-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NqNBoxBZv7OC6VMw12tMhn5TwedLWEn5LR/NPypZuxR6Ih1gC+t6/KaMnx5g37OA +BiBD+mcYO5OAaAGIOtbAQ== 0000950152-96-003654.txt : 19960801 0000950152-96-003654.hdr.sgml : 19960801 ACCESSION NUMBER: 0000950152-96-003654 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960731 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCEL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000001985 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 310788334 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-04625 FILM NUMBER: 96601524 BUSINESS ADDRESS: STREET 1: 475 METRO PLACE N CITY: DUBLIN STATE: OH ZIP: 43017 BUSINESS PHONE: 6147647000 MAIL ADDRESS: STREET 1: 475 METRO PLACE NORTH CITY: DUBLIN STATE: OH ZIP: 43017 FORMER COMPANY: FORMER CONFORMED NAME: ACCELERATION CORP DATE OF NAME CHANGE: 19870814 424B3 1 ACCEL INTERNATIONAL PROSPECTUS SUPPLEMENT 1 Prospectus filed pursuant to Rule 424(b)(3) Registration No. 333-4625 PROSPECTUS 6,834,648 SHARES ACCEL INTERNATIONAL CORPORATION COMMON STOCK --------------- ACCEL International Corporation (the "Company"), a Delaware corporation, is offering (the "Rights Offering") to holders of record (the "Rights Holders") of shares of its Common Stock, par value $.10 per share (the "Common Stock"), non-transferable subscription rights (the "Rights") to subscribe for and purchase additional shares of the Common Stock for a price of $2.25 per share (the "Subscription Price"). Such Rights Holders will receive one Right for every share of Common Stock held by them as of the close of business on June 18, 1996 (the "Record Date"). Rights Holders may purchase 1.5 shares of Common Stock (the "Underlying Shares") for each Right held upon payment of the Subscription Price (the "Basic Subscription Privilege"). No fractional Rights will be issued and no fractional shares of Common Stock will be issued upon exercise of the Rights. To the extent that the Basic Subscription Privilege is not exercised in full, the Company may determine to offer the shares of Common Stock not subscribed for sale to employees, independent agents and customers (including automobile dealers) of the Company directly through executive officers of the Company at a price of $2.25 per share (the "Additional Offering"). See "Plan of Distribution." The Rights will be evidenced by non-transferable certificates. Once a Rights Holder has exercised any Rights, such exercise may not be revoked. The Rights will expire at 5:00 p.m., Columbus, Ohio time, on August 26, 1996, unless extended (as it may be extended, the "Expiration Date"), provided that the Expiration Date shall in no event be later than August 28, 1996. Rights Holders who do not exercise their Rights will experience a decrease in their proportionate interest in the equity ownership and voting power of the Company. See "Risk Factors--Decrease in Proportionate Equity Ownership if Rights Not Exercised." The Common Stock is traded on the Nasdaq National Market under the symbol "ACLE." On July 23, 1996, the last reported sale price of the Common Stock was $2.75. After the Expiration Date, the Rights will no longer be exercisable and will have no value. Since the Rights are non-transferable, the Rights may not be sold and there will be no trading market for the Rights. POTENTIAL PURCHASERS OF THE COMMON STOCK PURSUANT TO AN EXERCISE OF THE RIGHTS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 6. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
======================================================================== Price to Underwriting Proceeds to Public Discount Company (1) - ------------------------------------------------------------------------ Per Share $2.25 None $2.25 - ------------------------------------------------------------------------ Total(2) $15,377,958 None $15,377,958 ======================================================================== (1) Before deducting expenses payable by the Company estimated to be $96,400. (2) The Total amount assumes the purchase of all 6,834,648 shares of Common Stock offered hereby.
The date of this Prospectus is July 25, 1996 2 AVAILABLE INFORMATION The Company has filed a Registration Statement on Form S-2 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with the Securities and Exchange Commission (the "Commission") with respect to the Rights and the shares of Common Stock offered pursuant to this Prospectus. For further information, reference is made to the Registration Statement and amendments thereof and exhibits thereto. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information are available for inspection without charge at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549-1004, as well as the Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street, 14th Floor, Chicago, Illinois 60661-2511. Copies of the Registration Statement and amendments thereof and the exhibits thereto may be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission by the Company (File No. 0-8162) are incorporated in this Prospectus by reference: (1) Annual Report on Form 10-K for the year ended December 31, 1995 (a copy of which accompanies this Prospectus). (2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (a copy of which accompanies this Prospectus). Any statement contained in a document which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including beneficial owners, to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, a copy of any and all of the foregoing documents, other than the exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents). Requests should be directed to ACCEL International Corporation, 475 Metro Place North, Suite 100, Dublin, Ohio 43017, Attention: Nicholas Z. Alexander, Senior Vice President, (614) 764-7000. 2 3 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the information appearing elsewhere in this Prospectus and in the documents incorporated in this Prospectus by reference. The Company The Company is an insurance holding company incorporated in Delaware in June 1978 as the successor to an Ohio corporation, formerly Acceleration Corporation, organized in 1969. The Company, through its subsidiaries, is engaged in the sale and underwriting of credit life and credit accident and health insurance, extended service contracts and other specialty casualty products. The credit insurance and extended service contract products are offered to consumers principally through automobile dealers, financial institutions and other business entities. For more detailed information concerning the business of the Company and its financial statements see the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (the "10-K") and Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (the "10-Q"), copies of which accompany this Prospectus and which are incorporated herein by reference. The Company's home office is located at 475 Metro Place North, Suite 100, Dublin, Ohio 43017 and its telephone number is (614) 764-7000. Risk Factors There are certain risks in connection with the Rights Offering that should be considered by Rights Holders prior to determining whether to exercise the Rights and purchase the Common Stock. The following is a summary of certain of these risks: (i) The Company has experienced net losses since 1992 and may incur net losses in the future; (ii) the Company's gross premiums derived from its credit insurance business are substantially dependent upon consumer credit transactions involving the purchase of automobiles; (iii) A.M. Best Company downgraded the Company's life insurance subsidiary's rating from A- to C+ and the property and casualty insurance subsidiary's rating from A to B in 1991 which ratings have remained unchanged since then. The current ratings may have an adverse affect on the insurance subsidiaries' ability to market their products; (iv) the Company does not expect to pay dividends in the foreseeable future and is limited under a note purchase agreement from doing so; (v) Chase Insurance Holdings Corporation ("CIHC"), a corporation which is beneficially owned indirectly by David T. Chase, a director of the Company, his wife, his children and various family trusts (collectively, the "Chase Stockholders"), beneficially owns, directly or indirectly, approximately 29.7% of the outstanding shares of Common Stock of the Company and Mr. Chase's wife beneficially owns an additional 8.4% of the Common Stock of the Company. It is possible that the Rights Offering will result in CIHC, either alone or together with the Chase Stockholders and Mrs. Chase, beneficially owning as much as 60.6% of the Common Stock, assuming that the Chase Stockholders and Mrs. Chase exercise their Basic Subscription Privilege in full and that the other Rights Holders do not exercise their Basic Subscription Privilege, and having actual control over the Company. The Company has been advised that the Chase Stockholders and Mrs. Chase do intend to exercise their Basic Subscription Privilege in full. Mr. Chase disclaims beneficial ownership of the shares of Common Stock owned by his wife; and (vi) there can be no assurance that the market price of the Common Stock will not decline. The Rights Offering Rights............................... Each record holder of Common Stock at the close of business on June 18, 1996 (the "Record Date") is receiving one non- transferable subscription right ("Right") for each share of Common Stock held of record on the Record Date. Each Right will entitle the holder thereof ("Rights Holder") to purchase from the Company 1.5 shares of Common Stock (the 3 4 "Underlying Shares") for a price of $2.25 per share (the "Subscription Price"). An aggregate of up to 6,834,648 shares of Common Stock will be sold in the Rights Offering upon exercise of the Rights. The Rights will be evidenced by non-transferable certificates (the "Subscription Rights Certificates"). Basic Subscription Privilege.......... Rights Holders are entitled to purchase, at the Subscription Price, 1.5 Underlying Shares for each Right held (the "Basic Subscription Privilege"). No fractional Rights will be issued and no fractional shares of common stock will be issued upon exercise of the Rights. See "The Rights Offering -- Basic Subscription Privilege." To the extent that the Basic Subscription Privilege is not exercised in full, the Company may determine to offer any or all of the shares of Common Stock not subscribed for sale to employees, independent agents and customers (including automobile dealers) of the Company directly through executive officers of the Company. See "The Rights Offering -- Basic Subscription Privilege" and "Plan of Distribution." Subscription Price.................... $2.25 per Underlying Share, payable in cash. See "The Rights Offering -- Exercise of Rights" and "The Rights Offering -- Determination of Subscription Price." Tender of Subordinated Notes in Lieu of Cash....................... The Company has decided to permit CIHC and its affiliate (the "Subordinated Noteholders") to tender $5,619,046 principal amount of the Company's 10.125% Subordinated Notes due July 2000 (the "Subordinated Notes") for cancellation as consideration (in lieu of cash) for the purchase of shares of Common Stock pursuant to the Rights Offering. Shares of Common Stock Outstanding After the Rights Offering............. As of the Record Date there were 4,556,432 Shares of Common Stock outstanding. An aggregate of up to 6,834,648 shares of Common Stock will be sold in the Rights Offering if all of the Rights are exercised. If all Rights are exercised, an aggregate of 11,391,080 shares of Common Stock will be outstanding upon completion of the Rights Offering. Transferability of Rights............. The Rights, including the Basic Subscription Privilege, are not transferable. Expiration Date....................... 5:00 p.m., Columbus, Ohio time, August 26, 1996, or such later date and time to which the Rights Offering may be extended (the "Expiration Date"), provided that the expiration date shall in no event be later than August 28, 1996. See "The Rights Offering -- Expiration Date." Rights not exercised prior to the Expiration Date will expire and become worthless. Procedure for Exercising Rights....... The Basic Subscription Privilege may be exercised by properly completing and signing the Subscription Certificate evidencing 4 5 the Rights (a "Subscription Certificate") and forwarding such Subscription Certificate (or following the Guaranteed Delivery Procedures), with payment of the Subscription Price for each Underlying Share subscribed for pursuant to the Basic Subscription Privilege, to the Subscription Agent on or prior to the Expiration Date. If Subscription Rights are sent by mail, Rights Holders are urged to use insured, registered mail. No interest will be paid on funds delivered in payment of the Subscription Price. See "The Rights Offering -- Exercise of Rights." No Revocation of Exercise............. Once a Rights Holder has exercised the Basic Subscription Privilege, such exercise may not be revoked. Persons Holding Common Stock or Wishing to Exercise Rights, Through Others........................ Persons holding shares of Common Stock beneficially, and receiving the Rights issuable with respect thereto, through a broker, dealer, commercial bank, trust company or other nominee, as well as persons holding certificates for Common Stock directly who would prefer to have such institutions effect transactions relating to the Rights on their behalf, should contact the appropriate institution or nominee and request it to effect such transactions for them. See "The Rights Offering -- Exercise of Rights". Issuance of Common Stock.............. Certificates representing shares of Common Stock purchased pursuant to the exercise of the Basic Subscription Privilege will be delivered to subscribers as soon as practicable after the corresponding Rights have been validly exercised and payment therefor has been received by the Company. See "The Rights Offering -- Basic Subscription Privilege." Use of Proceeds....................... The Company intends to use the net cash proceeds from the Rights Offering for general corporate purposes, including investments in, and advances to, its insurance company subsidiaries and the redemption of any Subordinated Notes which are not tendered in the Rights Offering. The Subordinated Noteholders have indicated that they intend to tender $5,619,046 principal amount or 88.7% of the $6,337,446 principal amount of Subordinated Notes outstanding as of June 30, 1996, for cancellation as consideration (in lieu of cash) for the purchase of shares of Common Stock. The Subordinated Notes will be accepted by the Company as consideration in an amount equal to the full principal amount of such Subordinated Notes plus accrued interest from July 1, 1996 through the date of exercise of the Basic Subscription Privilege by the Subordinated Noteholders. Accordingly, the net cash proceeds of the Rights Offering assuming all of the Rights are exercised in full are estimated to be approximately $9,600,000. Subscription Agent.................... National City Bank, Cleveland, Ohio. The Subscription Agent's telephone number is (800) 622-6757. 5 6 RISK FACTORS Prospective investors should consider carefully the following risk factors, together with other information contained or incorporated by reference in this Prospectus, in evaluating an investment in the Common Stock offered hereby. This Prospectus contains or incorporates by reference certain forward-looking statements reflecting management's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results to differ materially from those in the forward-looking statements, including but not limited to, the following risk factors. Continuing Net Losses The Company has experienced net losses since 1992 and may incur net losses in the future. The Company incurred net losses of $1,460,000, $5,238,000, $5,281,000 and $22,124,000 or an aggregate of $34,103,000 for the years ended December 31, 1995, 1994, 1993 and 1992, respectively. There can be no assurance that the Company will not experience net losses in the future. Decrease in Gross Premiums Written Since 1991 gross premiums written have decreased from $130,239,000 to $55,443,000 principally as a result of the Company's decision to discontinue all lines of business except for credit insurance and extended service contracts. See Item 1 of the 10-K for a general discussion of the discontinued lines of business and Table II on page 15 of the 10-K which sets forth the changes in gross premiums written for the past three fiscal years for both continuing lines of business and discontinued lines of business. Interest Rate Risk The Company, like all other life and health and property and casualty insurers, is subject to various risks which are discussed in Note A of the Notes to Consolidated Financial Statements included in the 10-K. In particular, the Company is subject to interest rate risk which is the risk that interest rates will change and cause a decrease in the value of an insurer's investments. The Company mitigates this risk by attempting to match the maturity schedule of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature, an insurer would have to borrow funds or sell assets prior to maturity and potentially recognize a gain or loss. At March 31, 1996, the estimated duration of the Company's fixed income investment portfolio was 2.84 years while the estimated liability duration was approximately 3.5 years. Currently, an interest rate change of 1% would impact the market value of the fixed maturity portfolio and stockholders' equity by a decline of approximately $1.8 million if interest rates rose and an increase of approximately $1.8 million if interest rates declined. Dependence Upon Automobile Purchases The Company sells credit insurance and extended warranty contracts primarily in connection with consumer credit transactions involving automobile purchases. Automobile purchases have been and will continue to be affected, directly and indirectly, by automobile prices, interest rates, the availability of consumer credit and general economic conditions, all of which are beyond the Company's control. 6 7 Effect of Downgrading of Insurance Ratings Life Insurance The Company's life insurance subsidiary is rated C+ (Fair) by A.M. Best Company ("Best"). Best downgraded the life insurance subsidiary's rating from A- to C+ in 1991 and the rating has remained unchanged since then. The Best rating is based on factors relevant to policyholders and is not directed toward the protection of stockholders. The Best rating is based upon its current opinion of the life insurance subsidiary's lack of consistently profitable operating results in recent years as well as its concern regarding the weak financial results, high debt level and poor liquidity position of the Company. The weaknesses noted by Best are partially offset by the general profitability of the life insurance subsidiary's core credit life insurance operations and the high quality of its investment portfolio. Although the Company has not experienced a material reduction in the level of its sales of credit insurance products through automobile dealers following Best's downgrading, the insurance company subsidiary's current rating adversely affects its ability to market those products through financial institutions. Property and Casualty Insurance The Company's property and casualty insurance company subsidiary is rated B (Adequate) by Best. Best downgraded the property and casualty insurance company subsidiary's rating from A to B in 1991 and the rating has remained unchanged since then. The Best rating reflects its analysis of the property and casualty insurance company subsidiary's continued operating losses and corresponding decline in surplus and ongoing reserve strengthening for the lines of business in runoff. The property and casualty insurance company subsidiary's current rating may have an adverse affect on its ability to market its products through certain quality agents and brokers. Uncertain Profitability of New Programs; Dependence Upon Agent The property and casualty insurance subsidiary has recently introduced two new insurance programs. See "Recent Developments." Because the property and casualty insurance company subsidiary has had little or no experience in writing coverage for the new insurance programs, there can be no assurance that either of such programs will be profitable. The Company has, however, employed individuals to develop these programs who have extensive experience. The Company's new commercial auto program (truck and bus) is being marketed through an independent agent, Transportation Insurance Specialists, Inc. ("TIS") which does have limited authority to bind the Company. If the commercial auto program (truck and bus) becomes material, the loss of TIS as an independent agent could have a material adverse impact on the Company's financial position or operating results. Limitations on Payment of Dividends The Company has not paid dividends on the Common Stock since 1991 due to the Company's lack of profitability in recent years and does not expect to pay dividends until the Company has returned to a level of profitability which will sustain the payment of cash dividends. In addition, the Company's outstanding 9.50% Notes due April 1, 2001 (the "Senior Notes"), were issued pursuant to a note purchase agreement which limits the Company's ability to pay dividends to 50% of net income computed on a cumulative basis from January 1, 1996 to and including the date of the dividend payment. Even if the Company does have net income in the future, its principal source of cash flow with which to pay dividends will be dependent upon the ability of its insurance company subsidiaries to pay dividends to the Company. Ohio domiciled insurance companies are subject to laws and regulations which, among other things, limit the amount of dividends and other payments that can be made by such insurance companies without prior regulatory approval. See "Price Range of Common Stock and Dividend Policy" included herein and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Consolidated Financial Statements and notes thereto included in the 10-K which accompanies this Prospectus. 7 8 Claims Asserted by Liquidation Bureau under Certificates of Suretyship On October 7, 1994, the Liquidation Bureau of the New York State Insurance Department (the "Liquidation Bureau") took control of Galaxy Insurance Company ("Galaxy"), which prior to the commencement of liquidation proceedings had been an indirect wholly-owned subsidiary of the Company, pursuant to an order of liquidation of the New York Supreme Court. Prior to the liquidation of Galaxy, Acceleration National Insurance Company ("ANIC"), the property and casualty insurance company subsidiary of the Company, had issued certain certificates of suretyship ("Certificates") with respect to certain Galaxy insurance policies, each of which provided that ANIC would assume the responsibilities of Galaxy under the specified policy if Galaxy became insolvent or financially unable to meet its obligations on the underlying policy, but only if certain conditions were met. In particular, the Certificates provided that ANIC's assumption of liability was contingent upon the insured's executing and delivering all agreements, assignments or evidence of subrogation satisfactory to ANIC respecting payments made or liabilities assumed. In May 1996, the Liquidation Bureau, acting on behalf of the New York Property/Casualty Insurance Security Funds (the "Guaranty Fund"), during a meeting with Company representatives informally advised the Company that on behalf of the Guaranty Fund it intended to seek indemnification or reimbursement from ANIC for claims paid by the Guaranty Fund to Galaxy insureds on policies which may have been covered by the Certificates. The Liquidation Bureau has not yet completed its response to the Company's request for accounting data and other information with respect to the Liquidation Bureau's analysis of the Guaranty Fund's right to indemnification and, accordingly, the Company cannot quantify the magnitude of the potential claim for indemnification or reimbursement. The Company has taken the position that the Guaranty Fund has no right to seek indemnification unless Galaxy insureds who hold properly issued Certificates have executed assignments and evidence of subrogation. Even if any Galaxy insured properly made such a claim directly against ANIC, the Company has been advised by counsel that if ANIC paid any such claim, it would have the right, under assignment and subrogation agreements with its insureds, to assert all rights that the insureds could have asserted to recover the loss amounts from any other source, including the Guaranty Fund. The Company intends to fully investigate each claim which the Liquidation Bureau, acting on behalf of the Guaranty Fund, formally asserts is entitled to the benefits of a Certificate to determine whether such Certificate was properly endorsed by ANIC and issued with proper authority and if so, whether proper agreements, assignments and evidence of subrogation have been executed. The Company intends to vigorously deny liability for any claims for indemnification or reimbursement made by the Liquidation Bureau, on behalf of the Guaranty Fund, with respect to the Certificates. Although the Company is not in a position to estimate the magnitude of the potential claims for indemnification or reimbursement, it does not believe that the ultimate resolution of such claims will have a material adverse effect on the financial condition or results of operations of the Company. Decrease in Proportionate Equity Ownership if Rights Not Exercised Rights Holders who do not exercise their Rights will experience a decrease in their proportionate interest in the equity ownership and voting power of the Company. In addition, the Chase Stockholders beneficially own, directly or indirectly, approximately 29.7% of the outstanding shares of Common Stock of the Company and Mr. Chases's wife beneficially owns an additional 8.4% of the Common Stock of the Company. It is possible that the Rights Offering will result in CIHC, either alone or together with the Chase Stockholders and Mrs. Chase, beneficially owning as much as 60.6% of the Common Stock, assuming that the Chase Stockholders and Mrs. Chase exercise their Basic Subscription Privilege in full and that the other Rights Holders do not exercise their Basic Subscription Privilege, and having actual control over the Company. 8 9 Potential Conflicts of Interest CIHC, which is beneficially owned by Mr. Chase and the other Chase Stockholders, is a principal stockholder of the Company and is one of the Subordinated Noteholders. The Subordinated Noteholders collectively hold $5,619,046 principal amount or 88.7% of the $6,337,446 principal amount of Subordinated Notes outstanding as of June 30, 1996. The Company has decided to permit the Subordinated Noteholders to tender their respective Subordinated Notes for cancellation as consideration (in lieu of cash) for the purchase of the Common Stock and the Subordinated Noteholders have indicated that they intend to tender all of the Subordinated Notes held by them. In addition, the Chase Stockholders have indicated that they intend to purchase the balance of Underlying Shares available to them after giving effect to the tender of the Subordinated Notes. Assuming that the $5,619,046 principal amount of Subordinated Notes held by the Subordinated Noteholders are tendered and the balance of the Underlying Shares are purchased for cash, an aggregate of 2,600,188 shares of Common Stock will be purchased by the Chase Stockholders. If no other Rights are exercised, the Chase Stockholders would beneficially own 60.6% of the outstanding shares of Common Stock. The remaining outstanding Subordinated Notes in the principal amount of $718,000 are held by an unrelated third party who is not a stockholder of the Company (the "Unrelated Subordinated Noteholder"). Because the Unrelated Subordinated Noteholder is not a stockholder of the Company, the Board of Directors concluded that the Company could not make available to the Unrelated Subordinated Noteholder the opportunity to tender Subordinated Notes held by the Unrelated Subordinated Noteholder for shares of Common Stock. The Company does intend, however, to retire the Subordinated Notes held by the Unrelated Subordinated Noteholder if sufficient cash proceeds from the Rights Offering are available. The Board of Directors was aware that by not permitting the Unrelated Subordinated Noteholder to participate in the Rights Offering, the Suboordinated Noteholders were obtaining benefits not being provided to the Unrelated Subordinated Noteholder, including the ability to acquire shares of Common Stock of the Company at a potential discount from the market price and without having to incur any interest costs. The Board of Directors has felt for some time that the Company must improve its debt-to-equity ratio and reduce its interest expense, thereby addressing concerns of both its insurance regulators and rating agencies. By improving the debt-to-equity ratio and reducing its interest expense, the Board of Directors believes that the Best ratings of the Company's insurance subsidiaries may be upgraded thereby creating new market opportunities. Since the elimination of the debt represented by the Subordinated Notes would significantly improve the Company's debt-to-equity ratio and reduce its interest expense, the Board of Directors concluded that it was in the best interest of the Company and its stockholders to agree to accept the tender of Subordinated Notes in lieu of cash. Nature of the Rights Offering The Company does not have a commitment for the purchase of shares of Common Stock which may remain unsold at the expiration of the Rights Offering. Accordingly, there can be no assurance as to the number of shares of Common Stock which will be sold by the Company in the Rights Offering or in the Additional Offering. Market Price Risks Associated With the Common Stock There can be no assurance that the market price of the Common Stock will not decline during the period the Rights are outstanding or that, following the issuance of the Rights and the sale of the Underlying Shares upon exercise of the Rights, a subscribing Rights Holder will be able to sell shares purchased in the Rights Offering at a price equal to or greater than the Subscription Price. Once a Rights Holder has exercised the Basic Subscription Privilege, such exercise may not be revoked. See "The Rights Offering -- No Revocation." Moreover, until certificates are delivered, subscribing Rights Holders may not be able to sell the shares of Common Stock that they have purchased in the Rights Offering. 9 10 USE OF PROCEEDS The Company intends to use the net cash proceeds from the Rights Offering for general corporate purposes, including investments in, and advances to, its insurance company subsidiaries and the redemption of any Subordinated Notes which are not tendered in the Rights Offering. The Subordinated Noteholders have indicated that they intend to tender $5,619,046 principal amount or 88.7% of the $6,337,446 principal amount of Subordinated Notes outstanding as of June 30, 1996, for cancellation as consideration (in lieu of cash) for the purchase of shares of Common Stock. The Subordinated Notes will be accepted by the Company as consideration in an amount equal to the full principal amount of such Subordinated Notes plus accrued interest from July 1, 1996 through the date of exercise of the Basic Subscription Privilege by the Subordinated Noteholders. Accordingly, the net cash proceeds of the Rights Offering assuming all of the Rights are exercised in full are estimated to be approximately $9,600,000. The Subordinated Notes bear interest at 10.125% per annum and are scheduled to mature in July 2000. No principal payments are required to be paid on the Subordinated Notes prior to maturity but the Subordinated Notes may be prepaid at any time without penalty. RECENT DEVELOPMENTS The property and casualty insurance subsidiary has recently introduced two new insurance programs, one is the commercial auto program (truck and bus) and the other is for automobile dealers. The commercial auto program (truck and bus) is a limited coverage program while the automobile dealers program is a multi-peril package program which provides property, liability and related coverages. During the first two quarters of 1996, the commercial auto program (truck and bus) produced approximately $9.1 million of annualized premiums. During the second quarter of 1996, the automobile dealer program produced approximately $1.0 million of annualized premiums. On May 16, 1996, the Company publicly announced that it had reached an agreement to settle its $5.16 million judgment against Homeowners Marketing Services, Inc. ("HMS") for $4.4 million in cash. Homeowners Group, Inc. ("HOMG"), the parent of HMS, has entered into a definitive merger agreement with Cross Country Group, Inc. which has agreed to pay the amount of the settlement at the time of the closing of its acquisition of HOMG. HOMG announced that the closing of the acquisition, which is subject to regulatory and stockholder approval, is anticipated in late September. When and if the amount of the settlement is paid, the Company intends to use such amount to increase the capital of the two insurance company subsidiaries to enable them to develop existing and new insurance programs. No part of the settlement will be recognized as income until received by the Company. The Company has had an arrangement with a financial institution pursuant to which it ceded credit life and credit accident and health insurance originated by the financial institution to a reinsurance company owned by the financial institution. During the most recent fiscal year, the Company wrote $1,486,000 in net premiums for which it received a ceding commission. The financial institution terminated the arrangement effective June 1, 1996. Although the Company does have the right to recapture the ceded insurance and retain 100% of the profits and losses thereof during runoff, the Company's premiums written in the future will be reduced unless it is able to replace the insurance originated by the financial institution with new business. 10 11 PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY The Common Stock is traded on the Nasdaq National Market under the symbol "ACLE." The following table sets forth the high and low sales prices of the Common Stock for each of the periods indicated through July 23, 1996 as reported by the Nasdaq National Market. The prices have been rounded up to the nearest eighth and do not include retail markups, markdowns or commissions.
High Low ---- --- YEAR ENDED DECEMBER 31, 1994 First Quarter.............................................................. $6.000 $3.750 Second Quarter............................................................. 5.000 3.000 Third Quarter.............................................................. 3.750 2.250 Fourth Quarter............................................................. 3.125 1.750 YEAR ENDED DECEMBER 31, 1995 First Quarter.............................................................. 2.875 1.750 Second Quarter............................................................. 3.125 2.000 Third Quarter.............................................................. 4.875 2.750 Fourth Quarter............................................................. 3.875 2.375 YEAR ENDING DECEMBER 31, 1996 First Quarter.............................................................. 3.375 2.875 Second Quarter............................................................. 3.750 2.500 Third Quarter (through July 23, 1996)...................................... 3.250 2.500
Prior to 1992 the Company had historically paid stock or cash dividends. On June 2, 1992, the Board of Directors of the Company decided to suspend payment of cash dividends on the Common Stock until the Company returned to a level of profitability which will sustain the payment of cash dividends. Moreover, the note agreement pursuant to which the Company's $16,500,000 principal amount of Senior Notes were issued restricts the payment of dividends on the Common Stock to an amount equal to 50% of net income computed on a cumulative basis from January 1, 1996 to and including the date of the dividend payment. Accordingly, there is presently no amount available for paying dividends after giving effect to this restriction. Even if the Company does have net income in the future, its principal source of cash flow with which to pay dividends will be dependent upon the ability of its insurance company subsidiaries to pay dividends to the Company. Ohio domiciled insurance companies are subject to laws and regulations which, among other things, limit the amount of dividends and other payments than can be made by such insurance companies without prior regulatory approval. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Consolidated Financial Statements and notes thereto included in the 10-K which accompanies this Prospectus. THE RIGHTS OFFERING The Rights The Company is hereby issuing Rights to each holder of Common Stock as of the close of business on June 18, 1996 (the "Record Date") at no charge to such holders. The Company will issue one Right for each share of Common Stock held on the Record Date. Each Right will entitle the holder thereof (the "Rights Holder") to subscribe for 1.5 shares of Common Stock. The Rights will be evidenced by non-transferable Subscription Rights Certificates which are being distributed to each Rights Holder contemporaneously with the delivery of this Prospectus. The issuance by the Company of shares of Common Stock pursuant to the Rights Offering is not 11 12 conditioned upon the subscription of any minimum number of shares of Common Stock by the Rights Holders. No fractional Rights will be issued and no fractional shares of Common Stock will be issued upon exercise of the Rights. See "The Rights Offering -- Basic Subscription Privilege." BEFORE EXERCISING ANY RIGHTS, POTENTIAL INVESTORS ARE URGED TO READ CAREFULLY THE INFORMATION SET FORTH UNDER "RISK FACTORS." Expiration Date The Rights will expire at 5:00 p.m., Columbus, Ohio time, on August 26, 1996, subject to extension at the discretion of the Company (as it may be extended, the "Expiration Date"), provided that the Expiration Date shall in no event be later than August 28, 1996. After the Expiration Date, unexercised Rights will be null and void. The Company will not be obligated to honor any purported exercise of Rights received by the Subscription Agent after 5:00 p.m., Columbus, Ohio time, on the Expiration Date, regardless of when the documents relating to such exercise were sent, except pursuant to the Guaranteed Delivery Procedures described below. The Company may extend the Expiration Date by giving oral or written notice to the Subscription Agent on or before the Expiration Date, followed by a press release no later than 9:00 a.m., Columbus, Ohio time on the next business day after the previously scheduled Expiration Date. Basic Subscription Privilege Each Right will entitle the Rights Holder to receive, upon payment of the Subscription Price, 1.5 shares of Common Stock (the "Basic Subscription Privilege"). Each Rights Holder is entitled to subscribe for all, or any portion, of such Right Holder's Rights subject to the elimination of fractional shares. Certificates representing Underlying Shares purchased pursuant to the Basic Subscription Privilege will be delivered to subscribers as soon as practicable after the corresponding Rights have been validly exercised and full payment for shares has been received and cleared. Exercise of Rights Rights may be exercised by delivering to National City Bank (the "Subscription Agent"), at or prior to 5:00 p.m., Columbus, Ohio time, on the Expiration Date, the properly completed and executed Subscription Certificate evidencing such Rights with any signatures required to be guaranteed so guaranteed, together with payment in full of the Subscription Price for each Underlying Share subscribed for pursuant to the Basic Subscription Privilege. All payments must be by (i) check or bank draft (cashier's check) drawn upon a U.S. bank or postal or express money order payable to National City Bank, as Subscription Agent, or (ii) by wire transfer of same-day funds to an account designated by the Subscription Agent, in which case please contact the Subscription Agent at (800) 622-6757 for information concerning such account. Payments will be deemed to have been received by the Subscription Agent only upon (i) clearance of any uncertified check, (ii) collection by the Subscription Agent of any certified check or bank draft upon a U.S. bank or of any postal or express money order or (iii) receipt of good funds in the account designated by the Subscription Agent. If paying by uncertified personal check, please note that the funds paid thereby may take up to ten business days to clear. Accordingly, Rights Holders who wish to pay the Subscription Price by means of uncertified personal check are urged to make payment sufficiently in advance of the Expiration Date to ensure that such payment is received and clears by such date and are urged to consider payment by means of certified or cashier's check, money order or wire transfer of funds. 12 13 The address to which the Subscription Certificates and payment of the Subscription Price should be delivered is:
By Mail: By Hand or Overnight Courier: National City Bank, Subscription Agent National City Bank, Subscription Agent Corporate Trust Operations Corporate Trust Operations P.O. Box 94720 3rd Floor -- North Annex Cleveland, Ohio 44101-4720 4100 West 150th Street Cleveland, Ohio 44135-1385
If a Rights Holder wishes to exercise Rights, but time will not permit such Rights Holder to cause the Subscription Certificate or Subscription Certificates evidencing such Rights to reach the Subscription Agent on or prior to the Expiration Date, such Rights may nevertheless be exercised if all of the following conditions (the "Guaranteed Delivery Procedures") are met: (i) such holder has caused payment in full of the Subscription Price for each Underlying Share being subscribed for pursuant to the Basic Subscription Privilege to be received (in the manner set forth above) by the Subscription Agent on or prior to the Expiration Date; (ii) the Subscription Agent receives, on or prior to the Expiration Date, a guarantee notice ("Notice of Guaranteed Delivery"), substantially in the form provided with the instructions (the "Instructions") distributed with the Subscription Certificates, from a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. ("NASD"), or from a commercial bank or trust company having an office or correspondent in the United States or from a bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program, pursuant to Rule 17Ad-15 of the Exchange Act (each, an "Eligible Institution"), stating the name of the exercising Rights Holder, the number of Rights represented by the Subscription Certificate or Subscription Certificates held by such exercising Rights Holder, the number of Underlying Shares being subscribed for pursuant to the Basic Subscription Privilege and guaranteeing the delivery to the Subscription Agent of any Subscription Certificate evidencing such Rights within five business days following the Expiration Date; and (iii) the properly completed Subscription Certificate evidencing the Rights being exercised, with any signatures required to be guaranteed so guaranteed, is received by the Subscription Agent within five business days following the Expiration Date. The Notice of Guaranteed Delivery may be delivered to the Subscription Agent in the same manner as Subscription Certificates at the address set forth above, or may be transmitted to the Subscription Agent by facsimile transmission (telecopy no. (216) 476-8367 ). Additional copies of the form of Notice of Guaranteed Delivery are available upon request from the Subscription Agent. Unless a Subscription Certificate (i) provides that the shares of Common Stock to be issued pursuant to the exercise of Rights represented thereby are to be issued in the name of the Rights Holder and/or are to be delivered to the Rights Holder or (ii) is submitted for the account of an Eligible Institution, signatures on such Subscription Certificate must be guaranteed by an Eligible Institution or other eligible guarantor institution which is a member of or a participant in a medallion guarantee program acceptable to the Subscription Agent. Rights Holders who hold shares of Common Stock for the account of others, such as brokers, trustees or depositories for securities, should notify the respective beneficial owners of such shares as soon as possible to ascertain such beneficial owners' intentions and to obtain instructions with respect to the Rights. If the beneficial 13 14 owner so instructs, the nominee holder should complete Subscription Certificates and submit them to the Subscription Agent with the proper payment. In addition, beneficial owners of Common Stock or Rights held through such a nominee holder should contact the nominee holder and request the nominee holder to act in accordance with such beneficial owner's instructions. If a beneficial owner wishes to obtain a separate Subscription Right Certificate, such beneficial owner should contact the nominee holder as soon as possible and request that a separate Subscription Right Certificate be issued. A nominee holder may request any Subscription Right Certificate held by it to be split into such smaller denominations as it wishes, provided that the Subscription Right Certificate is received by the Subscription Agent, properly endorsed, no later than the Expiration Date. The instructions accompanying the Subscription Certificates should be read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE COMPANY. THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., COLUMBUS, OHIO TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE UP TO TEN BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS. All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Company, whose determinations will be final and binding. The Company in its sole discretion may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Company determines in its sole discretion. Neither the Company nor the Subscription Agent will be under any duty to give notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability for failure to give such notification. Any questions or requests for assistance concerning the method of exercising Rights or requests for additional copies of this Prospectus, the Form 10-K, the Form 10-Q, the Instructions or the Notice of Guaranteed Delivery should be directed to the Subscription Agent, at its address set forth under "Exercise of Rights", above (telephone: (800) 622-6757). No Revocation ONCE A RIGHTS HOLDER HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED. Non-Transferability of Rights The Rights are not transferable and will not be traded on any securities exchange or quoted on any inter-dealer quotation system. Rights may only be exercised or permitted to expire. Rights Holders who determine not to exercise their Rights may not transfer their rights and, at the Expiration Date, Rights which have not been exercised will expire and be null and void and have no value, provided that Rights may be transferred by operation of law in the case of death, dissolution, liquidation or bankruptcy of the Rights Holder, or pursuant to an order of an appropriate court. A Rights Holder may, however, elect to have the Underlying Shares registered in the name of, and/or delivered to, a person other than the Rights Holder provided that the signature on the related Subscription 14 15 Certificate is guaranteed by an Eligible Institution or other eligible guarantor institution as more fully described under "-- Exercise of Rights", above, and in the accompanying Subscription Certificate and Instructions. Tender of Subordinated Notes in Lieu of Cash The Company has decided to permit holders of Subordinated Notes to tender their respective Subordinated Notes to the Company for cancellation as consideration (in lieu of cash) for the purchase of shares of Common Stock. Upon receipt of such Subordinated Notes, the Company will direct the Subscription Agent to accept such Subordinated Notes as consideration for the issuance of the related Underlying Shares. See "Use of Proceeds." Determination of Subscription Price The Subscription Price was determined by the Company. In making this determination, the material factors considered by the Company were the amount of proceeds that the Company desires to raise, the average market price of the Common Stock, the pro rata nature of the offering and pricing policies customary for transactions of this type. The Subscription Price should not be considered an indication of the actual value of the Company or the Common Stock. Foreign and Certain Other Stockholders Subscription Certificates will not be mailed to Rights Holders whose addresses are outside the United States or who have an APO or FPO address, but will be held by the Subscription Agent for their account. To exercise such Rights, such a Rights Holder must notify the Subscription Agent, and must establish to the satisfaction of the Subscription Agent and the Company that such exercise is permitted under applicable law. If the procedures set forth in the preceding sentence are not followed prior to the Expiration Date, the Rights will expire. Other Matters The Rights Offering is not being made in any state or other jurisdiction in which it is unlawful to do so, nor is the Company selling or accepting any offers to purchase any shares of Common Stock from Rights Holders who are residents of any such state or other jurisdiction. The Company may delay the commencement of the Rights Offering in certain states or other jurisdictions, or change the terms of the Rights Offering, in order to comply with the securities law requirements of such states or other jurisdictions. It is not anticipated that there will be any changes in the terms of the Rights Offering. If any such change is made that is material and has an adverse effect on any Rights Holder that has previously exercised Rights, such Rights Holder will be provided the opportunity to revoke such exercise. The Company, if it so determines in its sole discretion, may decline to make modifications to the terms of the Rights Offering requested by certain states or other jurisdictions, in which event Rights Holders resident in those states or jurisdictions will not be eligible to participate in the Rights Offering. FEDERAL INCOME TAX CONSEQUENCES The following summary describes the material United States federal income tax considerations applicable to U.S. Rights Holders who hold Common Stock as a capital asset and who receive Rights in respect of such Common Stock in the initial issuance of the Rights (the "Issuance"). This summary is based upon laws, regulations, rulings and decisions currently in effect. This summary does not discuss all aspects of federal income taxation that may be relevant to a particular investor or to certain types of investors subject to special treatment under the federal income tax laws (for example, banks, dealers in securities, life insurance companies, tax exempt organizations and foreign taxpayers), nor does it discuss any aspect of state, local or foreign tax laws. 15 16 Issuance of Rights Holders of Common Stock will not recognize taxable income in connection with the receipt of Rights. Basis and Holding Period of the Rights Except as provided in the following sentence, the basis of the Rights received by a stockholder as a distribution with respect to such stockholder's Common Stock will be zero. If either (i) the fair market value of the Rights on the date of Issuance is 15% or more of the fair market value (on the date of Issuance) of the Common Stock with respect to which they are received or (ii) the stockholder elects, in his or her federal income tax return for the taxable year in which the Rights are received, to allocate part of the basis of such Common Stock to the Rights, then upon exercise of the Rights, the stockholder's basis in such Common Stock will be allocated between the Common Stock and the Rights in proportion to the fair market values of each on the date of Issuance. The holding period of a stockholder with respect to the Rights received as a distribution on such stockholder's Common Stock will include the stockholder's holding period for the Common Stock with respect to which the Rights were issued. Lapse of the Rights Rights Holders who allow the Rights received by them in the Issuance to lapse will not recognize any gain or loss, and no adjustment will be made to the basis of the Common Stock, if any, owned by such Rights Holders. Exercise of the Rights; Basis and Holding Period of Common Stock Rights Holders will not recognize any gain or loss upon the exercise of such Rights. The basis of the Common Stock acquired through exercise of the Rights will be equal to the sum of the Subscription Price therefor and the Rights Holder's basis in such Rights (if any) as described above. The holding period for the Common Stock acquired through exercise of the Rights will begin on the date the Rights are exercised. THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY, EACH STOCKHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON HIS OR HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS. DESCRIPTION OF THE CAPITAL STOCK Common Stock The Company had 10,000,000 authorized shares of Common Stock, of which 4,456,432 shares were issued and outstanding as of March 31, 1996. At the Annual Meeting of Stockholders held on June 11, 1996, the stockholders adopted an amendment to the Company's Restated Certificate of Incorporation (the "Certificate of Incorporation") which increased the authorized shares of Common Stock from 10,000,000 to 15,000,000. The holders of the Common Stock are entitled to one vote per share on all matters requiring stockholder action. The Certificate of Incorporation does not permit cumulative voting for the election of directors. The holders of Common Stock have no preemptive or other subscription rights and there are no redemption, sinking fund or conversion privileges applicable thereto. The holders of Common Stock are entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available therefor. Upon liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in all assets remaining after payment of 16 17 liabilities. All outstanding shares of Common Stock are fully paid and nonassessable and the shares of Common Stock to be issued in the Rights Offering will, upon delivery and payment therefor in accordance with the terms of the Rights Offering, be fully paid and nonassessable. The Certificate of Incorporation contains a provision which requires the affirmative vote of not less than 80 percent of the outstanding shares of the Company entitled to elect directors for the approval of certain business combinations and other transactions with a corporation or any affiliate thereof which acquires more than five percent of the beneficial ownership of the outstanding shares of Common Stock of the Company unless such business combination or other transaction was approved by resolution of the Board of Directors of the Company prior to the acquisition by such corporation or affiliate thereof of the beneficial ownership of more than five percent of the outstanding Common Stock. This provision could have the effect of delaying, deferring or preventing a change in control of the Company. The registrar and transfer agent for the Company's Common Stock is National City Bank. Preferred Stock The Company has 1,000,000 authorized shares of Preferred Stock, par value $1.00 per share, none of which were issued and outstanding as of March 31, 1996. The Certificate of Incorporation provides that the Board of Directors is authorized to fix the voting rights, redemption rights, conversion rights, sinking fund provisions, designations, preferences and the relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions of the Preferred Stock. The Company has no present intention to issue any shares of Preferred Stock. PLAN OF DISTRIBUTION The Rights and Common Stock offered pursuant to the Rights Offering are being offered by the Company directly to its stockholders. Certain executive officers of the Company may solicit responses from Rights Holders to the Rights Offering, but such executive officers will not receive any commissions or compensation for such services other than their normal employment compensation. Upon completion of the Rights Offering, any shares of Common Stock that are not purchased by Rights Holders may be offered by the Company for sale to employees, independent agents and customers (including automobile dealers) of the Company at $2.25 per share (the "Additional Offering") for a period commencing on the Expiration Date and ending not later than September 30, 1996. The Company will sell such shares of Common Stock directly to any purchaser or purchasers through its executive officers. No soliciting fee or other compensation will be paid in connection with the Additional Offering. LEGAL MATTERS The validity of the issuance of Common Shares in the Rights Offering will be passed upon by counsel for the Company, Squire, Sanders & Dempsey, Columbus, Ohio. EXPERTS The Company's consolidated financial statements and schedules as of December 31, 1995 and 1994, and for each of the years in the two-year period ended December 31, 1995, included in the Form 10-K, a copy of which accompanies this Prospectus and which is incorporated by reference in this Prospectus, have been incorporated herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, and in reliance on the report of Ernst & Young LLP, independent certified public accountants, with respect to the Company's 17 18 consolidated financial statements and schedules for the year ended December 31, 1993 and are incorporated herein in reliance upon the authority of said firms as experts in accounting and auditing. The report of KPMG Peat Marwick LLP dated March 15, 1996 contains an explanatory paragraph that states that as discussed in Note D to the consolidated financial statements, on March 30, 1994, the Company and its principal lender agreed to waive compliance with certain loan agreement covenants through January 1, 1995. On February 7, 1995, the Company and the lender again renegotiated the credit agreement and certain of the covenants. The amended agreement stated that the loan was payable in full on June 30, 1997. On December 29, 1995, the Company issued senior notes with a different lender and retired the aforementioned credit agreement. The most recent loan agreement requires that during the period the loan is outstanding, the Company maintain consolidated tangible net worth, as defined. At December 31, 1995, required tangible net worth was $15,000,000 and the Company's consolidated tangible net worth, as defined, was $19,738,000. 18 19 ================================================================================ NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THIS PROSPECTUS RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. -------------------- TABLE OF CONTENTS
PAGE ---- Available Information...................................................... 2 Incorporation of Certain Documents by Reference............................ 2 Prospectus Summary......................................................... 3 Risk Factors............................................................... 6 Use of Proceeds........................................................... 10 Recent Developments....................................................... 10 Price Range of Common Stock and Dividend Policy........................... 11 The Rights Offering....................................................... 11 Federal Income Tax Consequences........................................... 15 Description of the Capital Stock.......................................... 16 Plan of Distribution...................................................... 17 Legal Matters............................................................. 17 Experts................................................................... 17
================================================================================ ACCEL INTERNATIONAL CORPORATION 6,834,648 SHARES OF COMMON STOCK -------------------- PROSPECTUS -------------------- JULY 25, 1996 ================================================================================ -----END PRIVACY-ENHANCED MESSAGE-----