction, decree or award of any court, arbitrator,
administrative agency or governmental or regulatory body against, or binding
upon, ANIC or any of the Acquired Assets in any material respect; (v)
constitute a violation by ANIC of any statute, law, rule or regulation of any
jurisdiction as such statute, law, rule or regulation relates to the Acquired
Policies or to any of the Acquired Assets in any material respect; or (vi)
violate any Permit (as defined in Section 2.7) in any material respect.
2.6 Compliance with Laws. ANIC is not in violation of any
applicable law, rule or regulation, the violation of which could materially and
adversely affect the Acquired Assets.
2.7 Permits. ANIC has duly obtained and holds in full force
and effect all consents, authorizations, permits, licenses, orders or approvals
of, and has made all declarations and filings with, all federal, state or local
governmental or regulatory bodies that are material or necessary with respect
to ANIC's operation of any of the Acquired Assets (collectively, the
"Permits"); all the Permits were duly obtained and are in full force and
effect; no violations are or have been recorded in respect of any such Permit
and no proceeding is pending or, to the knowledge of Accel or ANIC, threatened
to revoke, deny or limit any such Permit.
2.8 Actions and Proceedings. Except as provided on Schedule
2.8, there are no claims, actions, suits, arbitrations, proceedings,
investigations or inquiries, whether at law or in equity and whether or not
before any court, private body or group, governmental department, commission,
board, agency or instrumentality (collectively, "Actions"), pending or, to the
knowledge of Accel or ANIC, threatened against, involving
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or affecting the Acquired Assets (other than claims arising under the Acquired
Policies), whether or not fully or partially covered by insurance, or which
would give rise to any right of indemnification by any Person with respect to
the Acquired Assets, and there are no outstanding orders, writs, injunctions,
awards, sentences or decrees of any court, private body or group, governmental
department, commission, board, agency or instrumentality against, involving or
affecting the Acquired Assets. None of the Actions listed on Schedule 2.8,
individually or in the aggregate, will have a material adverse effect with
respect to the Acquired Assets, and there are no circumstances, nor any events
which have occurred which Accel or ANIC believes will result in an Action
against or affecting the Acquired Assets, other than claims filed under the
Acquired Policies in the ordinary course of business.
2.9 Employee Relations. An accurate listing of all of the
employees engaged in the operation of ANIC's warranty book of business,
together with their respective compensation and accrued vacation time, has
previously been delivered by ANIC to Lyndon, all of which employees are
employed under oral contracts terminable at will. ANIC has not at any time
during the last five years had, nor to the knowledge of Accel and ANIC is there
now threatened, a strike, picket, work stoppage, work slowdown, or other
material labor dispute, and Accel and ANIC have no knowledge of the threatened
resignation of any employee engaged in conducting or operating ANIC's warranty
book of business.
2.10 No Brokers. Neither Accel nor ANIC has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby for which
Lyndon may be responsible.
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2.11 Assets Necessary to Conduct Business. In Accel and ANIC's
best judgment, neither Accel or ANIC has any reason to believe that following
consummation of the transactions contemplated by this Agreement and the
concurrent consummation of the transactions contemplated by the Stock
Acquisition Agreement of even date herewith between Lyndon Insurance Group,
Inc., Lyndon Life Insurance Company and Accel (the "Stock Acquisition
Agreement"), the Acquired Assets, together with the assets then owned by the
Target Corporations (as defined in the Stock Acquisition Agreement) will not
constitute all material assets and properties (other than employees) necessary
for Lyndon to conduct, consistent with prior practices, the warranty book of
business conducted by ANIC prior to consummation of this Agreement, and also,
all the material assets necessary for ANIC, Dublin and ANSC to conduct their
respective businesses, consistent with prior practices.
2.12 Policies of Insurance. Accel and ANIC have no reason to
believe that the Acquired Policies will be terminated before their stated
expiration dates, except in the ordinary course, consistent with prior
practices, or will not be renewed in the ordinary course upon their expiration,
consistent with prior practices.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LYNDON
Lyndon represents and warrants to Accel and ANIC that:
3.1 Organization. Lyndon is a corporation duly organized,
validly existing and in good standing under the laws of the State of Missouri
with full power and authority to own, lease and operate its properties and to
carry on its business as now conducted.
3.2 Authority. The execution and delivery of this Agreement
by Lyndon and the consummation of the transactions contemplated hereby have
been authorized and approved by all requisite corporate action and this
Agreement and all instruments being delivered by Lyndon hereunder represent the
legal, valid and binding agreements of Lyndon enforceable against it in
accordance with their respect terms.
3.3 No Breach. The authorization, execution, delivery and
performance of this Agreement by Lyndon will not violate any provision of its
certificate of incorporation or by-laws or any agreement to which it is a
party.
ARTICLE IV
DELIVERIES
4.1 Closing. The Closing shall take place effective as of
December 31, 1997, as long as the Ohio Department of Insurance has approved the
transactions contemplated by this Agreement, at such time and place as shall be
agreed upon between the parties. The Closing shall occur concurrently with, and
shall be conditional upon, the closing of the transactions contemplated by the
Stock Acquisition Agreement.
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4.2 Deliveries to Buyer at Closing. At the Closing, ANIC
shall deliver to Lyndon:
(a) A warranty bill of sale conveying, assigning and
transferring to Lyndon the Acquired Assets, executed by ANIC.
(b) A copy of the consent of the Ohio Department of
Insurance with respect to the Reinsurance Agreements or
evidence of the expiration of the applicable deemer period.
(c) An executed copy of each Reinsurance Agreement.
(d) An officer's certificate executed by the
President of Accel and the Chief Financial Officer of ANIC
certifying that the representations and warranties contained
in Article II are true and correct in all material respects
on the Closing Date as if made on such date.
(e) A list of the Acquired Policies on a computer
disk containing the same.
4.3 Deliveries by Lyndon at Closing. At the Closing, Lyndon
shall deliver the following to ANIC:
(a) The sum of $10,300,000 by wire transfer of
federal funds or certified or official bank check payable to
the order of ANIC.
(b) An executed copy of each Reinsurance Agreement.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Restrictive Covenant. In order to insure to Lyndon the
benefits of its purchase of the Acquired Assets, including the goodwill of the
Acquired Assets, Accel and ANIC each hereby agree that through the third
anniversary of the Closing Date, Accel and ANIC each will not, without the
prior written consent of Lyndon, directly or indirectly, sell, underwrite,
place or write warranty insurance policies or solicit, accept or place for
itself and/or any other entity, any warranty insurance business from existing
customers of ANIC, provided, however, that nothing herein shall prohibit Accel
and ANIC from owning not more than 1% of the stock or other securities of any
such corporation, which securities are publicly traded over-the-counter or on a
national securities exchange, provided neither Accel nor ANIC directly or
indirectly renders any services or engage in any activities of any kind for or
on behalf of the issuer of such securities or any affiliate thereof. Lyndon may
proceed against both Accel and ANIC for breach of this covenant by injunction
in addition to any other claim for relief Lyndon may have in law or in equity.
5.2 Use of Name and Forms. ANIC hereby grants Lyndon full
right and authority to utilize ANIC's forms and to place contractual liability
insurance policies in connection with extended service contracts in the name of
ANIC in each of the states in which ANIC is currently licensed to do business
for a maximum period of eighteen (18) months from the Closing Date ("New
Business"). All New Business written by Lyndon utilizing ANIC's forms or issued
in ANIC's name shall be automatically reinsured by Lyndon under the Reinsurance
Agreements, and Lyndon shall indemnify ANIC and hold ANIC
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harmless from and against all liability, however arising, under the New
Business written by Lyndon on ANIC's forms or issued in ANIC's name and Lyndon
shall retain all premiums related thereto, except as provided by the applicable
Reinsurance Agreement. ANIC will assist Lyndon in the filing of policy forms,
rates and other regulatory matters, as reasonably requested by Lyndon.
5.3 Ordinary Course. During the period from the date of this
Agreement and continuing until the Closing Date, ANIC shall carry on its
warranty insurance business in the usual, regular and ordinary course
consistent with prior practices, including, without limitation, the continued
writing of warranty insurance policies, the collection of premiums therefor,
and the continued payment of claims for losses on outstanding warranty
insurance policies.
5.4 Post-Closing Litigation Assistance. ANIC will provide
Lyndon with reasonable assistance in litigating claims arising under any
Acquired Policies after the Closing. Such assistance may consist of, without
limitation, access to ANIC's books and records and/or personnel. Lyndon shall
provide reasonable compensation to ANIC if any ANIC personnel are required to
give depositions or testify in court in relation thereto.
5.5 Cost Guard Service Contract System. Accel will cause ANIC
to complete the following tasks, at ANIC's expense, for the Cost Guard Service
Contract System: (i) the resolution of all "Year 2000" issues, (ii) system
clean up, (iii) construction of a redesigned rate system module and a laser
check system module and (iv) an on-line claims update. Such work shall be
completed prior to May 1, 1998. Any costs incurred by Lyndon in causing such
work to be completed after May 1, 1998 shall be reimbursed by Accel
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within fifteen (15) days of Lyndon's invoice therefor, and shall not be limited
by the "indemnity basket" described in Section 7.1.
5.6 Stop-Loss Reinsurance. Accel will cause ANIC to maintain
in force ANIC's current stop-loss reinsurance program, at Lyndon's expense,
until otherwise advised by Lyndon.
5.7 Tax Matters. The parties are in agreement that the Assets
do not constitute a "trade or business" within the meaning of Internal Revenue
Code Section 1060. Nevertheless, the parties acknowledge the possibility that
the Internal Revenue Service may take a contrary position and require Lyndon
and Accel to prepare and file a Form 8594 with the IRS. In such event, the
parties agree that they will cooperate in determining the allocation of the
Purchase Price to the various acquired Assets and will utilize such agreed-upon
asset values in filing their respective federal tax returns.
ARTICLE VI
SURVIVAL
6.1 Survival. All representations and warranties made in this
Agreement and in any schedule, certificate or instrument delivered in
connection with the Agreement, shall survive the delivery of this Agreement for
a period of two years after the date hereof, except, however, that (i) claims
based on fraud or willful misrepresentation may be asserted at any time within
one year after the party learns of such fraud or willful misrepresentation and
(ii) any representation or warranty in respect of which indemnity may be sought
under Article VII that would otherwise terminate two years after the date
hereof shall survive the
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second anniversary of the date hereof if notice, given in good faith, of the
specific inaccuracy or breach thereof giving rise to such indemnity shall have
been given to the party against whom such indemnity may be sought prior to the
second anniversary of the date hereof.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
(a) Accel and ANIC each hereby agree to indemnify
defend and hold harmless Lyndon, its officers, directors, employees and agents
from and against all losses, fines, civil penalties, judgments, claims,
damages, liabilities or expenses (including reasonable attorneys' fees) of
every kind imposed upon, incurred or paid by Lyndon by reason of the breach by
Accel or ANIC of any representation and warranty made by Accel or ANIC in this
Agreement or, except as otherwise provided in the Reinsurance Agreements, any
losses under the Acquired Policies, in excess of $100,000 in the aggregate
(including any such damages incurred by Lyndon under the Stock Acquisition
Agreement); provided, however, that notwithstanding any provision of this
Agreement to the contrary, the aggregate indemnification obligations and
liability of Accel and ANIC under this Section 7.1 and under Section 11.1(a)(i)
of the Stock Acquisition Agreement shall in no event exceed $8 million, and
Accel and ANIC shall have no obligation whatsoever to further indemnify Lyndon,
its affiliates or any other Person after and in the event that Accel and ANIC
on a combined
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basis have paid a total of $8 million to Lyndon or any other Person pursuant to
this Section 7.1 and/or Section 11.1(a)(i) of the Stock Acquisition Agreement.
(b) Lyndon hereby agrees to indemnify, defend and
hold harmless Accel and ANIC from and against all losses, fines, civil
penalties, judgments, claims, damages, liabilities or expenses (including
reasonable attorneys' fees) of every kind imposed upon, incurred or paid by
Accel and ANIC by reason of (i) the breach by Lyndon of any representation and
warranty made by it in this Agreement or (ii) any claims made against ANIC
relating to the Acquired Policies or the New Business other than for losses
under the Acquired Policies (except as otherwise provided in the Reinsurance
Agreements) or arising out of or relating in any way to the conduct of the
warranty book of business being acquired by Lyndon on and after the Closing
Date hereof; provided, however, that the aggregate indemnification obligations
and liability of Lyndon to Accel for damages under this Section 7.1 and under
Section 11.1(b) of the Stock Acquisition Agreement shall in no event exceed $8
million.
(c) Each party hereto shall promptly notify the
other party in writing of any claim made on such party by any third party in
respect of a liability, obligation or other matter which is the subject of the
foregoing indemnity agreement, and the party obligated hereunder to indemnify
the party giving such notice shall have, at its election, the right to
compromise or defend any such claim through counsel of its choosing.
(d) Claims for indemnification under this Article
VII (other than with respect to a breach of the representations or warranties
contained in Section 2.4) must be
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asserted prior to the second anniversary of the date hereof, except as
otherwise provided in clauses (i) and (ii) of Section 6.1.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Amendment and Modification. This Agreement may be
amended, modified and supplemented only by a writing signed by Lyndon, Accel
and ANIC.
8.2 Waiver of Compliance. Any failure of Lyndon or Accel or
ANIC to comply with any obligation, covenant, agreement or condition herein
contained may be expressly waived, in writing only, by (i) Lyndon in the case
of any failure of ANIC or Accel (ii) Accel, in the case of any failure of
Lyndon. Such waiver shall be effective only in the specific instance and for
the specific purpose for which made or given.
8.3 Expenses. Each party will pay its own expenses incurred
in connection with this Agreement or any auction contemplated by this
Agreement. The foregoing shall not be construed as limiting any other rights
which any party may have as a result of misrepresentation of or breach by any
other party.
8.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand or when mailed by
certified or registered mail (return receipt requested), postage prepaid, or
when delivered by fax (evidenced by confirmation of successful transmission),
as follows:
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A. If to Lyndon:
Lyndon Property Insurance Company
645 Maryville Centre
St. Louis, Missouri 63141
Fax # (314) 275-5255
Attn: Roland G. Anderson, President
With a copy to:
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177-0077
Fax # (212) 661-0989
Attn: Sidney Todres, Esq.
or to such other person or place as Lyndon shall designate by notice in manner
provided in this Section 8.4;
B. If to Accel and ANIC:
Accel International Corporation
12603 SW Freeway, Suite 315
P.O. Box 1949
Stafford, Texas 77477-1949
Attn: Thomas H. Friedberg
With a copies to:
Accel International Corporation
475 Metro Place North
Dublin, Ohio 43017
Fax # (614) 764-7198
Attn: Nicholas Z. Alexander, Esq.
and
Squire, Sanders & Dempsey, LLP
1300 Huntington Center
31 South High Street
Fax # (614) 365-2499
Attn: Fred A. Summer, Esq.
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or to such other person as Accel or ANIC shall designate by notice in the
manner provided in this Section 8.4.
8.5 Assignment. This Agreement shall be binding upon and
inure to the benefit of Lyndon, Accel and ANIC and their respective successors
and assigns, but neither this Agreement nor any of the rights, interests and
obligations hereunder shall be assigned by Lyndon or Accel or ANIC without the
prior written consent of the other parties.
8.6 Third Parties. This Agreement is not intended to and
shall not be construed to give any person other than the parties hereto any
interest or rights (including, without limitation, any third party beneficiary
rights) with respect to or in connection with any agreement or provision
contained herein or contemplated hereby.
8.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws.
8.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
8.9 Headings. The headings of the sections, schedules and
articles of this Agreement are inserted for the sake of convenience only and
shall not constitute a part hereof.
8.10 Entire Agreement. This Agreement, including the
schedules and exhibits, contains the entire understanding of the parties in
respect of the subject matter
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contained herein and therein and there are no other terms or conditions,
representations or warranties, written or oral, express or implied, except as
set forth herein.
8.11 Further Assurances. Accel and ANIC each agree to execute
and deliver such documents, instruments or certificates as Lyndon may
reasonably request from time to time in order to vest in Lyndon title to the
Acquired Assets.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed on the date first above written.
LYNDON PROPERTY INSURANCE COMPANY
By: /s/ Peter H. Foley
----------------------------------------
Peter H. Foley, Authorized Signatory
ACCEL INTERNATIONAL CORPORATION
By: /s/ Thomas H. Friedberg
----------------------------------------
Thomas H. Friedberg, President
ACCELERATION NATIONAL
INSURANCE COMPANY
By: /s/ Thomas H. Friedberg
----------------------------------------
Thomas H. Friedberg, Chairman & CEO
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ANNEX III
- --------------------------------------------------------------------------------
CREDITRE CORPORATION
- --------------------------------------------------------------------------------
4107 Greenway Court * Colleyville, Texas 76034
(817) 788-8121 Fax (817) 788-8123
October 15, 1997
Mr. Thomas Fielding
ACCEL international Corporation
12603 SW Frwy Ste 315
P O Box 1949
Stafford, TX 77477-1949
Dear Tom,
You have requested my opinion on the purchase price of $40.5 million for
Acceleration Life Insurance Company (ALIC), Acceleration National Service
Corporation (ANSC), Dublin International Limited (Dublin), the rights to the
credit life and disability insurance business, and the rights to the service
contract business.
Based solely on the ALIC Statutory Annual Statement of December 31, 1996, the
GAAP financials as of June 30, 1997 as provided, and the valuations we have
performed in the past, I would place a market value on the block at $39.3
million.
The market value is based on:
GAAP book values from the June 30, 1997 financial statements Future GAAP
profits on inforce life, disability and service contract business Value of
future production of the life and disability business Value of future
production of service contract business Value of ALIC state licenses
Given my knowledge of the credit insurance and service contract marketplace,
this value is representative of the value that is available in the marketplace.
Aside from the GAAP book values and the value of state licenses, most, if not
all, of the value comes from the service contract business. At 1996 ALIC
expense levels, the sum of the (future GAAP profits) plus (value of future
production) on the credit life and disability business is negative. Credit life
and disability insurance business has little value in the current marketplace,
since the return on equity available in the marketplace is not competitive with
other industries. Over 50 insurers have left
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the credit life and disability industry in the 1990s with no new entrants. The
service contract business has remained financially health and viable during
this period.
In my opinion, the Frontier price of $40.5 is fair and reasonable, and it
places a value on the entities that equals or exceeds the value that the other
likely participants in this marketplace would pay for the block.
Please call me if you have questions about this document.
Sincerely,
/s/ Gary Fagg
Gary Fagg, FSA, MAAA
Consulting Actuary
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October 31, 1997 16:40
<PAGE> 109
ACCEL INTERNATIONAL CORPORATION
PROXY
SPECIAL MEETING OF STOCKHOLDERS
DECEMBER _, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas H. Friedberg and Nicholas Z.
Alexander and each of them, Proxies, with power of substitution to each, for
and in the name of the undersigned to vote, as designated below, all the shares
of Common Stock of ACCEL International Corporation, a Delaware corporation (the
"Company"), held of record by the undersigned as of November _, 1997 at the
Special Meeting of Stockholders to be held on December _, 1997 or any
adjournment thereof.
1. To consider and vote upon the approval and authorization of (i) the
sale of all of the outstanding capital stock of Acceleration Life
Insurance Company, Acceleration National Service Corporation and
Dublin International Limited by the Company to Lyndon Insurance Group,
Inc. and Lyndon Life Insurance Company pursuant to the Stock
Acquisition Agreement dated October 20, 1997 attached as Annex I to
the accompanying Proxy Statement (the "Stock Acquisition Agreement"),
(ii) the sale of the vehicle extended service contract business of the
Company's wholly owned subsidiary, Acceleration National Insurance
Company, by the Company to Lyndon Property Insurance Company pursuant
to the Asset Purchase Agreement dated October 20, 1997 attached as
Annex II to the accompanying Proxy Statement (the "Asset Purchase
Agreement"), and (iii) certain transactions related thereto
(collectively, the "Transaction")
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
(PLEASE SEE REVERSE SIDE)
October 31, 1997 16:40
<PAGE> 110
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE APPROVAL OF THE STOCK ACQUISITION AGREEMENT AND THE ASSET
PURCHASE AGREEMENT AND THE TRANSACTION AND ACCORDING TO THE JUDGMENT OF THE
PROXIES WITH RESPECT TO PROPOSAL 2.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement, each dated November o, 1997.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign.
Date:_________________, 1997
----------------------------------------
(Signature)
----------------------------------------
(Signature)
(When signing as attorney, as executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name
by authorized person.)
Please mark, sign, date and return this Proxy promptly
using the enclosed envelope.
October 31, 1997 16:40
