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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): DECEMBER 31, 1997
FRONTIER INSURANCE GROUP, INC.
(Exact name of registrant as specified in charter)
DELAWARE 0-15022 14-1681606
(State or other juris- (Commission (IRS Employer
diction of incorp- File Number) Identification No.)
oration)
195 LAKE LOUISE MARIE ROAD, ROCK HILL, NEW YORK 12775-8000
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (914) 796-2100
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
Acquisition of Automobile Aftermarket Credit and Warranty Business from
ACCEL International Corporation
Effective as of December 31, 1997, Frontier Insurance Group, Inc.
("Registrant"), through its subsidiaries, Lyndon Insurance Group, Inc., Lyndon
Life Insurance Company and Lyndon Property Insurance Company, acquired all of
the issued and outstanding capital stock of Acceleration Life Insurance Company,
Acceleration National Service Company and Dublin International Limited from
ACCEL International Corporation ("Accel") for an aggregate purchase price of
$30,200,000, pursuant to a stock purchase agreement dated October 20, 1997. In
the event the stockholders' equity of the acquired companies at December 31,
1997 determined in accordance with generally accepted accounting principles (the
"Closing GAAP Equity") exceeds $31,600,000, the purchase price will be increased
and Registrant will pay Accel the amount by which the Closing GAAP Equity
exceeds $31,600,000. In the event the Closing GAAP Equity is less than
$31,600,000, the purchase price will be decreased and Accel will pay Registrant
the amount by which the Closing GAAP Equity is less than $31,600,000.
Concurrently, Registrant also purchased the extended service contract
warranty line of business from another subsidiary of Accel, Acceleration
National Insurance Company, for a purchase price of $10,300,000, pursuant to an
asset purchase agreement also dated October 20, 1997.
The companies and assets acquired provide specialty lines for the
automobile aftermarket credit insurance business and the extended service
contract warranty business.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
10.19 Stock Acquisition Agreement dated October 20, 1997 among
Lyndon Insurance Group, Inc., Lyndon Life Insurance
Company and ACCEL International Corporation.
10.20 Asset Purchase Agreement dated October 20, 1997 among
Lyndon Property Insurance Company, ACCEL International
Corporation and Acceleration National Insurance Company.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRONTIER INSURANCE GROUP, INC.
(Registrant)
By: /s/ Mark H. Mishler
_____________________________________________
Mark H. Mishler
Vice President and Chief Financial Officer
Dated: January 12, 1998
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STATEMENT OF DIFFERENCES
The section symbol shall be expressed as.....................'SS'
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STOCK ACQUISITION
AGREEMENT
by and between
LYNDON INSURANCE GROUP, INC.
LYNDON LIFE INSURANCE COMPANY
and
ACCEL INTERNATIONAL CORPORATION
Dated: October 20, 1997
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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.
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(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.
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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.
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(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
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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
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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 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
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property rights (or applications therefor) used by ANSC in connection with its
business. 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
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Balance Sheet. No extensions with respect to the dates on which any Return was
or is due 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
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knowledge, no proceeding is pending or threatened to revoke, deny or limit any
such Permit.
(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
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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 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 thatthe 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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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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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
With a copy to:
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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:______________________________________
Peter H. Foley, Authorized Signatory
LYNDON INSURANCE GROUP, INC.
By:______________________________________
Peter H. Foley, Authorized Signatory
ACCEL INTERNATIONAL CORPORATION
By:_________________________________
Thomas H. Friedberg, President
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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
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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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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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(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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(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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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,
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trust, incorporated or unincorporated association, joint venture, joint stock
company, 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,
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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 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,
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"Actions"), pending or, to the knowledge of Accel or ANIC, threatened against,
involving 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
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connection with the transactions contemplated hereby for which Lyndon may be
responsible.
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
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Accel 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 second anniversary of the date hereof if notice, given in good
faith, of the specific
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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:
______________________________________
Peter H. Foley, Authorized Signatory
ACCEL INTERNATIONAL CORPORATION
By:
______________________________________
Thomas H. Friedberg, President
ACCELERATION NATIONAL
INSURANCE COMPANY
By:
______________________________________
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