STOCK ACQUISITION
AGREEMENT
by and between
▇▇▇▇▇▇ INSURANCE GROUP, INC.
▇▇▇▇▇▇ LIFE INSURANCE COMPANY
and
ACCEL INTERNATIONAL CORPORATION
Dated: October 20, 1997
STOCK ACQUISITION AGREEMENT
STOCK ACQUISITION AGREEMENT (the "Agreement") made as of this
20th day of October, 1997 by and between ▇▇▇▇▇▇ Life Insurance Company, a
Missouri corporation and ▇▇▇▇▇▇ Insurance Group, Inc., a Missouri corporation,
each with offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (
collectively "▇▇▇▇▇▇"), and Accel International Corporation, a Delaware
corporation ("Accel") with its executive offices at ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
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
("▇▇▇▇"), (ii) Dublin International Limited, ("Dublin"); and (iii) Acceleration
National Service Corporation ("ANSC") (collectively, the "Target Corporations");
and
WHEREAS, ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Life Insurance Company all of the Shares of ▇▇▇▇ and to
assign, transfer and deliver to ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ 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.
(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 ▇▇▇▇ 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 ▇▇▇▇▇▇ that:
2.1 Organization and Authority.
(a) ▇▇▇▇ 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 ▇▇▇▇ consists of 500
shares, of which 400 are issued and outstanding (the "▇▇▇▇ Shares"). The ▇▇▇▇
Shares have been duly authorized and are validly issued, fully paid and
nonassessable constitute the only shares of ▇▇▇▇ 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 ▇▇▇▇ 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 ▇▇▇▇ 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) ▇▇▇▇ 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 ▇▇▇▇ attached as Schedule 2.4(a) are correct and complete. The
stock transfer, minute books and corporate records of ▇▇▇▇ which have been made
available to ▇▇▇▇▇▇ 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 ▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇ 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) ▇▇▇▇ Financial Statements.
(i) ▇▇▇▇ GAAP Financial Statements. The unaudited
balance sheet of ▇▇▇▇ as at September 30, 1997 (the "▇▇▇▇ September 30, 1997
GAAP Balance Sheet") and the related unaudited statement of income for the nine
months then ended (together with the ▇▇▇▇ September 30, 1997 GAAP Balance Sheet,
the "▇▇▇▇ September 30, 1997 GAAP Financial Statements"), to be delivered to
▇▇▇▇▇▇, 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 ▇▇▇▇ as at the respective dates and for the respective
periods covered thereby and shall show no material adverse change from the ▇▇▇▇
▇▇▇▇ 30, 1997 GAAP Financial Statements previously delivered to ▇▇▇▇▇▇.
(ii) ▇▇▇▇ Statutory Financial Statements. Prior to the
Closing, there will be delivered to ▇▇▇▇▇▇ (i) the unaudited statutory balance
sheets of ▇▇▇▇ as at September 30, 1997 (the "▇▇▇▇ September 30, 1997 Statutory
Balance Sheet") and the related unaudited statement of income for the nine
months then ended (together with the ▇▇▇▇ September 30, 1997 Statutory Balance
Sheets, the "▇▇▇▇ 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 ▇▇▇▇'▇ chief financial officer and (ii)
the audited SAP balance sheets of ▇▇▇▇ 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 "▇▇▇▇ 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 ▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇ 30, 1997 SAP
Financial Statements previously delivered to ▇▇▇▇▇▇.
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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 ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇.
(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
▇▇▇▇▇▇, 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 ▇▇▇▇▇▇.
(d) Combined Audited GAAP Financial Statements. The
combined audited balance sheet of ▇▇▇▇, 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 ▇▇▇▇▇▇ 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 ▇▇▇▇, 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
▇▇▇▇▇▇ pursuant to this Agreement; or (ii) owned by, or leased or licensed to,
Acceleration National Insurance Company ("ANIC") and are being conveyed to
▇▇▇▇▇▇ Property Insurance Company pursuant to the Asset Purchase Agreement
between ▇▇▇▇▇▇
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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) ▇▇▇▇ has good and marketable title to all of the
assets reflected on its books and records and on the ▇▇▇▇ September 30, 1997
Statutory Balance Sheet and on the ▇▇▇▇ September 30, 1997 GAAP Balance Sheet,
free and clear of all Liens, except for those assets leased by ▇▇▇▇ under leases
listed on Schedule 2.8(a). All furniture, fixtures and equipment owned or used
by ▇▇▇▇ (the "▇▇▇▇ 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
▇▇▇▇ FIXED ASSETS AND THE ▇▇▇▇ 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 ▇▇▇▇ 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 ▇▇▇▇, 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 ▇▇▇▇, 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 ▇▇▇▇
or, to the knowledge of the Accel, by any other party thereto, which would
materially and adversely affect ▇▇▇▇, and grant the leasehold estates or other
interests they purport to grant with the right to quiet possession. ▇▇▇▇ 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
▇▇▇▇ 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 ▇▇▇▇ in connection with its business. Except as set forth in
Schedule 2.10(a), ▇▇▇▇ 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 ▇▇▇▇'▇ 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 ▇▇▇▇ 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
9
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) ▇▇▇▇ 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
▇▇▇▇▇▇, which Returns accurately reflect the taxes due for the periods
indicated, and ▇▇▇▇ 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 ▇▇▇▇, and no taxing authority has raised any issue with
respect to ▇▇▇▇ 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 ▇▇▇▇ nor any waivers or agreements by ▇▇▇▇ for the
extension of time for the assessment or payment of any Taxes are in force.
Except as set forth in Schedule 2.11, ▇▇▇▇ 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. ▇▇▇▇ 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
▇▇▇▇▇▇, 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
10
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 ▇▇▇▇▇▇,
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), ▇▇▇▇
(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
11
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 ▇▇▇▇ is a party or by which it may be bound involving in excess of $25,000
(other than insurance policies issued by ▇▇▇▇), 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 "▇▇▇▇ Contract"
and, collectively, the "▇▇▇▇ Contracts"), true and correct copies of which have
been made available to ▇▇▇▇▇▇. All ▇▇▇▇ Contracts constitute legal, valid and
binding obligations of ▇▇▇▇ and, to the knowledge of Accel, of the other parties
thereto, and are in full force and effect on the date hereof, and ▇▇▇▇ has paid
in full all amounts due thereunder which are due and payable and is not in
default under any such ▇▇▇▇ Contract nor, to the knowledge of Accel, is any
other party to any such ▇▇▇▇ 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 ▇▇▇▇ or, to
the knowledge of Accel, by any other Person. Except as set forth in Schedule
2.5(a), no ▇▇▇▇ Contract requires the consent or approval of a third party in
connection with the performance by ▇▇▇▇ 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 ▇▇▇▇▇▇. 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
12
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 ▇▇▇▇▇▇. 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), ▇▇▇▇ 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 ▇▇▇▇ makes premium payments whether or not ▇▇▇▇ 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 ▇▇▇▇ 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) ▇▇▇▇ 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.
13
(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 ▇▇▇▇ or in which ▇▇▇▇ is a named
insured or on which ▇▇▇▇ 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
14
fashion. Schedule 2.16(a) sets forth a summary of the claims history for ▇▇▇▇
under such policies since January 1, 1994 and, except as set forth on Schedule
2.16(a), there are no claims outstanding by ▇▇▇▇ 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
▇▇▇▇ 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
15
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
▇▇▇▇, 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 ▇▇▇▇
September 30, 1997 Statutory Balance Sheet and the ▇▇▇▇ September 30, 1997 GAAP
Balance Sheet, (b) those incurred in the ordinary course of ▇▇▇▇'▇ 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, (▇) 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 ▇▇▇▇ or any of its assets, whether or not fully
or partially covered by insurance (other than in the ordinary course of ▇▇▇▇'▇
business with respect to claims under policies of insurance issued by ▇▇▇▇,
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
▇▇▇▇, 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
▇▇▇▇.
(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
16
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 ▇▇▇▇ 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 ▇▇▇▇ 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 ▇▇▇▇,
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.
17
2.21 Sources of Premiums.
(a) Schedule 2.21(a) sets forth a computer print-out of
▇▇▇▇'▇ 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 ▇▇▇▇, provided, however, that ▇▇▇▇▇▇ acknowledges that accounts routinely
are added and terminated in the regular course of ▇▇▇▇'▇ 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 ▇▇▇▇▇▇ 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,
18
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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.
19
2.27 Employee Compensation. Schedule 2.27 lists all employees
of ▇▇▇▇, 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 ▇▇▇▇▇▇) 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 ▇▇▇▇▇▇ of the certificates evidencing such Target Shares duly
endorsed for transfer to ▇▇▇▇▇▇, ▇▇▇▇▇▇ will acquire good, valid, indefeasible
and marketable title thereto, free and clear of any and all liens.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
▇▇▇▇▇▇ represents and warrants to Accel that:
3.1 Organization. ▇▇▇▇▇▇ Life Insurance Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Missouri and ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ and is a valid and binding agreement of ▇▇▇▇▇▇
enforceable against ▇▇▇▇▇▇ in accordance with its terms, except as
enforceability may be limited by applicable
20
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. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ which would have a material adverse
effect on the ability of ▇▇▇▇▇▇ to consummate the transactions contemplated by
this Agreement.
3.5 Ability to Perform. ▇▇▇▇▇▇ has, and will continue to have
at the time of Closing, adequate cash resources or financing commitments from
third parties to enable ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ or the Target Corporations are doing business, (b)
the notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") and (c) as set forth in Schedule 2.5(a), (b) and
(c).
(b) ▇▇▇▇▇▇ does not have knowledge of any facts or
circumstances pertaining to ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ on a date prior to the execution of this Agreement, no claim,
action, proceeding or investigation is pending or, to the best knowledge of
▇▇▇▇▇▇ after due inquiry, threatened,
21
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ in writing, Accel
hereby covenants and agrees that it shall comply and it shall cause ▇▇▇▇, Dublin
and ANSC to comply with each of the following covenants:
4.1 Conduct of the Business. ▇▇▇▇, 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 ▇▇▇▇, 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
22
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 ▇▇▇▇ 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. ▇▇▇▇, 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, ▇▇▇▇, Dublin and ANSC shall
each afford ▇▇▇▇▇▇, 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 ▇▇▇▇, Dublin
and ANSC and to each of ▇▇▇▇, Dublin and ANSC employees, agents and independent
accountants (provided that ▇▇▇▇▇▇ shall use reasonable efforts to minimize any
disruption to the business of Accel and the Target Corporations), and shall
furnish to ▇▇▇▇▇▇, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to each of ▇▇▇▇, Dublin and ANSC as may reasonably be
requested, and shall instruct its employees, counsel and financial advisors to
cooperate with ▇▇▇▇▇▇ in its investigation of each of ▇▇▇▇, Dublin and ANSC.
4.5 Further Assurances. Each of Accel, ▇▇▇▇, Dublin and ANSC
shall do or cause to be done such further acts and things and deliver or cause
to be delivered to ▇▇▇▇▇▇ such additional assignments, agreements, powers and
instruments as ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ hereunder
and thereunder.
4.6 Tax Adjustments. Each of ▇▇▇▇, Dublin and ANSC shall
promptly notify ▇▇▇▇▇▇ 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 ▇▇▇▇, Dublin or ANSC or ▇▇▇▇▇▇ and shall provide to ▇▇▇▇▇▇ and
its representatives such information and records as they may
23
reasonably request with respect to such adjustments. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ by
the creation of adverse precedent or otherwise.
4.7 No "Shopping". Each of Accel, ▇▇▇▇, 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 ▇▇▇▇, 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 ▇▇▇▇, Dublin and ANSC or the acquisition of securities of each
of ▇▇▇▇, Dublin and ANSC or a merger or combination of each of ▇▇▇▇, Dublin and
ANSC with any Person other than ▇▇▇▇▇▇ or an affiliate of Frontier Insurance
Group, Inc., or (iii) make available, or permit to be made available, any
information concerning each of ▇▇▇▇, 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 ▇▇▇▇, Dublin and ANSC, or any of
the securities of each of ▇▇▇▇, Dublin and ANSC (other than to ▇▇▇▇▇▇).
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 ▇▇▇▇▇▇ when it determines that it
will have negotiations with a Third Party, including providing ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ a fee of $750,000.
4.8 Governmental Notification and Approvals. Each of ▇▇▇▇,
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 ▇▇▇▇, 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 ▇▇▇▇, 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
▇▇▇▇, Dublin and ANSC and shall use all
24
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
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
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, in immediately
available funds.
25
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,
▇▇▇▇▇▇ will forward a list to Accel setting forth the employees of the Target
Corporations that will continue to be employed by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
▇▇▇▇▇▇ hereby covenants and agrees that:
5.1 Confidentiality. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ 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
26
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 ▇▇▇▇▇▇ has breached
this Section 5.1, then ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ the
reasonable legal fees ▇▇▇▇▇▇ has incurred in defending any such litigation,
including any appeal therefrom.
5.2 Regulatory Matters. ▇▇▇▇▇▇, 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
Accel hereby covenants and agrees to use reasonable efforts
fulfill the following covenants, and shall cause ▇▇▇▇, Dublin and ANSC to
fulfill the following in covenants, and ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ each agree to cooperate in causing such actions to be taken as would
result in ▇▇▇▇, Dublin, and ANSC ceasing to be participating employers as of the
Closing Date in Accel's and its
27
ERISA Affiliates' Employee Benefit Plans in accordance with the requirements of
ERISA. Accel and ▇▇▇▇▇▇ further agree that, except for ▇▇▇▇, Dublin and ANSC
post-Closing Date contributions (and liabilities therefor) to such Employee
Benefit Plans for the time periods preceding the Closing Date, neither ▇▇▇▇,
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 ▇▇▇▇▇▇. The obligations of
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
28
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 ▇▇▇▇▇▇ and its
counsel.
(f) The ▇▇▇▇, Dublin and ANSC September 30, 1997 GAAP
Financial Statements and the ▇▇▇▇ September 30, 1997 SAP Financial Statements
shall have been delivered to ▇▇▇▇▇▇ 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, ▇▇▇▇, 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 ▇▇▇▇ 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 ▇▇▇▇▇▇ of
any indication otherwise. ▇▇▇▇▇▇ acknowledges that independent agencies are
routinely added and terminated in the regular course of each of ▇▇▇▇'▇ and
ANSC's businesses.
(j) ▇▇▇▇▇▇ 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 ▇▇▇▇, 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 ▇▇▇▇▇▇.
(k) Each of Accel, ▇▇▇▇, 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 ▇▇▇▇▇▇ all the right, title and interest they each possess to use the
servicemarks "Costguard" and "Loanguard" pursuant to two Assignments of Federal
▇▇▇▇ Registration substantially in forms of Exhibit B hereto and have licensed
to ▇▇▇▇▇▇ the right to use the servicemarks ACCELERATION, the Inverted "V"
Design, and ACCELERATION and the Inverted "V" Design
29
heretofore used in connection with the businesses of each of the Target
Corporations to ▇▇▇▇▇▇ 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, ▇▇▇▇, 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 ▇▇▇▇ 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 ▇▇▇▇▇▇ and Accel.
(t) The Light Pen system, including all relevant
documentation, shall have been delivered to ▇▇▇▇▇▇ or one of the Target
Corporations, as directed by ▇▇▇▇▇▇.
(u) The Lincoln National Reinsurance Agreement with ▇▇▇▇
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, which shall show no material adverse
change from the results reported as of June 30, 1997.
(w) Accel shall have caused ▇▇▇▇ 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 ▇▇▇▇▇▇ and its counsel.
30
(x) [Not Used].
(y) Any ▇▇▇▇ 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) ▇▇▇▇▇▇ shall have received at the Closing the opinion
of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., Senior Vice President and General Counsel for
Accel, dated as of the Closing Date, in form and substance reasonably
satisfactory to counsel for ▇▇▇▇▇▇, to the effect that (a) ▇▇▇▇ 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 ▇▇▇▇ 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
▇▇▇▇, 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
31
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 ▇▇▇▇▇▇ 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) ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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.
32
(f) Accel shall have received at the Closing the opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C., counsel to ▇▇▇▇▇▇, dated as of the Closing
Date, in form and substance reasonably satisfactory to counsel for Accel, to the
effect that (a) ▇▇▇▇▇▇ is duly authorized to enter into and perform this
Agreement and (b) this Agreement has been duly authorized, executed and
delivered by ▇▇▇▇▇▇, and is a valid and binding obligation of ▇▇▇▇▇▇, and each
agreement attached hereto as an Exhibit has been duly authorized, executed and
delivered by ▇▇▇▇▇▇, and each such agreement is a valid and binding obligation
of ▇▇▇▇▇▇ enforceable against ▇▇▇▇▇▇ 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) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C., ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. 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 ▇▇▇▇▇▇ the following:
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(a) Certificates representing the Target Shares, duly
endorsed for transfer to ▇▇▇▇▇▇ or its designee.
(b) The minute book, stock book and stock ledger of each
of ▇▇▇▇, Dublin and ANSC.
(c) A copy of the Articles of Incorporation of each of
▇▇▇▇ 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 ▇▇▇▇ and ANSC certified by the Secretary of State
of the State of Ohio for ▇▇▇▇ 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 ▇▇▇▇, 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 ▇▇▇▇, the existing insurance licenses or
certificates of authority issued by the department of insurance of each
jurisdiction in which ▇▇▇▇ is authorized to transact business as an insurance
company.
(e) The written resignations of the directors and officers
of each of ▇▇▇▇, Dublin and ANSC as requested by ▇▇▇▇▇▇.
(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 ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, General Counsel
of Accel.
8.3 Deliveries by ▇▇▇▇▇▇. At the Closing, ▇▇▇▇▇▇ shall deliver
to Accel the following:
(a) The Purchase Price by wire transfer of immediately
available funds.
(b) The opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C., counsel
to ▇▇▇▇▇▇.
34
(c) A true and complete copy, certified by the Secretary
or an Assistant Secretary of ▇▇▇▇▇▇, of the resolutions duly and validly adopted
by the Board of Directors of ▇▇▇▇▇▇ evidencing its authorization of the
execution and delivery of this Agreement and the other agreements to be executed
by ▇▇▇▇▇▇ as contemplated hereby and the consummation of the transactions
contemplated hereby.
(d) A certificate of the Secretary or an Assistant
Secretary of ▇▇▇▇▇▇ certifying the names and signatures of the officers of
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇.
ARTICLE 9
CERTAIN COVENANTS
9.1 Cooperation and Records Retention. ▇▇▇▇▇▇ shall cause each
of ▇▇▇▇, 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 ▇▇▇▇, Dublin and ANSC for a period that includes the date hereof or any prior
date, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ to maintain the Target Companies' financial
records in an orderly fashion. ▇▇▇▇▇▇ 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
35
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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ may have in law or in equity.
9.4 Use of Former Employees. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ shall
cause the employees of the Target Corporations to prepare the financial
statements of ▇▇▇▇, Dublin and ANSC on a GAAP basis for the year ended December
31, 1997 and the SAP financial statements for ▇▇▇▇ 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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ learns
of such fraud, willful misrepresentation or breach.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification.
(a) Indemnification by Accel.
36
(i) Accel hereby agrees to indemnify and hold harmless
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ resulting from, relating to, or arising out of the
inaccuracy of any representation or warranty herein by ▇▇▇▇, Dublin, ANSC or
Accel or the breach of any covenant herein by ▇▇▇▇, 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 ▇▇▇▇▇▇, its affiliates or any other
Person after and in the event that Accel has paid a total of $8 million to
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, 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 "▇▇▇▇▇▇ Tax
Act") or attributable to a breach by ▇▇▇▇▇▇ of its obligations under this
Agreement.
37
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Tax Act or to a
breach by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or the breach of any covenant
contained herein by ▇▇▇▇▇▇; provided, however, that the aggregate
indemnification obligations and liability of ▇▇▇▇▇▇ 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
38
(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 ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇, 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 ▇▇▇ for a refund
where applicable law permits such refund suits or contest the Tax Claim in any
permissible manner. However, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ delivers to Accel notice
of a claim for indemnification, ▇▇▇▇▇▇ shall provide reasonable access to the
books and records of ▇▇▇▇, Dublin and ANSC (and of ▇▇▇▇▇▇ in the event ▇▇▇▇▇▇
has possession of the requisite books and records) with respect to any matters
giving rise to such claim.
39
ARTICLE 12
TAX MATTERS
12.1 Tax Election. ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ shall be raised within 60 business days after receipt by
Accel of the Price Allocation Schedule. If ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ agree to act in accordance with such
Schedule in the preparation, filing and audit of any Tax Return.
40
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,
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ (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 ▇▇▇▇▇▇ within 10 days of its due
date and ▇▇▇▇▇▇ shall cause such Accel Return to be timely filed; provided,
however, that ▇▇▇▇▇▇ shall not assume any liability with respect to the content
of any such Accel Return. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
agrees that such retention and maintenance is no longer necessary, and (ii) to
allow ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ may ▇▇▇▇ 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 ▇▇▇▇▇▇. Any refunds or
credits of Taxes of any of the Target Corporations for any Straddle Period shall
be equitably apportioned between Accel and ▇▇▇▇▇▇. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
42
▇▇▇▇▇▇ 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
▇▇▇▇▇▇ at the Closing a certificate in form and substance satisfactory to
▇▇▇▇▇▇, 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 ▇▇▇▇▇▇.
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 ▇▇▇▇▇▇ and Accel.
13.2 Waiver of Compliance. Any failure of ▇▇▇▇▇▇ or Accel to
comply with any obligation, covenant, agreement or condition herein contained
may be expressly waived, in writing only, by (i) ▇▇▇▇▇▇ in the case of any
failure of Accel or (ii) Accel in the case of any failure of ▇▇▇▇▇▇. 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇:
▇▇▇▇▇▇ Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax # (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
With a copy to:
44
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax # (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
or to such other person or place as ▇▇▇▇▇▇ shall designate by notice in the
manner provided in this Section 13.4;
B. If to Accel:
Accel International Corporation
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax # ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
With copies to:
Accel International Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
and
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. Summer, Esq.
13.5 Assignment. This Agreement shall be binding upon and
inure to the benefit of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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.
45
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.
▇▇▇▇▇▇ LIFE INSURANCE COMPANY
By:______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, Authorized Signatory
▇▇▇▇▇▇ INSURANCE GROUP, INC.
By:______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, Authorized Signatory
ACCEL INTERNATIONAL CORPORATION
By:_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
46