<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
RELIASTAR FINANCIAL CORP.
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
6311 41-1620373
DELAWARE (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401
(612) 372-5432
(ADDRESS AND TELEPHONE NUMBER
OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
RICHARD R. CROWL
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
RELIASTAR FINANCIAL CORP.
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401
(612) 342-3514
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
THOMAS G. MORGAN GALE K. BUSEMEYER TIMOTHY L. LARGAY
FAEGRE & BENSON LLP SECURITY-CONNECTICUT CORPORATION RICHARD S. SMITH, JR.
2200 NORWEST CENTER 20 SECURITY DRIVE MURTHA, CULLINA, RICHTER
MINNEAPOLIS, MINNESOTA AVON, CONNECTICUT 06001 AND PINNEY
55402 (860) 677-8621 CITYPLACE I
(612) 336-3000 185 ASYLUM STREET
HARTFORD, CONNECTICUT
06103
(860) 240-6017
Approximate date of commencement of proposed sale of the securities to the
public: Upon the Effective Time of the Merger described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
REGISTERED BE REGISTERED(1) PER UNIT(2) PRICE(2) FEE(3)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without
par value, including
Rights to Purchase
Preferred Stock (4).. 6,650,557 shares $62.0625 $412,750,193.80 $42,708.42
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Based upon the assumed maximum number of shares of ReliaStar Financial
Corp. ("RLR") Common Stock that may be issued pursuant to the Merger
described herein, which is based upon the estimated number of shares of
Security-Connecticut Corporation ("SCC") Common Stock that may be
outstanding immediately prior to the Merger (8,582,471 shares) and assumes
an Exchange Ratio of .7749.
(2) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(f)(1), and based on the average of the high and low
sale prices per share of RLR Common Stock, as reported on the New York
Stock Exchange Composite Tape on May 16, 1997.
(3) Pursuant to Rule 457(b), the fee is after deduction of $82,367.40 paid
with respect to the transaction pursuant to Section 14(g) of the
Securities Exchange Act of 1934.
(4) Rights to Purchase Preferred Stock are initially attached to and trade
with the RLR Common Stock. Value attributable to such Rights, if any, is
reflected in the market price for RLR Common Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
LOGO
May 22, 1997
To the Stockholders of Security-Connecticut Corporation:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Security-Connecticut Corporation ("SCC" or the
"Company") to be held at 10:30 a.m., local time, on Tuesday, June 24, 1997, at
the principal executive offices of the Company located at 20 Security Drive,
Avon, Connecticut.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
February 23, 1997 (the "Merger Agreement"), by and between the Company and
ReliaStar Financial Corp., a Delaware Corporation ("RLR"), pursuant to which
SCC will be merged with and into RLR (the "Merger"). As a result of the
Merger, the separate corporate existence of SCC will cease and each
outstanding share of the common stock, par value $.01 per share, of SCC ("SCC
Common Stock") will be converted, without any action on the part of the holder
thereof, into the right to receive a fraction (the "Exchange Ratio") of a
share of the common stock of RLR ("RLR Common Stock").
The Exchange Ratio will be determined based on the average of the per share
closing sale prices of the RLR Common Stock on the New York Stock Exchange
Composite Tape for the twenty trading days immediately preceding the date on
which all conditions precedent to the Merger have been satisfied or waived
(the "Exchange Price"). If the Exchange Price is equal to or greater than
$52.65 and not greater than $60.65, the Exchange Ratio will be equal to the
quotient (rounded to the fourth decimal place) obtained by dividing $47.00 by
the Exchange Price. If the Exchange Price is less than $52.65 but equal to or
greater than $49.00, the Exchange Ratio will be fixed at .8927. If the
Exchange Price is greater than $60.65 but equal to or less than $64.30, the
Exchange Ratio will be fixed at .7749. If the Exchange Price is less than
$49.00, the Exchange Ratio will be either .8927 or, if RLR so elects, a
fraction expressed decimally to the fourth decimal place calculated by
dividing $43.74 by the Exchange Price. If the Exchange Price is less than
$49.00 and RLR has not made such election, SCC will have the right to
terminate the Merger Agreement. Conversely, if the Exchange Price is greater
than $64.30, the Exchange Ratio will be either .7749 or, if SCC so elects, a
fraction expressed decimally to the fourth decimal place calculated by
dividing $49.83 by the Exchange Price. If the Exchange Price is greater than
$64.30 and SCC has not made such election, RLR will have the right to
terminate the Merger Agreement.
The accompanying Proxy Statement/Prospectus provides a detailed description
of the Merger Agreement, certain business and financial information relating
to SCC and RLR and other important information, which you are urged to read
carefully. A copy of the Merger Agreement is attached to the Proxy
Statement/Prospectus as Exhibit A.
THE SCC BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS
AND CONDITIONS OF THE MERGER AGREEMENT AND THE PROPOSED MERGER. THE BOARD
UNANIMOUSLY BELIEVES THE TERMS AND CONDITIONS OF THE MERGER AGREEMENT AND THE
PROPOSED MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, SCC STOCKHOLDERS.
ACCORDINGLY, THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
PROPOSED MERGER AND UNANIMOUSLY RECOMMENDS THAT SCC STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT AND CONSUMMATION OF THE MERGER.
<PAGE>
SCC retained the investment banking firm of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") to advise it with respect to the
consideration to be paid by RLR to the SCC stockholders pursuant to the
Merger. Merrill Lynch delivered its written opinion, dated February 23, 1997,
that the consideration to be received by the holders of SCC Common Stock
pursuant to the Merger Agreement is fair, from a financial point of view, to
such stockholders. At the request of the SCC Board, Merrill Lynch delivered a
written update, dated the date of this Proxy Statement/Prospectus, to its
February 23, 1997 opinion. A copy of such opinion is attached to the Proxy
Statement/Prospectus as Exhibit B. SCC stockholders are urged to read the
opinion in its entirety.
All SCC stockholders are invited to attend the Special Meeting in person.
The affirmative vote of the holders of a majority of the shares of SCC Common
Stock outstanding as of the record date will be necessary for the approval and
adoption of the Merger Agreement and the transactions contemplated thereby.
Pursuant to Delaware law, the holders of shares of SCC Common Stock will not
be entitled to appraisal rights in connection with the Merger.
IT IS VERY IMPORTANT THAT YOUR VIEWS BE REPRESENTED WHETHER OR NOT YOU ARE
ABLE TO ATTEND THE SPECIAL MEETING. ACCORDINGLY, I URGE YOU TO COMPLETE, SIGN
AND DATE YOUR PROXY CARD AND RETURN IT TO US IN THE ENCLOSED ENVELOPE AS SOON
AS POSSIBLE. THE FAILURE TO RETURN YOUR PROXY CARD OR TO VOTE IN PERSON AT THE
SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER.
RETURNING YOUR COMPLETED PROXY CARD WILL NOT LIMIT YOUR RIGHT TO VOTE IN
PERSON IF YOU DECIDE TO ATTEND THE SPECIAL MEETING. PLEASE DO NOT SEND YOUR
STOCK CERTIFICATES AT THIS TIME. IF THE MERGER AGREEMENT AND THE MERGER ARE
APPROVED BY STOCKHOLDERS, YOU WILL BE SENT A SEPARATE LETTER OF TRANSMITTAL
CONTAINING INSTRUCTIONS FOR SURRENDERING YOUR STOCK CERTIFICATES.
On behalf of the SCC Board of Directors, I want to thank you for your
support and urge you to vote your shares "FOR" approval of the Merger
Agreement and consummation of the Merger.
Sincerely,
LOGO
Ronald D. Jarvis
Chairman, President and
Chief Executive Officer
<PAGE>
SECURITY-CONNECTICUT CORPORATION
20 SECURITY DRIVE
AVON, CONNECTICUT 06001
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 24, 1997
----------------
Notice Is Hereby Given that a Special Meeting of Stockholders (the "Special
Meeting") of Security-Connecticut Corporation, a Delaware corporation ("SCC"
or the "Company"), will be held at 10:30 a.m., local time, on June 24, 1997,
at the principal executive offices of the Company located at 20 Security
Drive, Avon, Connecticut, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of February 23, 1997 (the "Merger
Agreement"), by and between the Company and ReliaStar Financial Corp., a
Delaware Corporation ("RLR"), pursuant to which, among other things, (a)
SCC will be merged with and into RLR (the "Merger") and the separate
corporate existence of SCC will cease, and (b) each outstanding share of
the common stock, par value $.01 per share, of SCC ("SCC Common Stock")
will be converted, without any action on the part of the holder thereof,
into the right to receive a fraction (the "Exchange Ratio") of a share of
the common stock of RLR ("RLR Common Stock"). The Exchange Ratio will be
determined based on the average of the per share closing sale prices of the
RLR Common Stock on the New York Stock Exchange Composite Tape for the
twenty trading days immediately preceding the date on which all conditions
precedent to the Merger have been satisfied or waived, all as more fully
set forth in the Merger Agreement, a copy of which is attached to the
accompanying Proxy Statement/Prospectus as Exhibit A.
2. To transact such other business incidental to the Special Meeting as
may properly come before such Meeting or any adjournment or postponement
thereof.
The foregoing items of business are more fully described in the accompanying
Proxy Statement/Prospectus, which is incorporated herein by reference and made
a part hereof.
The Board of Directors of SCC has fixed May 5, 1997 as the record date for
the determination of stockholders entitled to notice of and to vote at the
Special Meeting and any adjournment or postponement thereof. Approval of the
Merger Agreement and the Merger will require the affirmative vote of the
holders of a majority of the shares of SCC Common Stock outstanding as of the
record date.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED
IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN
VOTED AT THE SPECIAL MEETING. ANY STOCKHOLDER ATTENDING THE SPECIAL MEETING
MAY VOTE IN PERSON EVEN IF SUCH STOCKHOLDER HAS RETURNED A PROXY.
By Order of the Board of Directors,
LOGO
Patricia A. DeVita
Corporate Secretary
Avon, Connecticut
May 22, 1997
<PAGE>
PROXY STATEMENT/PROSPECTUS
PROXY STATEMENT OF SECURITY-CONNECTICUT CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 24, 1997
---------------
PROSPECTUS OF RELIASTAR FINANCIAL CORP.
SHARES OF COMMON STOCK
---------------
This Proxy Statement/Prospectus is being furnished to the stockholders of
Security-Connecticut Corporation, a Delaware corporation ("SCC" or the
"Company"), in connection with the solicitation of proxies by the SCC Board of
Directors for use at the Special Meeting of Stockholders (the "Special
Meeting") to be held at 10:30 a.m., local time, on Tuesday, June 24, 1997, at
the principal executive offices of the Company located at 20 Security Drive,
Avon, Connecticut, and at any adjournments or postponements thereof.
At the Special Meeting, the stockholders of SCC will be asked to consider
and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of February 23, 1997 (the "Merger Agreement"), by and between
the Company and ReliaStar Financial Corp., a Delaware Corporation ("RLR"),
pursuant to which SCC will be merged with and into RLR (the "Merger") and the
separate corporate existence of SCC will cease. A copy of the Merger Agreement
is attached to this Proxy Statement/Prospectus as Exhibit A and is
incorporated herein by reference.
Upon consummation of the Merger, each outstanding share of common stock,
$.01 par value per share, of SCC ("SCC Common Stock") at the Effective Time
(as defined herein) will be converted, without any action on the part of the
holders thereof, into the right to receive a fraction (the "Exchange Ratio")
of a share of common stock of RLR ("RLR Common Stock"). Cash will be paid in
lieu of the issuance of fractional shares. The Exchange Ratio will be
determined based upon the average of the per share closing sale prices of RLR
Common Stock on the New York Stock Exchange, Inc. ("NYSE") Composite Tape for
the twenty trading days immediately prior to the Approval Date (the "Exchange
Price"). The "Approval Date" is the date when all conditions precedent to the
Merger have been satisfied or waived and is expected to be five business days
prior to the Effective Time. The final condition precedent to the Merger is
expected to be the vote of SCC's stockholders at the Special Meeting. Thus,
the Merger is expected to become effective on the fifth business day following
the date of the Special Meeting. Pursuant to the terms of the Merger
Agreement, if the Exchange Price is equal to or greater than $52.65 and not
greater than $60.65, the Exchange Ratio shall be calculated by dividing $47.00
by the Exchange Price (rounded to the fourth decimal place). Assuming the
Exchange Price is within such range, each share of SCC Common Stock would be
converted into and exchanged for a fraction of a share of RLR Common Stock
having a value of $47.00 (based on the value of a share of RLR Common Stock
being equal to the Exchange Price).
The Merger Agreement provides for adjustments to the Exchange Ratio in the
following circumstances: (i) if the Exchange Price is greater than $60.65 but
equal to or less than $64.30, the Exchange Ratio shall be .7749, (ii) if the
Exchange Price is less than $52.65 but equal to or greater than $49.00, the
Exchange Ratio shall be .8927, (iii) if the Exchange Price is less than
$49.00, the Exchange Ratio shall be either (A) .8927 or (B) if RLR shall so
designate, the quotient (rounded to the fourth decimal place) obtained by
dividing $43.74 by the Exchange Price, and (iv) if the Exchange Price is
greater than $64.30, the Exchange Ratio shall be either (A) .7749 or (B) if
SCC shall so designate, the quotient (rounded to the fourth decimal place)
obtained by dividing $49.83 by the Exchange Price. As a result of the
foregoing, if the Exchange Price falls within the specified ranges, each share
of SCC Common Stock could be converted into and exchanged for a fraction of a
share of RLR Common Stock having a value less than or greater than $47.00 per
share. If the Exchange Price is less than $49.00, SCC has the right to
terminate the Merger Agreement if RLR fails to designate an Exchange Ratio
that would result in each share of SCC Common Stock being converted into and
exchanged for a fraction of a share of RLR Common Stock having a value of
$43.74 per share (based on the value of a share of RLR Common Stock being
equal to the Exchange Price). If the Exchange Price is greater than $64.30,
RLR has the right to terminate the Merger Agreement if SCC fails to designate
an Exchange Ratio which would result in each share of SCC Common Stock being
converted into and exchanged for a fraction of a share of RLR Common Stock
having a value of $49.83 per share (based on the value of a share of RLR
Common Stock being equal to the Exchange Price). Assuming an Exchange Price of
$49.00, and based on the number of shares of SCC Common Stock outstanding on
May 5, 1997 (not including any shares of SCC Common Stock issuable pursuant to
the exercise of outstanding options) the maximum number of shares of RLR
Common Stock to be issued under the Merger is 7,661,572. See "The Merger--
General" and "The Merger--Amendment, Termination and Waiver."
Each outstanding SCC stock option will be assumed by RLR and will be
exercisable on the same terms and conditions as under the SCC option plan
under which such option was granted and related stock option agreement, except
that each such option will be exercisable for the number of shares of RLR
Common Stock as would have been received pursuant to the Merger for the shares
of SCC Common Stock subject to the option had the option been exercisable and
exercised immediately prior to the Effective Time, and the exercise price of
such option will be correspondingly adjusted. See "The Merger--Employee
Benefit Plans and Stock Options" and the Merger Agreement, which is attached
as Exhibit A to this Proxy Statement/Prospectus.
The consummation of the Merger is subject to obtaining the requisite
approval from the stockholders of SCC, necessary regulatory approvals and
certain other conditions, all as more fully described in this Proxy
Statement/Prospectus. See "General Information" and "The Merger--Conditions to
Consummation of the Merger."
THE BOARD OF DIRECTORS OF SCC HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO
APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER.
(continued)
---------------
The date of this Proxy Statement/Prospectus is May 22, 1997.
<PAGE>
This Proxy Statement/Prospectus is being mailed or delivered to the
stockholders of SCC on or about May 27, 1997. This Proxy Statement/Prospectus
also constitutes the prospectus of RLR with respect to shares of RLR Common
Stock, including Rights to Purchase Preferred Stock of RLR (see "Description
of RLR Capital Stock--Share Rights Plan"), to be issued in connection with the
Merger.
On February 21, 1997, the last trading day prior to the public announcement
of the Merger, the closing sale prices per share of RLR Common Stock and SCC
Common Stock as reported on the NYSE Composite Tape were $59.25 and $37.50,
respectively. On May 20, 1997, the last trading day for which closing sale
prices were available at the time of the printing of this Proxy
Statement/Prospectus, the closing sale prices per share of RLR Common Stock
and SCC Common Stock as reported on the NYSE Composite Tape were $63.125 and
$47.25, respectively. See "Market Price and Dividend Information." If the
Exchange Price were equal to the closing sale price per share of RLR Common
Stock on May 20, 1997, stockholders of SCC who are to receive shares of RLR
Common Stock would be entitled to receive .7749 of a share of RLR Common
Stock, having a market value of $48.92, in exchange for each share of SCC
Common Stock held by them. The actual value of the consideration and number of
shares of RLR Common Stock to be issued in the Merger may differ from the
foregoing example, however, because the actual value and number of shares will
not be determined until after the Special Meeting.
Certain capitalized terms used in this Proxy Statement/Prospectus are
defined under the caption "Glossary of Terms."
THE SHARES OF RLR COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
2
<PAGE>
AVAILABLE INFORMATION
RLR and SCC are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") and, in accordance
therewith, file reports, proxy statements and other information with the
Securities and Exchange Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facility of
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the SEC's Regional Offices located at Seven World Trade
Center, Suite 1300, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of these materials can be obtained
by mail from the public reference section of the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Certain of these materials may also be obtained via the SEC's Web site
(http://www.sec.gov). In addition, reports, proxy statements and other
information filed by RLR and SCC may be inspected and copied at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
This Proxy Statement/Prospectus constitutes a part of a registration
statement on Form S-4 filed by RLR with the SEC under the Securities Act of
1933, as amended. This Proxy Statement/Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement for further information with respect to RLR
and the RLR Common Stock offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and,
in each instance, reference is made to the copy of the document filed as an
exhibit to the Registration Statement or otherwise filed with the SEC. Each
such statement is qualified in its entirety by this reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. RLR WILL PROVIDE WITHOUT
CHARGE TO EACH PERSON TO WHOM A COPY OF THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY
OR ALL OF SUCH DOCUMENTS RELATING TO RLR (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, UNLESS THE EXHIBITS ARE SPECIFICALLY INCORPORATED THEREIN BY
REFERENCE), AND SUCH REQUESTS SHOULD BE DIRECTED TO RELIASTAR FINANCIAL CORP.,
20 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55401, ATTN: SECRETARY,
TELEPHONE (612) 342-3514. SCC WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO
WHOM A COPY OF THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON THE WRITTEN
OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF SUCH DOCUMENTS
RELATING TO SCC (OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS THE EXHIBITS
ARE SPECIFICALLY INCORPORATED THEREIN BY REFERENCE), AND SUCH REQUESTS SHOULD
BE DIRECTED TO SECURITY-CONNECTICUT CORPORATION, 20 SECURITY DRIVE, AVON,
CONNECTICUT 06001, ATTN: SECRETARY, TELEPHONE (860) 677-8621. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, ANY
REQUEST SHOULD BE MADE BY JUNE 14, 1997.
The following documents filed with the SEC by RLR (File No. 1-10640)
pursuant to the Exchange Act are incorporated herein by reference:
(i) RLR's Annual Report on Form 10-K for the year ended December 31, 1996
(which incorporates by reference certain portions of RLR's 1996 Annual
Report to Shareholders, including financial statements and accompanying
information, and certain portions of RLR's definitive proxy statement for
RLR's 1997 Annual Meeting of Shareholders), Quarterly Report on Form 10-Q
for the three months ended March 31, 1997 and its Current Report on Form 8-
K dated February 23, 1997; and
(ii) RLR's Form 8-K/A dated May 20, 1993 to RLR's Current Report on Form
8-K dated January 17, 1989 filed by RLR in lieu of a Registration Statement
on Form 8-B and RLR's Amendment on Form 8-A/A dated September 12, 1994 to a
Registration Statement on Form 8-A dated October 4, 1989, as amended on
February 15, 1990 (File No. 0-17441), which contain a description of the
RLR Common Stock and related Rights to Purchase Preferred Stock of RLR.
In addition, the following documents filed with the SEC by SCC (File No. 0-
12746) pursuant to the Exchange Act are also incorporated herein by reference:
SCC's Annual Report on Form 10-K for the year ended
3
<PAGE>
December 31, 1996 (which incorporates by reference certain portions of SCC's
definitive proxy statement for SCC's 1997 Annual Meeting of Shareholders),
Quarterly Report on Form 10-Q for the three months ended March 31, 1997, and
its Current Report on Form 8-K dated February 25, 1997.
All documents filed by RLR or SCC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the Special Meeting shall be deemed to be incorporated by reference
into this Proxy Statement/Prospectus and to be made a part hereof from the date
of the filing of such documents. Any statement contained in a document
incorporated herein by reference shall be deemed to be modified or superseded
for the purposes hereof to the extent that a statement contained herein (or in
any subsequently filed document that also is incorporated herein by reference)
modifies or supersedes that statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY RLR OR SCC OR ANY OTHER
PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF RLR OR SCC SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED OR INCORPORATED HEREIN BY REFERENCE IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 3
GLOSSARY OF TERMS.......................................................... 6
SUMMARY.................................................................... 8
General.................................................................. 8
The Parties to the Merger................................................ 8
The Special Meeting...................................................... 8
Required Vote............................................................ 9
Recommendation of the SCC Board and Reasons for the Merger............... 9
Fairness Opinions with Respect to the Merger............................. 11
The Merger............................................................... 11
No Dissenters' Rights in the Merger...................................... 15
Certain Federal Income Tax Consequences.................................. 15
Special Considerations................................................... 16
Comparative Rights of SCC Stockholders Before and After the Merger....... 16
Market Price and Dividend Data........................................... 16
Selected Historical Financial Data....................................... 18
Unaudited Pro Forma Combined Selected Financial Data..................... 21
Comparative Unaudited Per Share Data..................................... 21
GENERAL INFORMATION........................................................ 23
The Special Meeting...................................................... 23
Vote Required at Special Meeting......................................... 23
Solicitation of Proxies.................................................. 24
Other Matters............................................................ 24
BACKGROUND OF THE MERGER................................................... 24
RECOMMENDATION OF THE BOARD OF DIRECTORS AND REASONS FOR THE MERGER........ 28
OPINIONS OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED............. 32
General.................................................................. 32
Materials and Information Considered With Respect to the Merger.......... 33
Written Opinion for Joint Proxy Statement/Prospectus..................... 37
Limitations on Opinions.................................................. 37
Fees Payable to Merrill Lynch............................................ 38
THE MERGER................................................................. 38
General.................................................................. 38
Effective Time and Effect of the Merger.................................. 39
Exchange of Shares....................................................... 39
Employee Benefit Plans and Stock Options................................. 40
Conditions to Consummation of the Merger................................. 41
Representations, Warranties and Covenants................................ 42
Amendment, Termination and Waiver........................................ 42
Expenses and Termination Payments........................................ 43
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Stock Exchange Listing................................................... 43
Certain Legal Matters.................................................... 43
Conduct of Business Prior to the Merger.................................. 44
No Solicitation of Acquisition Transactions.............................. 45
Indemnification and Insurance............................................ 45
Interests of Certain Persons in the Merger............................... 45
Federal Income Tax Consequences.......................................... 46
Business and Management After the Merger................................. 48
Debt Assumption.......................................................... 48
Resale of Shares by SCC Affiliates....................................... 48
NO DISSENTERS' RIGHTS...................................................... 48
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS................ 49
CERTAIN FORWARD-LOOKING INFORMATION........................................ 55
BUSINESS OF RLR............................................................ 56
BUSINESS OF SCC............................................................ 56
DESCRIPTION OF RLR CAPITAL STOCK........................................... 57
General.................................................................. 57
Preferred................................................................ 57
Dividends................................................................ 57
Voting Rights............................................................ 58
Share Rights Plan........................................................ 58
Liquidation.............................................................. 59
Limitations on Change in Control......................................... 59
Limitation on Certain Liability of Directors and Indemnification......... 60
Transfer Agent........................................................... 60
MARKET PRICE AND DIVIDEND INFORMATION FOR RLR AND SCC COMMON STOCK......... 60
COMPARATIVE RIGHTS OF SHAREHOLDERS OF SCC AND RLR.......................... 61
General.................................................................. 61
RLR Preferred Stock...................................................... 61
Voting Rights............................................................ 61
Amendment of the RLR Certificate......................................... 62
Transactions with Interested Shareholders................................ 62
Consideration of Other Constituencies.................................... 63
Limitations on Liability and Indemnification of Directors................ 63
LEGAL MATTERS.............................................................. 63
EXPERTS.................................................................... 63
STOCKHOLDER PROPOSALS...................................................... 64
INDEPENDENT ACCOUNTANTS.................................................... 64
EXHIBIT A--Agreement and Plan of Merger.................................... A-1
EXHIBIT B--Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated... B-1
</TABLE>
5
<PAGE>
GLOSSARY OF TERMS
The following terms have the associated meanings when used in this Proxy
Statement/Prospectus (including the Summary).
"ACQUIRING PERSON" means a person or group of affiliated or associated
persons that has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding shares of RLR Common Stock.
"ACQUISITION PROPOSAL" means a publicly announced offer or a publicly
announced intent to make an offer, from a party other than RLR to acquire SCC
or Security-Connecticut Life Insurance Company in a merger, consolidation,
share exchange or other business combination or joint venture, to acquire all
or substantially all of the assets of SCC or SCL or a substantial part of the
assets of SCC and the SCC Insurance Subsidiaries, taken as a whole, or to
acquire at least 50% of the outstanding SCC Common Stock or at least 50% of
the equity interest in the SCC Insurance Subsidiaries, or a negotiated
transaction for any of the foregoing.
"ACQUISITION TRANSACTION" means any proposal or offer to acquire all or any
substantial part of the business and properties of SCC and the SCC
subsidiaries, taken as a whole, or any capital stock of SCC or any of the SCC
subsidiaries, whether by merger, purchase of assets, tender offer or
otherwise, and whether for cash, securities or any other consideration or
combination thereof.
"ANTITRUST DIVISION" means Antitrust Division of the Department of Justice.
"APPROVAL DATE" means the date when certain conditions precedent to the
Merger have been satisfied and is expected to be five days prior to the
Effective Time.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONNECTICUT DEPARTMENT" means the State of Connecticut Department of
Insurance.
"DELAWARE LAW" means the Delaware General Corporation Law.
"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation, RLR's
financial advisor with respect to the Merger.
"EFFECTIVE TIME" means the date upon which the appropriate filing of a
Certificate of Merger with the Delaware Secretary of State is made.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" means Norwest Bank Minnesota, National Association, RLR's
stock transfer agent.
"EXCHANGE PRICE" means the average of the per share closing sale prices of
RLR Common Stock on the NYSE Composite Tape for the twenty trading days
immediately prior to the Approval Date.
"EXCHANGE RATIO" means the fraction of a share of RLR Common Stock into
which each share of SCC Common Stock shall be converted in the Merger, as
calculated under the formula summarized on the cover page of the Proxy
Statement/Prospectus and discussed further under the caption "The Merger--
General."
"FTC" means the Federal Trade Commission.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"JUNIOR PARTICIPATING PREFERRED STOCK" means the Series A Junior
Participating Preferred Stock of RLR issuable under the RLR Rights Agreement.
"LNC" means Lincoln National Corporation.
"LSL" means Lincoln Security Life Insurance Company, a New York corporation
and wholly-owned subsidiary of SCL.
"MERGER" means the merger of SCC with and into RLR, as contemplated by the
Merger Agreement.
"MERGER AGREEMENT" means the Agreement and Plan of Merger by and between RLR
and SCC, dated as of February 23, 1997, a copy of which is attached hereto as
Exhibit A.
6
<PAGE>
"MERRILL LYNCH" means Merrill Lynch, Pierce, Fenner & Smith Incorporated,
SCC's financial advisor with respect to the Merger.
"NEW YORK DEPARTMENT" means the New York State Insurance Department.
"NYSE" means the New York Stock Exchange, Inc.
"REGISTRATION STATEMENT" means the registration statement on Form S-4,
together with all amendments and exhibits, of which this Proxy
Statement/Prospectus is a part.
"RELIASTAR LIFE" means ReliaStar Life Insurance Company, a Minnesota
corporation and wholly-owned subsidiary of RLR.
"RLR" means ReliaStar Financial Corp., a Delaware corporation.
"RLR BOARD" means the Board of Directors of RLR.
"RLR BY-LAWS" means the By-Laws of RLR.
"RLR CERTIFICATE" means the Certificate of Incorporation, as amended, of
RLR.
"RLR COMMON STOCK" means the common stock of RLR.
"RLR FAIR PRICE PROVISION" means the provision of the RLR Certificate
requiring the affirmative vote of 75% of RLR's outstanding capital stock
entitled to vote, voting as a single class, to approve certain "Business
Combinations" involving an "Interested Shareholder" unless the transaction is
approved by a majority of the "Continuing Directors," as such terms are
defined in the RLR Certificate.
"RLR PREFERRED STOCK" means the preferred stock, without par value, of RLR.
"RLR RIGHT" means the right that entitles the registered holder to purchase
from RLR one-tenth of a share of Junior Participating Preferred Stock at an
exercise price of $200, subject to adjustment.
"RLR RIGHTS AGREEMENT" means the Rights Agreement between RLR and Norwest
Bank Minnesota, National Association, as amended.
"RLR 10-K" means RLR's Annual Report on Form 10-K for the year ended
December 31, 1996 (which incorporates by reference certain portions of RLR's
1996 Annual Report to Shareholders, including financial statements and
accompanying information, and certain portions of RLR's definitive proxy
statement for RLR's 1997 Annual Meeting of Shareholders).
"RLR 10-Q" means RLR's Quarterly Report on Form 10-Q for the three months
ended March 31, 1997.
"SCC" means Security-Connecticut Corporation, a Delaware corporation.
"SCC BOARD" means the Board of Directors of SCC.
"SCC BYLAWS" means the Bylaws of SCC.
"SCC CERTIFICATE" means the Certificate of Incorporation of SCC.
"SCC COMMON STOCK" means the common stock, $.01 par value per share, of SCC.
"SCC DEBENTURES" means SCC's 7 1/8% Notes Due March 1, 2003, with a
principal amount of $75 million.
"SCC INSURANCE SUBSIDIARIES" means SCL and LSL.
"SCC RIGHTS PLAN" means the Rights Agreement, dated as of February 16, 1995,
between SCC and First National Bank of Boston, as amended.
"SCC 10-K" means SCC's Annual Report on Form 10-K for the year ended
December 31, 1996 (which incorporates by reference certain portions of SCC's
definitive proxy statement for SCC's 1997 Annual Meeting of Shareholders).
"SCC 10-Q" means SCC's Quarterly Report on Form 10-Q for the three months
ended March 31, 1997.
"SCL" means Security-Connecticut Life Insurance Company, a Connecticut
corporation and wholly-owned subsidiary of SCC.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL MEETING" means the special meeting of stockholders of SCC to be
held on June 24, 1997.
7
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. Capitalized terms used in this Summary are defined
under the caption "Glossary of Terms" and elsewhere in this Proxy
Statement/Prospectus. Reference is made to the more detailed information
contained elsewhere in this Proxy Statement/Prospectus, the exhibits hereto and
the documents incorporated herein by reference. A copy of the Merger Agreement
is attached as Exhibit A to this Proxy Statement/Prospectus and reference is
made thereto for a complete description of the terms of the Merger. All
information concerning RLR included or incorporated by reference in this Proxy
Statement/Prospectus has been furnished by RLR and all information concerning
SCC included or incorporated herein by reference has been furnished by SCC.
Each stockholder should read carefully this Proxy Statement/Prospectus and the
exhibits hereto in their entirety.
GENERAL
This Proxy Statement/Prospectus relates to the proposed Merger of SCC with
and into RLR pursuant to the Merger Agreement. See "The Merger."
THE PARTIES TO THE MERGER
RLR. RLR is a holding company whose subsidiaries specialize in life insurance
and related financial services. Through ReliaStar Life Insurance Company,
Minneapolis, Minnesota, and other subsidiaries, RLR provides individual life
insurance and annuities, group life and health insurance, life and health
reinsurance, mutual funds, residential mortgages, and personal finance
education. RLR's other principal subsidiaries are Northern Life Insurance
Company, ReliaStar United Services Life Insurance Company, ReliaStar Bankers
Security Life Insurance Company, ReliaStar Mortgage Corporation and Northstar
Investment Management Corporation. As used herein, the term RLR refers to
ReliaStar Financial Corp. and its subsidiaries, unless the context requires
otherwise.
RLR, which was incorporated in Delaware in 1988, became the parent of
ReliaStar Life and its subsidiaries pursuant to a Plan of Conversion and
Reorganization, which became effective on January 3, 1989. Pursuant to this
Plan, ReliaStar Life Insurance Company, which was organized in 1885 (as
Northwestern National Life Insurance Company) was converted from a combined
stock and mutual life insurance company to a stock life insurance company.
RLR's executive offices are located at 20 Washington Avenue South, Minneapolis,
Minnesota 55401, and its telephone number is (612) 342-3514. See "Business of
RLR."
SCC. SCC is an insurance holding company whose principal subsidiary is
Security-Connecticut Life Insurance Company, and in turn, whose principal
subsidiary is Lincoln Security Life Insurance Company. Through SCL and LSL, SCC
offers primarily life insurance and annuity products sold through a network of
independent general agencies and more than 50,000 independent life insurance
agents. As used herein, the term SCC refers to Security-Connecticut Corporation
and its subsidiaries, unless the context requires otherwise. The principal
executive offices of SCC are located at 20 Security Drive, Avon, Connecticut
06001, and its telephone number is (860) 677-8621. See "Business of SCC."
THE SPECIAL MEETING
Time, Date and Place. The Special Meeting will be held on June 24, 1997, at
the offices of SCC, at 10:30 a.m., local time.
Record Date, Quorum and Shares Entitled to Vote. Only stockholders of record
of SCC Common Stock at the close of business on May 5, 1997 are entitled to
notice of and to vote at the Special Meeting. At the close of business on May
5, 1997, there were outstanding 8,582,471 shares of SCC Common Stock that are
entitled to vote at the Special Meeting. Each share of SCC Common Stock is
entitled to one vote at the Special Meeting.
The presence, either in person or by properly executed proxy, of the holders
of a majority of the outstanding shares of SCC Common Stock entitled to vote at
the Special Meeting is necessary to constitute a quorum at the Special Meeting.
8
<PAGE>
If a quorum is not present at the Special Meeting, the stockholders present,
by vote of a majority of the votes cast by stockholders entitled to vote
thereon, may adjourn the Special Meeting, and at any such adjourned meeting at
which a quorum is present any business may be transacted which might have been
transacted at the Special Meeting as originally held and proxies will be voted
thereat as directed.
Proxies and Revocation of Proxies. The enclosed proxy card permits each
stockholder to specify that shares be voted "FOR" or "AGAINST" (or "ABSTAIN"
from) approval and adoption of the Merger Agreement and the Merger. If properly
signed and returned, and not revoked, a proxy will be voted in accordance with
its instructions. Where a signed proxy card is returned, but no instructions
are specified, the shares will be voted FOR approval and adoption of the Merger
Agreement and the Merger.
Each stockholder may revoke a previously granted proxy at any time before it
is exercised by filing with SCC's Secretary a revoking instrument or a duly
executed proxy bearing a later date. The powers of the proxy holders will be
suspended if the person executing the proxy attends the Special Meeting in
person and so requests. Attendance at the Special Meeting will not, in itself,
constitute revocation of a previously granted proxy.
Purpose of Special Meeting. At the Special Meeting, stockholders of SCC will
be asked to consider and vote on a proposal to approve and adopt the Merger
Agreement and the Merger and such other matters as may be properly brought
before the meeting.
Certain Voting Information. As of May 5, 1997, SCC's directors and executive
officers, as a group, beneficially owned 360,017 shares (or approximately
4.11%) of the outstanding SCC Common Stock entitled to vote at the Special
Meeting. All directors and executive officers of SCC have indicated that they
will vote all outstanding shares of SCC Common Stock beneficially owned by them
"FOR" approval and adoption of the Merger Agreement and the Merger.
Other Matters. Representatives of Ernst & Young LLP, the independent auditors
of SCC, are expected to be present at the Special Meeting. See "Independent
Accountants."
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding shares
of SCC Common Stock is required to approve and adopt the Merger Agreement and
the Merger. Each share of SCC Common Stock is entitled to one vote at the
Special Meeting. See "General Information--Vote Required at Special Meeting."
RECOMMENDATION OF THE SCC BOARD AND REASONS FOR THE MERGER
The Board of Directors of SCC has unanimously approved the Merger Agreement
and the transactions contemplated thereby and recommends that the stockholders
of SCC vote "FOR" approval and adoption of the Merger Agreement and the Merger.
The recommendation of the SCC Board is based upon its belief that the terms of
the Merger Agreement are fair to, and in the best interests of, SCC and its
stockholders and that the Merger will result in benefits to SCC's stockholders.
In reaching its decision to approve and adopt the Merger Agreement, the SCC
Board considered many factors, which are described in more detail below. See
"Recommendation of the Board of Directors and Reasons for the Merger." In view
of the wide variety and complexity of the factors considered, the SCC Board
generally did not attempt to quantify, rank or otherwise assign relative
weights to the specific factors it considered. Among the specific factors
considered by the SCC Board were the following:
. the current economic and competitive operating environment for insurance
companies, including greater public and regulatory concerns about the
financial stability of insurance companies, increased customer
sensitivity to ratings and intense competition in the traditional
individual life insurance lines of business;
9
<PAGE>
. SCC's inability to negotiate successfully any definitive strategic
alliance transactions with other insurance companies, despite having
systematically reviewed the relevant statistical data of more than 100
insurers and having initiated preliminary discussions with approximately
fifteen such insurers;
. the opportunity for SCC's stockholders to participate in the financial
results of the combined company in the Merger, which is expected to have
a greater potential for profits and growth and future increase in
stockholder value than SCC could have alone;
. the market value of the RLR Common Stock to be issued in exchange for
each share of SCC Common Stock represents a significant premium over the
recent trading price of the SCC Common Stock, as well as a substantial
investment return for those SCC stockholders who acquired their shares of
SCC Common Stock in the initial public offering of the SCC Common Stock
consummated on February 2, 1994;
. the imputed value of the fraction of a share of RLR Common Stock to be
received in the Merger for each share of SCC Common Stock is fixed at
$47.00, provided that the Exchange Price is equal to or greater than
$52.65 and not greater than $60.65, and the fact that (i) such value has
the potential to increase to as much as $49.83 in the event that the
Exchange Price increases from $60.65 to $64.30 (and to increase even more
in the event that the Exchange Price exceeds $64.30 and RLR does not
affirmatively elect to designate an Exchange Ratio having a value of no
more than $49.83) and (ii) such value has the potential to decrease to as
little as $43.74 in the event that the Exchange Price decreases from
$52.65 to $49.00 (but cannot fall below $43.74 without affording SCC the
right to terminate the Merger Agreement and abandon the Merger);
. the presentations made by Merrill Lynch and the opinion of Merrill Lynch
that the consideration to be received in the Merger is fair, from a
financial point of view, to the holders of SCC Common Stock;
. the strategic fit of the SCC and RLR businesses, the compatible operating
philosophies of the two companies and the synergies and potential
efficiencies that could result from combining SCC and RLR;
. the SCC Board's review with its legal and financial advisors of the
provisions of the Merger Agreement, including the provisions in the
Merger Agreement that would permit the SCC Board, in the exercise of its
fiduciary duties (after receiving the advice of outside legal counsel),
to supply information to, and cooperate and negotiate a superior
Acquisition Transaction with, third parties following the execution of
the Merger Agreement, and to withdraw or modify its recommendation in
favor of the Merger, upon the payment of an $8 million termination fee
(plus up to $2.5 million in expense reimbursement), and the fact that the
termination fee represents only approximately 1.6% of the aggregate value
of the proposed Merger (including the assumption of approximately $75
million of debt) and would not be likely to deter any third party from
making or proposing a superior Acquisition Transaction;
. the expectation that the Merger would be tax free for federal income tax
purposes to SCC and its stockholders (other than in respect of any cash
paid in lieu of fractional shares);
Although the SCC Board did not make any specific determination as to whether
any particular factor (or any aspect of any particular factor) was favorable or
unfavorable to its ultimate determination, the discussions among the members of
the SCC Board evidenced the general view that, except as described below, the
factors enumerated above were regarded as supporting the SCC Board's
determination to approve the Merger and the Merger Agreement. The SCC Board
considered carefully the structure of the Exchange Ratio and gave special
consideration to the fact that the imputed value of the fraction of a share of
RLR Common Stock to be received in the Merger for each share of SCC Common
Stock has the potential to increase to as much as $49.83 in the
10
<PAGE>
event that the Exchange Price increases from $60.65 to $64.30 (and to increase
even more in the event that the Exchange Price exceeds $64.30 and RLR does not
affirmatively elect to designate an Exchange Ratio having a value of no more
than $49.83), or decrease to as little as $43.74 in the event that the Exchange
Price decreases from $52.65 to $49.00. Given the fact that the closing price of
the RLR Common Stock on February 21, 1997 (the last trading day prior to the
SCC's Board approval of the Merger Agreement) was $59.25, the SCC Board
believed the potential increase in value that would result in the event that
the Exchange Price were to increase above $60.65 outweighed the potential
decrease in value that would result in the event that the Exchange Price were
to decrease below $52.65. The Board also considered the potential negative
effects of the termination fees set forth in the Merger Agreement but concluded
that the termination fees would not be likely to deter any third party from
making or proposing a superior Acquisition Transaction. See "Recommendation of
the Board of Directors and Reasons for the Merger." THE SCC BOARD IS UNANIMOUS
IN ITS RECOMMENDATION TO THE STOCKHOLDERS OF SCC THAT THE MERGER BE APPROVED.
In considering the recommendation of the SCC Board with respect to the
Merger, stockholders should be aware that certain directors and officers of SCC
have interests in the Merger that are different from the interests of other SCC
stockholders. See "The Merger--Interests of Certain Persons in the Merger."
FAIRNESS OPINIONS WITH RESPECT TO THE MERGER
In its role as financial advisor to SCC, Merrill Lynch was asked by SCC to
render an opinion to the SCC Board as to the fairness to the holders of SCC
Common Stock, from a financial point of view, of the consideration to be paid
by RLR to the stockholders of SCC pursuant to the Merger Agreement. On February
23, 1997 representatives of Merrill Lynch verbally advised the SCC Board that
the consideration to be paid by RLR to the stockholders of SCC was fair to the
stockholders of SCC from a financial point of view. A written opinion, dated as
of February 23, 1997, was subsequently delivered to the SCC Board. At the
request of the SCC Board, the Merrill Lynch opinion, dated February 23, 1997,
was subsequently updated, based upon and subject to the matters set forth
therein, as of the date of this Proxy Statement/Prospectus. See "Opinions of
Merrill Lynch, Pierce, Fenner & Smith Incorporated" A COPY OF THE MERRILL LYNCH
OPINION, DATED AS OF THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS ATTACHED AS
EXHIBIT B TO THIS PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS ARE URGED TO READ
THE OPINION IN ITS ENTIRETY FOR INFORMATION WITH RESPECT TO THE ASSUMPTIONS
MADE, AND MATTERS CONSIDERED, BY MERRILL LYNCH IN RENDERING SUCH OPINION.
THE MERGER
Conversion of Shares. At the Effective Time of the Merger, each outstanding
share of SCC Common Stock will be converted into the right to receive a
fraction of a share of RLR Common Stock, determined in accordance with the
Merger Agreement. This fraction is referred to in the Merger Agreement and in
this Proxy Statement/Prospectus as the "Exchange Ratio." See "The Merger--
General." The stockholders of RLR will continue to hold their shares of capital
stock of RLR, without any change in the number, designation, terms or rights of
such stock. For a summary of various differences between the rights of holders
of SCC Common Stock and the rights of holders of RLR Common Stock, see
"Comparative Rights of Stockholders of SCC and RLR."
The actual number of shares of RLR Common Stock that will be issued to the
stockholders of SCC in the Merger will be determined based upon the average of
the per share closing sale prices of RLR Common Stock on the New York Stock
Exchange Composite Tape for the twenty trading days immediately preceding the
date on which all conditions precedent to the Merger have been either satisfied
or waived. This average value is referred to in the Merger Agreement and this
Proxy Statement/Prospectus as the "Exchange Price." The following table sets
forth, for each Exchange Price within a range of specified hypothetical values,
(i) the Exchange Ratio that would result from such Exchange Price, (ii) the per
share imputed value of the fraction of a share of RLR Common Stock payable in
the Merger (assuming the imputed value of such share is equal to the Exchange
Price), and (iii) the percentage of the outstanding shares of RLR Common Stock
that will be held by the stockholders of SCC.
11
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
RLR COMMON STOCK
EXCHANGE EXCHANGE IMPUTED HELD BY SCC
PRICE RATIO VALUE STOCKHOLDERS*
-------- -------- ------- -----------------
<S> <C> <C> <C>
$67.00+ .7749 $51.92 14.20%
66.00+ .7749 51.14 14.20%
65.00+ .7749 50.37 14.20%
64.30+ .7749 49.83 14.20%
63.00 .7749 48.82 14.20%
62.00 .7749 48.04 14.20%
61.00 .7749 47.27 14.20%
60.65 .7749 47.00 14.20%
59.00 .7966 47.00 14.54%
58.00 .8103 47.00 14.75%
57.00 .8246 47.00 14.97%
56.00 .8393 47.00 15.20%
55.00 .8545 47.00 15.43%
54.00 .8704 47.00 15.67%
53.00 .8868 47.00 15.92%
52.65 .8927 47.00 16.01%
52.00 .8927 46.42 16.01%
51.00 .8927 45.53 16.01%
50.00 .8927 44.64 16.01%
49.00++ .8927 43.74 16.01%
</TABLE>
- --------
* The percentages shown in this column do not give effect to RLR's purchase
of any shares of SCC Common Stock or repurchase of any shares of Common
Stock either before or after the consummation of the Merger. See "Summary--
Share Repurchase."
+ In the event that the Exchange Price exceeds $64.30, the Merger Agreement
provides that the Exchange Ratio shall be .7749 or, if SCC shall so
designate in writing, the quotient (rounded to the fourth decimal point)
obtained by dividing $49.83 by the Exchange Price. If SCC makes this
election, the imputed value of the fraction of a share of RLR Common Stock
payable in the Merger (assuming the imputed value of such share is equal to
the Exchange Price) would be $49.83 for any Exchange Price in excess of
$64.30. If SCC fails to make this election, the Merger Agreement provides
that RLR may terminate the Merger Agreement and abandon the Merger. The
amounts shown in the table assume that (i) no election is made by SCC to
fix the imputed value of the transaction at $49.83 and (ii) RLR does not
exercise its right to terminate the Merger Agreement. In the event that the
Exchange Price exceeds $64.30 and SCC makes the election to fix the imputed
value of the transaction at $49.83, the Exchange Ratio and percentage of
RLR Common Stock held by SCC stockholders following the Merger would be
.7666 and 14.07% at an assumed Exchange Price of $65.00, .7550 and 13.88%
at an assumed Exchange Price of $66.00, and .7437 and 13.70% at an assumed
Exchange Price of $67.00.
++In the event that the Exchange Price is less than $49.00, the Merger
Agreement provides that the Exchange Ratio shall be .8927 or, if RLR shall
so designate in writing, the quotient (rounded to the fourth decimal point)
obtained by dividing $43.74 by the Exchange Price. If RLR makes this
election, the imputed value of the fraction of a share of RLR Common Stock
payable in the Merger (assuming the imputed value of such share is equal to
the Exchange Price) would be $43.74 for any Exchange Price less than
$49.00. If RLR fails to make this election, the Merger Agreement provides
that SCC may terminate the Merger Agreement and abandon the Merger. The
table does not show hypothetical transaction values that would result from
an Exchange Price which is less than $49.00 because the SCC Board does not
intend to proceed with the Merger without resoliciting the vote of the SCC
stockholders at an Exchange Price which is less than $49.00 unless RLR
makes an appropriate election to fix the imputed value of the transaction
at $43.74.
12
<PAGE>
Effective Time of the Merger. Subject to the terms and conditions of the
Merger Agreement, the Merger is expected to become effective by the end of June
1997. See "The Merger--Effective Time and Effect of the Merger." If the Merger
has not become effective on or before September 30, 1997, the Merger Agreement
provides that either party may terminate the Merger Agreement. See "The
Merger--Amendment, Termination and Waiver."
Conditions to the Merger. The obligations of RLR and SCC to effect the Merger
are subject to certain conditions, including, among other things, that certain
regulatory approvals shall have been obtained and that the Merger Agreement and
the Merger shall have been approved and adopted by the SCC stockholders. See
"The Merger--Conditions to Consummation of the Merger" for a discussion of
other conditions to the Merger. Any of the conditions to the obligation of RLR
or SCC to consummate the Merger may be waived or modified by the party that is
entitled to the benefits thereof. Neither RLR nor SCC has any present intention
to waive or modify any condition that it deems material. In the event that the
SCC Board determines that it would be in the best interests of SCC and the SCC
stockholders to waive or modify a material condition set forth in the Merger
Agreement, which condition is for the benefit of SCC, the SCC Board will
resolicit the vote of the SCC stockholders.
SCC Employee Benefit Plans and Stock Options. Pursuant to the Merger
Agreement, RLR has agreed to assume, in accordance with their respective terms,
certain of SCC's benefit plans, programs and arrangements. Under the Merger
Agreement, RLR will assume all unexercised options to purchase SCC Common
Stock. Once assumed, these options will be exercisable upon the same terms and
conditions as under the SCC option plan under which they were granted and the
related stock option agreements, except that each such option will be
exercisable for the number of shares of RLR Common Stock as would have been
received pursuant to the Merger for the shares of SCC Common Stock subject to
the option had the option been exercisable and exercised immediately prior to
the Effective Time, and the exercise price of such option will be
correspondingly adjusted. See "The Merger--Employee Benefit Plans and Stock
Options."
Amendment, Termination and Waiver. The Merger Agreement may be amended at any
time, provided that, after the Merger Agreement has been approved and adopted
by SCC's stockholders, it may be amended only as permitted by applicable law.
Under certain conditions, the Merger Agreement may be terminated prior to the
Effective Time, whether prior to or after approval by the SCC stockholders. The
conditions under which the Merger Agreement may be terminated include
termination by mutual consent of the Boards of Directors of RLR and SCC,
termination by either party if the Merger has not been consummated on or before
September 30, 1997, termination by either party upon the failure of SCC to
receive the requisite stockholder approval at the Special Meeting, or
adjournments thereof, termination by either party upon the failure to meet any
condition to the terminating party's obligation to consummate the Merger that
has not been waived or cured within the prescribed cure period, termination by
either party if a final unappealable order to prevent the Merger or an award of
substantial damages is entered, or termination by either party if the
provisions of either party's stockholder rights plan are triggered and not
redeemed. The Merger Agreement may also be terminated by either RLR or SCC if
the recommendation of the SCC Board in support of the Merger is withdrawn or
modified in a manner detrimental to RLR or if SCC shall have entered into a
definitive agreement related to the acquisition of SCC by a third party. The
SCC Board may terminate the Merger Agreement if the Exchange Price is less than
$49.00 and RLR shall have failed to designate the Exchange Ratio as described
on the cover page of this Proxy Statement/Prospectus, and the RLR Board may
terminate the Merger Agreement if the Exchange Price is greater than $64.30 and
SCC shall have failed to designate the Exchange Ratio as described on the cover
page of this Proxy Statement/Prospectus. See "The Merger--Conditions to
Consummation of the Merger" and "The Merger--Amendment, Termination and
Waiver."
As noted above, in the event that the Exchange Price is less than $49.00 and
RLR shall have failed to designate the Exchange Ratio described on the cover
page of this Proxy Statement/Prospectus (i.e., the quotient (rounded to the
fourth decimal place) obtained by dividing $43.74 by the Exchange Price), the
SCC Board will
13
<PAGE>
have the right to terminate the Merger Agreement and abandon the Merger. Any
such decision by the SCC Board will be based on a thorough review and
consideration of all of the relevant facts and circumstances existing at the
time after consultation with SCC's advisors. If the Exchange Price falls below
$49.00 and the imputed value of the merger consideration is less than $43.74,
SCC will request Merrill Lynch to reaffirm its opinion that the consideration
to be received in the Merger is fair, from a financial point of view, to the
SCC stockholders. If Merrill Lynch, in light of the circumstances existing at
the time, is unable to reaffirm such opinion, the SCC Board will not proceed
with the Merger. In the event that Merrill Lynch reaffirms that as of the date
of such opinion the consideration to be received in the Merger is fair, from a
financial point of view, to the SCC stockholders, the SCC Board intends to
resolicit the vote of the SCC stockholders. As a result, the value of the
consideration to be received by the SCC stockholders in the Merger will not
fall below $43.74 without the SCC stockholders first having had the opportunity
to reconsider the financial terms of the Merger and to cast another vote on the
proposed transaction. In the event that the Exchange Price is less than $49.00
and RLR designates the higher Exchange Ratio, the SCC Board will not have the
right to terminate the Merger Agreement and the Merger will be consummated at
the higher Exchange Ratio (i.e., the quotient (rounded to the fourth decimal
place) obtained by dividing $43.74 by the Exchange Price).
Expenses. If the Merger Agreement is terminated because the SCC Board does
not make a favorable recommendation of the Merger to the SCC stockholders or
because SCC has entered into a definitive agreement for an Acquisition
Proposal, other than the Merger, it provides for the payment by SCC to RLR of
$8 million. SCC has also agreed to pay to RLR $2.5 million in the event the
Merger Agreement is terminated as a result of the failure of the SCC
stockholders to approve the Merger. In that event SCC has agreed to pay RLR an
additional $5.5 million if an Acquisition Proposal is outstanding on the date
of such termination, or at any time within 90 days following such termination,
and the Acquisition Proposal, as it may be modified, or a substitute or
alternative Acquisition Proposal is consummated within 12 months of
termination. See "The Merger--Expenses and Termination Payments."
Solicitation of Third-Party Offers. In the Merger Agreement, SCC has agreed
not to initiate, solicit, negotiate or encourage proposals or offers, or
provide any confidential information relating to any acquisition of all or any
substantial portion of the business or properties of SCC. SCC is permitted to
supply information to third parties and cooperate or assist or engage in
discussions or negotiations with third parties relating to such acquisition
transaction, or modify or withdraw its recommendation of the Merger, if the SCC
Board is advised by its financial advisor that the third party has the
financial wherewithal to consummate its proposal, if the SCC Board determines
in good faith that the third party is likely to submit a bona fide offer for
SCC (whose offer of consideration is superior to that offered in the Merger),
if provided with such confidential information and access, if the SCC Board
determines in good faith, upon the advice of counsel, that the failure to
provide such confidential information and access could reasonably be expected
to constitute a breach of its fiduciary duty to its stockholders under
applicable law, and if the SCC Board receives an executed confidentiality
agreement from the third party. See "The Merger--No Solicitation of Acquisition
Transactions."
Regulatory Approvals. Consummation of the Merger is conditioned upon, among
other things, the receipt of all consents or approvals of governmental
agencies, including insurance regulatory authorities, that are necessary for
the consummation of the Merger and the transactions contemplated thereby,
without conditions that would result in a material adverse change in the
financial condition, results of operations or businesses of either RLR or SCC.
The parties believe that the required regulatory approvals are likely to be
secured without the imposition of any conditions that would result in such a
material adverse change. See "The Merger--Certain Legal Matters."
The consummation of the Merger is subject to, among other approvals, the
prior approval of the Connecticut Department of Insurance (the "Connecticut
Department") and the Department of Insurance of the State of New York (the "New
York Department") and to the expiration or early termination of the relevant
waiting period
14
<PAGE>
under the HSR Act. The Connecticut Department issued an order on May 20, 1997,
approving the change in control of SCC. The parties have also submitted their
completed application for approval of the Merger to the New York Department. On
April 7, 1997, the parties were informed by the FTC that they had received
early termination of the relevant waiting period under the HSR Act with respect
to the Merger. See "The Merger--Certain Legal Matters."
Surrender of Share Certificates. After the Effective Time, each stockholder
of SCC will be entitled to receive, upon surrender of certificates previously
representing shares of SCC Common Stock, certificates representing the number
of full shares of RLR Common Stock to which the stockholder is entitled
pursuant to the Merger Agreement. See "The Merger--General" and "The Merger--
Exchange of Shares." No fractional shares of RLR Common Stock will be issued,
and holders of SCC Common Stock will be entitled to receive an amount in cash
equal to the value of any such fraction of a share based upon the Exchange
Price and the Exchange Ratio. STOCKHOLDERS OF SCC SHOULD NOT SURRENDER THEIR
STOCK CERTIFICATES UNTIL THEY RECEIVE TRANSMITTAL MATERIALS, WHICH WILL BE
MAILED FOLLOWING THE EFFECTIVE TIME. See "The Merger--Exchange of Shares."
Accounting Treatment. The Merger will be accounted for under the purchase
method of accounting. See "Unaudited Pro Forma Combined Condensed Financial
Statements."
Business and Management After the Merger. After the Effective Time, the RLR
Board and current executive officers of RLR will continue as the Board of
Directors and executive officers of RLR, as the surviving corporation. RLR
anticipates certain operational and organizational changes to the businesses of
the surviving corporation as a result of the Merger. In general, RLR does not
contemplate significant changes to the management staff of SCC following the
Merger. Senior management of RLR will evaluate certain corporate and
administrative functions of SCC to determine whether cost savings may be
achieved through the consolidation of these functions at RLR. See
"Recommendation of the Board of Directors and Reasons for the Merger" and "The
Merger--Business and Management After the Merger."
Share Repurchase. Subject to preserving the transaction as one which
qualifies under Section 368(a)(1)(A) of the Code and compliance with all
applicable rules and regulations, RLR plans to repurchase up to $100 million of
RLR Common Stock. RLR may effect such repurchases through purchases of SCC
Common Stock prior to the Effective Time or RLR Common Stock after the
Effective Time. A portion of this share purchase will be financed through long-
term financing, which RLR expects to complete during the second quarter of
1997.
After the Effective Time, the principal executive offices of RLR, as the
surviving corporation, will continue to be at 20 Washington Avenue South,
Minneapolis, Minnesota 55401.
NO DISSENTERS' RIGHTS IN THE MERGER
SCC stockholders will NOT be entitled to demand appraisal of, or to receive
any appraisal payment for, their shares of SCC Common Stock. See "No
Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a "reorganization" within the meaning of
Section 368(a)(1)(A) of the Code, in which case no gain or loss would generally
be recognized by the holders of shares of SCC Common Stock on the receipt of
shares of RLR Common Stock in exchange therefor pursuant to the Merger, except
with respect to cash received in lieu of fractional shares. If the Merger were
not to so qualify, the exchange of shares would be taxable. It is a condition
to the obligation of each party to consummate the Merger that they receive an
opinion of their respective counsel to the effect that the Merger will qualify
as such a reorganization. Each stockholder of SCC is urged to consult with his
or her tax advisor to determine the specific tax consequences of the Merger to
such holder. See "The Merger--Federal Income Tax Consequences."
15
<PAGE>
SPECIAL CONSIDERATIONS
In considering whether to approve the Merger Agreement, SCC stockholders
should be aware of several special considerations relating to the Merger. The
imputed value of the fraction of a share of RLR Common Stock to be received by
SCC stockholders in exchange for each share of SCC Common Stock could be more
or less than $47.00 per share, depending on the actual value of the Exchange
Price as of the date immediately preceding the date on which all conditions
precedent to the Merger have been either satisfied or waived. In the event that
the Exchange Price is less than $52.65 but equal to or greater than $49.00, the
Exchange Ratio will be fixed at .8927. As the Exchange Price falls from $52.65
to $49.00, the imputed value of the fraction of a share of RLR Common Stock to
be received by SCC stockholders drops from $47.00 to $43.74. In the event that
the Exchange Price is more than $60.65 but equal to or less than $64.30, the
Exchange Ratio will be fixed at .7749. As the Exchange Price increases from
$60.65 to $64.30, the imputed value of the fraction of a share of RLR Common
Stock to be received by SCC stockholders increases from $47.00 to $49.83.
Moreover, the then-current market value of the fraction of a share of RLR
Common Stock to be received by SCC stockholders could be more or less than the
imputed value discussed above because the imputed value is based on a twenty-
day moving average of the closing sale prices of the RLR Common Stock on the
New York Stock Exchange.
In addition, the Merger Agreement requires SCC to pay RLR $8.0 million in the
event that the Merger Agreement is terminated because the SCC Board does not
make a favorable recommendation concerning the Merger to the SCC stockholders
or because SCC has entered into a definitive agreement for an Acquisition
Proposal other than the Merger. The Merger Agreement also requires SCC to pay
RLR $2.5 million in the event that the Merger Agreement is terminated as a
result of the failure of the SCC stockholders to approve the Merger. SCC must
pay RLR an additional $5.5 million if an Acquisition Proposal is outstanding on
the date of such termination, or at any time within 90 days following such
termination, and the Acquisition Proposal, as it may be modified, or a
substitute or alternative Acquisition Proposal is consummated within 12 months
of termination.
COMPARATIVE RIGHTS OF SCC STOCKHOLDERS BEFORE AND AFTER THE MERGER
The rights of the stockholders of SCC are currently governed by SCC's
Certificate and Bylaws. At the Effective Time, SCC stockholders will become
stockholders of RLR and their rights as RLR stockholders will then be governed
by RLR's Certificate and By-Laws. There are various differences between the
rights of SCC stockholders and the rights of holders of RLR Common Stock. These
differences include a higher percentage of stockholder approval required for
certain events in connection with a change of control of RLR versus SCC, and
the discretion given to the RLR Board to consider other constituencies when
evaluating such transactions. See "Comparative Rights of Stockholders of SCC
and RLR."
MARKET PRICE AND DIVIDEND DATA
The shares of RLR Common Stock and the shares of SCC Common Stock are each
listed and principally traded on the NYSE. The following table sets forth for
the periods indicated the high and low sale prices of RLR Common Stock and SCC
Common Stock, as reported in published financial sources, and the cash
dividends paid per share:
<TABLE>
<CAPTION>
RLR COMMON STOCK SCC COMMON STOCK
------------------------ -------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------- ------ --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995........................ $44.50 $29.00 $0.975 $28.50 $22.00 $0.48
1996........................ 58.375 40.00 1.09 35.625 24.875 0.48
1997
First Quarter............. 65.375 54.00 0.28 47.375 35.125 0.12
Second Quarter (through
May 20).................. 64.875 57.25 0.31 48.00 44.625 0.14
</TABLE>
On February 21, 1997, the last trading day prior to the public announcement
of the Merger, the closing sale prices per share of RLR Common Stock and SCC
Common Stock as reported on the NYSE Composite Tape were $59.25 and $37.50,
respectively. On May 20, 1997, the last trading day for which closing sale
prices
16
<PAGE>
were available at the time of the printing of this Proxy Statement/Prospectus,
the closing sale prices per share of RLR Common Stock and SCC Common Stock as
reported on the NYSE Composite Tape were $63.125 and $47.25, respectively. See
"Market Price and Dividend Information for RLR and SCC Common Stock." If the
Exchange Price were equal to the closing sale price per share of RLR Common
Stock on May 20, 1997, stockholders of SCC who are to receive shares of RLR
Common Stock would be entitled to receive .7749 of a share of RLR Common Stock,
having a market value of $48.92, in exchange for each share of SCC Common Stock
held by them. See "The Merger--General" for a discussion of the determination
of the actual Exchange Price and Exchange Ratio.
Listing on the NYSE of the shares of RLR Common Stock issuable in connection
with the Merger is a condition to consummation of the Merger.
17
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected historical financial data of RLR, SCC
and its predecessor for each of the years in the five year period ended
December 31, 1996 and selected unaudited historical financial data for the
three month periods ended March 31, 1997 and 1996. The balance sheet data are
as of December 31 and March 31 of the indicated periods. The selected
historical financial data of RLR as of and for each of the five years in the
period ended December 31, 1996 shown below have been derived from the
consolidated financial statements of RLR. The selected historical financial
data of SCC as of and for each of the three years in the period ended December
31, 1996 shown below have been derived from the consolidated financial
statements of SCC. The selected historical financial data of SCC as of and for
each of the two years in the period ended December 31, 1993 shown below have
been derived from the consolidated financial statements of Security-Connecticut
Life Insurance Company and subsidiary ("Predecessor Company"). The selected
historical financial data for RLR for the three month periods ended March 31,
1997 and 1996 have been derived from RLR's unaudited financial statements and
reflect all adjustments and accruals, consisting only of normal, recurring
adjustments and accruals which are, in the opinion of RLR management, necessary
for a fair statement of the results for the interim periods presented. The
selected historical financial data for SCC for the three month periods ended
March 31, 1997 and 1996 have been derived from SCC's unaudited financial
statements and, in the opinion of SCC management, include all adjustments and
accruals, consisting only of normal recurring adjustments and accruals,
considered necessary for a fair presentation of the interim periods presented.
This historical data is not necessarily indicative of results to be expected
after the Merger is consummated and should be read in conjunction with the
information set forth under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the RLR and SCC 10-Ks and
10-Qs and the separate consolidated financial statements and the notes thereto
of RLR and SCC incorporated herein by reference.
<TABLE>
<CAPTION>
RLR
-------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Premiums................ $ 204.7 $ 205.0 $ 836.9 $ 851.5 $ 726.9 $ 659.6 $ 589.9
Net Investment Income... 234.7 232.3 940.7 891.1 618.3 635.0 606.7
Realized Investment
Gains (Losses)......... 2.2 6.2 11.2 4.9 (27.4) (32.4) (33.7)
Other Income............ 121.6 89.9 401.8 342.9 253.0 228.2 215.1
--------- --------- -------- -------- -------- -------- --------
Total Revenues...... 563.2 533.4 2,190.6 2,090.4 1,570.8 1,490.4 1,378.0
Benefits and Expenses... 481.8 459.1 1,886.5 1,830.6 1,404.2 1,361.8 1,288.4
Income Tax Expense...... 28.4 26.2 106.1 90.7 58.9 46.1 29.0
Dividends on Preferred
Securities of
Subsidiary, Net of Tax. 1.7 .1 5.0 -- -- -- --
--------- --------- -------- -------- -------- -------- --------
Income from
Continuing
Operations......... 51.3 48.0 193.0 169.1 107.7 82.5 60.6
Loss from Discontinued
Operations............. -- -- -- (5.4) (2.6) -- --
--------- --------- -------- -------- -------- -------- --------
Income Before
Extraordinary Charges
and Cumulative Effect
of Accounting Changes.. 51.3 48.0 193.0 163.7 105.1 82.5 60.6
Extraordinary Charges... -- -- -- -- -- (9.7) (1.3)
Cumulative Effect of
Accounting Changes..... -- -- -- -- -- (7.5) --
--------- --------- -------- -------- -------- -------- --------
Net Income.......... $ 51.3 $ 48.0 $ 193.0 $ 163.7 $ 105.1 $ 65.3 $ 59.3
========= ========= ======== ======== ======== ======== ========
Net Income Available
to Common
Shareholders....... $ 51.3 $ 48.0 $ 187.8 $ 155.4 $ 96.8 $ 57.0 $ 50.1
========= ========= ======== ======== ======== ======== ========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
RLR
---------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS PER COMMON
SHARE:
Primary:
Income from Continuing
Operations........... $ 1.26 $ 1.24 $ 5.03 $ 4.36 $ 3.30 $ 2.63 $ 2.07
Loss from Discontinued
Operations........... -- -- -- (.15) (.09) -- --
--------- --------- --------- --------- -------- -------- --------
Income Before
Extraordinary Charges
and Cumulative Effect
of Accounting
Changes.............. 1.26 1.24 5.03 4.21 3.21 2.63 2.07
Extraordinary Charges. -- -- -- -- -- (.34) (.05)
Cumulative Effect of
Accounting Changes... -- -- -- -- -- (.26) --
--------- --------- --------- --------- -------- -------- --------
Net Income.......... $ 1.26 $ 1.24 $ 5.03 $ 4.21 $ 3.21 $ 2.03 $ 2.02
========= ========= ========= ========= ======== ======== ========
Fully Diluted:
Income from Continuing
Operations........... $ 1.26 $ 1.17 $ 4.73 $ 4.10 $ 3.08 $ 2.45 $ 1.93
Loss from Discontinued
Operations........... -- -- -- (.14) (.08) -- --
--------- --------- --------- --------- -------- -------- --------
Income Before
Extraordinary Charges
and Cumulative Effect
of Accounting
Changes.............. 1.26 1.17 4.73 3.96 3.00 2.45 1.93
Extraordinary Charges. -- -- -- -- -- (.31) (.05)
Cumulative Effect of
Accounting Changes... -- -- -- -- -- (.24) --
--------- --------- --------- --------- -------- -------- --------
Net Income.......... $ 1.26 $ 1.17 $ 4.73 $ 3.96 $ 3.00 $ 1.90 $ 1.88
========= ========= ========= ========= ======== ======== ========
DIVIDENDS PAID PER
COMMON SHARE:.......... $ .28 $ .25 $ 1.09 $ .975 $ .875 $ .785 $ .73
========= ========= ========= ========= ======== ======== ========
BALANCE SHEET DATA (END
OF PERIOD):
Invested Assets......... $11,920.6 $11,785.4 $11,996.3 $11,814.2 $7,918.2 $7,716.3 $7,159.6
Other Assets............ 5,013.3 3,986.9 4,710.7 3,705.0 2,448.6 2,196.6 1,915.6
--------- --------- --------- --------- -------- -------- --------
Total Assets.......... 16,933.9 15,772.3 16,707.0 15,519.2 10,366.8 9,912.9 9,075.2
Notes and Mortgages
Payable................ 449.1 423.3 407.5 422.3 194.6 230.3 220.5
Other Liabilities....... 14,979.5 13,884.2 14,760.9 13,676.8 9,373.7 8,882.0 8,174.9
--------- --------- --------- --------- -------- -------- --------
Total Liabilities..... 15,428.6 14,307.5 15,168.4 14,099.1 9,568.3 9,112.3 8,395.4
Trust-Originated
Preferred Securities... 121.0 120.8 120.9 -- -- -- --
Shareholders' Equity:
Preferred............. -- 69.0 -- 68.7 67.9 66.7 65.8
Common................ 1,384.3 1,275.0 1,417.7 1,351.4 730.6 733.9 614.0
Book Value per Common
Share.................. $ 34.46 $ 32.79 $ 35.43 $ 34.88 $ 22.69 $ 22.98 $ 20.85
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SCC
----------------------------------------------------------------
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
(PREDECESSOR
COMPANY)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Premiums................ $ 13.0 $ 14.0 $ 58.3 $ 64.1 $ 66.5 $ 52.1 $ 55.7
Insurance Fees.......... 34.8 33.9 136.8 125.5 116.9 104.2 94.6
Net Investment Income... 33.9 33.5 135.3 132.0 115.4 109.4 102.1
Realized Investment
Gains (Losses)......... 0.2 4.1 7.3 6.2 (0.7) 8.6 (0.5)
Other Income............ 0.0 0.2 0.6 1.4 0.3 0.2 0.5
-------- -------- -------- -------- -------- -------- --------
Total Revenues...... 81.9 85.7 338.3 329.2 298.4 274.5 252.4
Benefits and Expenses... 68.7 71.7 284.8 292.8 260.4 231.3 216.6
Income Tax Expense...... 4.6 4.8 18.2 12.3 12.8 18.0 9.6
-------- -------- -------- -------- -------- -------- --------
Income Before Cumulative
Effect of Accounting
Changes................ 8.6 9.2 35.3 24.1 25.2 25.2 26.2
Cumulative Effect of
Accounting Changes..... -- -- -- -- -- (1.2) --
-------- -------- -------- -------- -------- -------- --------
Net Income.......... $ 8.6 $ 9.2 $ 35.3 $ 24.1 $ 25.2 $ 24.0 $ 26.2
======== ======== ======== ======== ======== ======== ========
EARNINGS PER COMMON
SHARE:
Primary:
Income Before
Cumulative Effect of
Accounting
Changes(1)........... $ 0.99 $ 1.07 $ 4.10 $ 2.81 $ 2.94 $ 2.75 $ 2.84
Cumulative Effect of
Accounting
Changes(1)........... -- -- -- -- -- (0.14) --
-------- -------- -------- -------- -------- -------- --------
Net Income(1)....... $ 0.99 $ 1.07 $ 4.10 $ 2.81 $ 2.94 $ 2.61 $ 2.84
======== ======== ======== ======== ======== ======== ========
Fully Diluted:
Income Before
Cumulative Effect of
Accounting
Changes(1)........... $ 0.99 $ 1.07 $ 4.07 $ 2.80 $ 2.94 $ 2.75 $ 2.84
Cumulative Effect of
Accounting
Changes(1)........... -- -- -- -- -- (0.14) --
-------- -------- -------- -------- -------- -------- --------
Net Income(1)....... $ 0.99 $ 1.07 $ 4.07 $ 2.80 $ 2.94 $ 2.61 $ 2.84
======== ======== ======== ======== ======== ======== ========
DIVIDENDS PAID PER
COMMON SHARE:(1)....... $ 0.12 $ 0.12 $ 0.48 $ 0.48 $ 0.48 $ 0.70 $ 1.40
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA
(END OF PERIOD):
Invested Assets......... $1,793.3 $1,777.1 $1,799.1 $1,796.1 $1,510.7 $1,427.4 $1,217.5
Other Assets............ 539.2 535.2 539.2 485.3 531.3 401.7 382.2
-------- -------- -------- -------- -------- -------- --------
Total Assets.......... 2,332.5 2,312.3 2,338.3 2,281.4 2,042.0 1,829.1 1,599.7
Notes Payable........... 75.0 75.0 75.0 65.0 65.0 -- --
Other Liabilities....... 1,907.3 1,903.4 1,908.1 1,868.0 1,731.7 1,473.4 1,291.2
-------- -------- -------- -------- -------- -------- --------
Total Liabilities..... 1,982.3 1,978.4 1,983.1 1,933.0 1,796.7 1,473.4 1,291.2
Common Shareholders'
Equity:................ 350.2 333.9 355.2 348.4 245.3 355.7 308.5
Book Value per Common
Share(1), (2).......... $ 40.83 $ 39.04 $ 41.50 $ 40.71 $ 28.70 $ 35.18 $ 29.66
</TABLE>
20
<PAGE>
- --------
(1) For years 1992 and 1993, earnings per common share, dividends paid per
common share, and book value per common share are pro forma for the
interest on the debt outstanding and the change in capitalization as a
result of the reorganization of SCC prior to the initial public offering in
1994. Also for years 1992 and 1993, the calculations are based on 8,547,727
shares of SCC Common Stock assumed to be outstanding.
(2) Based on common shares outstanding as of December 31 and March 31.
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
The following table presents unaudited pro forma combined selected financial
data for RLR and SCC after giving effect to the Merger. These pro forma data
are presented for illustrative purposes only and are not necessarily indicative
of the results that would have been obtained if the Merger had been consummated
on January 1, 1996 (in the case of income statement items) or March 31, 1997
(in the case of balance sheet items), or that may be obtained in the future.
These pro forma data are derived from the Unaudited Pro Forma Combined
Condensed Financial Statements appearing elsewhere herein and should be read in
conjunction with those statements and the notes thereto.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C>
PRO FORMA STATEMENT OF INCOME DATA:
Revenues................................ $645.1 $2,528.8
Net Income.............................. 62.4 229.2
Net Income per Common Share (Fully
Diluted)............................... $ 1.31 $ 4.81
Common Shares Used in Calculation of
Above per Common Share Amount.......... 47.6 47.0
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C>
PRO FORMA BALANCE SHEET DATA:
Assets.................................. $19,271.3
Notes and Mortgages Payable............. 524.1
Shareholders' Equity.................... 1,795.5
Book Value per Common Share............. $ 38.12
Common Shares used in Calculation of
Above Book Value per Common Share
Amount................................ 47.1
</TABLE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth (i) the historical net income per common
share, the historical dividends paid per common share, the historical book
value per common share and the historical market value per common share data
for RLR and SCC; (ii) the unaudited pro forma combined net income per common
share, the unaudited pro forma combined dividends per common share and the
unaudited pro forma combined book value per common share data after giving
effect to the proposed Merger; and (iii) the unaudited pro forma equivalent
combined net income per common share, the unaudited pro forma equivalent
combined dividends per common share, the unaudited pro forma equivalent
combined book value per common share and the unaudited pro forma equivalent
combined market value per common share of SCC Common Stock all based upon an
Exchange Ratio of .7932. The information presented in the table should be read
in conjunction with the Unaudited Pro Forma
21
<PAGE>
Combined Condensed Financial Statements appearing elsewhere herein and the
notes thereto and the separate historical consolidated financial statements and
the notes thereto of RLR and SCC incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
NET INCOME PER COMMON SHARE:
Primary:
Historical RLR.................. $1.26 $5.03
Historical SCC.................. .99 4.10
Pro Forma Combined.............. 1.31 5.07
Pro Forma Equivalent for One
Share of SCC Common Stock...... 1.04 4.02
Fully Diluted:
Historical RLR.................. $1.26 $4.73
Historical SCC.................. .99 4.07
Pro Forma Combined.............. 1.31 4.81
Pro Forma Equivalent for One
Share of SCC Common Stock...... 1.04 3.82
DIVIDENDS PAID PER COMMON SHARE:
Historical RLR.................. $ .28 $1.09
Historical SCC.................. .12 .48
Pro Forma Combined(a)........... .28 1.09
Pro Forma Equivalent for One
Share of SCC Common Stock...... .22 .86
</TABLE>
<TABLE>
<CAPTION>
BOOK VALUE PER MARKET VALUE
SHARE OF PER SHARE OF
COMMON STOCK COMMON STOCK
MARCH 31, 1997 MAY 20, 1997
--------------- ------------
<S> <C> <C>
Historical RLR.............................. $34.46 $63.125
Historical SCC.............................. 40.83 47.25
Pro Forma Combined.......................... 38.12 N/A
Pro Forma Equivalent for One Share of SCC
Common Stock............................... 30.24 50.07
</TABLE>
- --------
(a) The pro forma dividends paid per common share are assumed to be the same as
the historical RLR dividends paid per common share.
22
<PAGE>
GENERAL INFORMATION
THE SPECIAL MEETING
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the SCC Board for use at the Special Meeting to be
held on June 24, 1997, and at any adjournments or postponements of that
meeting. This Proxy Statement/Prospectus also constitutes the Prospectus of
RLR with respect to the shares of RLR Common Stock, including Rights to
Purchase Preferred Stock of RLR (see "Description of RLR Capital Stock"), to
be issued in connection with the Merger.
The Special Meeting has been called for the purpose of considering and
voting upon a proposal to approve and adopt the Merger Agreement and the
Merger, whereby SCC will be merged with and into RLR, and such other matters
as may be properly brought before the Special Meeting. The Merger will be
accomplished pursuant to the Merger Agreement by a statutory merger of SCC
with and into RLR in which all the outstanding shares of SCC Common Stock will
be converted into the right to receive shares of RLR Common Stock. The
stockholders of RLR will continue to hold their shares of RLR Common Stock,
without any change in number, designation, terms or rights. Under the Merger
Agreement, holders of SCC Common Stock will become stockholders of RLR and
will receive a fraction of a share of RLR Common Stock for each outstanding
share of SCC Common Stock determined pursuant to the Exchange Price and the
Exchange Ratio. See "The Merger--General." Any outstanding option to purchase
SCC Common Stock will be assumed by RLR and will be exercisable upon the same
terms and conditions as under the SCC option plan under which the option was
granted and the related stock option agreement, except that each option will
be exercisable for the number of shares of RLR Common Stock as would have been
received pursuant to the Merger for the shares of SCC Common Stock subject to
the option had it been exercisable and exercised immediately prior to the
Effective Time, and its exercise price will be correspondingly adjusted. See
"The Merger--Exchange of Shares" and "The Merger--Employee Benefit Plans and
Stock Options."
VOTE REQUIRED AT SPECIAL MEETING
Approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote of a majority of the outstanding shares of SCC Common Stock
entitled to vote thereon. Holders of SCC Common Stock who dissent from the
approval and adoption of the Merger Agreement and the Merger do not have any
appraisal rights. See "No Dissenters' Rights."
The SCC Board has fixed the close of business on May 5, 1997 as the record
date for the determination of stockholders entitled to notice of and to vote
at the Special Meeting or any and all adjournments or postponements thereof.
At that date, there were outstanding 8,582,471 shares of SCC Common Stock
entitled to vote at the Special Meeting and the record holders on that date
will be entitled to one vote for each share of such stock held by them.
Based on filings with the SEC, as of February 14, 1997, Boston Partners
Asset Management, L.P., Greenhaven Associates, Inc. and Tweedy, Browne
Company, L.P., are each known by SCC management to be the beneficial owner of
more than 5% of the outstanding shares of SCC Common Stock. On May 5, 1997
SCC's directors and executive officers, as a group, beneficially owned 360,017
shares (or approximately 4.11%) of the outstanding shares of SCC Common Stock
on such date (including 186,378 shares held under options exercisable within
60 days). All directors and executive officers of SCC have indicated that they
will vote all outstanding shares of SCC Common Stock beneficially owned by
them for approval and adoption of the Merger Agreement and the Merger. For
information with respect to the beneficial ownership of shares of SCC Common
Stock by each of SCC's directors and all directors and executive officers of
SCC as a group and each person known to SCC to be the beneficial owner of more
than 5% of the outstanding shares of SCC Common Stock, see Item 12 of the SCC
10-K (which incorporates certain portions of SCC's definitive proxy statement
for SCC's 1997 Annual Meeting of Shareholders), which is incorporated herein
by reference.
23
<PAGE>
The presence at the Special Meeting in person or by proxy of the holders of
a majority of the shares of SCC Common Stock outstanding on May 5, 1997 is
required to constitute a quorum. As of May 5, 1997, there were 8,582,471
shares of SCC Common Stock outstanding. For these purposes, shares of SCC
Common Stock that are present or represented by proxy and entitled to vote at
the Special Meeting will be counted for quorum purposes regardless of whether
the holder of the shares or proxy fails to vote on a matter ("abstentions"). A
broker with discretionary authority failing to exercise its discretionary
authority to vote shares with respect to a matter ("broker non-votes") will
not be counted as present and entitled to vote on a matter. For voting
purposes, only shares of SCC Common Stock voted for the approval of a matter,
excluding abstentions, will be counted as voting for approval in determining
whether a matter is approved by the stockholders of SCC. As a consequence,
abstentions and broker non-votes will have the same effect as votes against
approval of the Merger.
If a quorum is not present at the Special Meeting, the stockholders present,
by vote of a majority of the votes cast by stockholders entitled to vote
thereon, may adjourn the Special Meeting, and at any such adjourned meeting at
which a quorum is present any business may be transacted which might have been
transacted at the Special Meeting as originally called and proxies will be
voted thereat as directed.
SOLICITATION OF PROXIES
SCC has retained Morrow & Co., Inc. to assist it in the solicitation of
proxies for a total estimated fee of approximately $4,500 plus expenses.
Directors, officers and employees of SCC may solicit proxies from stockholders
by personal interview, special letter, telephone or facsimile transmission.
SCC will bear the expenses of such solicitation on its behalf. Directors,
officers and other employees of SCC will not be specifically compensated for
the solicitation of proxies. Brokerage houses and other custodians, nominees
and fiduciaries will be requested to forward soliciting materials to the
beneficial owners of SCC Common Stock owned of record by such organizations,
and SCC will pay the reasonable expenses incurred in forwarding these
materials.
A proxy relating to the Special Meeting may be revoked by the stockholder at
any time before it is exercised; however, mere attendance at the Special
Meeting will not itself have the effect of revoking the proxy. An SCC
stockholder may revoke a proxy before it is voted by executing and filing a
subsequently dated proxy with SCC, by sending written notice of revocation
received by SCC not later than the close of business on June 23, 1997, or by
the holder of record voting in person at the Special Meeting.
A proxy in the accompanying form, when properly executed and returned, will
be voted in accordance with the instructions contained therein. A properly
executed proxy on which no instruction has been indicated will be voted for
approval and adoption of the Merger Agreement and the Merger.
OTHER MATTERS
At the date of this Proxy Statement/Prospectus, the SCC Board does not know
of any business to be presented at the Special Meeting other than as set forth
in the notice accompanying this Proxy Statement/Prospectus. If any other
matters should properly come before the Special Meeting, it is intended that
the shares represented by proxies will be voted with respect to such matters
in accordance with the judgment of the persons voting such proxies.
BACKGROUND OF THE MERGER
The terms and conditions of the Merger Agreement were determined through
arm's-length negotiations between the senior managements and Boards of
Directors of SCC and RLR. In determining the form of the transaction and the
form and amount of the consideration, numerous factors were reviewed by the
senior managements and Boards of Directors of SCC and RLR. See
"Recommendations of the Boards of Directors and Reasons for the Merger." The
following is a brief discussion of those negotiations and certain related
events.
Immediately prior to February 2, 1994, the two primary insurance operating
subsidiaries of SCC, Security-Connecticut Life Insurance Company and its
wholly owned subsidiary, Lincoln Security Life Insurance
24
<PAGE>
Company, were owned by Lincoln National Life Insurance Company, a wholly owned
subsidiary of Lincoln National Corporation. LNC originally acquired the SCC
Insurance Subsidiaries in 1979 to gain access to their independent
distribution system and to increase LNC's aggregate life insurance business.
By 1993, however, LNC decided to focus on its career agency system and
concluded that the SCC Insurance Subsidiaries, with their focus on an
independent agency distribution network, did not fit within LNC's current
business strategy. Accordingly, LNC organized SCC on October 13, 1993 to serve
as a holding company for the SCC Insurance Subsidiaries, and on February 2,
1994, LNC sold all of the outstanding shares of SCC to the public in an
underwritten public offering. SCC has been an independent public company since
that time.
Since the creation and sale of SCC by LNC, the senior management of SCC has
pursued a long-term business strategy of increasing revenues while maintaining
expenses in an effort to improve the Company's competitive position in its
markets. Due to the highly regulated and complex nature of the life insurance
business, however, senior management concluded that only limited gains could
be achieved through expense reduction. Accordingly, the senior management has
focused SCC's long-term business strategy on increasing revenues.
During 1995 and the first half of 1996, the senior management of SCC
considered different strategic alternatives intended to significantly increase
revenues with limited increases in the Company's underlying cost structure.
Although the details of each such potential strategic alternative differed,
the general approach was to identify and contact other companies that had in
force large blocks of term and universal life insurance business with a view
toward negotiating the purchase and/or administration of such business, as
well as the right to access such other companies' marketing and distribution
channels. During the course of this eighteen month period, SCC or its outside
consultants systematically reviewed the relevant statistical data of more than
100 insurers and initiated preliminary discussions with approximately fifteen
of those who expressed interest in the general proposal. None of these
discussions resulted in the consummation of any specific transactions,
however, and the senior management of SCC ultimately concluded that the
strategy was not viable. This conclusion was based on the fact that SCC or its
outside consultants had contacted substantially all of the insurers who were
viewed as having a potential strategic fit with SCC in their businesses or
product lines, and SCC was unable to negotiate a definitive transaction with
any of them.
The most significant transaction pursued by SCC during this period related
to a confidential proposal to enter into a potential strategic alliance with
another large life insurance company pursuant to which SCC and the other life
insurance company would afford one another access to specified marketing and
distribution channels. SCC was interested in pursuing such a strategic
alliance because it would have enabled SCC to have access to a wide range of
additional marketing and distribution channels without requiring a substantial
financial investment. SCC believed the potential alliance was attractive to
the other insurer because of the perceived complimentary nature of the product
lines of the respective parties. It was on this basis that SCC had first
identified the other insurance company as a potential strategic alliance
partner.
Initially, the discussions focused on the terms and conditions under which
the parties might agree to afford one another access to specified marketing
and distribution channels intended to capitalize on the strengths of each
party. As the discussions progressed, however, the parties independently
evaluated on a preliminary basis whether there existed an overall strategic
fit between the parties sufficient to warrant more detailed discussions
concerning a potential business combination transaction. On April 4, 1996, SCC
engaged Merrill Lynch to render general financial advisory and investment
banking services to SCC and to assist SCC in considering and negotiating a
possible business combination transaction. Ultimately, SCC and the other
insurance company were unable to reach any definitive agreement regarding a
potential strategic alliance, and the other insurance company never submitted
to SCC a definitive proposal concerning a potential business combination
transaction. By the end of April 1996, all substantive negotiations with the
other insurer were discontinued.
The senior management of SCC continued to have occasional contact with seven
other potential strategic alliance partners, including RLR, during the summer
and fall of 1996. These contacts, except for the contacts with RLR, which are
discussed in more detail below, were initiated either by the senior management
of SCC based upon their perception of the strategic fit that existed between
the parties or the senior managements of the other parties. None of these
contacts, except for the contacts with RLR, resulted in any definitive
proposals.
25
<PAGE>
On July 2, 1996, Mr. Ronald D. Jarvis, President and Chief Executive Officer
of SCC, met with Mr. John G. Turner, Chairman and Chief Executive Officer of
RLR, to discuss the possible cross-selling opportunities presented by their
respective companies' product lines and distribution channels. This meeting was
very informal with no consensus as to any future course of action between the
companies.
The July 2 meeting was followed by a subsequent meeting between Mr. Jarvis
and Messrs. Turner and John H. Flittie, President and Chief Operating Officer
of RLR, held on October 8, 1996. Messrs. Turner and Flittie discussed with Mr.
Jarvis a summary of the potential benefits that RLR perceived could be obtained
through a possible strategic alliance between SCC and RLR, and they provided
Mr. Jarvis with certain financial and other information concerning RLR. This
meeting adjourned with no consensus as to any future course of action between
the companies.
On October 15, 1996, Moody's Investors Service, Inc. announced that it had
assigned SCC a financial strength rating of "Baa1." A.M. Best Company, which
rates insurance companies based on qualitative and quantitative factors of
concern to policyholders, soon followed this announcement with a downgrade of
its rating of SCC's claim's paying ability from "A+ (Superior)" to "A
(Excellent)." Among the factors contributing to the downgrade was SCC's high
cost structure in comparison to other comparable insurers. Although SCC's
management disagreed with the conclusions of these rating agencies, it
recognized the potential negative impact these ratings could have on future
sales. A substantial portion of SCC's sales are to sophisticated, high net-
worth individuals whose purchases of insurance are influenced by financial
strength ratings. For this reason, the ratings downgrades were troubling to the
senior management of SCC.
At the regular meeting of the SCC Board held on December 6, 1996, the SCC
Board discussed the possibility of entering into a strategic business
combination with another life insurance company. The SCC Board noted that
competition in the industry was intensifying, that the downgrade in SCC's A.M.
Best Company rating could adversely affect SCC's competitive position in the
industry and that a strategic alliance with a strong partner might improve
SCC's ability to compete in the markets it serves. At the conclusion of this
meeting, the SCC Board constituted a Special Committee comprised of Messrs.
Jarvis and Levenson, a director of the Company, and authorized the Special
Committee to investigate, with the assistance of Mr. Robert J. Voight,
Executive Vice President and Chief Financial Officer of SCC, and Merrill Lynch,
the possibility of entering into a strategic business combination with another
life insurance company.
The Special Committee met with representatives of Merrill Lynch, together
with SCC's outside legal counsel, on January 13, 1997 to discuss an appropriate
strategy for pursuing possible strategic business combination transactions.
After discussions with Merrill Lynch and SCC's legal counsel, the Special
Committee identified three potential candidates that the Special Committee
believed should be approached by Merrill Lynch to solicit indications of
interest in a potential strategic business combination transaction. The Special
Committee authorized Merrill Lynch to continue its internal preparations and
analyses and directed it to be prepared to initiate contacts with the three
potential strategic partners that had been identified.
On January 21, 1997, a special meeting of the SCC Board was convened.
Representatives of Merrill Lynch and SCC's outside legal counsel also attended
this meeting. Merrill Lynch reported that it was prepared to execute
confidentiality agreements with the three potential strategic partners that the
Special Committee had identified and supply them with appropriate financial
data and other information concerning SCC. At the conclusion of this meeting,
the SCC Board ratified the recommendation of the Special Committee and
authorized Merrill Lynch to solicit indications of interest from the three
potential strategic partners. Merrill Lynch was instructed to make these
contacts on a confidential basis because the SCC Board believed a more public
approach would cause SCC's sales force to lose the incentive to market and
distribute SCC's products, undermine the confidence of SCC's existing customer
base and create instability among SCC's employees. Any of these developments
would adversely affect SCC's operations and strategic options.
When contacted, RLR expressed immediate interest and promptly entered into a
confidentiality agreement with SCC. Neither of the other two candidates that
had been identified by the Special Committee was prepared
26
<PAGE>
to proceed with a potential transaction. On Friday, January 31, 1997, Mr.
Turner sent Mr. Jarvis a letter by facsimile transmission confirming RLR's
interest in a possible business combination transaction and asking SCC to
execute a letter granting RLR the exclusive right to conduct due diligence and
negotiate with SCC through 5:00 p.m. on February 23, 1997. The letter indicated
that RLR would only proceed if it were granted an exclusive opportunity to
conduct due diligence and to negotiate the terms of a definitive agreement. In
a telephone conversation on Wednesday, February 5, 1997, Mr. Jarvis indicated
to Mr. Turner that, although SCC was interested in pursuing discussions with
RLR, it was unwilling to execute an exclusivity letter. Mr. Turner reiterated
RLR's interest in pursuing a possible business combination transaction with SCC
and expressed concern about the lack of exclusivity. Mr. Jarvis and Mr. Turner
reached a verbal understanding that, from Wednesday, February 5, through
Saturday, February 15, SCC would not entertain substantive discussions with any
other potential strategic partner.
The SCC Board met again on Monday, February 10, 1997, and Mr. Jarvis briefed
the directors on the status of the discussions with RLR. Mr. Jarvis reported
that he had verbally agreed to grant RLR exclusivity until Saturday, February
15, 1997. He reported that RLR was scheduled to conduct its due diligence
investigation of SCC from Monday, February 10, through Thursday, February 13.
An initial draft of the proposed Merger Agreement was scheduled to be delivered
to SCC and its legal counsel on Tuesday, February 11. A special meeting of the
RLR Board had been scheduled for Thursday, February 13. Mr. Jarvis and Mr.
Turner had made arrangements to speak by telephone during the afternoon on
Saturday, February 15, at which time Mr. Turner had undertaken to confirm
whether or not RLR continued to be interested in pursuing a strategic business
combination transaction with SCC.
The first draft of the Merger Agreement was furnished by RLR to SCC on
Tuesday, February 11. The SCC Special Committee had a telephonic meeting on
Friday, February 14, during which Merrill Lynch and SCC's outside legal counsel
reviewed the draft Merger Agreement and discussed the status of the
negotiations. Later that day, SCC's legal and financial advisors delivered a
brief memorandum to RLR summarizing several of the substantive issues raised by
the draft Merger Agreement. Among others, these included the calculation and
amount of the proposed merger consideration and of any potential termination
fee, the circumstances under which such a termination fee would be paid, and
the terms of certain covenants and conditions precedent involving RLR board
representation, employment agreements and pre-closing access by RLR to SCC's
operations.
In a telephone conversation on Saturday, February 15, 1997, representatives
of RLR reported to representatives of SCC that RLR continued to be interested
in negotiating a potential business combination transaction. It was verbally
agreed that representatives of the two companies would meet on Monday, February
17, to discuss the possible transaction.
On Monday, February 17, the senior managements of SCC and RLR, together with
their financial advisors and outside legal counsel, met to discuss the issues
that had been raised by the initial draft of the Merger Agreement. The meeting
took place in Hartford, Connecticut, at the offices of SCC's outside legal
counsel. By the conclusion of the meeting, the parties had reached a tentative
agreement concerning the financial terms of the proposed Merger, subject to the
completion of the ongoing due diligence investigations being conducted by each
party with respect to the other, the favorable resolution of certain other
remaining issues and the approval of all such terms and conditions by the SCC
Board and the Finance Committee of the RLR Board.
As discussed in more detail below, these terms generally provide for the
stockholders of SCC to receive in exchange for each share of SCC Common Stock a
fraction of a share of RLR Common Stock having a value of $47.00 (based on the
value of a share of RLR Common Stock being equal to the Exchange Price), as
long as the Exchange Price is equal to or greater than $52.65 and not greater
than $60.65. See "The Merger--General." This range was established with
reference to the twenty day moving average of the closing price of the RLR
Common Stock on the NYSE, which was $56.65 as of February 14, 1997, the last
full trading day prior to the February 17 negotiating session. The closing
prices of the RLR Common Stock and the SCC Common Stock on the NYSE on February
14, 1997 were $59.125 and $37.125, respectively. The parties agreed to the
principle of a
27
<PAGE>
symmetrical collar, and the range was expanded by $4.00 (or approximately 7%)
above and below the mid-point. A second collar was created above the fixed-
value range to enable the SCC stockholders to share in any appreciation in the
RLR Common Stock above $60.65 to a maximum of $64.30, and a third collar was
created to provide some level of protection to RLR in the event that the value
of the RLR Common Stock dropped below $52.65 to a floor of $49.00. Following
the agreed upon principle of symmetry, the collars above and below the fixed-
value range each extend for $3.65.
Before concluding the February 17 negotiating session, the parties also
reached a tentative agreement concerning the calculation and amount of any
potential termination fee and the circumstances under which such a termination
fee would be paid. Provided RLR was not in material breach of the Merger
Agreement, the parties tentatively agreed to a termination fee of $8 million
payable to RLR if the Merger Agreement is terminated because SCC entered into
a definitive agreement for an alternative Acquisition Transaction (as defined
in the Merger Agreement) or the SCC Board does not recommend that the SCC
stockholders vote in favor of the Merger. The parties also reached mutually
satisfactory resolutions to the remaining issues as reflected in the Merger
Agreement. See "The Merger."
The remaining issues concerning several technical aspects of the Merger
Agreement were discussed between, and tentatively resolved by, the parties'
respective legal advisors the next afternoon, Tuesday, February 18, during a
conference telephone call that had been scheduled at the conclusion of the
meeting held in Hartford.
SCC conducted its own due diligence investigation of RLR on Tuesday and
Wednesday, February 18 and 19, and representatives of both parties continued
to negotiate the definitive terms of the Merger Agreement throughout the week.
At a meeting of the SCC Board held on Thursday, February 20, 1997, SCC
senior management and Merrill Lynch presented an analysis of the proposed
Merger. At this meeting, SCC senior management also presented an overview of
SCC's financial condition, results of operations and future challenges and
opportunities of continuing on a stand-alone basis. SCC senior management also
reported to the SCC Board the results of their due diligence investigation of
RLR. Outside legal counsel to SCC advised the SCC Board with respect to the
fiduciary duties applicable to the consideration of a strategic business
combination transaction. The SCC Board did not take any definitive actions
with respect to the Merger at this meeting.
The closing sale prices per share of the RLR Common Stock and the SCC Common
Stock as reported on the NYSE Composite Tape on Friday, February 21, were
$59.25 and $37.50, respectively.
The SCC Board met on Sunday, February 23, 1997, to further consider the
Merger. After reviewing the findings of SCC's senior management concerning
their financial due diligence investigations of RLR, reviewing the terms of
the Merger Agreement with senior management, outside legal counsel and Merrill
Lynch, and considering the fairness opinion of Merrill Lynch (see "Opinions of
Merrill Lynch, Pierce, Fenner & Smith Incorporated"), the SCC Board determined
that the Merger was fair to, and in the best interests of, SCC and its
stockholders and unanimously voted to approve and adopt the Merger Agreement
and the Merger. The Merger Agreement was executed later that day. See
"Recommendation of the Boards of Directors and Reasons for the Merger."
Certain directors and officers of SCC have interests in the Merger different
from the interests of other SCC stockholders. See "The Merger--Interests of
Certain Persons in the Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS
AND REASONS FOR THE MERGER
The SCC Board believes that the terms of the Merger are fair to, and in the
best interests of, SCC and its stockholders. ACCORDINGLY, THE SCC BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SCC COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT AND THE MERGER. The SCC Board has retained the right,
under certain circumstances, to withdraw, modify or amend the foregoing
recommendation of the SCC Board. See "The Merger--No Solicitation of
Acquisition Transactions."
28
<PAGE>
The SCC Board believes that the Merger will permit the stockholders of SCC to
participate in a financially stronger, better diversified, cost efficient and
more competitive combined company through a tax-free reorganization, with taxes
incurred only upon the ultimate sale of the shares of RLR Common Stock to be
received in the Merger. See "The Merger--Federal Income Tax Consequences."
The SCC Board believes that the Merger will produce significant synergies and
cost savings of the combined company aggregating approximately $7 million per
year resulting from employee salary and benefit reductions, elimination of fees
to third party investment portfolio managers, removal of duplicative holding
company costs, and reduction of other miscellaneous costs (although there can
be no assurance that such cost savings will be realized). The SCC Board also
believes that a business combination of SCC and RLR represents a strong
strategic fit and creates numerous strategic benefits including:
diversification of SCC's and RLR's respective businesses; providing a more
attractive array of insurance products to a larger sales force through more
channels of distribution; the potential for a merger of the New York insurance
subsidiaries of SCC and RLR to obtain critical mass and efficiencies in the New
York market; and cost reductions through the elimination of duplicative support
services and functions and the elimination of redundant facilities.
In deciding to pursue a strategic business combination transaction with RLR
instead of remaining independent, the SCC Board evaluated with SCC senior
management their plans for the conduct of SCC's businesses on a stand-alone
basis. The analysis included a review of the historical financial condition and
results of operations of SCC and its subsidiaries, the profitability of various
lines of business, the current competitive environment in the life insurance
industry, the significant changes required to be implemented to achieve
satisfactory profitability and the achievability of strategic goals. Merrill
Lynch reviewed with the SCC Board analyses conducted as of such dates under
various valuation methodologies respecting the value of SCC.
At its meeting on February 20, 1997, the SCC Board considered a report from
SCC senior management concerning its management and financial due diligence
review of RLR. The SCC Board then reviewed in detail the proposed terms of the
Merger Agreement with senior management and its financial and legal advisors.
Merrill Lynch answered questions from the SCC Board concerning Merrill Lynch's
analysis of the financial terms of the Merger. SCC had selected Merrill Lynch
to act as SCC's financial adviser and render a fairness opinion based on
Merrill Lynch's expertise and its familiarity with SCC, having provided
investment banking services to SCC since 1994.
On February 23, 1997, the SCC Board again discussed the proposed terms of the
Merger Agreement with senior management and its financial and legal advisors.
Merrill Lynch then opined that the consideration to be received in the Merger
is fair to the stockholders of SCC from a financial point of view (see
"Opinions of Merrill Lynch, Pierce, Fenner & Smith Incorporated"). After
deliberating with respect to the Merger and the other transactions contemplated
by the Merger Agreement, considering, among other things, the matters discussed
herein and the opinion and presentation of Merrill Lynch, the SCC Board
unanimously determined the Merger to be advisable and in the best interests of
SCC and its stockholders and approved the Merger Agreement and the transactions
contemplated thereby. Merrill Lynch has subsequently delivered to the SCC Board
an updated opinion, dated the date of this Proxy Statement/Prospectus, to the
same effect as the opinion dated as of February 23, 1997.
In reaching its decision to approve and adopt the Merger Agreement on
February 23, 1997, the SCC Board consulted with SCC senior management and
financial and legal advisors and considered many factors, including, but not
limited to, those listed above and the following:
(i) historical information on both a line of business and company-wide
basis regarding the financial condition, capital levels, asset quality,
cash flow, operations, earnings, businesses and prospects of SCC, and the
recent and historic trading value and average trading volume of the SCC
Common Stock;
(ii) the financial analyses and pro forma and other information with
respect to SCC and RLR presented by SCC management and Merrill Lynch, as
well as the SCC Board's own knowledge of SCC and its businesses;
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(iii) the current economic and competitive operating environment,
including but not limited to greater public and regulatory concerns about
the financial stability of insurance companies, increased customer
sensitivity to ratings, intense competition in the traditional individual
life insurance lines of business, and the belief that the combined company
will be able to compete more effectively in the rapidly changing
marketplace for insurance products and to take advantage of opportunities
for growth and diversification that would not be available to SCC on its
own;
(iv) the potential effect on shareholder value of SCC continuing as an
independent entity compared to the effect of its combining with RLR in
light of the factors summarized herein with respect to the financial
condition and prospects of SCC in the current economic environment,
including (A) the exposure of a smaller and less diversified independent
entity to adverse external developments (including risks arising in
connection with general industry conditions, general economic conditions
and general financial market conditions) and (B) the recent downgrades of
SCC's financial strength rating issued by Moody's Investors Services, Inc.
and SCC's claims paying ability issued by A.M. Best Company;
(v) SCC had been unable to negotiate successfully any definitive
strategic alliance transactions with other insurance companies, despite
having systematically reviewed the relevant statistical data of more than
100 insurers and having initiated preliminary discussions with
approximately fifteen such insurers;
(vi) the stockholders of SCC would have an opportunity to participate in
the combined company in the Merger which was expected to have a greater
potential for profits and growth and future increase in stockholder value
than SCC could have alone. Except as set forth above with respect to the
potential synergies and cost savings that reasonably could be expected to
be achieved by the combined company (which the senior management of SCC
estimates will aggregate approximately $7 million per year), the SCC Board
did not consider it practicable to, nor did it attempt to, quantify all of
the benefits that reasonably could be expected to be realized by the
stockholders of SCC as a result of their continuing interest in the
combined company. Nonetheless, the SCC Board considered that there would be
a number of such benefits, including but not limited to (A) the financial
and managerial strength of the combined company and its consequent enhanced
ability to realize the potential of the businesses contributed by SCC, (B)
the potential for growth in the businesses of the combined company as a
result of the possibility of cross-marketing products of each company to
the policyholder base of the other, (C) the business synergies that might
be realized, and the consequent expense savings, cost reductions and
operating efficiencies, (D) the opportunity to diversify earnings, and (E)
the potential effect of the Merger on the perception by the ratings
agencies of the businesses of the combined company. The SCC Board
considered that as a result of the foregoing factors, the Merger was
expected to position the SCC businesses to better realize their potential
and thus to enhance their growth prospects, while at the same time
diversifying the operations of the combined company. The SCC Board also
considered that because of their continuing interest in the combined
company, the stockholders of SCC would be able to share in and benefit from
such growth and diversification.
(vii) the consideration to be received by SCC stockholders in the Merger
and the fact that the market value of the RLR Common Stock to be issued in
exchange for each share of SCC Common Stock represents a significant
premium over the recent trading price of the SCC Common Stock, as well as a
substantial investment return for those SCC stockholders who acquired their
shares of SCC Common Stock in the initial public offering of the SCC Common
Stock consummated on February 2, 1994 (assuming the per share value of the
Merger Consideration equals $47.00 per share, the Merger Consideration
represents a premium of 27.5% in comparison to the closing market price of
the SCC Common Stock on February 18, 1997, a premium of 23.9% in comparison
to the 30 day average closing market price of the SCC Common Stock as of
February 18, 1997, and a premium of 31.9% in comparison to the highest
closing market price of the SCC Common Stock for all of 1996; it also
represents a compound annual rate of return of 28.8% for those SCC
stockholders who acquired their shares of SCC Common Stock in the initial
public offering of such shares consummated on February 2, 1994);
(viii) the value at the Effective Time of the shares of RLR Common Stock
to be received in the Merger for each share of SCC Common Stock is fixed at
$47.00 (based on the average of the per share closing sale
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prices of the RLR Common Stock on the NYSE Composite Tape for the twenty
trading days immediately preceding the date on which all conditions
precedent to the Merger have been satisfied or waived), provided the
Exchange Price is equal to or greater than $52.65 and not greater than
$60.65, and the fact that (A) such value has the potential to increase to
as much as $49.83 in the event that the Exchange Price increases from
$60.65 to $64.30 (and to increase even more in the event that the Exchange
Price exceeds $64.30 and RLR does not affirmatively elect to designate an
Exchange Ratio having a value of no more than $49.83) and (B) such value
has the potential to decrease to as little as $43.74 in the event that the
Exchange Price decreases from $52.65 to $49.00 (but cannot fall below
$43.74 without affording SCC the right to terminate the Merger Agreement
and abandon the Merger);
(ix) the presentations made by Merrill Lynch, the opinion of Merrill
Lynch that the consideration to be received in the Merger is fair, from a
financial point of view, to the holders of SCC Common Stock, and the fact
that the Merrill Lynch opinion may not be applicable to the proposed Merger
in the event that the Exchange Price falls below $49.00 (see "Opinions of
Merrill Lynch, Pierce, Fenner & Smith Incorporated");
(x) historical information on both a line of business and company-wide
basis regarding the financial condition, capital levels, asset quality,
cash flow, operations, earnings, and the businesses and prospects of RLR,
the recent and historic trading value and average trading volume of RLR
Common Stock, and presentations by SCC senior management concerning its
financial and management due diligence review of RLR;
(xi) the strategic fit of the SCC and RLR businesses, the compatible
operating philosophies of the two companies and the synergies and potential
operating efficiencies discussed above which could result from combining
SCC and RLR;
(xii) the SCC Board's review with its legal and financial advisors of the
provisions of the Merger Agreement, including the provisions in the Merger
Agreement that would permit the SCC Board, in the exercise of its fiduciary
duties (after receiving the advice of outside legal counsel), to supply
information to, and cooperate and negotiate a superior Acquisition
Transaction with, third parties following the execution of the Merger
Agreement, and to withdraw or modify its recommendation in favor of the
Merger, upon the payment of an $8 million termination fee (plus up to $2.5
million in expense reimbursement), and the fact that such termination fee
represents only approximately 1.6% of the aggregate value of the proposed
Merger (including the assumption of approximately $75 million of debt) and
would not be likely to deter any third party from making or proposing a
superior Acquisition Transaction (see "The Merger--No Solicitation of
Acquisition Transactions");
(xiii) the expectation that the Merger would be tax free for federal
income tax purposes to SCC and its stockholders (other than in respect of
any cash paid as partial consideration or in lieu of fractional shares) and
would be accounted for under the purchase method of accounting;
(xiv) the various differences between the rights and preferences of the
holders of shares of SCC Common Stock and the holders of RLR Common Stock,
as discussed below under "Comparative Rights of Shareholders of SCC and
RLR;"
(xv) that the Merger is conditioned upon approval by the holders of more
than a majority of the outstanding shares of SCC Common Stock;
(xvi) the interests of certain officers and directors of SCC in the
Merger, including the matters described below under "The Merger--Interests
of Certain Persons in the Merger," and the fact that such officers and
directors have interests in the Merger that are different from the
interests of other SCC stockholders; and
(xvii) the advice of legal counsel that it reasonably could be expected
that the necessary regulatory approvals for the Merger would be obtained.
The foregoing discussion of the information and factors considered by the SCC
Board is not intended to be exhaustive, but is believed to include all of the
material factors considered by the SCC Board in connection with
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its evaluation of the Merger. In view of the wide variety of factors
considered and the complexity of such matters and except as set forth above
with respect to the potential synergies and cost savings that reasonably could
be expected to be achieved by the combined company (which the senior
management of SCC has estimated will aggregate approximately $7 million per
year), the SCC Board did not attempt to quantify, rank or otherwise assign
relative weights to the specific factors it considered in reaching its
decision. In addition, the SCC Board did not undertake to make any specific
determination as to whether any particular factor (or any aspect of any
particular factor) was favorable or unfavorable to its ultimate determination
but, rather, conducted a wide ranging discussion of the factors described
above, including asking questions of SCC's management and its legal and
financial advisors, following which the SCC Board reached a general consensus
that the Merger was in the best interests of SCC and its stockholders.
Individual members of the SCC Board may have felt differently about, and may
have given different weight to, different factors.
On balance, however, the discussions among the members of the SCC Board
evidenced the general view that, except as described below, the factors
enumerated above were regarded as supporting the SCC Board's determination to
approve the Merger and the Merger Agreement. The factors set forth in
paragraphs (i), (ii), (x), (xiv) and (xvi) were part of the general mix of
information considered by the SCC Board and were not necessarily regarded as
favorable or unfavorable. The factor set forth in paragraph (viii) was
generally regarded favorably by the SCC Board. Given the fact that the closing
price of the RLR Common Stock on February 21, 1997 (the last trading day prior
to the SCC's Board approval of the Merger Agreement) was $59.25, the SCC Board
believed the potential increase in value that would result in the event that
the Exchange Price were to increase above $60.65 outweighed the potential
decrease in value that would result in the event that the Exchange Price were
to decrease below $52.65. Finally, the factor set forth in paragraph (ix) was
regarded as highly favorable notwithstanding the fact that the SCC Board has
been advised that the Merrill Lynch fairness opinion may not be applicable to
the proposed Merger (without being reaffirmed in writing) in the event that
the Exchange Price falls below $49.00 and RLR does not elect to designate the
Exchange Ratio intended to maintain the imputed value of the transaction at
$43.74 because, in such event, the SCC Board would desire to receive
additional advice and counsel from Merrill Lynch with respect to the then-
current financial terms and conditions of the Merger and would not intend to
proceed with the Merger unless the then-current financial terms and conditions
were considered fair, from a financial point of view, to the SCC stockholders.
The SCC Board is unanimous in its recommendation to the stockholders of SCC
that the Merger be approved.
THE BOARD OF DIRECTORS OF SCC HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE MERGER AS BEING IN THE BEST INTERESTS OF STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER.
OPINIONS OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
GENERAL
Merrill Lynch has rendered written opinions to the SCC Board that, as of the
date of the Merger Agreement and as of the date of this Proxy
Statement/Prospectus, respectively, the consideration to be received in the
Merger is fair, from a financial point of view, to the holders of the SCC
Common Stock. THE FULL TEXT OF MERRILL LYNCH'S OPINION DATED THE DATE OF THIS
PROXY STATEMENT/PROSPECTUS IS ATTACHED HERETO AS EXHIBIT B. THE STOCKHOLDERS
OF SCC ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS
AND LIMITATIONS ON THE REVIEW UNDERTAKEN, BY MERRILL LYNCH IN CONNECTION
THEREWITH. IN CONSIDERING THE MERRILL LYNCH OPINIONS, STOCKHOLDERS MAY WANT TO
TAKE INTO ACCOUNT MERRILL LYNCH'S FEE ARRANGEMENTS WITH SCC WITH RESPECT TO
THE MERGER, UNDER WHICH MERRILL LYNCH'S FEES ARE SUBSTANTIALLY GREATER IF THE
MERGER IS CONSUMMATED. SEE "--FEES PAYABLE TO MERRILL LYNCH" BELOW.
Merrill Lynch is a globally recognized investment banking firm and, as part
of its investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers
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and acquisitions, underwritings, distributions of securities and similar
activities. Merrill Lynch was selected by the SCC Board on the basis of its
experience, expertise and familiarity with SCC, SCC's business and the life
insurance and annuity industries.
Merrill Lynch was engaged by the SCC Board as an independent contractor to
provide general financial advisory and investment banking services with
respect to the consideration of SCC's strategic alternatives, including the
Merger. In such role, Merrill Lynch participated on behalf of SCC in various
negotiations with RLR and a limited number of other potentially interested
parties. However, Merrill Lynch was not authorized by SCC or the SCC Board to
broadly solicit, nor did it broadly solicit, third-party indications of
interest for the acquisition of all or any part of SCC. Except for the
foregoing, no limitations were placed on Merrill Lynch by SCC with respect to
the investigation made or the procedures followed by Merrill Lynch in
preparing and rendering its opinions.
The opinions of Merrill Lynch, as set forth therein, relate only to the
relative values of SCC and RLR. Merrill Lynch did not express any opinion as
to what value the RLR Common Stock will have when it is issued pursuant to the
Merger or as to the price the RLR Common Stock will trade at subsequent to the
Merger. The opinions of Merrill Lynch do not address the merits of the
underlying decision by SCC to engage in the Merger and do not constitute a
recommendation to any SCC stockholder as to how such stockholder should vote
on the proposed Merger.
The opinions of Merrill Lynch are necessarily based on information
available, and financial, stock market, economic and other conditions and
circumstances as they existed and could be evaluated, as of the respective
dates of the opinions. Although subsequent developments may affect the
opinions, Merrill Lynch does not have any obligation to update, revise or
reaffirm the opinions.
Merrill Lynch will receive a fee from SCC for its services, substantially
all of which is contingent upon consummation of the Merger. See "--Fees
Payable to Merrill Lynch" below. In addition, SCC has agreed to indemnify
Merrill Lynch for certain liabilities arising out of its engagement. Merrill
Lynch has within the past two years provided certain financial advisory,
investment banking and other services to SCC and RLR, for which it received
customary compensation, including representing each of SCC and RLR in
connection with strategic advisory matters and acting as underwriter in
connection with various financing transactions. Merrill Lynch is currently on
retainer with RLR to provide financial advisory services unrelated to the
Merger. In addition, Merrill Lynch has advised SCC that, in the ordinary
course of its securities business, it may actively trade debt and/or equity
securities of SCC and RLR and their respective affiliates for its own account
and the accounts of its customers. Accordingly, Merrill Lynch from time-to-
time may hold a long or short position in such securities.
MATERIALS AND INFORMATION CONSIDERED WITH RESPECT TO THE MERGER
In connection with its opinions, Merrill Lynch, among other things: (i)
reviewed certain publicly available business and financial information
relating to SCC and RLR which Merrill Lynch deemed to be relevant; (ii)
reviewed certain information, including financial forecasts, relating to the
business, earnings, assets, equity and prospects of SCC and RLR, as well as
the amount and timing of the cost savings and related expenses expected to
result from the Merger ((i.e., the $7 million of expected savings discussed
above) the "Expected Synergies") furnished to Merrill Lynch by SCC and RLR;
(iii) conducted discussions with members of senior management of SCC and RLR
concerning their respective businesses and prospects before and after giving
effect to the Merger and the Expected Synergies; (iv) reviewed the historical
market prices and valuation multiples for the SCC Common Stock and the RLR
Common Stock and compared them with those of certain publicly-traded companies
which Merrill Lynch deemed to be relevant; (v) reviewed the results of
operations of SCC and RLR and compared them with those of certain companies
which Merrill Lynch deemed to be relevant; (vi) compared the proposed
financial terms of the Merger with the financial terms of certain other
transactions which Merrill Lynch deemed to be relevant; (vii) reviewed the
potential pro forma impact of the Merger; (viii) reviewed the draft Merger
Agreement dated February 18, 1997; and (xi) reviewed such other financial
studies and analyses and took into account such other matters as Merrill Lynch
deemed necessary, including its assessment of general economic, market and
monetary conditions.
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In preparing its opinions, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it
or publicly available, and Merrill Lynch did not assume any responsibility for
independently verifying such information or undertake an independent
evaluation or appraisal of any of the assets or liabilities of SCC or RLR. In
addition, Merrill Lynch relied on an actuarial appraisal of the SCC Insurance
Subsidiaries (the "Actuarial Appraisal") prepared by Milliman & Robertson,
Inc. The Actuarial Appraisal was performed as of June 30, 1996 and was
prepared in connection with the ordinary business operations of SCC and not
for the purposes of facilitating an analysis of the financial terms and
conditions of the Merger. Nonetheless, because the Actuarial Appraisal became
available at about the time Merrill Lynch was performing its analysis of the
financial terms and conditions of the Merger, the Actuarial Appraisal was made
available to Merrill Lynch.
With respect to the Actuarial Appraisal, Merrill Lynch assumed that it was
reasonably prepared on a basis reflecting the best available estimates and
judgments of the management of SCC as to the future operating and financial
performance of the SCC Insurance Subsidiaries as of January 24, 1997, and the
best judgment of the consulting actuarial firm as to the proper analysis to be
applied based on the assumptions provided to it by the management of SCC as to
the future operating and financial performance of the SCC Insurance
Subsidiaries. Merrill Lynch also assumed that there had been no material
changes to the business of SCC since such date that would materially affect
such actuarial analysis. In addition, Merrill Lynch did not conduct any
physical inspection of the properties or facilities of SCC or RLR. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with Merrill Lynch by SCC and RLR, Merrill Lynch
assumed that they had been reasonably prepared and reflected the best
currently available estimates and judgment of the managements of SCC or RLR as
to the expected future financial performance of SCC or RLR, as the case may
be, and the Expected Synergies. Merrill Lynch further assumed that the Merger
will qualify as a tax-free reorganization for U.S. federal income tax purposes
and that the final form of the Merger Agreement is substantially similar to
the last draft reviewed by them.
Set forth below is a brief summary setting forth the material analyses
presented by Merrill Lynch to the SCC Board in connection with its written
opinion as to the fairness, from a financial point of view, of the
consideration to be received by holders of SCC Common Stock on the date the
SCC Board approved the Merger Agreement. Unless otherwise specified, all
ratios and other financial information described below are based on financial
data as of or for the 12 months ended December 31, 1996. The procedures
followed, assumptions made, matters considered, and qualifications and
limitations on the review undertaken contained in the opinion dated the date
of the Merger Agreement are substantially the same as, and not materially
different from, those contained in the opinion dated the date of this Proxy
Statement/Prospectus and attached as Exhibit B.
Transaction Overview. Merrill Lynch presented a brief summary of the pricing
structure and the transaction pricing multiples resulting therefrom assuming
the Merger is consummated based on an Exchange Price that is within the fixed
price range of the negotiated pricing formula set forth in the Merger
Agreement. Assuming the Exchange Price is equal to or greater than $52.65 and
not greater than $60.65, the imputed value of the Merger to the holders of SCC
Common Stock is $47.00 per share of SCC Common Stock. Merrill Lynch calculated
that, within this range, the transaction results in an aggregate equity value
of approximately $411.0 million (based on fully diluted shares outstanding
with options valued using the treasury method at a $47.00 per share offer
price) and an aggregate enterprise value of approximately $486.0 million
(giving effect to the assumption of $75 million of debt). Based on the
foregoing, Merrill Lynch calculated the aggregate equity transaction valuation
as a multiple of Pre-FAS 115 SCC stockholders' equity at December 31, 1996 and
as a multiple of 1996 operating earnings and the estimated operating earnings
for 1997 and 1998. Merrill Lynch calculated these multiples to be 1.19x,
13.43x, 12.53x and 11.55x, respectively.
Merrill Lynch also calculated the premium the merger consideration
represents, based on an assumed $47.00 per share purchase price, when compared
to the SCC Common Stock closing market price on February 18, 1997 (two trading
days prior to the date of the SCC Board meeting at which Merrill Lynch made
its first presentation concerning the financial terms of the Merger), the 30
day average closing market price of the SCC Common Stock as of February 18,
1997, and the highest closing market price of the SCC Common Stock for all of
1996.
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Merrill Lynch calculated the premium to be 27.5% in comparison to the closing
market price of the SCC Common Stock on February 18, 1997, 23.9% in comparison
to the 30 day average closing market price of the SCC Common Stock as of
February 18, 1997, and 31.9% in comparison to the highest closing market price
of the SCC Common Stock for all of 1996. Merrill Lynch also calculated that the
merger consideration represents a compound annual rate of return of 28.8% for
those SCC stockholders who acquired their shares of SCC Common Stock in the
initial public offering of such shares consummated on February 2, 1994.
Merrill Lynch also calculated the imputed value of the merger consideration
assuming the Exchange Price falls outside the fixed price range of the
negotiated pricing formula set forth in the Merger Agreement. If the Exchange
Price is less than $52.65 but equal to or greater than $49.00, the Merger
Agreement provides that the Exchange Ratio shall be fixed at .8927. Within this
range, Merrill Lynch calculated that the imputed value of the merger
consideration would fall from $47.00 at an assumed Exchange Price of $52.65 to
$43.74 at an assumed Exchange Price of $49.00. Conversely, if the Exchange
Price is greater than $60.65 but equal to or less than $64.30, the Merger
Agreement provides that the Exchange Ratio shall be fixed at .7749. Within this
range, Merrill Lynch calculated that the imputed value of the merger
consideration would increase from $47.00 at an assumed Exchange Price of $60.65
to $49.83 at an assumed Exchange Price of $64.30.
Finally, Merrill Lynch calculated the imputed value of the merger
consideration assuming the Exchange Price falls outside the low and high ends
of the fixed ratio collars. The Merger Agreement provides that, if the Exchange
Price is less than $49.00, the Exchange Ratio shall be either .8927 or, if RLR
so elects, a fraction expressed decimally to the fourth decimal place
calculated by dividing $43.74 by the Exchange Price. If the Exchange Price is
less than $49.00 and RLR has not made such election, SCC shall have the right
to terminate the Merger Agreement. Conversely, if the Exchange Price is greater
than $64.30, the Merger Agreement provides that the Exchange Ratio shall be
either .7749 or, if SCC so elects, a fraction expressed decimally to the fourth
decimal place calculated by dividing $49.83 by the Exchange Price. If the
Exchange Price is greater than $64.30 and SCC has not made such election, RLR
shall have the right to terminate the Merger Agreement. At the low and high
ends of the spectrum, Merrill Lynch calculated that the imputed value of the
merger consideration would be fixed at $43.74 and $49.83, respectively,
assuming the requisite elections are made. In the event the requisite elections
are not made, the imputed value of the merger consideration would continue to
diminish as the Exchange Price falls below $49.00 and increase as the Exchange
Price rises above $64.30, assuming in each instance, the party entitled to
terminate the Merger Agreement does not, in fact, exercise its right to do so.
If the Exchange Price falls below $49.00 and the imputed value of the merger
consideration is less than $43.74 because the party entitled to terminate the
Merger Agreement does not exercise its right to do so, the SCC Board intends to
request Merrill Lynch to reaffirm its opinion that the consideration to be
received in the Merger is fair, from a financial point of view, to the SCC
stockholders.
Comparable Company Analysis. Merrill Lynch reviewed and compared the
financial, operating and market performance of the following group of nine
publicly traded life insurance and annuity companies with that of SCC:
Equitable Companies, Equitable of Iowa Companies, Kansas City Life Insurance
Company, Protective Life Insurance Company, Provident Companies, USLife
Corporation, ReliaStar Financial Corporation, SunAmerica Inc. and Western
National Corporation (the "Comparable Companies"). Merrill Lynch selected the
Comparable Companies on the basis of various characteristics, including
primarily the type of life insurance business written by each company, and,
additionally, the size of each company and the historical and expected
financial condition and performance of each company. Merrill Lynch considered
certain financial data of the Comparable Companies, including (i) common stock
prices as of February 18, 1997, (ii) the high and low closing stock prices
during the past 52 weeks, (iii) fully diluted market capitalizations, (iv)
projected 1997 returns on equity, (v) estimated price to earnings multiples for
1996, 1997 and 1998, (vi) price-to-Pre-FAS 115 book value multiples (as
reported in year-end earnings releases), (vii) five year projected growth
rates, and (viii) current dividend yields, and compared such data against
corresponding data relating to SCC. Merrill Lynch applied multiples based on
the multiples of the most relevant Comparable Companies to actual operating
earnings of SCC for 1996, the estimated earnings of SCC for 1997 and the Pre-
FAS 115 book value of SCC as of December 31, 1996 and calculated the Merrill
Lynch Comparable Company Trading Range for SCC. This analysis resulted in (A) a
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comparable company equity valuation reference at "fair public value" ranging
from $300.0 million to $350.0 million and a per share comparable company
valuation reference ranging from $34.50 to $40.25 (assuming 8.69 million fully
diluted shares outstanding); (B) a comparable company equity valuation
reference at a 10 percent premium to "fair public value" ranging from $330.0
million to $385.0 million and a per share comparable company valuation
reference ranging from $37.95 to $44.28 (assuming 8.69 million fully diluted
shares outstanding); (C) a comparable company equity valuation reference at a
20 percent premium to "fair public value" ranging from $360.0 million to $420.0
million and a per share comparable company valuation reference ranging from
$41.40 to $48.30 (assuming 8.69 million fully diluted shares outstanding); and
(D) a comparable company equity valuation reference at a 30 percent premium to
"fair public value" ranging from $390.0 million to $455.0 million and a per
share comparable company valuation reference ranging from $44.85 to $52.33
(assuming 8.69 million fully diluted shares outstanding). This analysis
indicated that the transaction value negotiated by RLR and SCC includes a
significant premium when compared to equity valuations for comparable companies
whose securities are publicly traded. Accordingly, this analysis is supportive
of the opinion that the proposed consideration to be received by the holders of
SCC Common Stock pursuant to the Merger, taken as a whole, is fair to such
stockholders from a financial point of view.
Comparable Transactions Analysis. Merrill Lynch reviewed the value of the
consideration paid in certain acquisition or business combination transactions
in the life insurance industry involving companies having characteristics
deemed to be similar to SCC. Merrill Lynch selected such companies on the basis
of various characteristics, including primarily the type of business of each
company, and, additionally, the historical financial condition and performance
of each company. The transactions included (acquiror/acquiree): American
General Corp./USLife Corp.; Aegon NV/Providian Corporation; American General
Corp./Home Beneficial Corp.; Penn Corp Financial Group Inc./Washington National
Corp.; General Electric Capital Corp./First Colony Corp.; Conseco, Inc./Life
Partners Group; General Electric Capital Corp./Life Insurance Co. of Virginia;
General Electric Capital Corp./Union Fidelity Life Insurance Corp.;
SunAmerica/Ford Life Insurance Co.; American General Corp./Independent
Insurance Group; SunAmerica/CalFarm Life (Zenith National); Jefferson-Pilot/
Alexander Hamilton Life; Conseco, Inc./CCP Insurance Inc.; American General
Corp./Franklin Life Insurance Co.; Torchmark Corp./American Income Life; and
ReliaStar Financial Corp./USLICO Corp. Merrill Lynch calculated and evaluated
statutory accounting based acquisition multiples of transaction value to total
assets; transaction value to adjusted capital and surplus; and transaction
value to operating income. Merrill Lynch also calculated and evaluated
generally accepted accounting based acquisition multiples of transaction value
to total assets; transaction value to total revenue; transaction value to
common equity; and transaction value to net operating income. Merrill Lynch
included the $75 million of assumed debt in these transaction value figures and
multiples as appropriate. Merrill Lynch then applied multiples based on the
multiples of the most relevant comparable transactions to the statutory capital
of SCC, the actual operating earnings of SCC for 1996, and the Pre-FAS 115 GAAP
book value of SCC as of December 31, 1996 and calculated the Merrill Lynch
acquisition comparable range for SCC. This analysis resulted in a comparable
acquisition equity valuation reference ranging from $350.0 million to $425.0
million and a per share acquisition comparable valuation reference ranging from
$40.25 to $48.88 (assuming 8.69 million fully diluted shares outstanding). This
analysis indicated that the transaction value negotiated by RLR and SCC is
greater than the average transaction value negotiated in comparable
transactions involving comparable companies. Accordingly, this analysis is
supportive of the opinion that the proposed consideration to be received by the
holders of SCC Common Stock pursuant to the Merger, taken as a whole, is fair
to such stockholders from a financial point of view.
Adjusted Actuarial Appraisal. Merrill Lynch also analyzed the results of the
Actuarial Appraisal. The Actuarial Appraisal was prepared for the use of SCC's
management in the ordinary course of its business and incorporated certain
agreed upon assumptions that were appropriate for that purpose. Merrill Lynch
analyzed the Actuarial Appraisal and made certain adjustments to the Actuarial
Appraisal it believed were necessary (and beyond the scope of the engagement of
the consulting actuarial firm in preparing the Actuarial Appraisal) to reflect
as of January 24, 1997 the value of SCC, including the SCC Insurance
Subsidiaries, on a consolidated basis. Such adjustments included using a higher
discount rate to reflect the inherent risks associated with projections.
Valuations were then computed using 15%, 13% and 11% discount rates. This
analysis by Merrill
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Lynch resulted in an adjusted actuarial equity valuation reference ranging from
$383.3 million to $421.9 million and a per share adjusted actuarial valuation
reference ranging from $44.08 to $48.52 (assuming 8.69 million fully diluted
shares outstanding). This analysis indicated that the transaction value
negotiated by RLR and SCC is within the reference range of adjusted actuarial
equity valuations. Accordingly, this analysis is supportive of the opinion that
the proposed consideration to be received by the holders of SCC Common Stock
pursuant to the Merger, taken as a whole, is fair to such stockholders from a
financial point of view.
Overall Merrill Lynch Relevant Range. Finally, Merrill Lynch analyzed the per
share reference ranges for SCC Common Stock derived from the comparable company
analysis, the comparable transactions analysis and the adjusted actuarial
appraisal analysis in order to derive an overall Merrill Lynch relevant range
of $360.0 million to $420.0 million and a per share range of $41.40 to $48.30
(assuming 8.69 million fully diluted shares outstanding).
WRITTEN OPINION FOR PROXY STATEMENT/PROSPECTUS
In connection with its written opinion dated as of the date of this Proxy
Statement/Prospectus, Merrill Lynch confirmed the appropriateness of its
reliance on the analyses used to render its February 23, 1997 opinion by
performing procedures to update certain of such analyses and by reviewing the
assumptions on which such analyses were based and the factors considered in
connection therewith.
LIMITATIONS ON OPINIONS
The information above summarizes the material analyses prepared by Merrill
Lynch in connection with its opinions. This summary does not purport to be a
complete description of the analyses performed by Merrill Lynch in connection
with the rendering of its fairness opinions. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. Merrill Lynch believes that its analyses and the summary set forth
above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or selecting part or all of the
above summary, without considering all factors and analyses, would create an
incomplete view of the process underlying the analyses set forth in the Merrill
Lynch presentations and opinions. With respect to the comparable company
analysis and comparable transactions analysis summarized above, no public
company utilized as a comparison is identical to SCC and such analyses involve
complex considerations and judgments concerning differences in financial and
operating characteristics of the Comparable Companies and other factors that
could affect the acquisition or public trading value of the Comparable
Companies. The range in calculations resulting from any particular analyses
described above should not be taken to be Merrill Lynch's view of the actual
value of SCC, which may be significantly more or less favorable than as set
forth therein. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was given more weight
than any other analyses.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of SCC or RLR. Such
analyses were prepared solely as part of Merrill Lynch's analysis of the
fairness of the consideration in the Merger, from a financial point of view, to
the stockholders of SCC and were provided to the SCC Board in connection with
the delivery of Merrill Lynch's opinions. Because any estimates contained in
the analyses performed by Merrill Lynch are inherently subject to uncertainty,
the opinions of Merrill Lynch clearly set forth the assumptions Merrill Lynch
relied upon in making such estimates. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold
or the prices at which any securities may be traded in the future.
The projections reviewed by Merrill Lynch were prepared by the senior
managements of SCC and RLR. Neither SCC nor RLR publicly discloses internal
management projections of the type provided to the SCC Board and to Merrill
Lynch in connection with their review of the Merger. Such projections were not
prepared with a view towards public disclosure. The projections were based on
numerous variables and assumptions which are
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inherently uncertain, including, without limitation, factors related to
general economic and competitive conditions. Accordingly, actual results could
vary significantly from those set forth in such projections.
As described above, Merrill Lynch's opinions and presentation to the SCC
Board is just one of the many factors taken into consideration by the SCC
Board.
FEES PAYABLE TO MERRILL LYNCH
SCC's engagement of Merrill Lynch provides for (i) a fee of $50,000 paid
upon execution of the Merrill Lynch engagement letter and on the date of the
first anniversary thereof, and (ii) an additional transaction fee equal to (A)
.80% of the per share merger consideration up to $35.99, (B) .85% of the per
share merger consideration between $36.00 and $40.00, and (C) an additional
2.50% of the per share merger consideration in excess of $40.00, subject to a
minimum of $2,000,000, contingent and payable upon consummation of the Merger.
Based upon an assumed value of the merger consideration equal to $47.00 per
share and an assumed aggregate valuation of approximately $411 million,
Merrill Lynch's fee payable upon consummation of the Merger would be
approximately $4.4 million. SCC has also agreed to reimburse Merrill Lynch for
its reasonable out-of-pocket expenses, including reasonable attorneys' fees
and disbursements not to exceed $20,000 without the prior approval of SCC, and
to indemnify Merrill Lynch against certain liabilities, including certain
liabilities under the federal securities laws.
Merrill Lynch has been engaged from time-to-time to underwrite debt and
equity securities of SCC and to provide other financial advisory services to
SCC, including having acted as financial advisor in connection with and having
participated in the creation of the SCC Rights Plan. All such relationships
with SCC have been in the ordinary course of business of Merrill Lynch, and
fees paid in connection therewith were negotiated on an arm's-length basis.
Merrill Lynch also has been engaged from time-to-time to underwrite debt and
equity securities of RLR, including recently having been engaged to act as
managing underwriter for a proposed offering of preferred securities to be
issued by RLR, and to provide other financial services to RLR, including the
issuance of a fairness opinion in connection with RLR's demutualization in
1988. A portion of the proceeds of RLR's proposed preferred securities
offering may be used by RLR to purchase up to $100,000,000 of RLR Common Stock
after the Merger has been consummated, although RLR is not obligated to do so.
There can be no assurance that the proposed preferred securities offering or
the repurchase of RLR Common Stock will occur. All such relationships with RLR
have been in the ordinary course of business of Merrill Lynch, and fees paid
in connection therewith were negotiated on an arm's-length basis.
THE MERGER
Set forth below is a summary of the material terms of the Merger Agreement,
a complete copy of which is attached as Exhibit A to this Proxy
Statement/Prospectus. All stockholders are urged to read the Merger Agreement
in its entirety.
GENERAL
In accordance with the terms of the Merger Agreement, upon consummation of
the Merger, each share of SCC Common Stock outstanding at the Effective Time
will be converted, without any action on the part of the holder thereof, into
the right to receive a fraction (equal to the Exchange Ratio) of a share of
RLR Common Stock. Cash will be paid in lieu of the issuance of fractional
shares of RLR Common Stock. The Exchange Ratio will be determined based upon
the Exchange Price as illustrated below. The Exchange Price is the average of
the per share closing sale prices of RLR Common Stock on the NYSE Composite
Tape for the twenty trading days immediately preceding the Approval Date. The
Approval Date is the date when all conditions precedent to the Merger have
been satisfied or waived and is expected to be five days prior to the
Effective Time.
If the Exchange Price is:
(i) equal to or greater than $52.65 but not greater than $60.65, the
Exchange Ratio shall be calculated by dividing $47.00 by the Exchange Price
(rounded to the fourth decimal place);
(ii) greater than $60.65 but equal to or less than $64.30, the Exchange
Ratio shall be .7749;
(iii) less than $52.65 but equal to or greater than $49.00, the Exchange
Ratio shall be .8927;
(iv) less than $49.00, the Exchange Ratio shall be either (A) .8927 or
(B) if RLR shall so designate, the quotient (rounded to the fourth decimal
place) obtained by dividing $43.74 by the Exchange Price; and
(v) greater than $64.30, the Exchange Ratio shall be either (A) .7749 or
(B) if SCC shall so designate, the quotient (rounded to the fourth decimal
place) obtained by dividing $49.83 by the Exchange Price.
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As a result of the foregoing, if the Exchange Price is equal to or greater
than $52.65 but not greater than $60.65, each share of SCC Common Stock would
be converted into and exchanged for a fraction of a share of RLR Common Stock
having a value of $47.00. If the Exchange Price is greater than $60.65 but
equal to or less than $64.30, each share of SCC Common Stock would be converted
into and exchanged for a fraction of a share of RLR Common Stock having a value
ranging between $47.01 and $49.83. If the Exchange Price is less than $52.65
but equal to or greater than $49.00, each share of SCC Common Stock would be
converted into and exchanged for a fraction of a share of RLR Common Stock
having a value ranging between $46.99 and $43.74. If the Exchange Price is less
than $49.00, each share of SCC Common Stock would be converted into and
exchanged for a fraction of a share of RLR Common Stock having a value less
than $43.74 per share, provided, however, that SCC would have the right to
terminate the Merger Agreement if RLR fails to designate an Exchange Ratio that
would result in each share of SCC Common Stock being converted into and
exchanged for a fraction of a share of RLR Common Stock having a value of
$43.74. Finally, if the Exchange Price is greater than $64.30, each share of
SCC Common Stock would be converted into and exchanged for a fraction of a
share of RLR Common Stock having a value in excess of $49.83 per share,
provided, however, that RLR would have the right to terminate the Merger
Agreement if SCC fails to designate an Exchange Ratio which would result in
each share of SCC Common Stock being converted into and exchanged for a
fraction of a share of RLR Common Stock having a value of $49.83.
In each instance, the value of the fraction of a share of RLR Common Stock
disclosed above assumes that the value of such RLR share is equal to the
Exchange Price. The market price of a share of RLR Common Stock at the
Effective Time could be greater or less than the Exchange Price.
EFFECTIVE TIME AND EFFECT OF THE MERGER
If the Merger Agreement and the Merger are approved and adopted by the
requisite vote of the SCC stockholders and all other conditions to the
obligations of the parties to consummate the Merger are satisfied or waived,
the Merger will become effective upon the appropriate filing of a Certificate
of Merger with the Delaware Secretary of State. The Effective Time is expected
to occur by the end of June 1997. As of the Effective Time, SCC will be merged
with and into RLR and RLR, as the surviving corporation, will possess SCC's
assets and will be responsible for SCC's liabilities, including the SCC
Debentures. The separate corporate existence of SCC will terminate upon
consummation of the Merger, and pursuant to the Merger Agreement and Delaware
Law each then-outstanding share of SCC Common Stock will be converted
automatically into a fraction of a share of RLR Common Stock equal to the
Exchange Ratio. Thereafter, holders of certificates formerly representing
outstanding shares of SCC Common Stock at the Effective Time will be entitled
to surrender these certificates to Norwest Bank Minnesota, National
Association, RLR's stock transfer agent, who will act as the exchange agent for
purposes of exchanging these certificates for certificates representing shares
of RLR Common Stock. The Exchange Ratio is subject to appropriate adjustment to
reflect the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into RLR Common Stock or
SCC Common Stock), exchange of shares, reclassification, reorganization,
recapitalization or other similar change with respect to the RLR Common Stock
or the SCC Common Stock prior to the Effective Time.
EXCHANGE OF SHARES
After the Effective Time, each record holder at the Effective Time of a
certificate or certificates theretofore representing shares of outstanding SCC
Common Stock will be entitled, upon the surrender of the certificate or
certificates to the Exchange Agent, promptly to receive in exchange therefor a
certificate or certificates representing the number of whole shares of RLR
Common Stock into which the shares of SCC Common Stock previously represented
by the certificate or certificates so surrendered shall have been converted
pursuant to the Merger Agreement. From and after the Effective Time, until
surrendered, each certificate previously representing shares of SCC Common
Stock will be deemed for all corporate purposes, other than payment of
dividends, to evidence the ownership of the number of whole shares of RLR
Common Stock into which such shares of SCC Common Stock shall have been
converted. Unless and until any such certificate shall be so surrendered, the
holder of that certificate will not be entitled to receive payment of any
dividends on those shares of RLR
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Common Stock payable to the holder thereof after the Effective Time. Upon the
surrender of a certificate previously representing shares of SCC Common Stock,
the holder thereof will receive a certificate representing the number of whole
shares of RLR Common Stock to which such holder shall be entitled and the
amount of any dividends or other distributions that shall have been payable to
holders of record of RLR Common Stock on or after the Effective Time with
respect to such shares of RLR Common Stock, without interest. Any dividends
payable to holders of record of RLR Common Stock as of any record date prior to
the Effective Time will not be payable to holders of certificates previously
representing SCC Common Stock.
No fractional shares of RLR Common Stock will be issued upon consummation of
the Merger. In lieu thereof, each SCC stockholder who would otherwise be
entitled to a fractional share will be paid an amount of cash, without
interest, equal to the value of such fractional share based upon the Exchange
Ratio.
Detailed instructions and transmittal materials will be mailed to SCC
stockholders following the Effective Time as to the method of exchanging
certificates formerly representing shares of SCC Common Stock for certificates
representing shares of RLR Common Stock. HOLDERS OF CERTIFICATES REPRESENTING
SHARES OF SCC COMMON STOCK SHOULD NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE
UNTIL THEY RECEIVE THE APPROPRIATE TRANSMITTAL MATERIALS.
The stockholders of RLR will continue to hold their shares of capital stock
of RLR without any change in number, designation, terms or rights.
EMPLOYEE BENEFIT PLANS AND STOCK OPTIONS
Under the Merger Agreement, RLR has agreed to assume, except to the extent
provided in the Merger Agreement, all of SCC's employee benefit plans and other
arrangements and has agreed to maintain each such plan or arrangement on
substantially the same terms as in effect at the Effective Time, until replaced
by an RLR employee benefit plan. Except to the extent otherwise provided in the
Merger Agreement, SCC employees will receive full credit for all service with
SCC for purposes of all material employee benefit plans and arrangements. SCC's
executive employees will continue to participate in SCC's current incentive
plans (provided that cash will be paid in lieu of any amounts owed in SCC
Common Stock) through the earlier of December 31, 1997 or until replaced by
RLR's incentive compensation plans. Payments for 1997 under such plans will be
pro-rated based on the portion of the year in which such plan was in place
(subject to review by the RLR Board). In connection with the Merger, RLR has
made no commitments with respect to the continued employment of any employee of
RLR or SCC or, except as expressly provided in the Merger Agreement, the
continuation of any RLR or SCC employee benefit plan or arrangement.
RLR will assume any outstanding option to purchase SCC Common Stock, and such
option will be exercisable upon the same terms and conditions as under the SCC
option plan under which it was granted and the related stock option agreement,
except that each option will be exercisable for the number of shares of RLR
Common Stock as would have been received pursuant to the Merger for the shares
of SCC Common Stock subject to the option had the option been exercisable and
exercised immediately prior to the Effective Time, and the exercise price per
share of such option will be equal to the option price per share under the
option in effect immediately prior to the Effective Time divided by the
Exchange Ratio, rounded up to the nearest full cent. Within 90 days of the
Effective Time, RLR has agreed to file and use all reasonable efforts in
obtaining effectiveness of a registration statement with respect to the shares
issuable upon exercise of these assumed options. For a description of the terms
of the stock option plans of SCC and certain of the SCC options outstanding
thereunder, see note 7 to the consolidated financial statements of SCC included
in the SCC 10-K and Item 11 of the SCC 10-K (which incorporates by reference
certain portions of SCC's definitive Proxy Statement for SCC's 1997 Annual
Meeting of Shareholders), each of which is incorporated herein by reference.
As of February 28, 1997, the aggregate number of shares of SCC Common Stock
subject to outstanding SCC options was 444,924, at exercise prices that ranged
from $19.25 to $36.50 per share, and of which SCC options to purchase 299,083
shares were vested.
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CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of each of RLR and SCC to consummate the Merger are subject
to (a) approval of the stockholders of SCC with respect to the Merger Agreement
and the Merger, (b) the expiration or termination of the waiting period
applicable to the consummation of the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR Act waiting period
terminated on April 7, 1997), (c) the absence of any judicial, governmental,
regulatory or administrative order preventing or making illegal the
consummation of the Merger, (d) the effectiveness of the Registration Statement
(of which this Proxy Statement/Prospectus constitutes a part) and all requisite
post-effective amendments thereto and the absence of any stop-orders suspending
the effectiveness thereof or proceedings initiated or, to the knowledge of the
parties, threatened by the SEC for such purpose, (e) the listing (subject to
official notice of issuance) on the NYSE of the shares of RLR Common Stock
issuable upon consummation of the Merger, (f) the receipt of all consents,
authorizations, orders and approvals of any governmental authority or other
regulatory body (without material conditions) that are required in connection
with the consummation of the Merger and related transactions, the failure of
which to obtain would prevent the consummation of the Merger or would
reasonably be expected to result in a material adverse change in the financial
condition, results of operations or businesses of either SCC on a consolidated
basis or RLR on a consolidated basis, and (g) the receipt of all
authorizations, consents, waivers and approvals from parties to contracts or
other agreements to which either SCC or RLR is a party that are necessary in
connection with the consummation of the Merger and related transactions.
Additional conditions to RLR's obligation to consummate the Merger include
(a) the accuracy, as of the date of the Merger Agreement and the closing date
of the Merger, of the representations and warranties of SCC (except for
inaccuracies that individually or in the aggregate do not constitute a material
adverse change in the financial condition, results of operations or businesses
of SCC on a consolidated basis) and the compliance with and performance of, in
all material respects, all of the terms, covenants and conditions of the Merger
Agreement to be complied with and performed by SCC prior to the consummation of
the Merger, (b) the non-occurrence of any material adverse change in the
financial condition, results of operations or businesses of SCC on a
consolidated basis since the date of the Merger Agreement (except the effect of
any changes in general economic or market conditions, including interest rates,
changes in insurance laws or regulations or events and developments adversely
affecting the life insurance industry generally), (c) the absence of any
dissenters' rights with respect to the Merger by the holders of SCC Common
Stock, (d) the receipt of a written update from DLJ confirming its opinion that
the Exchange Ratio is fair to RLR from a financial point of view, (e) the
receipt of an opinion of Murtha, Cullina, Richter and Pinney, counsel to SCC,
(f) the receipt of a tax opinion of Faegre & Benson LLP, counsel to RLR, in
form and substance reasonably satisfactory to the RLR Board, and (g) the
receipt of a letter from Ernst & Young LLP, with respect to certain financial
information regarding SCC included or incorporated by reference in this Proxy
Statement/Prospectus.
Additional conditions to SCC's obligations to consummate the Merger include
(a) the accuracy, as of the date of the Merger Agreement and the closing date
of the Merger, of the representations and warranties of RLR (except for
inaccuracies that individually or in the aggregate do not constitute a material
adverse change in the financial condition, results of operations or businesses
of RLR on a consolidated basis) and the compliance with and performance of, in
all material respects, all of the terms, covenants and conditions of the Merger
Agreement to be complied with and performed by RLR prior to the consummation of
the Merger, (b) the non-occurrence of any material adverse change in the
financial condition, results of operations or businesses of RLR on a
consolidated basis since the date of the Merger Agreement (except the effect of
any changes in general economic or market conditions, including interest rates,
changes in insurance laws or regulations or events and developments adversely
affecting the life insurance industry generally), (c) the receipt of a written
update from Merrill Lynch confirming its opinion that the consideration taken
as a whole to be received by the stockholders of SCC is fair to the
stockholders of SCC from a financial point of view, (d) the receipt of an
opinion of Richard R. Crowl, Senior Vice President, General Counsel and
Secretary of RLR and of Faegre & Benson LLP, counsel to RLR, (e) the receipt of
a tax opinion of Murtha, Cullina, Richter and Pinney, counsel to SCC, in form
and substance reasonably satisfactory to the SCC Board, and (g) the receipt of
a letter from Deloitte & Touche LLP, with respect to certain financial
information regarding RLR included or incorporated by reference in this Proxy
Statement/Prospectus.
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Under the terms of the Merger Agreement, RLR has no obligation to consummate
the Merger if any condition to its obligation to consummate the Merger is not
satisfied on or prior to the closing date of the Merger and SCC has no
obligation to consummate the Merger if any condition to its obligation to
consummate the Merger is not satisfied on or prior to the closing date of the
Merger. Any of the conditions to the obligation of RLR or SCC to consummate the
Merger may be waived or modified by the party that is, or whose stockholders
are, entitled to the benefits thereof. See "The Merger--Amendment, Terms and
Waiver." Neither RLR nor SCC has any present intention to waive or modify any
condition that it deems material.
Reference is made to Article VI of the Merger Agreement for a complete
statement of the conditions precedent to the obligations of the respective
parties to consummate the Merger.
REPRESENTATIONS, WARRANTIES AND COVENANTS
In the Merger Agreement, RLR and SCC have made various representations,
warranties, covenants and agreements, relating to, among other things, their
respective businesses and financial condition, the accuracy of their various
filings with the SEC, the satisfaction of certain legal requirements for the
Merger and the absence of certain material litigation. The representations and
warranties of each of the parties to the Merger Agreement will expire upon
consummation of the Merger.
AMENDMENT, TERMINATION AND WAIVER
The terms of the Merger Agreement may be amended or supplemented at any time
by written agreement of the RLR Board and the SCC Board, provided that after
the Merger Agreement has been approved and adopted by the stockholders of SCC,
the Merger Agreement may be amended only as may be permitted by Delaware Law.
Any provision of the Merger Agreement may be waived at any time by the party
that is, or whose stockholders are, entitled to the benefits thereof.
Notwithstanding prior approval of the Merger Agreement and the Merger by the
stockholders of SCC, the Merger Agreement may be terminated and the Merger and
other transactions contemplated by the Merger Agreement may be abandoned at any
time prior to the Effective Time (a) by the mutual written consent of the
Boards of Directors of RLR and SCC, (b) by either RLR or SCC, if the Merger
shall not have been consummated on or before September 30, 1997, (c) by either
RLR or SCC, if the Merger Agreement and the Merger shall have been submitted to
a vote of the stockholders of SCC at the Special Meeting, or any adjournments
thereof, and shall not have been approved by the requisite votes, (d) by either
RLR or SCC, if a condition to the terminating party's obligation to consummate
the Merger cannot be met on the closing date of the Merger and is not waived or
cured within the prescribed time period, (e) by either RLR or SCC, if a final
unappealable order to restrain, enjoin or otherwise prevent, or awarding
substantial damages in connection with, the consummation of the Merger
Agreement or the transactions contemplated in connection therewith, shall have
been entered, (f) by either RLR or SCC, if the recommendation of the SCC Board
with respect to the Merger is modified or withdrawn in any way detrimental to
RLR, (g) by SCC, if the Exchange Price is less than $49.00 and the RLR Board
shall not have designated an Exchange Ratio providing for the receipt of a
fraction of a share of RLR with a value (based on the Exchange Price) of $43.74
per share of SCC Common Stock, (h) by RLR, if the Exchange Price is greater
than $64.30 and the SCC Board shall not have designated an Exchange Ratio
agreeing to the receipt of a fraction of a share of RLR with a value (based on
the Exchange Price) of $49.83 per share of SCC Common Stock, (i) by either RLR
or SCC, if the rights issued pursuant to the RLR Rights Plan or the SCC Rights
Plan are triggered and not redeemed, or (j) by either RLR or SCC, if SCC shall
have entered into a definitive agreement with a party other than RLR with
respect to a publicly announced offer or intent to make an offer to acquire all
or substantially all of SCC or its subsidiaries.
As noted above, in the event that the Exchange Price is less than $49.00 and
RLR shall have failed to designate the Exchange Ratio described on the cover
page of this Proxy Statement/Prospectus (i.e., the quotient (rounded to the
fourth decimal place) obtained by dividing $43.74 by the Exchange Price), the
SCC Board will have the right to terminate the Merger Agreement and abandon the
Merger. Any such decision by the SCC Board will be based on a thorough review
and consideration of all of the relevant facts and circumstances existing at
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the time after consultation with SCC's advisors. If the Exchange Price falls
below $49.00 and the imputed value of the merger consideration is less than
$43.74, SCC will request Merrill Lynch to reaffirm its opinion that the
consideration to be received in the Merger is fair, from a financial point of
view, to the SCC stockholders. If Merrill Lynch, in light of the circumstances
existing at the time, is unable to reaffirm such opinion, the SCC Board will
not proceed with the Merger. In the event that Merrill Lynch reaffirms that as
of the date of such opinion the consideration to be received in the Merger is
fair, from a financial point of view, to the SCC stockholders, the SCC Board
intends to resolicit the vote of the SCC stockholders. The SCC Board has been
advised by Merrill Lynch that the fairness opinion rendered by such firm will
not be applicable to the Merger if the Exchange Price is less than $49.00 and
RLR shall have failed to designate the higher Exchange Ratio. In such event,
the SCC Board, at a minimum, will not proceed with the Merger unless Merrill
Lynch reaffirms its fairness opinion and advises the SCC Board in writing that
the then-current financial terms of the Merger are fair to the SCC
stockholders from a financial point of view. Even then, the SCC Board will
resolicit the vote of the SCC stockholders. As a result, the value of the
consideration to be received by the SCC stockholders in the Merger will not
fall below $43.74 without the SCC stockholders first having had the
opportunity to reconsider the financial terms of the Merger and to cast
another vote on the proposed transaction. In the event that the Exchange Price
is less than $49.00 and RLR designates the higher Exchange Ratio, the SCC
Board will not have the right to terminate the Merger Agreement and the Merger
will be consummated at the higher Exchange Ratio (i.e., the quotient (rounded
to the fourth decimal place) obtained by dividing $43.74 by the Exchange
Price).
EXPENSES AND TERMINATION PAYMENTS
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby will be paid by the party incurring such
costs and expenses.
Provided there has been no material breach by RLR of the representations,
warranties, covenants and agreements of RLR under the Merger Agreement, SCC
has agreed to pay RLR $8 million if the Merger Agreement is terminated either
as a result of (a) the modification or withdrawal, in any way detrimental to
RLR, of the recommendation of the SCC Board with respect to the Merger, or (b)
the execution by SCC of a definitive agreement with a party other than RLR
with respect to a publicly announced offer or intent to make an offer to
acquire all or substantially all of SCC or its subsidiaries.
If there has been no material breach by RLR of its representations,
warranties, covenants and agreements under the Merger Agreement and RLR elects
to terminate the Merger Agreement on the basis that the Merger has not been
approved by the SCC stockholders at the Special Meeting or any adjournment
thereof, SCC has agreed to pay RLR $2.5 million to reimburse RLR's expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby. In addition to the foregoing payment, if an Acquisition
Proposal is outstanding on the date of such termination, or at any time within
90 days following such termination, and the Acquisition Proposal, as it may be
modified, or a substitute or alternative Acquisition Proposal is consummated
within 12 months of the termination of the Merger Agreement, SCC has agreed to
pay RLR an additional amount of $5.5 million. As used in the Merger Agreement,
an "Acquisition Proposal" is a publicly announced offer or a publicly
announced intent to make an offer from a party other than RLR, to acquire SCC
or SCL in a merger, consolidation, share exchange or other business
combination or joint venture, to acquire all or substantially all of the
assets of SCC or SCL or a substantial part of the assets of SCC and its
subsidiaries, or to acquire at least 50% of the outstanding SCC Common Stock
or at least 50% of the equity interest in SCL and LSL.
STOCK EXCHANGE LISTING
RLR Common Stock is listed on the NYSE, and it is a condition to
consummation of the Merger that the additional shares of RLR Common Stock
issuable upon consummation of the Merger shall have been approved for listing
on the NYSE subject to official notice of issuance.
CERTAIN LEGAL MATTERS
Certain acquisition transactions such as the Merger are reviewed by the
Antitrust Division of the Department of Justice (the "Antitrust Division") or
the Federal Trade Commission (the "FTC") to determine whether
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such transactions comply with applicable antitrust laws. Under the provisions
of the HSR Act, the Merger may not be consummated until certain information has
been furnished to the Antitrust Division and the FTC and certain waiting period
requirements of the HSR Act have been satisfied. Information was filed with the
Antitrust Division and the FTC under the HSR Act by RLR and SCC on March 20,
1997, and the waiting period under the HSR Act terminated on April 7, 1997.
SCC is subject to insurance holding company laws of the states in which its
insurance subsidiaries are domiciled. Under those laws, no person or group may
acquire "control" of SCC or its insurance subsidiaries without first obtaining
the approval of the insurance commissioner in each such state pursuant to
procedures which may require notice to interested parties or a public hearing.
SCC's insurance subsidiaries are domiciled in Connecticut and New York. A
change-of-control filing was filed with the Connecticut Department, which
issued an order on May 20, 1997, approving the change in control of SCC. In
addition, a change-of-control application also has been filed with the New York
Department, at whose request additional materials were recently supplied.
Actions or filings related to the Merger will also be submitted to the States of
Minnesota, Virginia and Michigan, but are not a condition precedent to the
consummation of the Merger.
Consummation of the Merger is conditioned upon, among other things, the
absence of any judicial, governmental, regulatory or administrative order
preventing or making illegal the consummation of the Merger. In addition,
consummation of the Merger is conditioned upon receipt of all consents,
authorizations, orders and approvals of any governmental authority or other
regulatory body (without material conditions) that are required in connection
with the consummation of the Merger and related transactions, the failure of
which to obtain would prevent the consummation of the Merger or would
reasonably be expected to result in a material adverse change in the financial
condition, results of operations or businesses of either SCC on a consolidated
basis or RLR on a consolidated basis. The parties believe that the required
regulatory approvals are likely to be secured without the imposition of any
conditions that would result in such a material adverse change. See "The
Merger--Conditions to Consummation of the Merger."
CONDUCT OF BUSINESS PRIOR TO THE MERGER
The Merger Agreement provides that, prior to the Effective Time, SCC will
conduct its business only in the ordinary course of business and consistent
with prior practice, and generally provides for certain restrictions with
respect to SCC on, among other things, the issuance or other disposition,
encumbrance or repurchase of capital stock of SCC or its subsidiaries, certain
sales of assets of SCC or its subsidiaries, the declaration or payment of
dividends except for regular quarterly cash dividends of not more than $.14 per
share on SCC Common Stock, the amendment of the corporate charters or bylaws of
SCC or subsidiaries of SCC, the acquisition of any business, the incurrence of
certain indebtedness, the making of certain capital expenditures in excess of
specific dollar amounts, the granting of certain employee benefits or the
adoption or amendment of employee benefit plans, the hiring of certain
executive and management employees or certain actions relating to the entering
into, amendment in any material respect of, or termination or waiver of any
material right under, certain contracts or arrangements material to SCC.
Pursuant to the Merger Agreement, prior to the Effective Time, SCC will amend
the Rights Agreement, dated as of February 16, 1995, as amended, between SCC
and First National Bank of Boston, to provide for expiration of the rights
issued under such plan prior to the Effective Time.
The Merger Agreement further provides that, prior to the Effective Time, RLR
will conduct its business only in, and will not take any material action except
in, the ordinary course of business and consistent with past practices, and
generally provides for certain restrictions with respect to RLR on, among other
things, the issuance or other disposition, encumbrance or repurchase of capital
stock, certain sales of assets of RLR or its subsidiaries, certain acquisitions
of corporations, partnerships or other business organizations, the incurrence
of indebtedness and the issuance of debt securities (except under existing
facilities or in an additional aggregate amount of $150 million), the amendment
of the RLR Certificate or By-Laws, the declaration or payment of dividends
(except for regular quarterly cash dividends of not more than $.33 per share on
RLR Common Stock) and the liquidation, merger or consolidation of RLR or any of
its subsidiaries or the acquisition of certain corporations.
44
<PAGE>
NO SOLICITATION OF ACQUISITION TRANSACTIONS
Under the Merger Agreement, SCC has agreed that it will not, directly or
indirectly, through any director, officer, employee, agent, representative or
otherwise, solicit, initiate or intentionally encourage submission of any
inquiries, proposals or offers from any person or entity (other than RLR)
relating to any merger, consolidation, share exchange, purchase or other
acquisition of all or (other than in the ordinary course of business) any
substantial portion of the assets of or any substantial equity interest in SCC
or its subsidiaries or any business combination with SCC or its subsidiaries or
participate in any discussions or negotiations regarding, or furnish to any
other person any information with respect to, SCC or its subsidiaries or afford
access to the properties, books or records of SCC for the purposes of, or
cooperate with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to seek or effect an Acquisition
Transaction. SCC may furnish information relating to SCC or its subsidiaries or
afford access to the properties, books or records of SCC to a third party
interested in an Acquisition Transaction if (i) the SCC Board is advised by its
financial advisor that such potential acquirer has the financial wherewithal to
consummate an Acquisition Transaction in which the consideration to be offered
would be superior to the consideration offered in the Merger, (ii) the SCC
Board determines in good faith that the potential acquirer is likely to submit
a bona fide offer of superior consideration if provided with such information
and access, (iii) upon advice of counsel knowledgeable in corporate fiduciary
matters, the SCC Board determines in good faith that the failure to provide
such information and access could reasonably be expected to constitute a breach
of its fiduciary duty to the stockholders of SCC under Delaware Law, and (iv)
the potential acquirer has negotiated with, signed and delivered to SCC a
confidentiality agreement. Following receipt of such a bona fide offer,
provided the SCC Board has determined in good faith that such offer is for
consideration superior to the consideration offered in the Merger and, after
consultation with outside counsel who is knowledgeable in corporate fiduciary
matters, and has determined in good faith that the failure to negotiate with
such potential acquiror would likely constitute a breach of its fiduciary duty
to the SCC stockholders under applicable law, SCC may engage in discussions or
negotiations with such third party relating to an Acquisition Transaction. SCC
has agreed to promptly notify RLR if any such inquiry, proposal, offer or
interest with respect to an Acquisition Transaction is made.
INDEMNIFICATION AND INSURANCE
RLR has agreed that from and after the Effective Time it will assume and
honor the indemnification obligations of SCC set forth in the SCC Certificate,
as in effect on February 23, 1997, as to any matter arising out of any action
or omission of any person described in such indemnification provisions prior to
the Effective Time (including without limitation any claim based upon or
arising out of the Merger, this Proxy Statement/Prospectus or any of the
transactions contemplated by the Merger Agreement) and such persons shall be
entitled to the full benefits of such provisions as if the provisions continued
in full force and effect after the Effective Time as an obligation of RLR. In
addition, RLR has agreed to provide directors' and officers' liability
insurance coverage for the benefit of SCC's present or former directors and
officers on substantially the same terms as that provided RLR's directors and
officers for a period of six years after the Effective Time. See "The Merger--
Interests of Certain Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the SCC Board with respect to the
Merger, SCC stockholders should be aware that certain directors and officers of
SCC have interests in the Merger different from the interests of other SCC
stockholders.
Mr. Ronald D. Jarvis, Chairman, President and Chief Executive Officer of SCC;
Mr. William P. Norris, Jr., Senior Vice President, Sales and Marketing of SCC;
Mr. Barry J. St. Pierre, Senior Vice President, Operations of SCC; and Mr.
Robert J. Voight, Executive Vice President of SCC, are each a party to an
employment agreement with SCC. Pursuant to the terms of each agreement, if such
executive officer is terminated for any reason other than "for cause," or
resigns for "good reason" (i) within two years of a change in control of SCC,
SCC has agreed to pay such officer an amount equal to two (three, in the case
of Mr. Jarvis) years' base salary
45
<PAGE>
plus average bonus, or (ii) more than two years after a change in control of
SCC, SCC has agreed to pay such officer one year's base salary plus average
bonus. Each of these employment agreements is for a rolling three-year term.
"Good reason" includes the assignment to such executive officer of duties or
responsibilities which are materially inconsistent with such officer's current
duties or responsibilities, a change in such officer's current reporting
responsibilities, titles or offices, or the relocation of such officer outside
the Hartford, Connecticut metropolitan area. In the case of Mr. Jarvis, a
voluntary termination within one year of a change of control will be considered
a resignation for "good reason." Based upon the base compensation specified in
each agreement, if termination other than for cause or resignation for "good
reason" were to occur on the date following the consummation of the Merger, the
maximum aggregate amount of severance cash compensation payable under such
agreements to Messrs. Jarvis, Norris, St. Pierre and Voight would be
approximately $3 million. In addition, the agreements provide for other
benefits, such as outplacement services and credit for additional years of
service under SCC's pension plans.
As of the Effective Time, RLR will assume all of the obligations of SCC under
each employment agreement discussed above.
The SCC Certificate provides for indemnification and advancement of expenses
to directors and officers, employees and agents of SCC. In addition, in the
case of present and former officers and directors who are parties to the
indemnification agreements disclosed to RLR, SCC has agreed to indemnify each
such director or officer from and against all losses, costs, damages and
expenses incurred in connection with his or her service to SCC and its
subsidiaries, and to provide for advancement of expenses. Pursuant to the terms
of the Merger Agreement, RLR has agreed to assume SCC's obligations pursuant to
the terms of the SCC Certificate. RLR has also agreed to maintain directors'
and officers' liability insurance coverage for the current and former directors
and officers of SCC for a period of six years after the Effective Time. See
"The Merger--Indemnification and Insurance."
The SCC Board was informed of the interests described herein prior to
approving the Merger Agreement and the Merger.
In addition to the foregoing benefits, each director or officer of SCC who is
a participant in SCC's employee benefit plans and stock option plan will be
entitled to the benefits described under the caption "The Merger--Employee
Benefit Plans and Stock Options."
RLR anticipates that Mr. Jarvis, currently Chairman, President and Chief
Executive Officer of SCC, will continue to serve as the President and Chief
Executive Officer of SCL and in addition, Mr. Jarvis will also serve as a
member of the RLR Management Committee. See "The Merger--Business and
Management After the Merger."
Except for the arrangements specifically set forth in this Proxy
Statement/Prospectus and the Merger Agreement, RLR has made no commitments with
respect to the retention of RLR or SCC employees or entities after the Merger.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the Merger. This discussion is based on currently
existing provisions of the Code, existing and proposed Treasury Regulations
thereunder, and current administrative rulings and court decisions, all of
which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences to RLR, SCC or SCC's stockholders
as described herein.
SCC stockholders should be aware that this discussion does not deal with all
federal income tax considerations that may be relevant to particular SCC
stockholders in light of their particular circumstances, such as stockholders
who are dealers in securities, who are subject to the alternative minimum tax
provisions of the
46
<PAGE>
Code, who are foreign person, who do not hold their SCC Common Stock as
capital assets, or who acquired their shares in connection with stock option
or stock purchase plans or in other compensatory transactions. In addition,
the following discussion does not address the tax consequences of the Merger
under foreign, state or local tax laws, the tax consequences of transactions
effectuated prior or subsequent to, or concurrently, with the Merger (whether
or not any such transactions are undertaken in connection with the Merger),
including without limitation any transactions in which shares of SCC Common
Stock are acquired or shares of RLR Common Stock are disposed of, or the tax
consequences of the assumption by RLR of the SCC Options. Accordingly, SCC
STOCKHOLDERS AND OPTION HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
The Merger is intended to constitute a reorganization within the meaning of
Code Section 368(a)(1)(A), and the Merger Agreement provides that the
obligations of SCC and RLR to proceed with and consummate the Merger are
subject to the receipt of written opinions from their respective counsel,
Faegre & Benson LLP, counsel to RLR, and Murtha, Cullina, Richter and Pinney,
counsel to SCC, to the effect that the Merger will constitute such a
reorganization and that accordingly:
(i) No gain or loss will be recognized by RLR upon the receipt of the
assets of SCC solely in exchange for RLR Common Stock.
(ii) No gain or loss will be recognized by SCC upon the transfer of its
assets to RLR pursuant to the Merger.
(iii) The basis of the assets of SCC, in the hands of RLR, will be the
same as the basis of such assets in hands of SCC immediately prior to the
Merger.
(iv) No gain or loss will be recognized by the stockholders of SCC upon
the receipt of RLR Common Stock solely in exchange for their shares of SCC
Common Stock.
(v) The payment of cash to a holder of SCC Common Stock in lieu of a
fractional share of RLR Common Stock will be treated for federal income tax
purposes as if the fractional share was distributed as part of the Merger
and then was redeemed by RLR. This cash payment will be treated as having
been received as a distribution in full payment for the stock redeemed.
Gain or loss will be realized and recognized by the SCC stockholder
receiving cash in lieu of a fractional share of RLR Common Stock equal to
the difference between the cash received and the basis of the fractional
share interest.
(vi) Gain or loss recognized by a holder of SCC Common Stock upon receipt
of cash in exchange for the holder's fractional share interest will be
capital gain or loss, provided the shares of SCC Common Stock were held as
capital assets on the date of the Merger. If the shares of SCC Common Stock
have been held for longer than one year, the gain or loss will be long-term
capital gain or loss.
(vii) The basis of the SCC stockholders in the shares of RLR Common Stock
to be received in the Merger will be the same as their basis in the shares
of SCC Common Stock surrendered in exchange therefore, decreased by the
amount of cash received and loss recognized in the Merger and increased by
the amount of gain recognized in the Merger.
(viii) The holding period of the shares of RLR Common Stock to be
received in the Merger by the stockholders of SCC will include the period
during which the shares of SCC Common Stock surrendered in exchange
therefore were held, provided that the shares of SCC Common Stock were held
as capital assets on the date of the Merger.
The parties are not requesting and will not request a ruling from the
Internal Revenue Service in connection with the Merger. The Merger Agreement
provides that the obligations of SCC and RLR to proceed with and
47
<PAGE>
consummate the Merger are subject to the receipt of written opinions from
their respective counsel Faegre & Benson LLP, counsel to RLR, and Murtha,
Cullina, Richter and Pinney, counsel to SCC, to the effect that the Merger
will constitute a reorganization under Code Section 368(a)(1)(A). The form of
each of these opinions is filed as an Exhibit to the Registration Statement of
which this Proxy Statement/Prospectus is a part. SCC stockholders should be
aware that these tax opinions will not bind the IRS and the IRS therefore will
not be precluded from asserting a contrary position. These tax opinions will
be made subject to certain assumptions and qualifications, including but not
limited to the truth and accuracy of certain representations made by SCC and
RLR, including representations in certain certificates to be delivered to
counsel by the respective managements of SCC and RLR.
A successful IRS challenge to the status of the Merger as a reorganization
under Code Section 368(a)(1)(A) would result in SCC stockholders recognizing
taxable gain or loss with respect to each share of SCC Common Stock
surrendered equal to the difference between the stockholder's basis in such
share and the fair market value, as of the Effective Time, of the RLR Common
Stock received in exchange therefor. In such event, a stockholder's aggregate
basis in the RLR Common Stock so received will equal its fair market value and
the stockholder's holding period for such stock would begin the day after the
Merger.
BUSINESS AND MANAGEMENT AFTER THE MERGER
RLR intends to operate SCL in a manner substantially consistent with its
current operations. RLR will carefully review the operations of SCL in an
attempt to identify opportunities for expense reduction through the use of
shared resources with RLR. RLR intends to make RLR variable insurance products
available for sale by SCL's and LSL's existing agents and make SCL's joint
universal life policies available for sale by RLR's existing agents. Following
the Merger, RLR intends to merge LSL with its wholly-owned indirect subsidiary
ReliaStar Bankers Security Life Insurance Company. This merger will be subject
to the approval of the New York Department. See "Recommendations of the Board
of Directors and Reasons for the Merger."
The current directors and executive officers of RLR will continue in their
present capacities after consummation of the Merger. It is anticipated that
after the consummation of the Merger, Mr. Jarvis, currently Chairman,
President and Chief Executive Officer of SCC, will continue to serve as the
President and Chief Executive Officer of SCL, and in addition, Mr. Jarvis will
also serve as a member of RLR's Management Committee.
DEBT ASSUMPTION
The Merger Agreement provides that RLR will assume the SCC Debentures.
RESALE OF SHARES BY SCC AFFILIATES
The shares of RLR Common Stock to be received in the Merger will be freely
transferable, except for shares of RLR Common Stock received by persons who
are deemed to be "affiliates," as defined in the rules under the Securities
Act, of SCC immediately prior to the Effective Time (or of RLR after the
Effective Time). Shares of RLR Common Stock received in the Merger by persons
who are affiliates of SCC immediately prior to the Effective Time but who do
not become affiliates of RLR at the time of the Merger may be sold only in
accordance with the provisions of Rule 144 under the Securities Act (which
imposes certain limitations on the volume and manner of sales by such
affiliates), pursuant to an effective registration statement under the
Securities Act, or in transactions exempt from registration thereunder.
NO DISSENTERS' RIGHTS
Under Delaware Law, no holder of SCC Common Stock will be entitled to demand
appraisal of, or to receive payment for, such holder's shares.
48
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following pro forma combined condensed financial statements reflect the
Merger of SCC with and into RLR. The Merger will be accounted for as a
"purchase" of SCC by RLR under generally accepted accounting principles. The
pro forma combined condensed financial statements are unaudited and combine
the operations of RLR and SCC for the three months ended March 31, 1997 and
for the year ended December 31, 1996. The pro forma balance sheet assumes the
Merger occurred at March 31, 1997. The pro forma statements of income assume
the Merger occurred on January 1, 1996. The pro forma financial statements
have not been compiled, reviewed or audited by independent accountants.
The historical financial information of RLR as of and for the three months
ended March 31, 1997 and for the year ended December 31, 1996 has been derived
from the RLR financial statements which are incorporated herein by reference.
The historical financial information of SCC as of and for the three months
ended March 31, 1997 and for the year ended December 31, 1996 has been derived
from the SCC financial statements which are incorporated herein by reference.
The pro forma financial statements should be read in conjunction with the
accompanying notes and with the historical financial statements of RLR and SCC
incorporated herein by reference.
The unaudited pro forma combined condensed financial statements have been
included as required by the SEC and are provided for comparative purposes
only. As further discussed in the accompanying notes, the pro forma financial
statements do not purport to be indicative of the financial position or
operating results that would have been achieved had the Merger been
consummated as of the dates indicated and should not be construed as
representative of future financial position or operating results.
49
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF MARCH 31, 1997
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
------------------- INCREASE NOTE
RLR SCC (DECREASE) REFERENCE PRO FORMA
--------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments.............. $11,920.6 $1,793.3 $ 3.7 (a) $13,717.6
Deferred Policy
Acquisition
Costs/Present Value of
Future Profits.......... 1,299.0 414.2 (65.3) (b) 1,647.9
Other Assets............. 1,143.8 125.0 (20.4) (b) 1,335.3
101.5 (c)
(7.8) (d)
(6.8) (e)
Participation Fund
Account Assets.......... 315.9 0.0 0.0 315.9
Assets Held in Separate
Accounts................ 2,254.6 0.0 0.0 2,254.6
--------- -------- ------ ---------
TOTAL ASSETS........... $16,933.9 $2,332.5 $ 4.9 $19,271.3
========= ======== ====== =========
LIABILITIES
Future Policy and
Contract Benefits....... $11,902.2 $1,811.9 $(52.3) (b) $13,661.8
Notes and Mortgages
Payable................. 449.1 75.0 0.0 524.1
Other Liabilities........ 512.3 95.4 4.9 (f) 603.9
0.0 (g)
(8.7) (h)
Participation Fund
Account Liabilities..... 315.9 0.0 0.0 315.9
Liabilities Related to
Separate Accounts....... 2,249.1 0.0 0.0 2,249.1
--------- -------- ------ ---------
TOTAL LIABILITIES...... 15,428.6 1,982.3 (56.1) 17,354.8
--------- -------- ------ ---------
Trust-Originated
Preferred Securities.... 121.0 0.0 0.0 121.0
SHAREHOLDERS' EQUITY
Common Stock............. 578.9 0.1 (0.1) (i) 990.1
411.2 (j),(q)
Additional Paid-In
Capital................. 0.0 83.1 (83.1) (i) 0.0
Net Unrealized Investment
Gains (Losses).......... 60.1 (2.1) 2.1 (i) 60.1
Retained Earnings........ 834.5 269.1 (269.1) (i) 834.5
Other, Net............... (89.2) 0.0 0.0 (89.2)
--------- -------- ------ ---------
TOTAL SHAREHOLDERS'
EQUITY................ 1,384.3 350.2 61.0 1,795.5
--------- -------- ------ ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.. $16,933.9 $2,332.5 $ 4.9 $19,271.3
========= ======== ====== =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
50
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
------------ INCREASE NOTE
RLR SCC (DECREASE) REFERENCE PRO FORMA
------ ----- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Premiums.......................... $204.7 $13.0 $ 0.0 $217.7
Net Investment Income............. 234.7 33.9 0.0 (k) 268.6
Realized Investment Gains......... 2.2 0.2 0.0 2.4
Other Income...................... 121.6 34.8 0.0 (l) 156.4
------ ----- ----- ------
TOTAL........................... 563.2 81.9 0.0 645.1
------ ----- ----- ------
BENEFITS AND EXPENSES
Benefits to Policyholders......... 317.5 44.7 0.0 362.2
Sales and Operating Expenses...... 121.4 11.6 0.0 (m) 133.6
0.6 (n)
Amortization of Deferred Policy
Acquisition Costs/Present Value
of Future Profits................ 28.4 10.9 (4.7) (o) 34.6
Interest Expense.................. 7.4 1.4 0.0 8.8
Dividends and Experience Refunds
to Policyholders................. 7.1 0.1 0.0 7.2
------ ----- ----- ------
TOTAL........................... 481.8 68.7 (4.1) 546.4
------ ----- ----- ------
Income Before Income Taxes........ 81.4 13.2 4.1 98.7
Income Tax Expense................ 28.4 4.6 1.6 (p) 34.6
Dividends on Preferred Securities
of Subsidiary, Net of Tax........ 1.7 0.0 0.0 1.7
------ ----- ----- ------
Net Income........................ $ 51.3 $ 8.6 $ 2.5 (q) $ 62.4
====== ===== ===== ======
PER COMMON SHARE
Net Income:
Primary......................... $ 1.26 $0.99 N/A $ 1.31
Fully Diluted................... $ 1.26 $0.99 N/A (q) $ 1.31
WEIGHTED AVERAGE SHARES
Common and Common Equivalent
Shares (Primary)................. 40.7 8.6 (1.7) 47.6
Common Shares Assuming Maximum
Dilution (Fully Diluted)......... 40.7 8.7 (1.8) 47.6
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
51
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
--------------- INCREASE NOTE
RLR SCC (DECREASE) REFERENCE PRO FORMA
-------- ------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Premiums....................... $ 836.9 $ 58.3 $0.0 $ 895.2
Net Investment Income.......... 940.7 135.3 (0.1) (k) 1,075.9
Realized Investment Gains...... 11.2 7.3 0.0 18.5
Other Income................... 401.8 137.4 0.0 (l) 539.2
-------- ------ ---- --------
TOTAL........................ 2,190.6 338.3 (0.1) 2,528.8
-------- ------ ---- --------
BENEFITS AND EXPENSES
Benefits to Policyholders...... 1,287.7 192.9 0.0 1,480.6
Sales and Operating Expenses... 437.4 49.9 0.0 (m) 489.8
2.5 (n)
Amortization of Deferred Policy
Acquisition Costs/Present
Value of Future Profits....... 113.0 36.2 (5.3) (o) 143.9
Interest Expense............... 28.7 5.4 0.0 34.1
Dividends and Experience
Refunds to Policyholders...... 19.7 0.4 0.0 20.1
-------- ------ ---- --------
TOTAL........................ 1,886.5 284.8 (2.8) 2,168.5
-------- ------ ---- --------
Income Before Income Taxes..... 304.1 53.5 2.7 360.3
Income Tax Expense............. 106.1 18.2 1.8 (p) 126.1
Dividends on Preferred
Securities of Subsidiary, Net
of Tax........................ 5.0 0.0 0.0 5.0
-------- ------ ---- --------
Net Income..................... $ 193.0 $ 35.3 $0.9 (q) $ 229.2
======== ====== ==== ========
PER COMMON SHARE
Net Income:
Primary...................... $ 5.03 $ 4.10 N/A $ 5.07
Fully Diluted................ $ 4.73 $ 4.07 N/A (q) $ 4.81
WEIGHTED AVERAGE SHARES
Common and Common Equivalent
Shares (Primary).............. 37.3 8.6 (1.7) 44.2
Common Shares Assuming Maximum
Dilution (Fully Diluted)...... 40.1 8.7 (1.8) 47.0
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
52
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
The pro forma combined condensed financial statements reflect the Merger of
SCC with and into RLR. The pro forma combined condensed financial statements
have been prepared under the purchase method of accounting. The pro forma
combined condensed balance sheet assumes the Merger occurred on March 31,
1997, and the pro forma combined condensed statements of income assume the
Merger occurred on January 1, 1996. The pro forma combined condensed financial
statements have not been compiled, reviewed or audited by independent
accountants.
The historical financial information has been derived from the financial
statements incorporated herein by reference. The pro forma combined condensed
financial statements should be read in conjunction with the historical
financial statements of RLR and SCC incorporated by reference in this Proxy
Statement/Prospectus.
The pro forma combined condensed financial statements do not purport to be
indicative of the financial position or operating results which would have
been achieved had the Merger been consummated as of the dates indicated and
should not be construed as representative of future financial position or
operating results.
The pro forma financial statements assume all shares of SCC Common Stock, as
described, are converted, pursuant to the Merger, into shares of RLR Common
Stock at an exchange ratio of .7932 and at an assumed RLR Common Stock market
price of $59.25 per share, the closing sale price per share of RLR Common
Stock on February 21, 1997, the last trading day prior to the public
announcement of the Merger. It is further assumed that cash to be paid for
fractional shares will not be significant.
RLR management's preliminary allocation of the purchase price was based upon
the estimated fair value of the assets acquired and liabilities assumed. The
actual allocation will be based on further studies and valuations as of the
Effective Time and will be primarily affected by the impact of market interest
rates as of the Effective Time upon the valuation of assets and liabilities of
SCC, the effect of the RLR Common Stock price as of the Effective Time upon
the determination of the purchase price and the accrual at the Effective Time
of estimated costs to eliminate duplicative facilities and equipment and to
record the estimated liability for severance and other employee termination
costs. The actual adjustments (other than those related to the accruals of
certain costs at the Effective Time described above) are not, at the present
time, expected to be significantly different, however, there can be no
assurance that significant differences will not arise.
The pro forma combined condensed financial statements do not include all
adjustments to conform the accounting policies of SCC to those followed by
RLR. The nature and extent of such adjustments, if any, will be based upon
further study and analysis and would not be expected to be significant to the
pro forma financial results.
The following describes the pro forma adjustments reflected in the
accompanying unaudited pro forma combined condensed financial statements:
(a) To value SCC's commercial mortgage loans at estimated fair value.
(b) To eliminate SCC's deferred policy acquisition costs, goodwill,
acquired insurance in-force and unearned revenue balances and to record the
present value of future profits of the in-force business acquired. Present
value of future profits reflects the estimated fair value of the business
in-force and represents the portion of the cost to acquire SCC that is
allocated to the value of the right to receive future cash flows from
insurance contracts existing at the assumed date of acquisition. Such value
is the present value of the actuarially determined projected cash flows
from the acquired policies.
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<PAGE>
The 15% discount rate used to determine such value is the rate of return
required by RLR to invest in the business being acquired. In determining the
rate of return used to value the policies purchased, the following factors are
considered:
. The magnitude of the risk associated with each of the actuarial
assumptions used in determining expected future cash flows.
. Cost of capital available to fund the acquisition.
. The perceived likelihood of changes in insurance regulations and tax
laws.
. Complexity of the acquired company.
The value allocated to present value of future profits is based on a
preliminary determination of such value; accordingly, this allocation may be
adjusted upon final determination of such value. On a pro forma basis,
assuming an acquisition date of March 31, 1997, expected gross amortization
using current assumptions and accretion of interest based on an interest rate
equal to the liability or contract rate (such rates ranging from 5.25% to 7.0%
) on the cost of policies purchased for each of the years in the five year
period ended March 31, 2002, is as follows (dollars in millions):
<TABLE>
<CAPTION>
YEAR
ENDED BEGINNING GROSS ACCRETION OF NET ENDING
MARCH 31, BALANCE AMORTIZATION INTEREST AMORTIZATION BALANCE
--------- --------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
1998.................... $348.9 $50.8 $19.9 $30.9 $318.0
1999.................... 318.0 43.2 18.3 24.9 293.1
2000.................... 293.1 37.9 16.8 21.1 272.0
2001.................... 272.0 32.5 15.8 16.7 255.3
2002.................... 255.3 29.7 14.7 15.0 240.3
</TABLE>
(c) To record the excess of the cost to acquire SCC over the sum of the
amounts assigned to identifiable assets acquired less liabilities assumed.
(d) To record the direct out-of-pocket costs of acquisition.
(e) To remove SCC's capitalized software costs to conform to RLR's
accounting policies.
(f) To record lease related fair value adjustments, net.
(g) At the Effective Time, the estimated liability for severance and
other employee costs for certain executive officers and employees of SCC
and the estimated costs to eliminate duplicative facilities and equipment
and merge such operations will be accrued. These estimated costs have not
been accrued on the pro forma balance sheet. The present estimate of these
costs to be accrued at the Effective Time is approximately $8.0 million.
The estimated $8.0 million liability will be accrued on the initial post-
acquisition balance sheet of SCC and will increase annual goodwill
amortization by approximately $130,000.
(h) To adjust the deferred tax liability of SCC to the tax effected
difference between the estimated fair value of the net assets acquired and
the estimated tax basis of the net assets acquired.
(i) To eliminate SCC equity.
(j) To record the fair value of the pro forma 6.94 million shares of RLR
Common Stock to be issued to acquire SCC, using an RLR share price of
$59.25.
(k) To record the amortization of the pro forma fair value adjustment to
the cost basis of SCC investments. The pro forma adjustments to investments
and investment income are based upon interest rates at March 31, 1997 and
are not likely to be reflective of future results as the actual fair value
adjustment and related future income statement effects will be dependent
upon the interest rate environment at the time the Merger is completed. The
fair value adjustment to the cost basis of investments has been amortized
over the estimated average remaining investment life.
54
<PAGE>
(l) It is expected that cross-selling of life insurance products between
RLR and SCC will produce incremental profits to the combined company. For
purposes of the pro forma combined condensed statements of income, these
incremental profits have not been included because they are not assured.
(m) It is expected that certain costs and expenses of the combined
companies will be less than those reflected in the accompanying pro forma
combined condensed statements of income due to consolidation of operations.
The estimated expense reductions are primarily related to the elimination
of duplicative facilities, equipment and other personnel and functions. For
purposes of the pro forma combined condensed statements of income, these
expense reductions have not been included because they are not assured
until RLR management takes affirmative actions to implement the cost
reductions which cannot take place until the Merger is effective. Until
such time, they are not permitted to be reflected in the pro forma
financial information according to accounting rules. The pro forma pre-tax
annualized expense reductions are currently estimated to total
approximately $7.0 million. In addition to the $7.0 million, the combined
company expects to realize cost savings from the potential merger of the
New York operations of RLR and SCC.
(n) To record the amortization of goodwill over the estimated periods to
be benefited (40 years).
(o) To record the adjustment to historical amortization of deferred
policy acquisition costs to reflect the new amortization of the present
value of future profits intangible asset established on the pro forma
combined condensed balance sheet as of March 31, 1997.
(p) To record income tax expense (benefit) of the pro forma adjustments
(excluding goodwill amortization) at the applicable statutory federal
effective rate of 35%.
(q) Pro Forma Net Income and Fully Diluted Net Income per share for the
year ended December 31, 1996, and the pro forma increase to shareholders'
equity using the pro forma RLR share price of $59.25 and the floor and
ceiling share price of $49.00 and $64.30 are shown in the following table:
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------------------
RLR COMMON
STOCK INCREASE TO FULLY DILUTED
PRICE EXCHANGE SHAREHOLDERS' NET NET INCOME
ASSUMED RATIO EQUITY INCOME PER SHARE
---------- -------- ------------- ------ -------------
<S> <C> <C> <C> <C>
$59.25 .7932 $411.2 $229.2 $4.81
$49.00 .8927 $382.1 $229.9 $4.73
$64.30 .7749 $436.5 $228.6 $4.81
</TABLE>
CERTAIN FORWARD-LOOKING INFORMATION
This Proxy Statement/Prospectus contains certain forward-looking information
including information provided in "Unaudited Pro Forma Combined Selected
Financial Data," "Comparative Unaudited Per Share Data" and "Unaudited Pro
Forma Combined Condensed Financial Statements." The Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking
information to encourage companies to provide prospective information about
their companies without fear of litigation so long as such information is
identified as forward-looking and is accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in the information. RLR and SCC identify
the following important factors which could cause RLR's and SCC's actual
results to differ materially from any such results which might be projected,
forecast, estimated or budgeted by RLR or SCC in forward-looking information.
All of such factors are difficult to predict and many are beyond the control of
RLR and SCC. Accordingly, while RLR and SCC believe that the assumptions
underlying the forward-looking information are reasonable, there can be no
assurances that such assumptions will approximate actual experience. These
important factors include: (i) general economic conditions, changes in interest
rates and the performance of stock markets, each of which may impact the
profitability of the combined company, the market value of the combined
company's investment portfolio, the credit quality of the combined company's
loan portfolio and the demand for life insurance products; (ii) regulatory
developments affecting financial institutions, generally, and life insurance
companies, specifically; (iii) changes in federal and state income tax laws and
regulations which
55
<PAGE>
affect the relative tax advantage of life insurance products; (iv) industry
consolidation and increased competition; (v) the combined company's ability to
control costs and realize estimated cost savings; (vi) the integration of RLR
and SCC's products, sales and operations in a timely and cost effective
manner; (vii) the timing, cost and successful completion of RLR's announced
stock repurchase program. Shareholder are also directed to consider other
risks and uncertainties discussed in documents filed by RLR and SCC with the
Commission. RLR and SCC each disclaim any obligation to update forward-looking
information.
BUSINESS OF RLR
RLR is a holding company whose subsidiaries specialize in life insurance and
related financial services businesses. Through ReliaStar Life Insurance
Company, Minneapolis, Minnesota, and other subsidiaries, RLR issues and
distributes individual life insurance and annuities; group life and health
insurance; life and health reinsurance; and markets and manages mutual funds.
RLR operates in four business segments: Individual Insurance, Employee
Benefits, Life and Health Reinsurance and Pension.
RLR's strategy is to compete by focusing on the needs of its customers and
providing innovative products in a service-oriented, cost-efficient manner. It
is RLR's goal to form lifetime partnerships with its customers, delivering
integrated financial solutions.
Other life insurance subsidiaries, each of which is owned directly or
indirectly by ReliaStar Life, are Northern Life Insurance Company, Seattle,
Washington; ReliaStar United Services Life Insurance Company, Arlington,
Virginia; and ReliaStar Bankers Security Life Insurance Company, Woodbury, New
York. ReliaStar Life, United Services and Bankers Security were formerly known
as Northwestern National Life Insurance Company, United Services Life
Insurance Company and Bankers Security Life Insurance Society, respectively.
Additional subsidiaries include Washington Square Advisors, Inc., Minneapolis,
Minnesota; Washington Square Securities, Inc., Minneapolis, Minnesota;
ReliaStar Mortgage Corporation, West Des Moines, Iowa; NWNL Northstar, Inc.,
Greenwich, Connecticut; PrimeVest Financial Services, Inc., St. Cloud,
Minnesota; and Successful Money Management Seminars, Inc., Portland, Oregon.
BUSINESS OF SCC
SCC is an insurance holding company that provides, through its subsidiaries,
a diverse portfolio of individual life insurance and annuity products to
customers throughout the fifty states, the District of Columbia and Guam. SCC
markets its products principally to professionals, high net worth and upper
middle class individuals and small, closely-held businesses through
independent general agents.
SCC utilizes the independent agency system for the distribution of its
products. The Company's core group of approximately 360 independent general
agencies, together with other distribution channels, access approximately
50,000 licensed insurance agents throughout the United States. Distribution
through the independent agency system provides the Company with a variable
distribution cost structure. This is especially important during times of
fluctuating sales activity since most of the distribution costs incurred are
directly related to the quantity of business written.
At December 31, 1996, SCC had approximately $2.3 billion of total assets,
approximately $33.6 billion of life insurance in force net of reinsurance and
a ratio of statutory capital and surplus plus asset valuation reserve to
statutory assets of 10.6%. SCC's investment portfolio at December 31, 1996 had
a market value of $1.8 billion. SCC has maintained high quality standards in
its investment portfolio with 86.8% of its portfolio at December 31, 1996
invested in fixed maturity securities, of which 93.8% were comprised of
investment grade securities. At December 31, 1996, the estimated market value
of SCC's fixed maturity securities available-for-sale was $1.6 billion, or
$31.4 million more than amortized cost, and 7% of SCC's portfolio was invested
in mortgage loans, which are diverse in type and geographic location.
SCC is currently rated "A (Excellent)" by A.M. Best Company, which rates
insurance companies based on qualitative and quantitative factors of concern
to policyholders. A.M. Best Company assigns ratings which
56
<PAGE>
currently range from "A++ (Superior)" to "C- (Fair)." In addition, SCC's
claims-paying ability is rated A+ by Standard & Poor's Corporation.
Lincoln National Life Insurance Company, a wholly-owned subsidiary of
Lincoln National Corporation, organized SCC under the laws of the State of
Delaware on October 13, 1993 to facilitate the sale of the SCC Insurance
Subsidiaries in an underwritten public offering. The offering was completed on
January 26, 1994, and SCC has been operating as an independent public company
since that time. See "Background of the Merger."
DESCRIPTION OF RLR CAPITAL STOCK
Set forth below is a summary of certain provisions of the RLR Certificate,
the RLR By-Laws and a Rights Agreement between RLR and Norwest Bank Minnesota,
National Association, as amended. Copies of these documents are included as
exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part.
GENERAL
The authorized capital stock of RLR consists of 100,000,000 shares of RLR
Common Stock and 7,000,000 shares of preferred stock, without par value.
All issued and outstanding shares of RLR Common Stock are, and the shares of
RLR Common Stock to be issued in the Merger will be, fully paid and non-
assessable. Holders of shares of RLR Common Stock and holders of shares of RLR
Preferred Stock do not have any preemptive rights to subscribe for or purchase
any securities of RLR except, with respect to shares of RLR Preferred Stock,
such preemptive rights as may be provided in the resolution or resolutions of
the RLR Board or a committee designated by the RLR Board providing for the
issuance thereof. Holders of shares of RLR Common Stock have the rights
described below under "Share Rights Plan."
PREFERRED
The RLR Certificate authorizes the RLR Board to issue, without action or
approval of the RLR stockholders, one or more series of RLR Preferred Stock
with such designations, voting powers, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated in the resolution or
resolutions providing for the issuance thereof. There are currently reserved
for issuance up to 2,500,000 shares of Series A Junior Participating Preferred
Stock of RLR issuable under the RLR Rights Agreement referred to below under
"Share Rights Plan."
DIVIDENDS
Under Delaware Law, subject to restrictions contained in the RLR Certificate
discussed in the following paragraph, dividends may be declared or paid out of
surplus of RLR or, if there is no such surplus, out of net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal
year.
The RLR Certificate provides that so long as there are outstanding any
shares of RLR Preferred Stock entitled to cumulative dividends, no dividends
(other than dividends payable in shares of RLR Common Stock) may be paid or
declared, nor may any distribution be made, on shares of RLR Common Stock, nor
may any shares of RLR Common Stock be purchased, redeemed or otherwise
acquired for value by RLR (other than in exchange for, or through application
of the proceeds of the sale of, shares of RLR Common Stock) if RLR is in
default with respect to any dividend payable on, or obligation to redeem or to
maintain a purchase, retirement or sinking fund with respect to, shares of RLR
Preferred Stock.
RLR is primarily a holding company owning, directly or indirectly, the
capital stock of ReliaStar Life and its other insurance company subsidiaries
and other subsidiaries. There are legal limitations on the extent to which
ReliaStar Life and RLR's other insurance company subsidiaries may pay
dividends or lend or otherwise supply funds to RLR or ReliaStar Life.
57
<PAGE>
The payment of future dividends by RLR will be largely dependent upon the
ability of ReliaStar Life to pay dividends to RLR. Under Minnesota insurance
law regulating the payment of dividends by ReliaStar Life, any such payments
shall be in an amount deemed prudent by ReliaStar Life's board of directors
and, unless otherwise approved by the Commissioner of the Minnesota Department
of Commerce, must be paid solely from the adjusted earned surplus of ReliaStar
Life. Adjusted earned surplus means the earned surplus as determined in
accordance with statutory accounting principles (unassigned funds) less 25% of
the amount of such earned surplus which is attributable to unrealized capital
gains. Further, without approval of the Commissioner, ReliaStar Life may not
pay in any calendar year any dividend which, when combined with other
dividends paid within the preceding 12 months, exceeds the greater of (i) 10%
of ReliaStar Life's statutory surplus at the prior year end or (ii) 100% of
ReliaStar Life's statutory net gain from operations (not including realized
capital gains) for the prior calendar year.
The payment of future dividends by RLR may be affected by the foregoing
limitations, further restrictions and limitations in the event of statutory or
regulatory changes and by such other factors as the RLR Board may deem
relevant.
VOTING RIGHTS
The RLR Certificate provides that, except as otherwise provided by law or
the RLR Certificate, holders of shares of RLR Common Stock are entitled to one
vote per share. Holders of shares of RLR Common Stock do not have any
cumulative voting rights.
Except as otherwise provided by law or by the resolution or resolutions
providing for the issuance thereof, holders of shares of RLR Preferred Stock
have no voting rights.
The RLR Certificate requires the affirmative vote of 75% of RLR's
outstanding capital stock entitled to vote, voting as a single class, (i) to
approve certain "Business Combinations" involving an "Interested Shareholder"
unless the transaction is approved by a majority of the "Continuing
Directors," as such terms are defined in the RLR Certificate, (ii) to remove
directors, (iii) to effect certain amendments to the RLR Certificate, and (iv)
in order for the stockholders of RLR to amend the RLR By-Laws.
SHARE RIGHTS PLAN
Pursuant to the RLR Rights Agreement, each share of RLR Common Stock issued
by RLR has attached one preferred share purchase right. Each RLR Right
entitles the registered holder to purchase from RLR one-tenth of a share of
Junior Participating Preferred Stock at an exercise price of $200, subject to
adjustment.
Until the Distribution Date, the RLR Rights will be evidenced by
certificates representing shares of RLR Common Stock and will be transferred
only with the shares of RLR Common Stock. The RLR Rights will separate from
the shares of RLR Common Stock and a Distribution Date for the RLR Rights will
occur upon the earlier of (i) the close of business on the 15th day following
a public announcement that a person or group of affiliated or associated
persons has acquired, or obtained the right to acquire, beneficial ownership
of 20% or more of the outstanding shares of RLR Common Stock, or (ii) the
close of business on the 15th day following the commencement or announcement
of a tender or exchange offer the consummation of which would result in a
person or group of affiliated or associated persons becoming the beneficial
owner of 20% or more of the outstanding shares of RLR Common Stock.
The RLR Rights are not exercisable until the Distribution Date. The RLR
Rights will expire on September 8, 2004, unless extended or earlier redeemed
by RLR.
In the event that (i) RLR is the surviving corporation in a merger,
consolidation or statutory share exchange with an Acquiring Person and
outstanding shares of RLR are not changed or exchanged, (ii) an Acquiring
Person engages in one of a number of self-dealing transactions specified in
the RLR Rights Agreement, (iii) an Acquiring Person increases by more than 1%
its proportion of beneficial ownership of the outstanding shares of any class
of equity securities or securities exercisable for or convertible into equity
securities of RLR or any of
58
<PAGE>
its subsidiaries pursuant to a recapitalization, reclassification or similar
transaction, or (iv) a person (other than RLR and certain of its affiliates)
becomes a beneficial owner of 20% or more of the outstanding shares of RLR
Common Stock, each holder of an RLR Right (other than RLR Rights beneficially
owned by an Acquiring Person or, in certain circumstances, transferees) will
thereafter have the right to receive, upon exercise thereof at the then
current exercise price of the RLR Right, that number of shares of RLR Common
Stock having a market value of two times the exercise price of the RLR Right,
subject to certain adjustments.
In the event that RLR is acquired in a merger or other business combination
transaction or 50% or more of the assets or earning power of RLR and its
subsidiaries (taken as a whole) are sold after a public announcement that a
person has become an Acquiring Person, each holder of an RLR Right will
thereafter have the right to receive, upon exercise thereof at the then
current exercise price of the RLR Right, that number of common shares of the
Acquiring Person (or in certain cases, one of its affiliates) having a market
value of two times the exercise price of the RLR Right.
In certain instances, RLR may exchange RLR Rights for shares of RLR Common
Stock or reduce the 20% stock ownership threshold to not less than 10%.
The RLR Rights are redeemable at a price of one cent per RLR Right at any
time prior to the 30th day after a public announcement that a person has
become an Acquiring Person, provided, however, that redemption may occur after
any person has become an Acquiring Person only if there has not been a change
in control of the RLR Board. The redemption period may be extended if no such
change in control has occurred or if no person has become an Acquiring Person.
LIQUIDATION
Subject to preferential payments due or other rights with respect to any
shares of RLR Preferred Stock that may then be issued and outstanding, in the
event of any liquidation of RLR, the holders of RLR Common Stock are entitled
to share, in proportion to the number of shares of RLR Common Stock held, in
the assets remaining after discharge of all obligations and liabilities of
RLR.
LIMITATIONS ON CHANGE IN CONTROL
The RLR Certificate and the RLR By-Laws provide that the RLR Board will be
divided into three classes serving staggered terms, with one class of
directors to be elected for a three-year term at each annual meeting of RLR
stockholders. As a result, at least two meetings of RLR stockholders will
generally be required for RLR stockholders to effect a change in control of
the RLR Board. The RLR Certificate and the RLR By-Laws also provide that
stockholder action may be taken only at annual or special meetings of
stockholders, and may not be taken by stockholder consent, and that
stockholders are not permitted to call, or to require the RLR Board to call,
special meetings of stockholders. The RLR Certificate provides that, when
considering a merger, consolidation, sale of assets, business combination
(including a Business Combination under the RLR Fair Price Provision) or other
transaction (including a tender or exchange offer), the RLR Board and any
committee thereof, the directors and the officers of RLR may, in considering
the best interests of RLR and RLR's stockholders, consider the interests of
and the effects of such transaction upon the employees, customers and
suppliers of RLR and its subsidiaries and upon communities in which RLR and
its subsidiaries are located or do business. The RLR By-Laws provide that
advance notice of nominations for the election of directors to be made at, and
business to be brought before, an annual meeting of stockholders by an RLR
stockholder must be received by the Secretary of RLR not less than 60 days in
advance of such meeting (except that if public disclosure of such meeting is
made less than 75 days prior to the meeting, the notice need only be received
within 15 days following such public disclosure). RLR has entered into
agreements with certain of its executive employees for certain financial
arrangements that RLR will provide upon termination of employment under
certain circumstances following a change in control of RLR. In addition,
certain retirement and other employee benefit arrangements provide for
accelerated vesting of benefits and allocation to participants of surplus
retirement plan benefits upon a change in control of RLR. The foregoing
provisions and agreements, the voting provisions, including the RLR
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<PAGE>
Fair Price Provision, referred to above under "Voting Rights," the RLR Rights
Agreement and the authority of the RLR Board to issue additional shares of
capital stock, without action or approval of the RLR stockholders, could have
the effect of discouraging, delaying or preventing a tender or exchange offer,
proxy contest or other attempt to gain control of or change the management of
RLR.
LIMITATION ON CERTAIN LIABILITY OF DIRECTORS AND INDEMNIFICATION
The RLR Certificate and RLR By-Laws contain provisions limiting the liability
of directors for monetary damages to RLR and its stockholders for breach of
fiduciary duty of care to RLR and authorizing the indemnification of directors,
officers and employees to the fullest extent permitted by Delaware Law. RLR
maintains a directors' and officers' liability insurance policy.
TRANSFER AGENT
The Transfer Agent for the RLR Common Stock is Norwest Bank Minnesota,
National Association.
MARKET PRICE AND DIVIDEND INFORMATION
FOR RLR AND SCC COMMON STOCK
RLR Common Stock and SCC Common Stock are each listed and principally traded
on the NYSE under the symbols "RLR" and "SRC," respectively.
The following table shows, for the periods indicated, the reported high and
low sale prices on the NYSE Composite Tape and dividends for the RLR Common
Stock and SCC Common Stock:
<TABLE>
<CAPTION>
RLR COMMON STOCK SCC COMMON STOCK
------------------------- -------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995:
First Quarter............ $35.50 $29.00 $0.225 $26.125 $22.00 $0.12
Second Quarter........... 39.625 33.75 0.25 25.875 22.625 0.12
Third Quarter............ 41.50 36.00 0.25 28.50 24.50 0.12
Fourth Quarter........... 44.50 39.875 0.25 27.75 23.375 0.12
1996:
First Quarter............ 51.625 41.50 0.25 27.625 24.875 0.12
Second Quarter........... 47.00 41.375 0.28 29.625 24.875 0.12
Third Quarter............ 48.125 40.00 0.28 32.00 25.00 0.12
Fourth Quarter........... 58.375 47.625 0.28 35.625 30.50 0.12
1997:
First Quarter............ 65.375 54.00 0.28 47.375 35.125 0.12
Second Quarter (through
May 20)................. 64.875 57.25 0.31 48.00 44.625 0.14
</TABLE>
On February 24, 1997, public announcement of the Merger was made. The closing
sale price per share of RLR Common Stock on the NYSE Composite Tape on February
21, 1997 (the last trading day prior to the public announcement of the Merger)
was $59.25, and the closing sale price per share of SCC Common Stock on the
NYSE Composite Tape on such date was $37.50. On May 20, 1997, the closing sale
price per share on the NYSE Composite Tape of RLR Common Stock was $63.125 and
of SCC Common Stock was $47.25. If the Exchange Price were equal to the closing
sale price per share of RLR Common Stock on May 20, 1997, stockholders of SCC
who are to receive shares of RLR Common Stock would be entitled to receive
.7749 of a share of RLR Common Stock, having a market value of $48.92, in
exchange for each share of SCC Common Stock held by them. See the discussion of
the determination of the actual Exchange Price and Exchange Ratio on the cover
page of this Proxy Statement/Prospectus.
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<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS OF SCC AND RLR
As a result of the Merger, stockholders of SCC will become stockholders of
RLR, and their rights will be governed by the RLR Certificate, By-Laws and
Rights Agreement, which differ in certain material respects from SCC's
Certificate of Incorporation and Bylaws. The following is a summary of certain
material differences between the rights of holders of SCC Common Stock and
holders of RLR Common Stock. This summary does not purport to identify all
differences that may, under given situations, be material to SCC stockholders.
Reference is made to SCC's Certificate of Incorporation and Bylaws, the RLR
Certificate, By-Laws and Rights Agreement, and Delaware Law.
GENERAL
SCC and RLR are both incorporated under Delaware Law. Holders of SCC Common
Stock, whose rights as stockholders are currently governed by the SCC
Certificate and the SCC Bylaws, will, at the Effective Time of the Merger,
become holders of RLR Common Stock and their rights as such will be governed
by the RLR Certificate and the RLR By-Laws. In addition, SCC stockholders have
Rights under the SCC Rights Plan which will be terminated prior to the
Effective Time, when, as holders of RLR Common Stock, they will become holders
of RLR Rights pursuant to the RLR Rights Agreement. Certain differences
between the rights of holders of SCC Common Stock and RLR Common Stock are
summarized below.
Certain provisions contained in Delaware Law, the RLR Certificate, the RLR
By-Laws and the RLR Rights Agreement discourage transactions involving an
actual or threatened change in control of RLR. To the extent any of these
provisions has such an effect, stockholders might thereby be deprived of an
opportunity to sell their shares at a premium above the market price. These
provisions could thus be considered to be anti-takeover measures. See the
discussion below and "Description of RLR Capital Stock--Share Rights Plan" and
"--Limitations on Change in Control" for a description of existing provisions
in the RLR Certificate, the RLR By-Laws and the RLR Rights Agreement that may
be viewed as having anti-takeover effects. The RLR Rights Agreement was not
adopted in response to any efforts, of which RLR management was or is aware,
to accumulate RLR Common Stock or to obtain control of RLR, and RLR management
has no knowledge of any present effort to accumulate RLR Common Stock or to
obtain control of RLR.
RLR PREFERRED STOCK
At the Effective Time, the holders of SCC Common Stock will become holders
of RLR Common Stock. Each share of RLR Common Stock received by the present
holders of SCC Common Stock in the Merger will have attached one Right to
purchase from RLR one-tenth of a share of Junior Participating Preferred Stock
at an exercise price of $200, subject to adjustment, as described above under
"Description of RLR Capital Stock--Share Rights Plan."
VOTING RIGHTS
The RLR Certificate generally provides that, except as otherwise provided
therein or by law, holders of the shares of RLR Common Stock are entitled to
one vote per share. Holders of shares of RLR Common Stock do not have any
cumulative voting rights. Except as otherwise provided by law and in the
resolution or resolutions providing for the issuance thereof, holders of
shares of RLR Preferred Stock have no voting rights. For a description of the
voting rights of RLR Preferred Stock, see "Description of RLR Capital Stock--
Voting Rights."
The SCC Certificate provides that, except as otherwise provided by law,
holders of shares of SCC Common Stock are entitled to one vote per share.
Holders of shares of SCC Common Stock do not have any cumulative voting
rights.
The RLR Certificate requires the affirmative vote of 75% of the outstanding
capital stock entitled to vote, voting as a single class: (i) to approve
certain business combinations, (ii) to remove directors, (iii) to amend
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certain provisions of the RLR Certificate, and (iv) in order for the
stockholders to amend the RLR By-Laws. The SCC Certificate requires the
affirmative vote of two-thirds of the outstanding capital stock entitled to
vote to amend certain provisions of the SCC Certificate and Bylaws.
AMENDMENT OF THE RLR CERTIFICATE
As stated above, the RLR Certificate requires the approval of 75% of the
shares of RLR capital stock entitled to vote in order to amend certain
provisions of the RLR Certificate, as compared with the more-than-two-thirds
vote required to amend certain provisions of the SCC Articles. The provisions
of the RLR Certificate that may be amended only by a 75% vote are: Article
Fourth (setting forth, among other things, the authorized capital stock of RLR
and authorizing the RLR Board, without a vote of stockholders, to issue RLR
Common Stock and RLR Preferred Stock and to fix the terms of series of the RLR
Preferred Stock); the following sections of Article Sixth: Section 2
(providing for classification of the RLR Board), Section 4 (governing removal
of the directors by stockholders), Section 7 (limiting personal monetary
liability of directors for breach of the fiduciary duty of care), Section 8
(authorizing the RLR Board to adopt or amend the RLR By-Laws and requiring a
vote of 75% of the outstanding shares of voting stock in order for
stockholders to amend the RLR By-Laws), Section 9 (providing that the RLR
Board may consider the interests of and effects on employees, customers and
suppliers and communities in which RLR and its subsidiaries are located or do
business when considering a merger, sale of assets, business combination or
other transaction), Section 10 (authorizing the RLR Board to determine certain
matters with respect to stockholder inspections of books and records), Section
11 (providing that the directors are empowered to exercise all powers and to
do all acts that may be done by RLR) and Section 12 (preventing stockholders
from taking action by written consent and providing that the procedures for
calling, and persons entitled to call, a special meeting of stockholders shall
be specified by the RLR By-Laws); Article Seventh (the RLR Fair Price
Provisions (see "Transactions with Interested Shareholders" below); and
Article Tenth (requiring a 75% vote to amend the foregoing provisions of the
RLR Certificate).
The requirement of an increased stockholder vote to amend certain provisions
of the RLR Certificate and the RLR By-Laws is designed to prevent a
stockholder who controls a majority of the voting power of RLR from avoiding
the requirements of those provisions by simply amending or replacing them and
to make it more difficult for the stockholder to circumvent certain of the
other provisions contained in the RLR Certificate, such as the classification
of the RLR Board, by adopting by-laws restricting the power of the RLR Board
or the ability of RLR to operate its business in the interests of all of its
stockholders. These provisions, however, will also make it more difficult for
stockholders to amend the RLR Certificate and the RLR By-Laws even if a
majority of the stockholders deem such amendment to be in their best
interests.
TRANSACTIONS WITH INTERESTED SHAREHOLDERS
The RLR Fair Price Provision requires the approval of Business Combinations
(as defined) involving Interested Shareholders (as defined) by a vote of the
holders of at least 75% of RLR's outstanding capital stock entitled to vote,
unless either the transaction is approved by a majority of the Continuing
Directors (as defined) or the transaction meets certain fair price and
procedural requirements. The purpose of this provision is to prevent an
Interested Shareholder from taking advantage of its position as a substantial,
if not controlling, stockholder and from engaging in "self-dealing"
transactions with the corporation which may not be fair to other stockholders
and to give greater assurance to the holders of the RLR capital stock that
they will receive fair and equitable treatment in the event of a Business
Combination involving the Interested Shareholder. This is accomplished by
requiring Business Combinations to meet certain fair price and procedural
requirements or to be approved either by a majority of the Continuing
Directors or 75% of the outstanding shares entitled to vote on the matter,
voting as a single class. For similar reasons however, this provision makes
more difficult and discourages a merger or takeover of RLR or the acquisition
of control of RLR and thus the removal of incumbent management. In addition,
to the extent that these provisions discourage a takeover that would result in
a change of RLR management, those changes may be less likely to occur. The SCC
Certificate contains no such provision.
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CONSIDERATION OF OTHER CONSTITUENCIES
The RLR Certificate provides that, when considering a merger, consolidation,
sale of assets, business combination (including a Business Combination
involving an Interested Shareholder as described above) or other transaction
(including a tender or exchange offer), the RLR Board and any committee
thereof, the directors and the officers of RLR may, in considering the best
interests of RLR and its stockholders, consider the interests of and the
effects of such transaction upon the employees, customers and suppliers of RLR
and its subsidiaries and upon communities in which RLR and its subsidiaries
are located or do business.
This provision in the RLR Certificate will not make a Business Combination
or other transaction regarded by the RLR Board as being in the interests of
RLR and its stockholders more difficult to accomplish, but it would permit the
RLR Board to determine that a Business Combination or other transaction is not
in the best interests of RLR or its stockholders (and thus oppose it) on the
basis of various factors deemed relevant. In some cases, such opposition by
the RLR Board might have the effect of maintaining the position of incumbent
management.
Neither the SCC Certificate nor the SCC Bylaws contain a similar provision
regarding the consideration of other constituencies by the SCC Board in making
a decision whether to proceed with a business combination or other
transaction.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF DIRECTORS
The RLR Certificate provides that no director shall be liable to RLR or its
stockholders for monetary damages for breach of fiduciary duty by the director
as a director, except that such provision shall not eliminate or limit the
liability of the director to the extent provided by applicable law (i) for any
breach of the duty of loyalty of the director to RLR or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any unlawful action under
Section 174 of Delaware Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
In general, under Delaware Law the indemnification provided for therein is
not deemed to be exclusive of any nonstatutory indemnification rights provided
to directors, officers and employees under any by-law, agreement or vote of
stockholders or disinterested directors. The RLR By-Laws and the SCC
Certificate provide for the indemnification of directors, officers, agents and
employees, to the fullest extent permitted by Delaware Law against liability
arising by reason of the fact that such individual was a director, officer,
agent or employee of RLR or SCC, as the case may be.
LEGAL MATTERS
The validity of the shares of RLR Common Stock to be issued in the Merger
will be passed upon for RLR by Faegre & Benson LLP, Minneapolis, Minnesota.
Certain tax consequences of the Merger will be passed upon for RLR by Faegre &
Benson LLP and for SCC by Murtha, Cullina, Richter and Pinney, Hartford,
Connecticut.
EXPERTS
The consolidated financial statements of RLR and related financial statement
schedules as of December 31, 1996 and 1995 and for each of the three years in
the period ended December 31, 1996, incorporated in this Proxy
Statement/Prospectus by reference from the RLR Annual Report on Form 10-K for
the year ended December 31, 1996, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated
herein by reference and have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of SCC as of December 31, 1996 and 1995
and for each of the years in the three-year period ended December 31, 1996, and
the related
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financial statements schedule appearing in SCC's Annual Report (Form 10-K) for
the year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report therein and are incorporated
by reference herein in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
If the stockholders of SCC do not approve and adopt the Merger Agreement and
the Merger or if the Merger is not consummated, SCC anticipates holding its
next annual meeting of stockholders on May 14, 1998. Stockholder proposals
intended to be presented at that meeting must be submitted by December 2, 1997
for consideration by SCC for possible inclusion in the proxy materials for that
meeting.
INDEPENDENT ACCOUNTANTS
Representatives of Ernst & Young LLP are expected to be present at the
Special Meeting and will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
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EXHIBIT A
CONFORMED COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
RELIASTAR FINANCIAL CORP.
AND
SECURITY-CONNECTICUT CORPORATION
DATED AS OF FEBRUARY 23, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(NOT PART OF THE AGREEMENT)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION AND RECITALS................................................. A-5
I. CONTEMPLATED BUSINESS COMBINATION...................................... A-5
1.1 The Merger.......................................................... A-5
1.2 Effect of the Merger................................................ A-5
1.3 Consummation of the Merger.......................................... A-6
1.4 Closing............................................................. A-6
1.5 Certificate of Incorporation and By-Laws............................ A-6
1.6 Conversion of Securities............................................ A-6
1.7 Letters of Transmittal.............................................. A-8
1.8 Lost, Stolen or Destroyed Certificate............................... A-8
1.9 Further Action...................................................... A-8
II. REPRESENTATIONS AND WARRANTIES........................................ A-8
2.1 Representations and Warranties of RELIASTAR......................... A-8
(a) Organization and Compliance with Law.............................. A-8
(b) Capitalization.................................................... A-9
(c) Authorization and Validity of Agreements.......................... A-10
(d) No Notices or Approvals Required and No Conflicts................. A-10
(e) RELIASTAR Reports and Financial Statements........................ A-11
(f) Conduct of Business in the Ordinary Course and Absence of Certain
Changes and Events................................................... A-12
(g) Certain Fees...................................................... A-13
(h) Litigation........................................................ A-13
(i) Employee Benefit Plans............................................ A-13
(j) Taxes............................................................. A-14
(k) Intellectual Property............................................. A-15
(l) Environmental Matters............................................. A-15
(m) Opinion of Financial Advisor...................................... A-16
(n) Investigation by RELIASTAR........................................ A-16
2.2 Representations and Warranties of SECURITY.......................... A-16
(a) Organization and Compliance with Law.............................. A-16
(b) Capitalization.................................................... A-17
(c) Authorization and Validity of Agreements.......................... A-18
(d) No Notices or Approvals Required and No Conflicts................. A-18
(e) SECURITY Reports and Financial Statements......................... A-19
(f) Conduct of Business in the Ordinary Course and Absence of Certain
Changes and Events................................................... A-20
(g) Certain Fees...................................................... A-21
(h) Litigation........................................................ A-21
(i) Employee Benefit Plans............................................ A-21
(j) Taxes............................................................. A-22
(k) Intellectual Property............................................. A-23
(l) No Secured Debt................................................... A-23
(m) Environmental Matters............................................. A-23
(n) Opinion of Financial Advisor...................................... A-24
(o) Investigation by SECURITY......................................... A-24
III. COVENANTS OF SECURITY................................................ A-24
3.1 Conduct of Business by SECURITY and SECURITY Subsidiaries Pending
the Merger............................................................. A-24
3.2 Proxy Statement..................................................... A-26
3.3 Meeting of Stockholders of SECURITY................................. A-26
3.4 No Solicitation of Acquisition Transactions......................... A-26
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.5 Access to Information; Confidentiality.............................. A-27
3.6 Dissenters' Rights.................................................. A-28
3.7 Tax Certificate..................................................... A-28
3.8 Amendment to Rights Plan............................................ A-28
IV. COVENANTS OF RELIASTAR................................................ A-28
4.1 Conduct of Business by RELIASTAR and RELIASTAR Subsidiaries Pending
the Merger............................................................. A-28
4.2 Proxy Statement..................................................... A-30
4.3 Registration Statement.............................................. A-30
4.4 Access to Information; Confidentiality.............................. A-30
4.5 Reservation of RELIASTAR Capital Stock.............................. A-30
4.6 Tax Certificate..................................................... A-31
4.7 Employee Benefits................................................... A-31
4.8 Indemnification..................................................... A-31
4.9 SECURITY Options.................................................... A-32
4.10 Tax Matter......................................................... A-32
V. MUTUAL COVENANTS....................................................... A-32
5.1 Expenses............................................................ A-32
5.2 Reimbursement of Expenses; SECURITY Fee............................. A-32
5.3 Additional Agreements............................................... A-33
5.4 Notification of Certain Matters..................................... A-33
5.5 Agreement to Defend................................................. A-33
5.6 Compliance with HSR Act............................................. A-33
5.7 Securities Laws..................................................... A-33
VI. CONDITIONS............................................................ A-34
6.1 Conditions to Obligations of Each Party to Effect the Merger........ A-34
6.2 Additional Conditions to Obligations of RELIASTAR................... A-34
6.3 Additional Conditions to Obligations of SECURITY.................... A-35
VII. MISCELLANEOUS........................................................ A-36
7.1 Termination......................................................... A-36
7.2 Effect of Termination............................................... A-37
7.3 Waiver and Amendment................................................ A-37
7.4 Nonsurvival of Representations and Warranties....................... A-37
7.5 Public Statements................................................... A-37
7.6 Knowledge........................................................... A-37
7.7 Assignment.......................................................... A-37
7.8 Notices............................................................. A-37
7.9 Governing Law....................................................... A-38
7.10 Severability....................................................... A-38
7.11 Counterparts....................................................... A-38
7.12 Headings........................................................... A-38
7.13 Entire Agreement................................................... A-38
7.14 Limited Liability.................................................. A-38
7.15 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL...................... A-39
</TABLE>
EXHIBIT 2.1(A)RELIASTAR SUBSIDIARIES
EXHIBIT 2.2(A)SECURITY SUBSIDIARIES
EXHIBIT 3.7 SUBSTANCE OF SECURITY TAX CERTIFICATE
EXHIBIT 4.6 SUBSTANCE OF RELIASTAR TAX CERTIFICATE
EXHIBIT 4.7(B)RELIASTAR PLANS
EXHIBIT 6.2(E)SUBSTANCE OF OPINION OF COUNSEL TO SECURITY
EXHIBIT 6.3(D)
SUBSTANCE OF OPINION OF COUNSEL TO RELIASTAR
A-2
<PAGE>
INDEX OF DEFINED TERMS
(NOT PART OF THE AGREEMENT)
<TABLE>
<CAPTION>
SECTION
------------
<S> <C>
Acquisition Proposal............................................... 5.2(b)
Acquisition Transaction............................................ 3.4
Agreement.......................................................... Introduction
Approval Date...................................................... 1.4
By-Laws............................................................ 1.5
Certificate........................................................ 1.5
Closing............................................................ 1.4
Closing Date....................................................... 1.4
Code............................................................... Recitial
Common Stock of the Surviving Corporation.......................... 1.6(A)
Constituent Corporations........................................... 1.2
Delaware Law....................................................... 1.1
Effective Time..................................................... 1.3
Environmental Law.................................................. 2.1(1)(i)
ERISA.............................................................. 2.1(i)(i)
Exchange Agent..................................................... 1.6(b)
Exchange Price..................................................... 1.6(b)(i)
Exchange Ratio..................................................... 1.6(b)
Hazardous Substances............................................... 2.1(1)(i)
HSR Act............................................................ 2.1(d)(iii)
IRS................................................................ 2.1(i)(iii)
Indemnitees........................................................ 4.9(a)
LSL................................................................ 2.2(a)
Material Adverse Effect on RELIASTAR............................... 2.1(a)
Material Adverse Effect on SECURITY................................ 2.2(a)
Material Breach.................................................... 5.2(a)
Merger............................................................. Recitals
1933 ACT........................................................... 2.1(e)(i)
1934 ACT........................................................... 2.1(e)(i)
NLIC............................................................... 2.1(a)
PBGC............................................................... 2.1(i)(ii)
Potential Acquirer................................................. 3.4
Potential Acquirer Confidentiality Agreement....................... 3.4
Proxy Statement.................................................... 3.2
Registration Statement............................................. 4.3
RELIASTAR.......................................................... Introduction
RELIASTAR Board.................................................... Recitals
RELIASTAR Common Stock............................................. Recitals
RELIASTAR Disclosure Letter........................................ 2.1
RELIASTAR Drip..................................................... 2.1(b)(ii)
RELIASTAR Employee Plans........................................... 2.1(i)(i)
RELIASTAR Insurance Filings........................................ 2.1(e)(v)
RELIASTAR Insurance Subsidiaries................................... 2.1(a)
RELIASTAR Insurance Subsidiary Shares.............................. 2.1(b)(iii)
RELIASTAR Junior Preferred Stock................................... 2.1(b)(i)
RELIASTAR Pension Plans............................................ 2.1(i)(i)
RELIASTAR Plans.................................................... 4.7(b)
RELIASTAR Proxy Statement.......................................... 2.1(b)(ii)
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
SECTION
------------
<S> <C>
RELIASTAR Rights................................................... 2.1(b)(i)
RELIASTAR Rights Agreement......................................... 2.1(b)(i)
RELIASTAR SEC Reports.............................................. 2.1(e)(i)
RELIASTAR Subsidiaries............................................. 2.1(a)
RELIASTAR Subsidiary Shares........................................ 2.1(b)(iii)
RELIASTAR 10-K..................................................... 2.1(b)(ii)
RELIASTAR 10-Qs.................................................... 2.1(e)(iii)
RBSL............................................................... 2.1(a)
RLIC............................................................... 2.1(a)
RUSLIC............................................................. 2.1(a)
SEC................................................................ 2.1(e)(i)
Section 2.1(J) Investor............................................ 2.1(j)(iv)
Section 2.2(J) Investor............................................ 2.2(j)(iv)
SECURITY........................................................... Introduction
SECURITY Board..................................................... Recitals
SECURITY Common Stock.............................................. Recitals
SECURITY Disclosure Letter......................................... 2.2
SECURITY Employee Plans............................................ 2.2(i)(i)
SECURITY Incentive Shares.......................................... 2.2(b)(ii)
SECURITY Insurance Filings......................................... 2.2(e)(vi)
SECURITY Insurance Subsidiaries.................................... 2.2(a)
SECURITY Long-Term Incentive Plan.................................. 2.2(b)(ii)
SECURITY Option Plan............................................... 2.2(b)(ii)
SECURITY Options................................................... 2.2(b)(ii)
SECURITY Pension Plans............................................. 2.2(i)(i)
SECURITY Plans..................................................... 4.7(a)
SECURITY Rights.................................................... 2.2(b)(i)
SECURITY Rights Agreement.......................................... 2.2(b)(i)
SECURITY SEC Reports............................................... 2.2(e)(i)
SECURITY Subsidiaries.............................................. 2.2(a)
SECURITY Subsidiary Shares......................................... 2.2(b)(iii)
SECURITY 10-K...................................................... 2.2(e)(iv)
SECURITY 10-Qs..................................................... 2.2(e)(iv)
SCL................................................................ 2.2(a)
Surviving Corporation.............................................. 1.1
Tax or Taxes....................................................... 2.1(j)(i)
Tax Returns........................................................ 2.1(j)(i)
</TABLE>
A-4
<PAGE>
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February 23,
1997, by and between ReliaStar Financial Corp., a Delaware corporation
("RELIASTAR"), and Security-Connecticut Corporation, a Delaware corporation
("SECURITY").
RECITALS
WHEREAS, the Board of Directors of RELIASTAR (the "RELIASTAR Board") and the
Board of Directors of SECURITY (the "SECURITY Board") respectively believe it
is in the long-term strategic interests of RELIASTAR and its stockholders and
of SECURITY and its stockholders that RELIASTAR and SECURITY effect the
transactions contemplated hereby;
WHEREAS, RELIASTAR and SECURITY desire to adopt a plan of reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended (the "Code"), providing for the merger of SECURITY
with and into RELIASTAR (the "Merger") pursuant to which all of the issued and
outstanding shares of Common Stock, $.01 par value per share, of SECURITY
("SECURITY Common Stock") will be converted into and exchanged for shares of
Common Stock, without par value, of RELIASTAR ("RELIASTAR Common Stock"), all
pursuant to the plan of reorganization set forth herein;
WHEREAS, the RELIASTAR Board and the SECURITY Board have each approved this
Agreement, the Merger and the other transactions contemplated hereby;
WHEREAS, RELIASTAR and SECURITY desire to effect the Merger and the other
transactions contemplated hereby; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties, covenants and agreements made by each to the other as an
inducement to the consummation of the Merger and the other transactions
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements contained herein, the parties hereto
hereby agree as follows:
I. CONTEMPLATED BUSINESS COMBINATION
In accordance with the terms and subject to the conditions of this
Agreement, RELIASTAR and SECURITY shall effect the Merger as follows:
1.1 The Merger. At the Effective Time (as defined in Section 1.3), in
accordance with this Agreement and the General Corporation Law of the State
of Delaware (the "Delaware Law"), SECURITY shall be merged with and into
RELIASTAR, the separate existence of SECURITY shall cease, and RELIASTAR
shall continue as the surviving corporation under the corporate name it
possesses immediately prior to the Effective Time and shall be governed by
the laws of the State of Delaware. RELIASTAR is herein sometimes referred
to as the "Surviving Corporation".
1.2 Effect of the Merger. At the Effective Time, the Surviving
Corporation shall thereupon and thereafter possess all the rights,
privileges, powers and franchises, of a public as well as of a private
nature, of each of RELIASTAR and SECURITY (collectively, the "Constituent
Corporations") and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; all and singular, the
rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property of each of the Constituent Corporations,
real, personal and mixed, and all debts due to each of the Constituent
Corporations on whatever account, as well for stock subscriptions as all
other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation; all assets,
property, rights, privileges, powers and franchises and all and every other
interest of each of the Constituent Corporations shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
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respective Constituent Corporations; and the title to any real estate
vested by deed or otherwise under the laws of the United States, the State
of Delaware or other jurisdiction in each of the Constituent Corporations
shall be vested in the Surviving Corporation and shall not revert or be in
any way impaired by reason of the Merger; and all rights of creditors and
all liens upon any property of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities, obligations and duties of
each of the Constituent Corporations shall thenceforth attach to the
Surviving Corporation and may be enforced against it to the extent as if
such debts, liabilities, obligations and duties had been incurred or
contracted by it; all in accordance with Section 259(a) of the Delaware
Law.
1.3 Consummation of the Merger. As soon as is practicable on the Closing
Date (as defined in Section 1.4) after all conditions to the consummation
of the Merger set forth herein have been satisfied or duly waived, the
parties hereto shall cause the Merger to be consummated by filing with the
Secretary of State of the State of Delaware, a Certificate of Merger in
such form as is required by, and executed, acknowledged and certified in
accordance with, the relevant provisions of the Delaware Law (the time of
such filing is herein referred to as the "Effective Time").
1.4 Closing. The closing of the Merger (the "Closing") shall take place:
(a) at the offices of Faegre & Benson LLP, 2200 Norwest Center, 90
South Seventh Street, Minneapolis, Minnesota 55402, at 10:00 a.m.
Minneapolis time on the fifth business day following (i) the date of
the last to occur of compliance with the conditions to the Closing set
forth in Section 6.1(a), (b), (d), (e) and (f), (ii) if any order
referred to in Section 6.1(c) shall be in effect on the date described
in the foregoing Clause (i), the date such order ceases to be in
effect, or (iii) if any condition set forth in Section 6.2 or Section
6.3 is not satisfied or waived on the date described in the foregoing
Clause (i) or (ii), the date on which any cure period provided by
Section 7.1(d) or 7.1(e) expires or such earlier date on which the cure
is effected (the date determined in accordance with foregoing Clauses
(i), (ii) and (iii) hereinafter called the "Approval Date"); or
(b) at such other time and place or on such other date as RELIASTAR
and SECURITY shall mutually agree (such fifth business day following
the Approval Date or such other mutually agreed to date is herein
referred to as the "Closing Date").
1.5 Certificate of Incorporation and By-Laws. The Certificate of
Incorporation of RELIASTAR (the "Certificate") and the By-Laws of RELIASTAR
(the "By-Laws"), as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation and By-Laws of the Surviving
Corporation and thereafter shall continue to be its Certificate of
Incorporation and By-Laws until amended as provided therein and in
accordance with the Delaware Law.
1.6 Conversion of Securities. In accordance with the terms and subject to
the conditions of this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of RELIASTAR, SECURITY or the
holder of any of the following securities:
(a) Each share of RELIASTAR Common Stock outstanding immediately
prior to the Effective Time shall remain outstanding as a share of
RELIASTAR Common Stock (the "Common Stock of the Surviving
Corporation") and shall not be converted into any other securities or
cash pursuant to the Merger. The certificates for such shares shall not
be surrendered or in any way modified by reason of the effectiveness of
the Merger.
(b) Each share of SECURITY Common Stock outstanding immediately prior
to the Effective Time shall be automatically converted into such number
of fully paid and nonassessable shares of Common Stock of the Surviving
Corporation as determined in accordance with this Section 1.6(b). The
number of shares of Common Stock of the Surviving Corporation to be
received for each share of SECURITY Common Stock (the "Exchange Ratio")
shall be determined as follows:
(i) if the average of the per share closing sale prices of RELIASTAR
Common Stock on the New York Stock Exchange Composite Tape for the 20
trading days immediately prior to the Approval Date (the "Exchange
Price") is equal to or greater than $52.65 and not greater than $60.65,
the Exchange Ratio shall be equal to the quotient (rounded to the
fourth decimal place) obtained by dividing $47.00 by the Exchange
Price;
A-6
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(ii) if the Exchange Price is less than $52.65 but equal to or
greater than $49.00, the Exchange Ratio shall be .8927;
(iii) if the Exchange Price is greater than $60.65 but equal to or
less than $64.30, the Exchange Ratio shall be .7749;
(iv) if the Exchange Price is less than $49.00, the Exchange Ratio
shall be as set forth in Clause (A) or (B) below:
(A) .8927, or
(B) if RELIASTAR shall so designate by written notice to SECURITY
on the second business day following the Approval Date, the quotient
(rounded to the fourth decimal point) obtained by dividing $43.74 by
the Exchange Price; and
(v) if the Exchange Price is greater than $64.30, the Exchange Ratio
shall be as set forth in Clause (A) or (B) below:
(A) .7749, or
(B) if SECURITY shall so designate by written notice to RELIASTAR
on the second business day following the Approval Date, the quotient
(rounded to the fourth decimal point) obtained by dividing $49.83 by
the Exchange Price.
The Exchange Ratio shall be adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into RELIASTAR Common Stock or
SECURITY Common Stock), exchange of shares, reclassification,
reorganization, recapitalization or other similar change (including the
exercise of any RELIASTAR Rights under the RELIASTAR Rights Agreement (as
such terms are defined in Section 2.1(b)(i)) or the exercise of any
SECURITY Rights under the SECURITY Rights Agreement (as such terms are
defined in Section 2.2(b)(i))) with respect to the RELIASTAR Common Stock
or the SECURITY Common Stock occurring after the date hereof and prior to
the Effective Time. After the Effective Time, each record holder of a
certificate or certificates that immediately prior thereto represented
outstanding shares of SECURITY Common Stock shall be entitled, upon
surrender thereof to the Surviving Corporation or the exchange or transfer
agent (the "Exchange Agent") for the Common Stock of the Surviving
Corporation, promptly to receive in exchange therefor a certificate or
certificates representing the number of whole shares of Common Stock of the
Surviving Corporation into which such shares of SECURITY Common Stock shall
have been converted pursuant to this Section 1.6, in such denominations and
registered in such names as such holder may request, and, in addition, each
such holder who would otherwise be entitled to a fraction of a share of
Common Stock of the Surviving Corporation shall be entitled, upon such
surrender of a certificate or certificates to the Surviving Corporation or
the Exchange Agent, promptly to be paid cash for such fraction of a share
in accordance with Section 1.6(e). Until so surrendered, each certificate
that immediately prior to the Effective Time represented outstanding shares
of SECURITY Common Stock shall be deemed from and after the Effective Time,
for all corporate purposes other than the payment of dividends or other
distributions, to evidence the ownership of the number of whole shares of
Common Stock of the Surviving Corporation into which such shares of
SECURITY Common Stock shall have been so converted and to be paid cash in
lieu of the issuance of any fractional share of Common Stock of the
Surviving Corporation in accordance with Section 1.6(e). Unless and until
any such certificate that immediately prior to the Effective Time
represented outstanding shares of SECURITY Common Stock shall be so
surrendered, no dividends or other distributions payable to the holders of
Common Stock of the Surviving Corporation, as of the Effective Time or any
time thereafter, shall be paid to the holder of such certificate; provided
however, that, upon surrender of such certificate that immediately prior to
the Effective Time represented outstanding shares of SECURITY Common Stock,
there will be promptly paid to the record holder of the certificate or
certificates issued in exchange therefor the amount, without interest
thereon, of dividends and other distributions, if any, that theretofore
became payable with respect to the number of whole shares of Common Stock
of the Surviving Corporation issued to such holder.
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(c) All shares of Common Stock of the Surviving Corporation into which
shares of SECURITY Common Stock shall have been converted pursuant to
Section 1.6(b) shall be issued, and cash payable for any fractional shares
pursuant to Section 1.6(e) shall be paid, in full satisfaction of all
rights pertaining to such converted shares.
(d) If any certificate for shares of Common Stock of the Surviving
Corporation is to be issued in a name other than that of the record holder
of the certificate surrendered in exchange therefor, it will be a condition
of the issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such issuance shall have paid to the Exchange Agent or
any other agent designated by RELIASTAR any transfer or other taxes
required by reason of the issuance of a certificate for shares of Common
Stock of the Surviving Corporation in any name other than that of the
record holder of the certificate surrendered, or established to the
satisfaction of the Exchange Agent or any other agent designated by
RELIASTAR that such tax has been paid or is not payable.
(e) No fraction of a share of Common Stock of the Surviving Corporation
shall be issued, but in lieu thereof each record holder of shares of
SECURITY Common Stock who would otherwise be entitled to a fraction of a
share of Common Stock of the Surviving Corporation shall be entitled, upon
surrender to the Surviving Corporation or the Exchange Agent of a
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of SECURITY Common Stock, promptly to be
paid in cash an amount equal to the value of such fraction of a share based
upon the Exchange Price and the Exchange Ratio. No interest shall be paid
on any such amount.
(f) All shares of SECURITY Common Stock held by a record holder shall be
aggregated for the purposes of computations of the number of shares of
Common Stock of the Surviving Corporation issuable and cash to be paid in
lieu of fractional shares hereunder.
1.7 Letters of Transmittal. Promptly after the Effective Time, the Surviving
Corporation shall, or shall cause the Exchange Agent to, mail, to each record
holder of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of SECURITY Common Stock, a
letter of transmittal and reasonable instructions for such holder's use in
effecting the surrender of such certificate or certificates in exchange for a
certificate or certificates representing shares of Common Stock of the
Surviving Corporation.
1.8 Lost, Stolen or Destroyed Certificate. In the event that any certificate
evidencing shares of SECURITY Common Stock shall be alleged to have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such
alleged lost, stolen or destroyed certificate, upon the making of an affidavit
of such allegation by the record holder thereof, a certificate for such shares
of Common Stock of the Surviving Corporation and such record holder shall be
entitled to any cash payments required pursuant to Section 1.6; provided
however, that the Surviving Corporation may, in its discretion and as a
condition precedent to the issuance thereof, require such holder of such
alleged lost, stolen or destroyed certificate to deliver a bond in such sum as
the Surviving Corporation may reasonably direct as indemnity against any claim
that may be made against the Surviving Corporation and/or the Exchange Agent
with respect to the certificate alleged to have been lost, stolen or
destroyed.
1.9 Further Action. Each of RELIASTAR and SECURITY shall take all such
reasonable and lawful action as may be necessary or appropriate in order to
effectuate the Merger as promptly as possible. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Constituent Corporations, the directors and
officers of each of the Constituent Corporations are fully authorized and
empowered in the name and on behalf of their respective corporation or
otherwise to take, and shall take, all such further action.
II. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of RELIASTAR. RELIASTAR hereby represents
and warrants to SECURITY that, except as disclosed in a disclosure letter
delivered by RELIASTAR to SECURITY prior to the date hereof (the "RELIASTAR
Disclosure Letter"):
(a) Organization and Compliance with Law. Each of RELIASTAR and its
direct and indirect subsidiaries (all such direct and indirect
subsidiaries, including without limitation ReliaStar Life Insurance
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Company, a Minnesota corporation ("RLIC") and a wholly owned subsidiary of
RELIASTAR, Northern Life Insurance Company, a Washington corporation
("NLIC") and a wholly-owned subsidiary of RLIC, ReliaStar United Services
Life Insurance Company, a Virginia corporation ("RUSLIC") and a wholly-
owned subsidiary of RLIC, and ReliaStar Bankers Security Life Insurance
Company, a New York corporation ("RBSL") and a wholly owned subsidiary of
RUSLIC, are herein sometimes collectively referred to as the "RELIASTAR
Subsidiaries" and RLIC, NLIC, RUSLIC and RBSL are herein sometimes referred
to as the "RELIASTAR Insurance Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
corporate authority and all requisite governmental and other authorizations
to own, lease and operate its assets and properties and to carry on its
business as now being conducted, except such governmental and other
authorizations (if any) where the failure to have such authorizations does
not and would not, either individually or in the aggregate, have a material
adverse effect on the financial condition, results of operations or
business of RELIASTAR and the RELIASTAR Subsidiaries, taken as a whole (a
"Material Adverse Effect on RELIASTAR"). RELIASTAR is incorporated in the
State of Delaware. Exhibit 2.1(a) hereto sets forth the name and
jurisdiction of incorporation of each of the RELIASTAR Subsidiaries. Each
of RELIASTAR and the RELIASTAR Subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect on
RELIASTAR. Each of RELIASTAR and the RELIASTAR Insurance Subsidiaries
possesses all material permits, licenses, authorizations, certificates,
franchises, orders, consents or other indicia of authority required by any
governmental, administrative or regulatory authority or agency and is in
compliance with all applicable laws, judgments, orders, decrees, rules and
regulations, except where the failure to possess such permits, licenses and
other authorizations does not and would not, either individually or in the
aggregate, have a Material Adverse Effect on RELIASTAR. RELIASTAR has
heretofore delivered to SECURITY true and complete copies of the
Certificate and the By-Laws and of the charter and bylaws of each of the
RELIASTAR Insurance Subsidiaries, in each case as in existence on the date
hereof.
(b) Capitalization.
(i) The authorized capital stock of RELIASTAR consists of 100,000,000
shares of RELIASTAR Common Stock and 7,000,000 shares of preferred
stock, without par value. As of December 31, 1996, there were issued
and outstanding 40,016,685 shares of RELIASTAR Common Stock. As of such
date, there were also reserved for issuance up to 2,500,000 shares of
RELIASTAR's Series A Junior Participating Preferred Stock ("RELIASTAR
Junior Preferred Stock") issuable under a Rights Agreement, dated as of
October 7, 1988, as amended, between RELIASTAR and Norwest Bank
Minnesota, National Association, as Rights Agent (the "RELIASTAR Rights
Agreement"), pursuant to which each outstanding share of RELIASTAR
Common Stock has attached to it certain rights ("RELIASTAR Rights")
including rights under certain circumstances to purchase one-tenth of a
share of RELIASTAR Junior Preferred Stock at $200, at the date hereof,
subject to adjustment. Except for shares of RELIASTAR Common Stock
issued in connection with the exercise of options to purchase ReliaStar
Common Stock, since December 31, 1996 no shares of RELIASTAR capital
stock have been issued. All outstanding shares of RELIASTAR capital
stock are validly issued, fully paid and nonassessable and no holder
thereof is entitled to any preemptive rights. All shares of Common
Stock of the Surviving Corporation issued in accordance with this
Agreement, when issued, will be validly issued, fully paid and
nonassessable, will have RELIASTAR Rights attached thereto in
accordance with the RELIASTAR Rights Agreement and will not have any
preemptive rights. Neither RELIASTAR nor any of the RELIASTAR Insurance
Subsidiaries is a party to, nor is RELIASTAR aware of, any voting
agreement, voting trust or similar agreement, arrangement or
understanding relating to any class of capital stock of, or any
agreement, arrangement or understanding providing for registration
rights with respect to any class of capital stock or other securities
of, RELIASTAR or any of the RELIASTAR Insurance Subsidiaries, other
than voting arrangements relating to the RELIASTAR Common Stock held by
RELIASTAR's Employee Stock Ownership Plan and except for any such
voting agreements, voting trusts or similar agreements as may be
disclosed in any filings under Section 13(d) or 13(g) of the 1934 Act.
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(ii) Other than the RELIASTAR Dividend Reinvestment and Optional Cash
Payment Plan (the "RELIASTAR DRIP"), the RELIASTAR Rights Agreement and
options outstanding under the RELIASTAR employee benefit and option
plans as described in RELIASTAR's Annual Report on Form 10-K for the
year ended December 31, 1995 (the "RELIASTAR 10-K") or RELIASTAR's
proxy statement dated March 26, 1996 (the "RELIASTAR Proxy Statement"),
there are not now, and at the Effective Time there will not be, any
outstanding options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of any class of
capital stock of RELIASTAR, or contracts, agreements, arrangements or
understandings to which RELIASTAR is a party, or by which it is or may
be bound, to issue additional shares of any class of its capital stock
or options, warrants, scrip or rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, any additional shares of
any class of capital stock of RELIASTAR.
(iii) The shares of capital stock or other equity securities of each
of the RELIASTAR Subsidiaries are collectively referred to herein as
the "RELIASTAR Subsidiary Shares". The shares of capital stock or other
equity securities of each of the RELIASTAR Insurance Subsidiaries are
collectively referred to herein as the "RELIASTAR Insurance Subsidiary
Shares." All outstanding RELIASTAR Subsidiary Shares are validly
issued, fully paid and nonassessable and, except as set forth in
Exhibit 2.1(a) hereto, owned beneficially and of record directly or
indirectly by RELIASTAR, free and clear of all liens, pledges, security
interests, claims or other encumbrances. Except as aforesaid, there are
not now, and at the Effective Time will not be, any (A) outstanding
RELIASTAR Insurance Subsidiary Shares that are owned of record or
beneficially by any person or entity other than RELIASTAR or one of the
RELIASTAR Subsidiaries, or (B) outstanding options, warrants, scrip,
rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any class of capital stock of any of the
RELIASTAR Insurance Subsidiaries, or contracts, agreements,
arrangements or understandings to which RELIASTAR or any of the
RELIASTAR Insurance Subsidiaries is a party, or by which any thereof is
or may be bound, to issue additional shares of any class of capital
stock or options, warrants, scrip or rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, any additional shares of
any class of capital stock of any of the RELIASTAR Subsidiaries.
(c) Authorization and Validity of Agreements. RELIASTAR has all requisite
corporate power and corporate authority to enter into this Agreement and to
perform its obligations hereunder, including without limitation the
preparation, filing and distribution of the Registration Statement (as
defined in Section 4.3), and the execution and delivery by RELIASTAR of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all requisite corporate action. This
Agreement has been duly executed and delivered by RELIASTAR and is the
valid and binding obligation of RELIASTAR, enforceable against RELIASTAR in
accordance with its terms, except that (i) such enforcement may be subject
to bankruptcy, insolvency, moratorium or similar laws affecting creditors'
rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought.
(d) No Notices or Approvals Required and No Conflicts. None of the
execution and delivery of this Agreement by RELIASTAR, the performance by
RELIASTAR of its obligations hereunder or the consummation by RELIASTAR of
the transactions contemplated hereby will:
(i) conflict with the Certificate or the By-Laws or with the charter
or bylaws of any of the RELIASTAR Subsidiaries;
(ii) assuming satisfaction of the requirements set forth in Clause
(iii) (A), (B), (C) and (D) below, violate any provision of law
applicable to RELIASTAR or any of the RELIASTAR Subsidiaries, except
for any such violations of law as do not and would not, either
individually or in the aggregate, have a Material Adverse Effect on
RELIASTAR;
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(iii) require any consent or approval of, or filing with or notice
to, any public body or authority, domestic or foreign, under any
provision of law applicable to RELIASTAR or any of the RELIASTAR
Subsidiaries, except for (A) requirements of Federal and state
securities laws, (B) requirements arising out of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (C) the
filing of this Agreement or a Certificate of Merger in accordance with
the Delaware Law, (D) approvals of or notices to regulatory authorities
pursuant to the insurance laws of the State of Connecticut, the State
of New York and any other jurisdiction in which RELIASTAR or any of the
RELIASTAR Insurance Subsidiaries is licensed or authorized to do
business, and (E) such consents, approvals or filings the failure of
which to obtain or make would not, either individually or in the
aggregate, have a Material Adverse Effect on RELIASTAR; or
(iv) require any consent, approval or notice under, or violate,
breach, be in conflict with or constitute a default (or an event that,
with notice or lapse of time or both, would constitute a default)
under, or permit the termination of, or result in the creation or
imposition of any lien upon any assets, properties or business of
RELIASTAR or any of the RELIASTAR Insurance Subsidiaries under, any
note, bond, indenture, mortgage, deed of trust, lease, franchise,
permit, authorization, license (other than franchises, permits,
authorizations, or licenses which may require action under Section
2.1(d)(iii) above), contract, instrument or other agreement or
commitment, order, judgment or decree to which RELIASTAR or any of the
RELIASTAR Insurance Subsidiaries is a party or by which RELIASTAR or
any of the RELIASTAR Insurance Subsidiaries or any of the assets or
properties thereof is bound or encumbered, except for such consents,
approvals or notices the failure of which to obtain or make would not,
either individually or in the aggregate, have a Material Adverse Effect
on RELIASTAR.
(e) RELIASTAR Reports and Financial Statements.
(i) Since December 31, 1993, each of RELIASTAR and the RELIASTAR
Subsidiaries has filed all reports, registration statements and other
filings, together with any amendments required to be made with respect
thereto, that it has been required to file with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "1933 Act"), and the Securities Exchange Act of 1934, as
amended (the "1934 Act"). All reports, registration statements and
other filings (including all exhibits, notes and schedules thereto and
documents incorporated by reference therein) filed by RELIASTAR and any
of the RELIASTAR Insurance Subsidiaries with the SEC on or after
January 1, 1994, together with any amendments thereto, including, when
filed, the Registration Statement, together with any amendments
thereto, insofar as the Registration Statement contains data and
information with respect to RELIASTAR or any of the RELIASTAR Insurance
Subsidiaries, are herein sometimes collectively referred to as the
"RELIASTAR SEC Reports". RELIASTAR has heretofore delivered to SECURITY
true and complete copies of all of the RELIASTAR SEC Reports that have
been filed with the SEC prior to the date hereof. As of (A) with
respect to all of the RELIASTAR SEC Reports other than registration
statements filed under the 1933 Act, the respective dates of their
filing with the SEC and (B) with respect to all registration statements
filed under the 1933 Act, their respective effective dates, the
RELIASTAR SEC Reports complied or will comply, as the case may be, in
all material respects with the rules and regulations of the SEC and did
not or will not, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein not
misleading.
(ii) All material contracts and agreements of RELIASTAR and the
RELIASTAR Subsidiaries have been disclosed in the RELIASTAR SEC Reports
filed with the SEC or in the RELIASTAR Disclosure Letter, except for
those contracts and agreements not required to be filed pursuant to the
rules and regulations of the SEC and those contracts and agreements
that have already been fully performed and as to which there are no
material contingent liabilities on the part of RELIASTAR or any of the
RELIASTAR Subsidiaries.
(iii) The consolidated financial statements (including any related
notes or schedules) included in the RELIASTAR 10-K and RELIASTAR's
Quarterly Reports on Form 10-Q for the quarters ended March 31, June
30, and September 30, 1996 (the "RELIASTAR 10-Qs"), as filed with the
SEC, were
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prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be noted therein or in the
notes or schedules thereto) and fairly present in all material respects
the consolidated financial position of RELIASTAR and its consolidated
subsidiaries as of December 31, 1994 and 1995 and March 31, June 30 and
September 30, 1995 and 1996 and the consolidated results of their
operations and cash flows for each of the three years in the three-year
period ended December 31, 1995 and each of the three months ended March
31, 1995 and 1996, each of the six months ended June 30, 1995 and 1996,
and each of the nine months ended September 30, 1995 and 1996 subject,
in the case of the unaudited interim financial statements contained in
the RELIASTAR 10-Qs, to normal year-end adjustments on a basis
comparable with prior periods. The accountants who certified any
financial statements and supporting schedules included or incorporated
by reference in the RELIASTAR SEC Reports are independent public
accountants with respect to RELIASTAR as required by the rules and
regulations of the SEC.
(iv) The statutory financial statements of each of RELIASTAR's
Insurance Subsidiaries for the year ended December 31, 1995 and for the
quarters ended March 31, June 30 and September 30, 1996 have been
prepared in accordance with all material accounting practices
prescribed or permitted by the National Association of Insurance
Commissioners and, with respect to each such insurance subsidiary, the
appropriate insurance department of the state of domicile of such
insurance subsidiary, and such accounting practices have been applied
on a consistent basis throughout the period involved, except as
disclosed therein. RELIASTAR has heretofore delivered to SECURITY true
and complete copies of all such statements.
(v) Since December 31, 1993, each of RELIASTAR and the RELIASTAR
Subsidiaries has filed all reports and other filings, together with any
amendments required to be made with respect thereto, that it has been
required to file with state and other insurance and securities
regulatory authorities (the "RELIASTAR Insurance Filings"), except for
any such reports and other filings, including any amendments thereto,
the failure of which to file would not have a Material Adverse Effect
on RELIASTAR, and all of the RELIASTAR Insurance Filings filed prior to
the date hereof have complied in all material respects, and all such
filings made hereafter prior to the Effective Time will comply in all
material respects, with applicable laws, rules and regulations, and
there are no material open or unresolved issues of which RELIASTAR has
knowledge raised by any insurance or securities regulatory authority
with respect to any of such filings.
(f) Conduct of Business in the Ordinary Course and Absence of Certain
Changes and Events.
(i) Except as contemplated by this Agreement or as disclosed in the
RELIASTAR SEC Reports filed with the SEC prior to the date hereof, and
except for changes resulting from (A) changes in general economic or
market conditions, including changes in interest rates, (B) changes in
insurance laws or regulations, and (C) matters affecting the life
insurance industry generally, since September 30, 1996 RELIASTAR and
the RELIASTAR Subsidiaries have taken no action of the type referred to
in paragraphs (a) though (c) of Section 4.1 and there has not been any
material adverse change in the financial condition, results of
operations or businesses of RELIASTAR and the RELIASTAR Subsidiaries,
taken as a whole, and there has not been any condition, event or
development that is reasonably expected by RELIASTAR to result in a
material adverse change in the financial condition, results of
operations or businesses of RELIASTAR and the RELIASTAR Subsidiaries,
taken as a whole, and that would be required to be disclosed in the
RELIASTAR SEC Reports under the rules and regulations of the SEC or
that would be required to be disclosed in RELIASTAR's consolidated
financial statements or the notes thereto under generally accepted
accounting principles. RELIASTAR and the RELIASTAR Subsidiaries are not
parties to any collective bargaining agreements and believe that their
relations with their employees are generally satisfactory. Since
September 30, 1996, no significant labor dispute with any employees of
RELIASTAR or any of the RELIASTAR Subsidiaries or union organizing
effort has existed or, to the knowledge of RELIASTAR, is imminent or
threatened.
(ii) Neither RELIASTAR nor any of the RELIASTAR Subsidiaries is in
violation of its charter or bylaws or in default in the performance of,
and no event has occurred that, with notice or lapse of time
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or both, would constitute a default in the performance of, any note,
bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or
commitment, order, judgment or decree to which RELIASTAR or any of the
RELIASTAR Subsidiaries is a party or by which RELIASTAR or any of the
RELIASTAR Subsidiaries or any of the assets or properties thereof is
bound or encumbered, except for such defaults which would not have a
Material Adverse Effect on RELIASTAR.
(g) Certain Fees. With the exception of the engagement by RELIASTAR of
Donaldson, Lufkin & Jenrette Securities Corporation, Milliman and
Robertson, and Deloitte & Touche LLP, none of RELIASTAR or any of the
RELIASTAR Subsidiaries or any of their respective directors, officers,
employees, agents or representatives, on behalf of RELIASTAR or any of the
RELIASTAR Subsidiaries or their respective boards of directors, or any
committee thereof, has employed any financial advisor, actuary, broker or
finder or incurred any liability for any financial advisory, actuarial,
brokerage or finders' fees or commissions in connection with the
transactions contemplated hereby.
(h) Litigation. Except as disclosed in the RELIASTAR SEC Reports filed
with the SEC prior to the date hereof, there are no claims (other than
policy claims that are not in litigation), actions, suits, investigations
or proceedings pending or, to the knowledge of RELIASTAR, threatened
against or affecting RELIASTAR or any of the RELIASTAR Subsidiaries or any
of their respective assets or properties, at law or in equity, before or by
any Federal, state, municipal or other governmental agency or authority,
foreign or domestic, or before any arbitration board or panel, wherever
located.
(i) Employee Benefit Plans.
(i) There are no "employee pension benefit plans", as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), maintained by RELIASTAR or any of the RELIASTAR
Subsidiaries for the benefit of their employees (collectively,
"RELIASTAR Pension Plans"), except for the RELIASTAR Pension Plans
disclosed in the RELIASTAR Proxy Statement or in the RELIASTAR
Disclosure Letter. Each "employee benefit plan", as defined in Section
3(3) of ERISA, maintained by RELIASTAR, any of the RELIASTAR
Subsidiaries or any of their predecessors (collectively, "RELIASTAR
Employee Plans") has been maintained and administered in accordance
with its terms and complies in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws
(except that certain RELIASTAR Pension Plans may not yet have been
amended to comply with the Small Business Job Protection Act of 1996
and subsequent laws and regulations). None of RELIASTAR or any of the
RELIASTAR Subsidiaries nor any of their respective directors, officers,
employees or agents has, with respect to any of the RELIASTAR Employee
Plans, engaged in any "prohibited transaction", as defined in Section
4975 of the Code or Section 406 of ERISA, or any conduct that is
reasonably expected by RELIASTAR to result in any taxes or penalties on
prohibited transactions under Section 4975 of the Code or Section
502(i) of ERISA or any liability under Section 409 of ERISA for breach
of fiduciary duty, that, individually or in the aggregate, are
reasonably expected by RELIASTAR to result in a Material Adverse Effect
on RELIASTAR.
(ii) Each of RELIASTAR and the RELIASTAR Subsidiaries has fulfilled
its obligations to the extent applicable under the minimum funding
requirements of Section 302 of ERISA and Section 412 of the Code with
respect to each of the RELIASTAR Pension Plans; none of the RELIASTAR
Pension Plans has incurred an "accumulated funding deficiency", as
defined in Section 302 of ERISA and Section 412 of the Code, whether or
not waived; and no material civil or criminal action or claim (other
than uncontested claims for benefits) is pending or, to the knowledge
of RELIASTAR, threatened with respect to any of the RELIASTAR Employee
Plans. Neither RELIASTAR nor any of the RELIASTAR Subsidiaries has, or
within the past five years has had, any obligation to contribute to any
"multiemployer plan", as defined in Section 3(37) of ERISA, and neither
RELIASTAR nor any of the RELIASTAR Subsidiaries has incurred, and no
event has occurred that might reasonably be expected to result in, any
material liability under Title IV of ERISA (excluding liability for
required premium payments to the Pension Benefit Guaranty Corporation
("PBGC")) in connection with any such
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multiemployer plan or any of the RELIASTAR Pension Plans that is
subject to Title IV of ERISA. RELIASTAR and the RELIASTAR Subsidiaries
have paid all premiums, if any, that have become due to the PBGC with
respect to any of the RELIASTAR Pension Plans.
(iii) The assets of each of the RELIASTAR Pension Plans that are
subject to Title IV of ERISA exceed the present value of vested and
nonvested benefits accrued under such plan, determined as of the date
of the most recent actuarial report for such plan on a termination
basis using the actuarial assumptions established by the PBGC as in
effect on such date. The Internal Revenue Service (the "IRS") has
issued a letter for each of the RELIASTAR Pension Plans determining
that such plan is qualified under Section 401(a) of the Code and there
has been no occurrence since the date of any such determination letter
that has adversely affected such qualification.
(j) Taxes.
(i) All returns and reports, including without limitation information
and withholding returns and reports (collectively, "Tax Returns") of or
relating to any foreign, Federal, state, local or other income,
premium, property, sales, excise and other taxes of any nature
whatsoever, including any interest, penalties and additions to tax in
respect thereof ("Tax" or "Taxes") heretofore required to be filed by
RELIASTAR or any of the RELIASTAR Subsidiaries have been duly filed on
a timely basis, except to the extent that any such failure to file
would not, either individually or in the aggregate, have a Material
Adverse Effect on RELIASTAR. All such Tax Returns so filed were
complete and accurate in all material respects. Each of RELIASTAR and
the RELIASTAR Subsidiaries has paid or has made adequate provision for
the payment of all Taxes, including any Taxes as a result of being a
member of an affiliated, consolidated, combined or unitary group for
any taxable period or as a result of any obligation to indemnify
another person, except to the extent that any failure to fully pay or
make provision for the payment of such Taxes would not, either
individually or in the aggregate, have a Material Adverse Effect on
RELIASTAR.
(ii) As of the date of this Agreement there are no audits or
administrative proceedings, court proceedings or claims pending against
RELIASTAR or any of the RELIASTAR Subsidiaries with respect to any
Taxes, no assessment, deficiency or adjustment has been asserted or, to
the knowledge of RELIASTAR, proposed with respect to any Tax Return of
or with respect to RELIASTAR or any of the RELIASTAR Subsidiaries and
there are no liens for Taxes upon the assets or properties of RELIASTAR
or any of the RELIASTAR Subsidiaries, except liens for Taxes not yet
delinquent and, in each case, except for any audits, proceedings,
claims, assessments, deficiencies, adjustments or liens as would not
have a Material Adverse Effect on RELIASTAR.
(iii) There are not in force any waivers or agreements by or with
respect to RELIASTAR or any of the RELIASTAR Subsidiaries of or for an
extension of time for the assessment or payment of any Taxes. Neither
RELIASTAR nor any of the RELIASTAR Subsidiaries has received a written
ruling of a taxing authority relating to Taxes or entered into a
written and legally binding agreement with a taxing authority relating
to Taxes that would have a continuing Material Adverse Effect on
RELIASTAR after the Closing Date. Neither RELIASTAR nor any of the
RELIASTAR Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change
in accounting method initiated by RELIASTAR or any of the RELIASTAR
Subsidiaries, and to the best knowledge of RELIASTAR the IRS has not
proposed any such adjustment or change in accounting method. For
purposes of this Section 2.1(j), the term "RELIASTAR Subsidiaries"
shall include former subsidiaries of RELIASTAR for the periods during
which any such subsidiaries were owned directly or indirectly by
RELIASTAR.
(iv) To the best knowledge of RELIASTAR, no person (a "Section 2.1(j)
Investor"), by reason of ownership of a partnership interest in any
partnership in which RELIASTAR or any of the RELIASTAR Subsidiaries
owned or owns directly or indirectly a partnership interest and with
respect to which partnership interests were issued pursuant to an
exemption from the 1933 Act, has asserted any claim against RELIASTAR
or any of the RELIASTAR Subsidiaries with respect to Taxes, which
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claim is derived from such Section 2.1(j) Investor's interest in such
partnership, nor has any governmental authority asserted or proposed
any adjustment that could give rise to such a claim. To the best
knowledge of RELIASTAR, no such claim has been threatened.
(v) Each of RELIASTAR and the RELIASTAR Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party, except for any Taxes the failure of
which to withhold or pay would not, either individually or in the
aggregate, have a Material Adverse Effect on RELIASTAR.
(vi) Neither RELIASTAR nor any of the RELIASTAR Subsidiaries has
filed a consent under Section 341(f) of the Code. RELIASTAR and the
RELIASTAR Subsidiaries are parties to Tax allocation and Tax sharing
arrangements among them, all of which arrangements have heretofore been
disclosed to SECURITY by RELIASTAR.
(vii) No property of RELIASTAR or any of the RELIASTAR Subsidiaries
is property that RELIASTAR or any of the RELIASTAR Subsidiaries is
required to treat as owned by another person pursuant to the safe
harbor leasing provisions (now repealed) of the Code.
(k) Intellectual Property. As of the date of this Agreement and to the
best knowledge of RELIASTAR, RELIASTAR and the RELIASTAR Subsidiaries own
or are otherwise duly authorized or entitled to utilize all trademarks,
service marks, trade names, trade secrets, licenses, designs, copyrights,
formulas, processes, patents, or applications therefor, and other
intellectual property rights as are presently used in, or necessary for,
the conduct of the businesses of RELIASTAR and the RELIASTAR Subsidiaries
as presently conducted, except where the failure to have such ownership or
authorization or entitlement does not and would not, individually or in the
aggregate, have a Material Adverse Effect on RELIASTAR. Since December 31,
1993, to the best knowledge of RELIASTAR there has not been any violation
or infringement by RELIASTAR or any of the RELIASTAR Subsidiaries of any
intellectual property right of any other person, or any claim of such
infringement, that has not been resolved and is continuing, and neither
RELIASTAR nor any of the RELIASTAR Subsidiaries has given to or made with
any other person any forbearance to sue or settlement for infringement of
any intellectual property right.
(l) Environmental Matters.
(i) For purposes of this Agreement,
(A) "Environmental Law" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901
et seq., the Federal Water Pollution Control Act, 33 U.S.C. (S) 1201
et seq., the Clean Water Act, 33 U.S.C. (S) 1321 et seq., the Clean
Air Act, 42 U.S.C. (S) 7401 et seq., and any other federal, state,
local or other governmental statute, regulation, law or ordinance
dealing with the protection of the environment;
(B) "Hazardous Substance" means any pollutant, contaminant,
hazardous substance or waste, solid waste, petroleum or any fraction
thereof, or any other chemical, substance or material listed or
identified in or regulated by any Environmental Law; and
(C) A "RELIASTAR Environmental Claim" shall mean any written
communication by a person or entity alleging potential liability
(including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Hazardous
Substance at any location, whether or not owned by RELIASTAR or any
RELIASTAR Subsidiary or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
(ii) Except for matters that are not reasonably likely to have a
Material Adverse Effect on RELIASTAR:
(A) RELIASTAR and each RELIASTAR Subsidiary comply with all
Environmental Laws applicable to the ownership of their respective
assets and the conduct of their respective businesses;
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(B) RELIASTAR and each RELIASTAR Subsidiary possess all licenses
and permits required by all Environmental Laws applicable to the
ownership of their respective assets and the conduct of their
respective businesses, and RELIASTAR and each RELIASTAR Subsidiary
comply in all material respects with the terms and conditions of
such licenses and permits;
(C) There is no RELIASTAR Environmental Claim pending or, to the
knowledge of RELIASTAR, threatened against RELIASTAR or any
RELIASTAR Subsidiary or against any person or entity whose liability
for such RELIASTAR Environmental Claim RELIASTAR or any RELIASTAR
Subsidiary have or may have retained or assumed either contractually
or by operation of law; and
(D) The property currently owned or operated by RELIASTAR or any
of the RELIASTAR Subsidiaries is not subject to, and RELIASTAR has
no knowledge of, any restriction on the ownership, occupancy, use or
transferability of such property in connection with any
Environmental Law or resulting from any release, threatened release
or disposal of any Hazardous Substance.
(m) Opinion of Financial Advisor. The RELIASTAR Board has received from
Donaldson, Lufkin & Jenrette Securities Corporation a written opinion,
dated on or prior to the date of this Agreement, to the effect that the
Exchange Ratio is fair to RELIASTAR from a financial point of view.
(n) Investigation by RELIASTAR. RELIASTAR has conducted its own
independent review and analysis of the businesses, assets, condition,
operations and prospects of SECURITY and the SECURITY Subsidiaries. In
entering into this Agreement, RELIASTAR has relied solely upon its own
investigation and analysis and the representations and warranties of
SECURITY contained herein, and RELIASTAR:
(i) acknowledges that none of SECURITY, the SECURITY Subsidiaries or
any of their respective directors, officers, employees, affiliates,
agents or representatives makes any representation or warranty, either
express or implied, as to the accuracy or completeness of any of the
information provided or made available to RELIASTAR or their agents or
representatives prior to the execution of this Agreement; and
(ii) agrees, to the fullest extent permitted by law, that none of
SECURITY, the SECURITY Subsidiaries or any of their respective
directors, officers, employees, affiliates, agents or representatives
shall have any liability or responsibility whatsoever to RELIASTAR on
any basis (including, without limitation, in contract or tort, under
federal or state securities laws or otherwise) based upon any
information provided or made available, or statements made, to
RELIASTAR prior to the execution of this Agreement.
except that the foregoing shall not apply (A) to the extent SECURITY makes
the specific representations and warranties set forth in Section 2.2 of
this Agreement and in the SECURITY Disclosure Letter, or (B) to the extent
SECURITY, the SECURITY Subsidiaries or any of their respective directors,
officers, employees, affiliates, agents or representatives commits fraud
with respect to the information that it provides or makes available to
RELIASTAR.
2.2 Representations and Warranties of SECURITY. SECURITY hereby represents
and warrants to RELIASTAR that, except as disclosed in a disclosure letter
delivered by SECURITY to RELIASTAR prior to the date hereof (the "SECURITY
Disclosure Letter"):
(a) Organization and Compliance with Law. Each of SECURITY and its direct
and indirect subsidiaries (all such direct and indirect subsidiaries,
including without limitation Security-Connecticut Life Insurance Company, a
Connecticut corporation ("SCL") and a wholly owned subsidiary of SECURITY,
Arrowhead, Ltd., a Bermuda insurance corporation ("AHL") and a wholly owned
subsidiary of SECURITY, and Lincoln Security Life Insurance Company, a New
York corporation ("LSL") and a wholly owned subsidiary of SCL, are herein
sometimes collectively referred to as the "SECURITY Subsidiaries", and SCL
and LSL are sometimes herein referred to as the "SECURITY Insurance
Subsidiaries") is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
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incorporation and has all requisite corporate power and corporate authority
and all requisite governmental and other authorizations to own, lease and
operate its assets and properties and to carry on its business as now being
conducted, except such governmental and other authorizations (if any) where
the failure to have such authorizations does not and would not, either
individually or in the aggregate, have a material adverse effect on the
financial condition, results of operations or business of SECURITY and the
SECURITY Subsidiaries, taken as a whole (a "Material Adverse Effect on
SECURITY"). SECURITY is incorporated in the State of Delaware. Exhibit
2.2(a) hereto sets forth the name and jurisdiction of incorporation of each
of the SECURITY Subsidiaries. Neither SECURITY nor any of the SECURITY
Subsidiaries is a general partner in any partnership. Except as set forth
in Exhibit 2.2(a) hereto, neither SECURITY nor any of the SECURITY
Subsidiaries is a party to any joint venture in which SECURITY and the
SECURITY Subsidiaries have made, or have an obligation to make, capital
contributions in excess of $1 million. Each of SECURITY and the SECURITY
Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to so qualify
would not have a Material Adverse Effect on SECURITY. Each of SECURITY and
the SECURITY Insurance Subsidiaries possesses all material permits,
licenses, authorizations, certificates, franchises, orders, consents or
other indicia of authority required by any governmental, administrative or
regulatory authority or agency and is in compliance with all applicable
laws, judgments, orders, decrees, rules and regulations, except where the
failure to possess such permits, licenses and other authorizations does not
and would not, either individually or in the aggregate, have a Material
Adverse Effect on SECURITY. SECURITY has heretofore delivered to RELIASTAR
true and complete copies of its articles of incorporation and bylaws and of
the charter and bylaws of each of the SECURITY Insurance Subsidiaries, in
each case as in existence on the date hereof. Notwithstanding anything to
the contrary contained herein, all representations of SECURITY in this
Section 2.2(a) relating to AHL (other than the representation and warranty
regarding the ownership of AHL), shall be limited to the best knowledge of
SECURITY.
(b) Capitalization.
(i) The authorized capital stock of SECURITY consists of 50,000,000
shares of SECURITY Common Stock and 10,000,000 shares of preferred
stock, par value $.01. As of the date hereof there were issued and
outstanding 8,572,115 shares of SECURITY Common Stock. As of such date,
there were also reserved for issuance up to 500,000 shares of SECURITY
Preferred Stock issuable under a Rights Agreement, dated as of February
16, 1995, between SECURITY and The First National Bank of Boston, as
Rights Agent (the "SECURITY Rights Agreement"), pursuant to which each
outstanding share of SECURITY Common Stock has attached to it certain
rights (the "SECURITY Rights"), including rights under certain
circumstances to purchase shares of SECURITY Preferred Stock at $85.00,
subject to adjustment. All outstanding shares of SECURITY Common Stock
are validly issued, fully paid and nonassessable and no holder thereof
is entitled to any preemptive rights. Neither SECURITY nor any of the
SECURITY Subsidiaries is a party to, nor is SECURITY aware of, any
voting agreement, voting trust or similar agreement, arrangement or
understanding relating to any class of capital stock of, or any
agreement, arrangement or understanding providing for registration
rights with respect to any class of capital stock or other securities
of, SECURITY or any of the SECURITY Subsidiaries, except for any such
voting agreements, voting trusts or similar agreements as may be
disclosed in any filing under Section 13(d) or 13(g) of the 1934 Act.
(ii) As of the date hereof, there are outstanding options (the
"SECURITY Options") to purchase under SECURITY's 1993 Stock Incentive
Plan (the "SECURITY Option Plan") an aggregate of not more than 444,924
shares of SECURITY Common Stock at a weighted average exercise price
per share of $25.55 (ranging from $19.25 to $36.50 per share). As of
the date hereof, SECURITY is obligated to issue an aggregate of not
more than 5,058 shares of SECURITY Common Stock without additional
consideration under the SECURITY Long-Term Incentive Plan (the
"SECURITY Long-Term Incentive Plan"), subject to certain conditions
therein contained (any shares of SECURITY Common Stock issuable on or
after the date hereof and to and including the Effective Time under the
SECURITY Long-Term Incentive Plan are herein called the "SECURITY
Incentive Shares"). Other
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than as set forth in this Section 2.2(b) and other than the SECURITY
Rights Agreement, the SECURITY Options and option agreements relating
thereto, the SECURITY Incentive Shares, and the SECURITY Long-Term
Incentive Plan, and any shares of SECURITY Common Stock issued pursuant
to any of the foregoing, there are not now, and at the Effective Time
there will not be, any (A) outstanding shares of capital stock or other
equity securities of SECURITY, or (B) outstanding options, warrants,
scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any class of capital stock of SECURITY, or
contracts, agreements, arrangements or understandings to which SECURITY
is a party, or by which it is or may be bound, to issue additional
shares of any class of its capital stock or options, warrants, scrip or
rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, any additional shares of any class of capital stock
of SECURITY. SECURITY has heretofore delivered to RELIASTAR true and
complete copies of the SECURITY Option Plan as in existence on the date
hereof.
(iii) The shares of capital stock or other equity securities of each
of the SECURITY Subsidiaries are collectively referred to herein as the
"SECURITY Subsidiary Shares". All outstanding SECURITY Subsidiary
Shares are validly issued, fully paid and nonassessable and owned
beneficially and of record directly or indirectly by SECURITY, free and
clear of all liens, pledges, security interests, claims or other
encumbrances. Except as aforesaid, there are not now, and at the
Effective Time there will not be, any (A) outstanding SECURITY
Subsidiary Shares that are owned of record or beneficially by any
person or entity other than SECURITY or one of the SECURITY
Subsidiaries, or (B) outstanding options, warrants, scrip, rights to
subscribe for, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable
for, shares of any class of capital stock of any of the SECURITY
Subsidiaries, or contracts, agreements, arrangements or understandings
to which SECURITY or any of the SECURITY Subsidiaries is a party, or by
which any thereof is or may be bound, to issue additional shares of any
class of capital stock or options, warrants, scrip or rights to
subscribe for, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable
for, any additional shares of capital stock of any of the SECURITY
Subsidiaries.
(c) Authorization and Validity of Agreements. Subject only, with respect
to the Merger, to approval of this Agreement by the stockholders of
SECURITY as provided for in Section 3.3, SECURITY has all requisite
corporate power and corporate authority to enter into this Agreement and to
perform its obligations hereunder, and the execution and delivery by
SECURITY of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by all requisite corporate
action. Without limiting the generality of the foregoing, the SECURITY
Board or a duly authorized committee thereof has taken all necessary
action, if any, on the part of SECURITY (i) to provide for all SECURITY
Options unexercised as of the Effective Time to be exercisable in
accordance with Section 4.9, and (ii) to provide for RELIASTAR Common Stock
to be issued in lieu of any SECURITY Incentive Shares required to be issued
at or after the Effective Time. On or prior to the date hereof, the
SECURITY Board has determined to recommend approval of the Merger to the
stockholders of SECURITY, and such determination is in effect as of the
date hereof. As of the date of this Agreement, neither SECURITY nor any
director, officer or representative thereof is soliciting, initiating or
engaged in any substantive discussions or other negotiations with or
providing any information to any third party concerning any possible
Acquisition Transaction (as defined in Section 3.4). This Agreement has
been duly executed and delivered by SECURITY and is the valid and binding
obligation of SECURITY, enforceable against SECURITY in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to certain equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
(d) No Notices or Approvals Required and No Conflicts. None of the
execution and delivery of this Agreement by SECURITY, the performance by
SECURITY of its obligations hereunder or the consummation by SECURITY of
the transactions contemplated hereby will:
(i) conflict with the articles of incorporation or bylaws of SECURITY
or with the charter or bylaws of any of the SECURITY Subsidiaries;
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(ii) assuming satisfaction of the requirements set forth in Clause
(iii) (A), (B), (C) and (D) below, violate any provision of law
applicable to SECURITY or any of the SECURITY Subsidiaries, except for
any such violations of law as do not and would not, either individually
or in the aggregate, have a Material Adverse Effect on SECURITY;
(iii) require any consent or approval of, or filing with or notice
to, any public body or authority, domestic or foreign, under any
provision of law applicable to SECURITY or any of the SECURITY
Subsidiaries, except for (A) requirements of Federal and state
securities laws, (B) requirements arising out of the HSR Act, (C) the
filing of this Agreement or a Certificate of Merger in accordance with
the Delaware Law, (D) approvals of or notices to regulatory authorities
pursuant to the insurance laws of the State of Connecticut, the State
of New York and any other jurisdiction in which SECURITY or any of the
SECURITY Insurance Subsidiaries is licensed or authorized to do
business, and (E) such consents, approvals or filings the failure of
which to obtain or make would not, either individually or in the
aggregate, have a Material Adverse Effect on SECURITY; or
(iv) require any consent, approval or notice under, or violate,
breach, be in conflict with or constitute a default (or an event that,
with notice or lapse of time or both, would constitute a default)
under, or permit the termination of, or result in the creation or
imposition of any lien upon any assets, properties or business of
SECURITY or any of the SECURITY Subsidiaries under, any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license (other than franchises, permits, authorizations,
or licenses which may require action under Section 2.2(d)(iii) above),
contract, instrument or other agreement or commitment, order, judgment
or decree to which SECURITY or any of the SECURITY Subsidiaries is a
party or by which SECURITY or any of the SECURITY Subsidiaries or any
of the assets or properties thereof is bound or encumbered, except for
such consents, approvals or notices the failure of which to obtain or
make would not, either individually or in the aggregate, have a
Material Adverse Effect on SECURITY.
(e) SECURITY Reports and Financial Statements.
(i) Since December 31, 1993, each of SECURITY and the SECURITY
Subsidiaries has filed all reports, registration statements and other
filings, together with any amendments required to be made with respect
thereto, that it has been required to file with the SEC under the 1933
Act and the 1934 Act. All reports, registration statements and other
filings (including all exhibits, notes and schedules thereto and
documents incorporated by reference therein) filed by SECURITY and any
of the SECURITY Subsidiaries with the SEC on or after January 1, 1994,
together with any amendments thereto, including, when filed, the Proxy
Statement, together with any amendments thereto, insofar as the Proxy
Statement contains data and information with respect to SECURITY or any
of the SECURITY Subsidiaries, are herein sometimes collectively
referred to as the "SECURITY SEC Reports". SECURITY has heretofore
delivered to RELIASTAR true and complete copies of all of the SECURITY
SEC Reports that have been filed with the SEC prior to the date hereof.
As of (A) with respect to all of the SECURITY SEC Reports other than
registration statements filed under the 1933 Act, the respective dates
of their filing with the SEC and (B) with respect to all registration
statements filed under the 1933 Act, their respective effective dates,
the SECURITY SEC Reports complied or will comply, as the case may be,
in all material respects with the rules and regulations of the SEC and
did not or will not, as the case may be, contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein not
misleading.
(ii) All material contracts and agreements of SECURITY and the
SECURITY Subsidiaries have been disclosed in the SECURITY SEC Reports
filed with the SEC or in the SECURITY Disclosure Letter, except for
those contracts and agreements not required to be filed pursuant to the
rules and regulations of the SEC and those contracts and agreements
that have already been fully performed and as to which there are no
material contingent liabilities on the part of SECURITY or any of the
SECURITY Subsidiaries.
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(iii) Except as disclosed in the SECURITY SEC Reports or the SECURITY
Disclosure Letter, none of SECURITY, SCL, LSL or any of the other
SECURITY Subsidiaries is a party to any contract or agreement (or group
of related contracts or agreements) that during the calendar year 1996
contributed more than $5 million of new life paid annualized premiums,
and none is a party to any contract or agreement entered into other
than in the ordinary course of business in which the liability of
SECURITY and the SECURITY Subsidiaries for future payments exceeds $5
million in the aggregate.
(iv) The consolidated financial statements (including any related
notes or schedules) included in SECURITY's Annual Report on Form 10-K
for the year ended December 31, 1995 (the "SECURITY 10-K") and
SECURITY's Quarterly Reports on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1996 (the "SECURITY 10-Qs"), as filed
with the SEC, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be
noted therein or in the notes or schedules thereto) and fairly present
in all material respect the consolidated financial position of SECURITY
and its consolidated subsidiaries as of December 31, 1994 and 1995 and
March 31, June 30 and September 30, 1995 and 1996 and the consolidated
results of their operations and cash flows for each of the three years
in the three-year period ended December 31, 1995 and each of the three
months ended March 31, 1995 and 1996, each of the six months ended June
30, 1995 and 1996, and each of the nine months ended September 30, 1995
and 1996, subject, in the case of the unaudited interim financial
statements contained in the SECURITY 10-Qs, to normal year-end
adjustments on a basis comparable with prior periods. The accountants
who certified any financial statements and supporting schedules
included or incorporated by reference in the SECURITY SEC Reports are
independent public accountants with respect to SECURITY as required by
the rules and regulations of the SEC.
(v) The statutory financial statements of each of SECURITY's
Insurance Subsidiaries for the year ended December 31, 1995 and for the
quarters ended March 31, June 30, and September 30 1996 have been
prepared in accordance with all material accounting practices
prescribed or permitted by the National Association of Insurance
Commissioners and, with respect to each such insurance subsidiary, the
appropriate insurance department of the state of domicile of such
insurance subsidiary, and such accounting practices have been applied
on a consistent basis throughout the period involved, except as
disclosed therein. SECURITY has heretofore delivered to RELIASTAR true
and complete copies of all such statements.
(vi) Since December 31, 1993, each of SECURITY and the SECURITY
Subsidiaries has filed all reports and other filings, together with any
amendments required to be made with respect thereto, that it has been
required to file with state and other insurance and securities
regulatory authorities (the "SECURITY Insurance Filings"), except for
any such reports and other filings, including any amendments thereto,
the failure of which to file would not have a Material Adverse Effect
on SECURITY, all of the SECURITY Insurance Filings filed prior to the
date hereof have complied in all material respects, and all such
filings made hereafter prior to the Effective Time will comply in all
material respects, with applicable laws, rules and regulations, and
there are no material open or unresolved issues of which SECURITY has
knowledge raised by any insurance or securities regulatory authority
with respect to any of such filings.
(f) Conduct of Business in the Ordinary Course and Absence of Certain
Changes and Events.
(i) Except as contemplated by this Agreement or as disclosed in the
SECURITY SEC Reports filed with the SEC prior to the date hereof and
except for changes resulting from (A) changes in general economic or
market conditions, including changes in interest rates, (B) changes in
insurance laws or regulations, and (C) matters affecting the life
insurance industry generally, since September 30, 1996 SECURITY and the
SECURITY Subsidiaries have taken no action of the type referred to in
paragraphs (a) through (g) of Section 3.1 and there has not been any
material adverse change in the financial condition, results of
operations or businesses of SECURITY and the SECURITY Subsidiaries,
taken as a whole, and there has not been any condition, event or
development that is reasonably expected by
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SECURITY to result in a material adverse change in the financial
condition, results of operations or businesses of SECURITY and the
SECURITY Subsidiaries, taken as a whole, and that would be required to
be disclosed in the SECURITY SEC Reports under the rules and
regulations of the SEC or that would be required to be disclosed in
SECURITY's consolidated financial statements or the notes thereto under
generally accepted accounting principles. SECURITY and the SECURITY
Subsidiaries are not parties to any collective bargaining agreement and
believe that their relations with their employees are generally
satisfactory. Since September 30, 1996, no significant labor dispute
with any employees of SECURITY or any of the SECURITY Subsidiaries or
union organizing effort has existed or, to the knowledge of SECURITY,
is imminent or threatened.
(ii) Neither SECURITY nor any of the SECURITY Subsidiaries is in
violation of its charter or bylaws or in default in the performance of,
and no event has occurred that, with notice or lapse of time or both,
would constitute a default in the performance of, any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or
commitment, order, judgment or decree to which SECURITY or any of the
SECURITY Subsidiaries is a party or by which SECURITY or any of the
SECURITY Subsidiaries or any of the assets or properties thereof is
bound or encumbered, except for defaults which would not have a
Material Adverse Effect on SECURITY.
(g) Certain Fees. With the exception of the engagement by SECURITY of
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Milliman and Robertson
and Ernst & Young LLP, none of SECURITY or any of the SECURITY
Subsidiaries, or any of their respective directors, officers, employees,
agents or representatives, on behalf of SECURITY or any of the SECURITY
Subsidiaries or their respective boards of directors, or any committee
thereof, has employed any financial advisor, actuary, broker or finder or
incurred any liability for any financial advisory, actuarial, brokerage or
finders' fees or commissions in connection with the transactions
contemplated hereby.
(h) Litigation. Except as disclosed in the SECURITY SEC Reports filed
with the SEC prior to the date hereof, there are no claims (other than
policy claims that are not in litigation), actions, suits, investigations
or proceedings pending or, to the knowledge of SECURITY, threatened against
or affecting SECURITY or any of the SECURITY Subsidiaries or any of their
respective assets or properties, at law or in equity, before or by any
Federal, state, municipal or other governmental agency or authority,
foreign or domestic, or before any arbitration board or panel, wherever
located.
(i) Employee Benefit Plans.
(i) There are no "employee pension benefit plans", as defined in
Section 3(2) of ERISA, maintained by SECURITY or any of the SECURITY
Subsidiaries for the benefit of their employees (collectively,
"SECURITY Pension Plans") except for the SECURITY Pension Plans
disclosed in the SECURITY Proxy Statement dated April 2, 1996 or in the
SECURITY Disclosure Letter. Each "employee benefit plan", as defined in
Section 3(3) of ERISA, maintained by SECURITY, any of the SECURITY
Subsidiaries or any of their predecessors (collectively, "SECURITY
Employee Plans") has been maintained and administered in accordance
with its terms and complies in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws
(except that certain SECURITY Pension Plans may not yet have been
amended to comply with the Small Business Job Protection Act of 1996
and subsequent laws and regulations). None of SECURITY or any of the
SECURITY Subsidiaries nor any of their respective directors, officers,
employees or agents has, with respect to any of the SECURITY Employee
Plans, engaged in any "prohibited transaction", as defined in Section
4975 of the Code or Section 406 of ERISA, or any conduct that is
reasonably expected by SECURITY to result in any taxes or penalties on
prohibited transactions under Section 4975 of the Code or Section
502(i) of ERISA or any liability under Section 409 of ERISA for breach
of fiduciary duty that, individually or in the aggregate, are
reasonably expected by SECURITY to result in a Material Adverse Effect
on SECURITY.
(ii) Each of SECURITY and the SECURITY Subsidiaries has fulfilled its
obligations to the extent applicable under the minimum funding
requirements of Section 302 of ERISA and Section 412 of the
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Code with respect to each of the SECURITY Pension Plans; none of the
SECURITY Pension Plans has incurred an "accumulated funding
deficiency", as defined in Section 302 of ERISA and Section 412 of the
Code, whether or not waived; and no material civil or criminal action
or claim (other than uncontested claims for benefits) is pending or, to
the knowledge of SECURITY, threatened with respect to any of the
SECURITY Employee Plans. Neither SECURITY nor any of the SECURITY
Subsidiaries has, or within the past five years has had, any obligation
to contribute to any "multiemployer plan", as defined in Section 3(37)
of ERISA, and neither SECURITY nor any of the SECURITY Subsidiaries has
incurred, and no event has occurred that might reasonably be expected
to result in, any material liability under Title IV of ERISA (excluding
liability for required premium payments to the PBGC) in connection with
any such multiemployer plan or any of the SECURITY Pension Plans that
is subject to Title IV of ERISA. SECURITY and the SECURITY Subsidiaries
have paid all premiums, if any, that have become due to the PBGC with
respect to any of the SECURITY Pension Plans.
(iii) The assets of each of the SECURITY Pension Plans that are
subject to Title IV of ERISA exceed the present value of vested and
nonvested benefits accrued under such plan, determined as of the date
of the most recent actuarial report for such plan on a termination
basis using the actuarial assumptions established by the PBGC as in
effect on such date. The IRS has issued a letter for each of the
SECURITY Pension Plans determining that such plan is qualified under
Section 401(a) of the Code and there has been no occurrence since the
date of any such determination letter that has adversely affected such
qualification.
(j) Taxes.
(i) All Tax Returns of or relating to any Taxes heretofore required
to be filed by SECURITY or any of the SECURITY Subsidiaries have been
duly filed on a timely basis, except to the extent that any failure to
so file would not, either individually or in the aggregate, have a
Material Adverse Effect on SECURITY. All such Tax Returns so filed were
complete and accurate in all material respects. Each of SECURITY and
the SECURITY Subsidiaries has paid or made adequate provision for the
payment of all Taxes, including any Taxes as a result of being a member
of an affiliated, consolidated, combined or unitary group for any
taxable period or as a result of any obligation to indemnify another
person, except to the extent that any failure to fully pay or make
provision for the payment of such Taxes would not, either individually
or in the aggregate, have a Material Adverse Effect on SECURITY.
(ii) As of the date of this Agreement there are no audits or
administrative proceedings, court proceedings or claims pending against
SECURITY or any of the SECURITY Subsidiaries with respect to any Taxes,
no assessment, deficiency or adjustment has been asserted or, to the
knowledge of SECURITY, proposed with respect to any Tax Return of or
with respect to SECURITY or any of the SECURITY Subsidiaries and there
are no liens for Taxes upon the assets or properties of SECURITY or any
of the SECURITY Subsidiaries, except liens for Taxes not yet delinquent
and, in each case, except for any audits, proceedings, claims,
assessments, deficiencies, adjustments or liens as would not have a
Material Adverse Effect on SECURITY.
(iii) There are not in force any waivers or agreements by or with
respect to SECURITY or any of the SECURITY Subsidiaries of or for an
extension of time for the assessment or payment of any Taxes. Neither
SECURITY nor any of the SECURITY Subsidiaries has received a written
ruling of a taxing authority relating to Taxes or entered into a
written and legally binding agreement with a taxing authority relating
to Taxes that would have a continuing Material Adverse Effect on
SECURITY after the Closing Date. Except as disclosed in the SECURITY
Disclosure Letter, neither SECURITY nor any of the SECURITY
Subsidiaries is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by SECURITY or any of the SECURITY
Subsidiaries, and to the best knowledge of SECURITY the IRS has not
proposed any such adjustment or change in accounting method. For
purposes of this Section 2.2(j), the term "SECURITY Subsidiaries" shall
include former subsidiaries of SECURITY for the periods during which
any such subsidiaries were owned directly or indirectly by SECURITY.
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(iv) To the best knowledge of SECURITY, no person (a "Section 2.2(j)
Investor"), by reason of ownership of a partnership interest in any
partnership in which SECURITY or any of the SECURITY Subsidiaries owned
or owns directly or indirectly a partnership interest and with respect
to which partnership interests were issued pursuant to an exemption
from the 1933 Act, has asserted any claim against SECURITY or any of
the SECURITY Subsidiaries with respect to Taxes, which claim is derived
from such Section 2.2(j) Investor's interest in such partnership, nor
has any governmental authority asserted or proposed any adjustment that
could give rise to such a claim. To the best knowledge of SECURITY, no
such claim has been threatened.
(v) Each of SECURITY and the SECURITY Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party, except for any Taxes the failure of
which to withhold or pay would not, either individually or in the
aggregate, have a Material Adverse Effect on SECURITY.
(vi) Neither SECURITY nor any of the SECURITY Subsidiaries has filed
a consent under Section 341(f) of the Code. SECURITY and the SECURITY
Subsidiaries are parties to Tax allocation and Tax sharing arrangements
among them, all of which arrangements have heretofore been disclosed to
RELIASTAR by SECURITY.
(vii) No property of SECURITY or any of the SECURITY Subsidiaries is
property that SECURITY or any of the SECURITY Subsidiaries is required,
or that RELIASTAR or any of the RELIASTAR Subsidiaries will be
required, to treat as owned by another person pursuant to the safe
harbor leasing provisions (now repealed) of the Code.
(k) Intellectual Property. As of the date of this Agreement and to the
best knowledge of SECURITY, SECURITY and the SECURITY Subsidiaries own or
are otherwise duly authorized or entitled to utilize all trademarks,
service marks, trade names, licenses, designs, copyrights, formulas,
processes, patents, or applications therefor, and other intellectual
property rights as are presently used in, or necessary for, the conduct of
the businesses of SECURITY and the SECURITY Subsidiaries as presently
conducted, except where the failure to have such ownership or authorization
or entitlement does not and would not, individually or in the aggregate,
have a Material Adverse Effect on SECURITY. Since December 31, 1993, to the
best knowledge of SECURITY there has not been any violation or infringement
by SECURITY or any of the SECURITY Subsidiaries of any intellectual
property right of any other person, or any claim of such infringement, that
has not been resolved and is continuing, and neither SECURITY nor any of
the SECURITY Subsidiaries has given to or made with any other person any
forbearance to sue or settlement for infringement of any intellectual
property right.
(l) No Secured Debt. There is not now, and there will not be immediately
prior to the Effective Time, any secured debt (including capitalized
leases) of SECURITY or any of the SECURITY Subsidiaries except for
capitalized leases of less than $1 million in the aggregate as to SECURITY
and the SECURITY Subsidiaries, the existence of which does not violate the
terms of any material note, bond, indenture, mortgage, deed of trust,
lease, franchise, permit, authorization, license, contract, instrument or
other agreement or commitment to which SECURITY or any of the SECURITY
Subsidiaries is a party or by which SECURITY or any of the SECURITY
Subsidiaries or any of the assets or properties thereof is bound or
encumbered.
(m) Environmental Matters.
(i) For purposes of this Agreement, a "SECURITY Environmental Claim"
shall mean any written communication by a person or entity alleging
potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (i) the presence,
or release into the environment, of any Hazardous Substance at any
location, whether or not owned by SECURITY or any SECURITY Subsidiary
or (ii) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
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(ii) Except for matters that are not reasonably likely to have a
Material Adverse Effect on SECURITY:
(A) SECURITY and each SECURITY Subsidiary comply with all
Environmental Laws applicable to the ownership of their respective
assets and the conduct of their respective businesses;
(B) SECURITY and each SECURITY Subsidiary possess all licenses and
permits required by all Environmental Laws applicable to the
ownership of their respective assets and the conduct of their
respective businesses, and SECURITY and each SECURITY Subsidiary
comply in all material respects with the terms and conditions of
such licenses and permits;
(C) There is no SECURITY Environmental Claim pending or, to the
knowledge of SECURITY, threatened against SECURITY or any SECURITY
Subsidiary or against any person or entity whose liability for such
SECURITY Environmental Claim SECURITY or any SECURITY Subsidiary
have or may have retained or assumed either contractually or by
operation of law; and
(D) The property currently owned or operated by SECURITY or any of
the SECURITY Subsidiaries is not subject to, and SECURITY has no
knowledge of, any restriction on the ownership, occupancy, use or
transferability of such property in connection with any
Environmental Law or resulting from any release, threatened release
or disposal of any Hazardous Substance.
(n) Opinion of Financial Advisor. The SECURITY Board has received from
Merrill Lynch, Pierce, Fenner & Smith Incorporated a written opinion, dated
on or prior to the date of this Agreement, to the effect that the
consideration taken as a whole to be received by the stockholders of
SECURITY in the Merger is fair to the stockholders of SECURITY from a
financial point of view.
(o) Investigation by SECURITY. SECURITY has conducted its own independent
review and analysis of the businesses, assets, condition, operations and
prospects of RELIASTAR and the RELIASTAR Subsidiaries. In entering into
this Agreement, SECURITY has relied solely upon its own investigation and
analysis and the representations and warranties contained herein, and
SECURITY:
(i) acknowledges that none of RELIASTAR, the RELIASTAR Subsidiaries
or any of their respective directors, officers, employees, affiliates,
agents or representatives makes any representation or warranty, either
express or implied, as to the accuracy or completeness of any of the
information provided or made available to SECURITY or their agents or
representatives prior to the execution of this Agreement; and
(ii) agrees, to the fullest extent permitted by law, and none of
RELIASTAR, the RELIASTAR Subsidiaries or any of their respective
directors, officers, employees, affiliates, agents or representatives
shall have any liability or responsibility whatsoever to SECURITY on
any basis (including, without limitation, in contract or tort, under
federal or state securities laws or otherwise) based upon any
information provided or made available, or statements made, to SECURITY
prior to the execution of this Agreement.
except that the foregoing shall not apply (A) to the extent RELIASTAR makes
the specific representations and warranties set forth in Section 2.1 of
this Agreement and in the RELIASTAR Disclosure Letter, or (B) to the extent
RELIASTAR, the RELIASTAR Subsidiaries or any of their respective directors,
officers, employees, affiliates, agents or representatives commits fraud
with respect to the information that it provides or makes available to
SECURITY.
III. COVENANTS OF SECURITY
3.1 Conduct of Business by SECURITY and SECURITY Subsidiaries Pending the
Merger. SECURITY covenants and agrees with RELIASTAR that, with respect to
SECURITY and the SECURITY Subsidiaries, prior to the Effective Time, unless
RELIASTAR shall otherwise agree or as is otherwise contemplated by this
Agreement:
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(a) The businesses of SECURITY and the SECURITY Subsidiaries will be
conducted only in, and SECURITY and the SECURITY Subsidiaries will not take
any material action except in the ordinary course of business and
consistent with prior practices.
(b) Each of SECURITY and the SECURITY Subsidiaries will not directly or
indirectly do any of the following: (i) issue, sell, pledge, dispose of or
encumber (A) any shares of capital stock of SECURITY or any of the SECURITY
Subsidiaries, except the issuance of shares of SECURITY capital stock
pursuant to the SECURITY Rights Agreement or upon exercise of SECURITY
Options outstanding as of the date hereof and referred to in Section
2.2(b)(ii), (B) any investment assets of SECURITY or any of the SECURITY
Subsidiaries other than in the ordinary course of business consistent with
prior practices or in transactions not in excess of $5 million in the
aggregate, or (C) any other assets or properties of SECURITY or any of the
SECURITY Subsidiaries other than in the ordinary course of business and
consistent with prior practices or in transactions not in excess of $3
million in the aggregate; (ii) amend or propose to amend its charter or
bylaws; (iii) split, combine or reclassify any outstanding capital stock,
or declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to its capital stock whether now
or hereafter outstanding, except for (A) cash dividends from one of the
SECURITY Subsidiaries paid to SECURITY or another of the SECURITY
Subsidiaries and (B) regular quarterly cash dividends of not more than $.14
per share per quarter on SECURITY Common Stock; (iv) redeem, purchase or
acquire or offer to acquire any of their capital stock, except pursuant to
the exercise of, or the tax withholding provisions under, any outstanding
awards granted under the SECURITY Option Plan; or (v) agree or commit to do
any of the foregoing.
(c) Each of SECURITY and the SECURITY Subsidiaries will not directly or
indirectly do any of the following: (i) grant, issue, sell, pledge or
dispose of any options, warrants or rights of any kind to acquire any
shares of any class of capital stock of SECURITY or any of the SECURITY
Subsidiaries or any securities that are convertible or exchangeable
therefor; (ii) acquire (whether by merger, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership or other
business organization or division thereof; (iii) incur any indebtedness for
borrowed money or issue any debt securities, except for intercompany
indebtedness; (iv) cancel any material debts or obligations owing to it,
except in connection with the settlement of policy claims; (v) liquidate or
merge into or consolidate with any other corporation; or (vi) agree or
commit to do any of the foregoing.
(d) Each of SECURITY and the SECURITY Subsidiaries will not enter into,
amend in any material respect, terminate or waive any material right under
any contract or agreement referred to in Clause (iii) of Section 2.2(e) or
that would have been disclosed pursuant to such clause if such contract or
agreement had been in effect as of the date hereof; provided however, that
this Section 3.1(d) shall not prohibit SECURITY or any of the SECURITY
Subsidiaries from taking any of the following actions in the ordinary
course of business and consistent with prior practices: accepting or
reinsuring insurance or annuity risks, or entering into, modifying or
terminating agency contracts; provided however, that SECURITY will consult
with RELIASTAR prior to terminating any agency contract referred to in
Clause (iii) of Section 2.2(e) or that would have been disclosed pursuant
to such clause if such contract had been in effect as of the date hereof.
(e) Other than the engagement of lawyers, accountants and other
professional advisors in the ordinary course of business or in connection
with the transactions contemplated by this Agreement, each of SECURITY and
the SECURITY Subsidiaries will not enter into or amend any employment,
consulting, separation or termination agreement, arrangement or
understanding nor take any action with respect to the grant of any
separation or termination pay or with respect to any increase of benefits
payable under its separation or termination pay policies or agreements or
arrangements in effect as of the date hereof.
(f) Each of SECURITY and the SECURITY Subsidiaries will not (i) hire any
new executive employee, (ii) hire any new management employee with annual
compensation greater than $100,000, (iii) except for replacements in the
ordinary course of business consistent with prior practices, hire any other
new employee, (iv) except in the ordinary course of business consistent
with prior practices, increase the compensation of any employee, or (v)
adopt or amend (except to comply with applicable law) any bonus,
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profit sharing, compensation, stock option, pension, retirement,
separation, deferred compensation or other employee benefit plan, agreement
or trust fund for the benefit or welfare of, any employee or former
employee.
(g) Each of SECURITY and the SECURITY Subsidiaries will not make any
capital expenditure or commitment for which it is not contractually bound
at the date hereof except necessary replacements in the ordinary course of
business consistent with past practices. All capital expenditures and
commitments in excess of $50,000 for which SECURITY and the SECURITY
Subsidiaries are contractually bound at the date hereof are disclosed in
the SECURITY Disclosure Letter.
(h) Subject to the provisions hereof, SECURITY will use all reasonable
efforts (i) to preserve intact the business organization of SECURITY, SCL,
LSL and each of the other SECURITY Subsidiaries, including without
limitation their current product distribution systems, to maintain in
effect any licenses, franchises, authorizations or similar rights material
to the businesses of SECURITY and the SECURITY Subsidiaries, to keep
available the services of their respective current officers and key
employees and to preserve the goodwill of those having relationships with
SECURITY or any of the SECURITY Subsidiaries, and (ii) to cooperate with
RELIASTAR in jointly communicating with SECURITY's employees and with
members of SECURITY's product distribution system, including independent
contractors, regarding the Merger and continuing operations after
consummation of the Merger.
3.2 Proxy Statement. As promptly as practicable after the date hereof,
SECURITY will cooperate with RELIASTAR in drafting and will file with the SEC
under the 1934 Act, and will use all reasonable efforts to have cleared by the
SEC, a proxy statement (the "Proxy Statement") with respect to the meeting of
stockholders of SECURITY referred to in Section 3.3, and SECURITY will
cooperate with RELIASTAR in drafting the Registration Statement (of which the
Proxy Statement is a part). The Proxy Statement (as it relates to SECURITY)
will comply as to form in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC, and the Registration
Statement (with respect to information concerning SECURITY or the SECURITY
Subsidiaries furnished by or on behalf of SECURITY to RELIASTAR specifically
for use therein) and the Proxy Statement (except with respect to data and
information concerning RELIASTAR and the RELIASTAR Subsidiaries furnished by
or on behalf of RELIASTAR to SECURITY specifically for use therein) will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein not misleading. Subject to the provisions of Section 3.4, the Proxy
Statement will contain the recommendation of the SECURITY Board that the
stockholders of SECURITY vote to approve and adopt the Merger and this
Agreement. SECURITY will promptly notify RELIASTAR in writing if prior to the
Effective Time it shall obtain knowledge of any fact that would make it
necessary to amend the Proxy Statement (or the Registration Statement) in
order to render the statements made therein not misleading or to comply with
applicable law. SECURITY will promptly furnish to RELIASTAR a true and
complete copy of each written communication of SECURITY with the SEC with
respect to the Proxy Statement and will promptly advise RELIASTAR of the
substance of each such oral communication.
3.3 Meeting of Stockholders of SECURITY. Subject to the provisions of
Section 3.4, as soon as practicable after the date hereof, SECURITY and the
SECURITY Board will (i) take all action necessary in accordance with the
Delaware Law and its certificate of incorporation and bylaws to convene a
meeting of its stockholders to consider and vote upon approval and adoption of
the Merger and this Agreement, (ii) recommend that the stockholders of
SECURITY vote to approve and adopt the Merger and this Agreement, (iii) mail
the Proxy Statement to its stockholders, (iv) use commercially reasonable
efforts to solicit from its stockholders proxies in favor of such approval and
adoption and (v) take all other commercially reasonable action necessary or
helpful to secure a vote of its stockholders in favor of such approval and
adoption.
3.4 No Solicitation of Acquisition Transactions. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement, unless
RELIASTAR shall otherwise agree in writing, SECURITY shall not, and shall not
permit any of the SECURITY Subsidiaries to, initiate, solicit, negotiate,
encourage, or provide confidential information or access to the properties,
books or records of SECURITY or any of the SECURITY
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Subsidiaries to facilitate, and SECURITY shall, and shall cause each of the
SECURITY Subsidiaries to, cause each officer, director or employee of, and
each financial advisor, attorney, accountant or other agent retained by,
SECURITY or any of the SECURITY Subsidiaries, not to initiate, solicit,
negotiate, encourage, or provide confidential information or access to the
properties, books or records of SECURITY or any of the SECURITY Subsidiaries
to facilitate, any proposal or offer to acquire all or any substantial part of
the business and properties of SECURITY and the SECURITY Subsidiaries, taken
as a whole, or any capital stock of SECURITY or any of the SECURITY
Subsidiaries, whether by merger, purchase of assets, tender offer or
otherwise, and whether for cash, securities or any other consideration or
combination thereof (such transactions, exclusive of an acquisition of assets
that does not constitute substantially all of the assets of SECURITY and the
SECURITY Subsidiaries taken as a whole, being referred to herein as
"Acquisition Transactions"); provided, however, that:
(i) SECURITY and the SECURITY Subsidiaries may furnish information
concerning their business, properties or assets and access to the
properties, books and records of SECURITY and the SECURITY Subsidiaries to
a corporation, partnership, person or other entity or group (a "Potential
Acquirer") if (A) the SECURITY Board is advised by its financial advisor
that such Potential Acquirer has the financial wherewithal to consummate an
Acquisition Transaction whose offer of consideration is superior to the
consideration offered in the Merger, (B) the SECURITY Board determines in
good faith that such Potential Acquirer is likely to submit a bona fide
offer to consummate an Acquisition Transaction whose offer of consideration
is superior to the consideration offered in the Merger if provided with
such confidential information and access, (C) upon advice of Murtha,
Cullina, Richter and Pinney or other outside counsel knowledgeable in
corporate fiduciary matters, the SECURITY Board determines in good faith
that the failure to provide such confidential information and access could
reasonably be expected to constitute a breach of its fiduciary duty to the
SECURITY stockholders under applicable law, and (D) the Potential Acquirer
has negotiated with, signed and delivered to SECURITY a confidentiality
agreement in customary form (the "Potential Acquirer Confidentiality
Agreement"); and
(ii) following receipt of a bona fide offer from a Potential Acquirer who
meets the requirements of Clause (i)(A) above and has executed a Potential
Acquirer Confidentiality Agreement, and whose offer the SECURITY Board
determines in good faith provides consideration superior to the
consideration offered in the Merger, SECURITY may, with respect to such
Potential Acquirer, negotiate and take any of the actions otherwise
prohibited by this Section 3.4 if, upon advice of Murtha, Cullina, Richter
and Pinney or other outside counsel knowledgeable in corporate fiduciary
matters, the SECURITY Board determines in good faith that the failure to
negotiate with such Potential Acquirer would likely constitute a breach of
its fiduciary duty to the SECURITY stockholders under applicable law.
In the event SECURITY shall determine to provide any information or access as
described above, or shall receive any offer of the type referred to in this
Section 3.4, it shall concurrently give notice to RELIASTAR as to the fact
that information or access is to be provided and the nature of the information
and access to be provided or that an offer has been received and shall furnish
to RELIASTAR the identity of the recipient of such information or access or
the proponent of such offer, if applicable, and, if an offer has been
received, a description of the material terms thereof. SECURITY may enter into
a definitive agreement for an Acquisition Transaction with a Potential
Acquirer with which it is permitted to negotiate pursuant to this Section 3.4
and consummate the transactions contemplated thereby, provided that at least
three days prior to execution thereof SECURITY shall have furnished RELIASTAR
with a description of all of the material terms thereof. Upon compliance with
the foregoing, SECURITY shall be entitled to not recommend, or to modify or
withdraw its recommendation concerning, the Merger, and SECURITY shall be
entitled to enter into an agreement with the Potential Acquirer concerning an
Acquisition Transaction and consummate the transactions contemplated thereby;
provided however, that in any such event SECURITY shall immediately terminate
this Agreement and make payment in full to RELIASTAR of the fee set forth in
Section 5.2.
3.5 Access to Information; Confidentiality. From the date hereof to the
Effective Time, (i) each of SECURITY and the SECURITY Subsidiaries will, and
their respective directors, officers, employees, agents and representatives
will, afford the officers, employees, agents and representatives of RELIASTAR
reasonable access at all reasonable times to the officers, employees,
representatives, properties, books and records of SECURITY
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and the SECURITY Subsidiaries, and to the books and records of any
predecessors thereof in the possession of SECURITY or any of the SECURITY
Subsidiaries, and will furnish to RELIASTAR all financial, operating and other
data and information as RELIASTAR, through its officers, employees or
representatives, may reasonably request, and (ii) SECURITY will cooperate with
RELIASTAR personnel to facilitate the transition from preclosing operations to
postclosing operations; provided that, notwithstanding the foregoing, no
person shall have access to information or documents subject to the
attorney/client privilege between SECURITY and its counsel to the extent that
providing such access would, in the opinion of counsel to SECURITY, constitute
a waiver of such privilege. SECURITY agrees to hold in confidence all, and not
to disclose to others for any reason whatsoever any, non-public information
received by it pursuant to Section 4.4 or otherwise in connection with the
transactions contemplated hereby, except (a) as required by law, (b) for
disclosure to directors, officers, employees, agents and representatives as
necessary to the Merger or as necessary to the operation of its and
RELIASTAR's businesses, and (c) for information that becomes publicly
available other than through SECURITY or any of the SECURITY Subsidiaries or
their respective directors, officers, employees, agents or representatives. In
the event that this Agreement is terminated, upon receipt of a written request
from RELIASTAR, SECURITY will return to RELIASTAR all documents and other
material (and all copies thereof) obtained from RELIASTAR or any of the
RELIASTAR Subsidiaries in connection with the transactions contemplated hereby
and will destroy all documents and other material prepared by SECURITY or any
of the SECURITY Subsidiaries, or their respective directors, officers,
employees, agents and representatives, that reflect any such non-public
information received by any of them in connection with the transactions
contemplated hereby.
3.6 Dissenters' Rights. SECURITY will not take any action that would affect
its stockholders' appraisal rights with respect to the Merger or the other
transactions contemplated hereby under the Delaware Law.
3.7 Tax Certificate. Immediately prior to the Effective Time, SECURITY will
deliver a certificate to RELIASTAR and its tax counsel making the
representations and warranties substantially in the form attached hereto as
Exhibit 3.7.
3.8 Amendment to Rights Plan. Prior to the execution and delivery of this
Agreement, the Board of Directors of SECURITY authorized an amendment to the
SECURITY Rights Agreement to provide that (i) RELIASTAR will not become an
"Acquiring Person" as a result of the consummation of the transactions
contemplated by this Agreement, (ii) no "Stock Acquisition Date" or
"Distribution Date" (as such terms are defined in the SECURITY Rights
Agreement) will occur as a result of the consummation of the transactions
contemplated by this Agreement, and (iii) all outstanding SECURITY Rights
issued and outstanding under the SECURITY Rights Agreement will expire
immediately prior to the Effective Time. As soon as reasonably practicable
after the date hereof, SECURITY shall cause said amendment to be documented
and to be executed and delivered as of the date hereof. Anything in this
Agreement to the contrary notwithstanding, SECURITY shall have the right at
any time after the date of this Agreement and prior to the Effective Time to
further amend, or take any other action with respect to, the SECURITY Rights
Agreement as deemed necessary by SECURITY; provided that any such further
action or amendment shall not contravene the amendment contemplated by this
Section 3.8.
IV. COVENANTS OF RELIASTAR
4.1 Conduct of Business by RELIASTAR and RELIASTAR Subsidiaries Pending the
Merger. RELIASTAR covenants and agrees with SECURITY that, with respect to
RELIASTAR and the RELIASTAR Subsidiaries, prior to the Effective Time, unless
SECURITY shall otherwise agree or as is otherwise contemplated by this
Agreement:
(a) The businesses of RELIASTAR and the RELIASTAR Subsidiaries will be
conducted only in, and RELIASTAR and the RELIASTAR Subsidiaries will not
take any material action except in the ordinary course of business and
consistent with prior practices.
(b) Each of RELIASTAR and the RELIASTAR Subsidiaries will not directly or
indirectly do any of the following: (i) issue, sell, pledge, dispose of or
encumber (A) any shares of capital stock of RELIASTAR
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or any of the RELIASTAR Subsidiaries, except the issuance of RELIASTAR
capital stock pursuant to the RELIASTAR DRIP, pursuant to the RELIASTAR
Rights Agreement or upon the exercise of options referred to in Section
2.1(b)(ii), and further except for the issuance of RELIASTAR capital stock
with a market value not in excess of $50 million, (B) any investment assets
of RELIASTAR or any of the RELIASTAR Subsidiaries other than in the
ordinary course of business and consistent with prior practices or in
transactions not in excess of $50 million in the aggregate, or (C) any
other assets or properties of RELIASTAR or any of the RELIASTAR
Subsidiaries other than in the ordinary course of business consistent with
prior practices or in transactions not in excess of $30 million in the
aggregate; (ii) amend or propose to amend its charter or bylaws (provided
that this Clause (ii) shall not prohibit any increase in the authorized
capital stock of RELIASTAR or any change in the par value of RELIASTAR
capital stock); (iii) combine or reclassify any outstanding capital stock
(provided that this Clause (iii) shall not prohibit a stock split), or
declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to its capital stock whether now
or hereafter outstanding, except for (A) cash dividends from one of the
RELIASTAR Subsidiaries to RELIASTAR or another of the RELIASTAR
Subsidiaries, (B) regular cash dividends on RELIASTAR's preferred stock and
(C) regular quarterly cash dividends on RELIASTAR Common Stock of not more
than $.33 per share per quarter on RELIASTAR Common Stock; (iv) except as
described in the RELIASTAR Disclosure Letter, redeem, purchase or acquire
or offer to acquire any of their capital stock; or (v) agree or commit to
do any of the foregoing.
(c) Each of RELIASTAR and the RELIASTAR Subsidiaries will not directly or
indirectly do any of the following: (i) except pursuant to existing
agreements and plans referred to in Section 2.1(b)(ii), grant, issue, sell,
pledge or dispose of any options, warrants or rights of any kind to acquire
shares of any class of capital stock of RELIASTAR or any of the RELIASTAR
Subsidiaries or any securities that are convertible or exchangeable
therefor; (ii) acquire (whether by way of merger, consolidation,
acquisition of stock or assets or otherwise) any corporation, partnership
or other business organization or division thereof with gross revenues in
excess of $35 million during its last fiscal year or a net asset value in
excess of $50 million if, after giving effect to any such acquisition, the
aggregate consideration paid by RELIASTAR and the RELIASTAR Subsidiaries
for all such acquisitions between the date hereof and the Effective Time
would exceed $50 million; (iii) incur any indebtedness for borrowed money
or issue any debt securities, except under (A) the $200 million commercial
paper program and related credit agreement among Chase Manhattan Bank (as
successor to Chemical Bank), as agent, the lenders named therein, and
ReliaStar Mortgage Corporation, which is guaranteed by ReliaStar Life
Insurance Company, which commercial paper program may be increased by $50
million, (B) the loan agreement between First Bank National Association and
ReliaStar Mortgage Corporation, which is guaranteed by ReliaStar Life
Insurance Company, providing for a $75 million credit facility, (C) the
loan agreement between Chase Manhattan Bank (as successor to Chemical
Bank), as agent, the lenders named therein, and RELIASTAR, providing for a
$75 million credit facility, (D) the loan agreement between Allomon Funding
and RELIASTAR providing for a $25 million credit facility, (E) the
overdraft line provided by Zapp Bank to PrimeVest Financial Services, Inc.,
which is guaranteed by RELIASTAR, in the amount of $2 million, (F) the loan
agreement between Bankers Trust and PrimeVest Financial Services, Inc.
providing for a $5 million credit facility, (G) the agent debt line
provided to Northern Life Insurance Company by SeaFirst in the amount of $8
million, (H) intercompany loans and advances, (I) additional credit
facilities and debt securities in the aggregate amount of up to $150
million, and (J) any refinancings of the foregoing; (iv) cancel any
material debts or obligations owing to it, except in connection with the
settlement of policy claims; (v) liquidate or merge into or consolidate
with any other corporation; or (vi) agree or commit to do any of the
foregoing.
(d) Subject to the provisions hereof, RELIASTAR will use all reasonable
efforts (i) to preserve intact the business organization of RELIASTAR and
each of the RELIASTAR Subsidiaries, including without limitation their
current product distribution systems, to maintain in effect any licenses,
franchises, authorizations or similar rights material to the businesses of
RELIASTAR and the RELIASTAR Subsidiaries and to preserve the goodwill of
those having relationships with RELIASTAR or any of the RELIASTAR
Subsidiaries and (ii) to cooperate with SECURITY in jointly communicating
with SECURITY's employees and with members of SECURITY's product
distribution system, including independent contractors, regarding the
Merger and continuing operations after consummation of the Merger.
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4.2 Proxy Statement. As promptly as practicable after the date hereof,
RELIASTAR will cooperate with SECURITY in drafting the Proxy Statement. The
Proxy Statement (as it relates to RELIASTAR) will not contain (with respect to
data and information concerning RELIASTAR and the RELIASTAR Subsidiaries
furnished by or on behalf of RELIASTAR to SECURITY specifically for use
therein) any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein not misleading. RELIASTAR will promptly notify SECURITY in writing if
prior to the Effective Time it shall obtain knowledge of any fact that would
make it necessary to amend the Proxy Statement in order to render the
statements made therein not misleading or to comply with applicable law.
4.3 Registration Statement. As promptly as practicable after the date
hereof, RELIASTAR will file with the SEC a registration statement (the
"Registration Statement") on an appropriate form under the 1933 Act with
respect to the offering, sale and delivery of the shares of RELIASTAR Common
Stock to be issued pursuant to the Merger, and RELIASTAR will use all
reasonable efforts to cause such Registration Statement to become effective as
promptly as practicable after filing and to cause the shares of RELIASTAR
Common Stock to be issued pursuant to the Merger to be duly listed for trading
on the New York Stock Exchange. RELIASTAR will also use all reasonable efforts
to take action required to be taken under state securities laws in connection
with the issuance of RELIASTAR Common Stock pursuant to the Merger. The
Registration Statement will comply as to form in all material respects with
the requirements of the 1933 Act and the 1934 Act and the rules and
regulations of the SEC and (except with respect to data and information
concerning SECURITY and the SECURITY Subsidiaries furnished by or on behalf of
SECURITY to RELIASTAR specifically for use therein) will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein not
misleading. RELIASTAR will advise SECURITY promptly in writing if prior to the
Effective Time it shall obtain knowledge of any fact that would make it
necessary to amend the Registration Statement in order to render the
statements made therein not misleading or to comply with applicable law.
RELIASTAR will promptly furnish to SECURITY a true and complete copy of each
written communication of RELIASTAR with the SEC with respect to the
Registration Statement and will promptly advise SECURITY of the substance of
each such oral communication.
4.4 Access to Information; Confidentiality. From the date hereof to the
Effective Time, each of RELIASTAR and the RELIASTAR Subsidiaries will, and
their respective directors, officers, employees, agents and representatives
will, afford the officers, employees, agents and representatives of SECURITY
reasonable access at all reasonable times to the officers, employees,
representatives, properties, books and records of RELIASTAR and the RELIASTAR
Subsidiaries, and the books and records of any predecessors thereof in the
possession of RELIASTAR or any of the RELIASTAR Subsidiaries, and will furnish
to SECURITY all financial, operating and other data and information as
SECURITY, through its officers, employees or representatives, may reasonably
request; provided, that, notwithstanding the foregoing, no person shall have
access to information or documents subject to the attorney/client privilege
between RELIASTAR and its counsel to the extent that providing such access
would, in the opinion of counsel to RELIASTAR, constitute a waiver of such
privilege. RELIASTAR agrees to hold in confidence all, and not to disclose to
others for any reason whatsoever any, non-public information received by it
pursuant to Section 3.5 or otherwise in connection with the transactions
contemplated hereby, except (a) as required by law, (b) for disclosure to
directors, officers, employees, agents and representatives as necessary to the
Merger or as necessary to the operation of its and SECURITY's businesses, and
(c) for information that becomes publicly available other than through
RELIASTAR or any of the RELIASTAR Subsidiaries or their respective directors,
officers, employees, agents or representatives. In the event that this
Agreement is terminated, upon receipt of a written request from SECURITY,
RELIASTAR will return to SECURITY all documents and other material (and all
copies thereof) obtained from SECURITY or any of the SECURITY Subsidiaries in
connection with the transactions contemplated hereby and will destroy all
documents and other material prepared by RELIASTAR or any of the RELIASTAR
Subsidiaries, or their respective directors, officers, employees, agents and
representatives, that reflect any such non-public information received by any
of them in connection with the transactions contemplated hereby.
4.5 Reservation of RELIASTAR Capital Stock. Prior to the Effective Time,
RELIASTAR shall reserve for issuance, out of its authorized but unissued
capital stock, (a) such number of shares of RELIASTAR Common
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Stock as may be issuable upon consummation of the Merger (taking into
consideration the number of shares of SECURITY Common Stock that may be
issuable pursuant to Sections 2.2(b)(ii) and 4.9) and (b) such number of
shares of RELIASTAR Junior Preferred Stock as may be necessary for the Rights
to attach to the shares of RELIASTAR Common Stock referred to in Clause (a) of
this Section 4.5.
4.6 Tax Certificate. Immediately prior to the Effective Time, RELIASTAR will
deliver a certificate to SECURITY and its tax counsel making the
representations and warranties substantially in the form attached hereto as
Exhibit 4.6.
4.7 Employee Benefits.
(a) Without limiting the obligations of RELIASTAR to assume any SECURITY
employee benefit plan, program, policy, contract, agreement or arrangement
as may arise by operation of law, at the Effective Time RELIASTAR will
assume all SECURITY employee benefit plans, programs, policies, contracts,
agreements and arrangements (the "SECURITY Plans") and shall succeed to all
rights of SECURITY as the employer or sponsor under the SECURITY Plans to
amend, modify or terminate the same in accordance with their terms and
applicable law, except to the extent otherwise expressly provided in
Exhibit 4.7(b) hereto.
(b) Following the Effective Time, RELIASTAR agrees to furnish to
employees who are employees of SECURITY or any of the SECURITY Subsidiaries
the employee benefit plans, programs, policies and arrangements set forth
in Exhibit 4.7(b) hereto (the "RELIASTAR Plans"), subject, except to the
extent otherwise expressly provided in Exhibit 4.7(b) hereto, to its rights
as the employer or sponsor under the RELIASTAR Plans to amend, modify or
terminate the same in accordance with their terms and applicable law.
(c) Nothing contained in this Section 4.7 or elsewhere in this Agreement
shall confer, or be deemed to confer, upon any person who is an employee of
RELIASTAR or any of the RELIASTAR Subsidiaries or of SECURITY or any of the
SECURITY Subsidiaries any rights to continued employment or, except as
expressly provided in Exhibit 4.7(b) hereto, to continuation of any benefit
plans, programs, policies or arrangements, including the SECURITY Plans and
the RELIASTAR Plans, for any particular period of time following
consummation of the Merger.
4.8 Indemnification.
(a) RELIASTAR agrees that from and after the Effective Time it will
assume and honor the indemnification obligations (including any obligations
relating to the advancement of expenses) of SECURITY set forth in Article
Eleventh of the Certificate of Incorporation of SECURITY as in effect on
the date hereof with respect to any and all persons described in such
charter provision (the "indemnitees") as to any matter arising out of any
action or omission of any such indemnitee prior to the Effective Time
(including without limitation indemnification for any claim that is based
upon, arises out of or in any way relates to the Merger, the Registration
Statement, the Proxy Statement, this Agreement or any of the transactions
contemplated hereby) and that such indemnitees shall be entitled to the
full benefits of, and RELIASTAR shall be bound by, such charter provision
as though such charter provision continued in full force and effect after
the Effective Time as an obligation of RELIASTAR with respect to such
matters.
(b) RELIASTAR agrees that for a period of six years from and after the
Effective Time it will maintain and cause to remain in effect the current
directors' and officers' liability insurance policies maintained by
SECURITY or any SECURITY Subsidiary with respect to claims arising from
facts or events which occurred at or before the Effective Time; provided,
however, that RELIASTAR may substitute therefor new or additional policies
of at least the same coverage and amounts and containing terms and
conditions no less advantageous than such current directors' and officers'
liability insurance policies.
(c) In the event RELIASTAR or any of its successors or assigns (i)
reorganizes or consolidates with or merges into or enters into another
business combination transaction with any other person or entity and is not
the resulting, continuing or surviving corporation or entity of such
consolidation, merger or transaction, or (ii) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any
person or entity, then, and in each such case, proper provision shall be
made so that the successors and assigns of RELIASTAR assume the obligations
set forth in this Section 4.8.
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(d) This Section 4.8 shall be construed as an agreement, as to which the
indemnitees are intended to be third-party beneficiaries, between RELIASTAR
and such indemnitees as unaffiliated third parties and is not subject to
any limitations to which RELIASTAR may be subject in indemnifying its own
directors or officers or other persons.
4.9 SECURITY Options.
(a) Upon and after the Effective Time each unexercised SECURITY Option
outstanding immediately prior to the Effective Time will be assumed by
RELIASTAR in a manner that will cause RELIASTAR to be a corporation
"assuming a stock option in a transaction to which Section 424(a) applies"
within the meaning of Section 422(a)(2) of the Code or, to the extent that
Section 422 of the Code does not apply to the option, would cause RELIASTAR
to be such a corporation if Section 422 of the Code were applicable to the
option. The SECURITY Options assumed by RELIASTAR will be exercisable upon
the same terms and conditions as under the applicable SECURITY Option Plan
or the governing option agreements (taking into account, without
limitation, provisions under which the exercisability of options would be
accelerated on account of the transactions contemplated hereby), as the
case may be, except that (i) the option shall be exercisable for that
number of shares of RELIASTAR Common as would have been received pursuant
to Section 1.6(b) at the Effective Time of the Merger for the shares of
SECURITY Common Stock subject to the option had the option been exercisable
and exercised immediately prior to the Effective Time, and any fractional
share of RELIASTAR Common Stock shall be settled at the time the option is
exercised by a cash payment equal to the fair market value of such
fractional share, and (iii) the exercise price per share of RELIASTAR
Common Stock issuable upon the exercise of the option shall be an amount
equal to the option price per share of the SECURITY Common Stock in effect
immediately prior to the Effective Time, divided by the Exchange Ratio,
rounded upward to the nearest full cent; provided that in no event shall
the Merger be deemed an event that terminates the option.
(b) No later than 90 days after the Effective Time, RELIASTAR will file
and use all reasonable efforts to obtain effectiveness under the 1933 Act
of one or more registration statements on Form S-8, or other applicable
form, in respect of shares of RELIASTAR Common Stock into which SECURITY
Options that have been converted under this Section 4.9 are exercisable.
RELIASTAR further agrees to use all reasonable efforts to keep such
registration statement or statements effective by means of all required
supplements or amendments thereto until all shares of RELIASTAR Common
Stock issuable upon exercise of such SECURITY Options have been issued upon
exercise thereof or such options have terminated, as the case may be.
4.10 Tax Matters. Following the Merger, RELIASTAR will continue the historic
business of SECURITY and the SECURITY Subsidiaries or use a significant
portion of the historic business assets thereof in a business, in each case
within the meaning of Treasury Regulations Section 1.368-1(d).
V. MUTUAL COVENANTS
5.1 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such costs and expenses.
5.2 Reimbursement of Expenses; SECURITY Fee.
(a) If (i) there has been no material breach by RELIASTAR of the
representations, warranties, covenants and agreements of RELIASTAR under
this Agreement (a "Material Breach") and (ii) this Agreement is terminated
pursuant to Section 7.1(g) or (k), then SECURITY will promptly thereafter,
but in no event later than three business days after receiving a written
request by RELIASTAR therefor, pay to RELIASTAR a fee of $8 million.
(b) If (i) there has been no Material Breach and (ii) this Agreement is
terminated pursuant to Section 7.1(c), then SECURITY will promptly
thereafter, but in no event later than three business days after receiving
a written request by RELIASTAR therefor, pay to RELIASTAR the amount of
$2.5 million to
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reimburse RELIASTAR for its expenses incurred in connection with this
Agreement and the transactions contemplated hereby. If at the time this
Agreement is terminated pursuant to Section 7.1(c), or at any time within
90 days thereafter an Acquisition Proposal (as defined below) is
outstanding and the Acquisition Proposal, as it may be modified, or a
substitute, alternative or other Acquisition Proposal, is consummated
within 12 months after this Agreement is terminated pursuant to Section
7.1(c), then SECURITY will at the time of such consummation or promptly
thereafter, but in no event later than three business days after receiving
a written request from RELIASTAR therefor, pay to RELIASTAR a fee of $5.5
million. As used herein, an "Acquisition Proposal" shall mean a publicly-
announced offer, or a publicly-announced intent to make an offer, from a
party other than RELIASTAR or its affiliates, to acquire SECURITY or SCL in
a merger, consolidation, share exchange or other business combination or
joint venture, to acquire all or substantially all of the assets of
SECURITY or SCL or a substantial part of the assets of SECURITY and the
SECURITY Insurance Subsidiaries, taken as a whole, or to acquire at least
50% of the outstanding SECURITY Common Stock or at least 50% of the equity
interests in the SECURITY Insurance Subsidiaries, or a negotiated
transaction for any of the foregoing. Notwithstanding the foregoing, in the
event that this Agreement is terminated pursuant to Section 7.1(c) at a
time when either party would have the right to terminate this Agreement
pursuant to Section 7.1(g) or 7.1(k), then such termination shall be deemed
to be a termination under Section 7.1(g) or (k), as the case may be, no fee
shall be payable pursuant to this Section 5.2(b), and the fee payable by
SECURITY shall be as set forth in Section 5.2(a).
5.3 Additional Agreements. In accordance with the terms and subject to the
conditions hereof, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to fulfill the conditions and
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
5.4 Notification of Certain Matters. SECURITY will give prompt notice to
RELIASTAR, and RELIASTAR will give prompt notice to SECURITY, of (i) the
occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Effective Time, and (ii) any material failure of
SECURITY or RELIASTAR, or any director, officer, employee, agent or
representative thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
5.5 Agreement to Defend. In the event any claim, action, suit, investigation
or other proceeding by any governmental body or other person or other legal or
administrative proceeding is commenced that questions the validity or legality
of the transactions contemplated hereby or seeks damages in connection
therewith, whether before or after the Effective Time, the parties hereto
agree to cooperate and use all reasonable efforts to defend against and
respond thereto.
5.6 Compliance with HSR Act. Each of RELIASTAR and SECURITY will use all
reasonable efforts to (i) file as promptly as possible and in any event within
20 days after the date of this Agreement with the Department of Justice and
the Federal Trade Commission any premerger notification required of it under
the HSR Act, (ii) respond promptly to any inquiries from the Department of
Justice or the Federal Trade Commission in connection with the transactions
contemplated hereby, and (iii) obtain the earliest possible termination or
waiver of any applicable HSR Act waiting period.
5.7 Securities Laws. RELIASTAR and SECURITY acknowledge that the
transactions contemplated hereby are subject to the provisions of the 1933 Act
and Rule 145 thereunder and of the 1934 Act. Each of RELIASTAR and SECURITY
agrees to provide promptly to the other such data and information concerning
its financial condition, assets and properties, affairs, operations and
businesses as may be required or appropriate for inclusion in the Registration
Statement or in the Proxy Statement and to cause its counsel, investment
advisors, accountants and actuaries to cooperate with the other's counsel,
investment advisors, accountants and actuaries in the preparation of the
Registration Statement and the Proxy Statement. Each of RELIASTAR and SECURITY
agrees to use its reasonable efforts to have the Registration Statement
declared effective under the 1933 Act as soon as
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may be practicable. Upon the declaration of the effectiveness of the
Registration Statement and subject to the provisions of this Agreement and the
receipt of the letters and opinions contemplated by Sections 6.2(d), 6.2(h),
6.3(c) and 6.3(f), SECURITY will distribute the Proxy Statement to the
stockholders of SECURITY not less than 25 business days prior to the meeting
of stockholders of SECURITY. RELIASTAR shall not be required to maintain the
effectiveness of the Registration Statement for the purpose of resale by
stockholders of SECURITY who may be "affiliates" pursuant to Rule 145 under
the 1933 Act.
VI. CONDITIONS
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party hereto to effect the Merger and to
consummate the other transactions contemplated hereby will be subject to the
fulfillment at or prior to the Closing of the following conditions:
(a) The Merger and this Agreement shall have been approved and adopted by
the requisite vote of the stockholders of SECURITY as required by law and
by any applicable provisions of its certificate of incorporation and
bylaws.
(b) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) No order shall have been entered and remain in effect in any action
or proceeding before any foreign, Federal or state court or governmental
agency or other foreign, Federal or state regulatory or administrative
agency or commission that would prevent or make illegal the consummation of
the Merger.
(d) The Registration Statement shall be effective, and all post-effective
amendments filed with the SEC (if any) shall have been declared effective
or shall have been withdrawn, and no stop-order suspending the
effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the parties,
threatened by the SEC.
(e) The shares of RELIASTAR Common Stock into which the shares of
SECURITY Common Stock are to be converted pursuant to this Agreement shall
have been approved for listing on the New York Stock Exchange subject to
official notice of issuance.
(f) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental authority or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement, the failure of which to obtain would prevent the consummation of
the Merger or have, individually or in the aggregate, a Material Adverse
Effect on SECURITY or a Material Adverse Effect on RELIASTAR, shall have
been obtained without the imposition of any conditions which would have,
individually or in the aggregate, a Material Adverse Effect on SECURITY or
a Material Adverse Effect on RELIASTAR.
(g) All authorizations, consents, waivers and approvals from parties to
contracts or other agreements to which any of SECURITY or RELIASTAR or
their respective Subsidiaries is a party, or by which any is bound, which
are required to be obtained in connection with the transactions
contemplated by this Agreement, the failure of which to obtain would
prevent the consummation of the Merger or have, individually or in the
aggregate, a Material Adverse Effect on SECURITY or a Material Adverse
Effect on RELIASTAR shall have been obtained.
6.2 Additional Conditions to Obligations of RELIASTAR. The obligations of
RELIASTAR to effect the Merger and to consummate the other transactions
contemplated hereby are, at the option of RELIASTAR, also subject to the
fulfillment at or prior to the Closing of the following conditions:
(a) The representations and warranties of SECURITY contained in Section
2.2 shall be accurate as of the date of this Agreement and, except to the
extent that such representations and warranties refer to a specific date,
accurate as if made on the Closing Date, except in the case of either such
date for any inaccuracy which individually or in the aggregate does not
have a Material Adverse Effect on SECURITY; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by SECURITY
at or before the Closing shall have been duly complied with and performed
in all material respects; and a certificate to the foregoing effect dated
as of the Closing Date and signed by the Chief Executive Officer or Chief
Financial Officer of SECURITY shall have been delivered to RELIASTAR.
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(b) Since the date of this Agreement, no material adverse change in the
financial condition, results of operations or businesses of SECURITY and
the SECURITY Subsidiaries, taken as a whole, shall have occurred, other
than changes resulting from (i) changes in general economic or market
conditions, including changes in interest rates, (ii) changes in insurance
laws or regulations, or (iii) matters affecting the life insurance industry
generally, and a certificate to such effect dated as of the Closing Date
and signed by the Chief Executive Officer or Chief Financial Officer of
SECURITY shall have been delivered to RELIASTAR.
(c) Holders of shares of SECURITY Common Stock shall not have dissenters'
rights with respect to the Merger or the other transactions contemplated
hereby.
(d) On the date of the Proxy Statement, the RELIASTAR Board shall have
received from Donaldson, Lufkin & Jenrette Securities Corporation a written
update, dated such date, confirming the opinion referred to in Section
2.1(m).
(e) RELIASTAR shall have received a written opinion of Murtha, Cullina,
Richter and Pinney, counsel to SECURITY, dated as of the Closing Date,
substantially to the effect set forth in Exhibit 6.2(e) hereto, together
with an opinion of such counsel with respect to AHL as RELIASTAR may
reasonably request.
(f) The RELIASTAR Board shall have received a written opinion of counsel
to RELIASTAR, in form and substance reasonably satisfactory to the
RELIASTAR Board, dated as of the Closing Date, to the effect that the
Merger will qualify as a reorganization pursuant to the provisions of
Section 368(a)(1)(A) of the Code.
(g) RELIASTAR shall have received from Ernst & Young LLP a letter, dated
the date of the Proxy Statement, with respect to certain financial
information regarding SECURITY included in the Proxy Statement, which
letter shall be in form and substance reasonably satisfactory to RELIASTAR
and customary in scope and substance for letters delivered by independent
public accountants in connection with proxy statements similar to the Proxy
Statement.
6.3 Additional Conditions to Obligations of SECURITY. The obligations of
SECURITY to effect the Merger and to consummate the other transactions
contemplated hereby are, at the option of SECURITY, also subject to the
fulfillment at or prior to the Closing of the following conditions:
(a) The representations and warranties of RELIASTAR contained in Section
2.1 shall be accurate as of the date of this Agreement and, except to the
extent that such representations and warranties refer to a specific date,
accurate as if made on the Closing Date, except in the case of either such
date for any inaccuracy which individually or in the aggregate does not
have a Material Adverse Effect on RELIASTAR; all of the terms, covenants
and conditions of this Agreement to be complied with and performed by
RELIASTAR at or before the Closing shall have been duly complied with and
performed in all material respects; and a certificate to the foregoing
effect dated as of the Closing Date and signed by the Chief Executive
Officer or Chief Financial Officer of RELIASTAR shall have been delivered
to SECURITY.
(b) Since the date of this Agreement, no material adverse change in the
financial condition, results of operations or businesses of RELIASTAR and
the RELIASTAR Subsidiaries, taken as a whole, shall have occurred, other
than changes resulting from (i) changes in general economic or market
conditions, including changes in interest rates, (ii) changes in insurance
laws or regulations, or (iii) matters affecting the life insurance industry
generally, and a certificate to such effect dated as of the Closing Date
and signed by the Chief Executive Officer or Chief Financial Officer of
RELIASTAR shall have been delivered to SECURITY.
(c) On the date of the Proxy Statement, the SECURITY Board shall have
received from Merrill Lynch, Pierce, Fenner & Smith Incorporated a written
update, dated as of such date, confirming the opinion referred to in
Section 2.2(n).
(d) SECURITY shall have received written opinions of Richard R. Crowl,
Senior Vice President, General Counsel and Secretary of RELIASTAR and
Faegre & Benson LLP, counsel to RELIASTAR, dated as of the Closing Date,
substantially to the effect set forth in Exhibit 6.3(d) hereto.
A-35
<PAGE>
(e) The SECURITY Board shall have received a written opinion of counsel
to SECURITY, in form and substance reasonably satisfactory to the SECURITY
Board, dated as of the Closing Date, to the effect that the Merger will
qualify as a reorganization pursuant to the provisions of Section
368(a)(1)(A) of the Code.
(f) SECURITY shall have received from Deloitte & Touche LLP a letter,
dated the effective date of the Registration Statement, with respect to
certain financial information regarding RELIASTAR included in the
Registration Statement, which letter shall be in form and substance
reasonably satisfactory to SECURITY and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
VII. MISCELLANEOUS
7.1 Termination. This Agreement may be terminated and the Merger and the
other transactions contemplated herein may be abandoned at any time prior to
the Effective Time, whether prior to or after approval by the stockholders of
SECURITY:
(a) By the mutual written consent of the RELIASTAR Board and the SECURITY
Board.
(b) By the RELIASTAR Board or the SECURITY Board, if the Merger shall not
have been consummated on or before September 30, 1997 (unless such failure
to consummate is the result of a breach of the terms hereof in any material
respect by the party asserting the termination right).
(c) By the RELIASTAR Board or the SECURITY Board, if the Merger and this
Agreement shall have been submitted to a vote of the stockholders of
SECURITY and shall not have been approved by the requisite vote.
(d) By the SECURITY Board, if a condition to SECURITY's obligations to
close set forth in Article VI of this Agreement cannot be met on the
Closing Date and is not waived; provided however, that with respect to the
failure to satisfy a condition under Section 6.3 that is capable of being
cured within 30 days, the right of the SECURITY Board to terminate this
Agreement shall exist only if the failure to satisfy such condition is not
cured within 30 days after written notice by SECURITY to RELIASTAR of such
condition.
(e) By the RELIASTAR Board, if a condition to RELIASTAR's obligations to
close set forth in Article VI of this Agreement cannot be met on the
Closing Date and is not waived; provided however, that with respect to the
failure to satisfy a condition under Section 6.2 that is capable of being
cured within 30 days, the right of the RELIASTAR Board to terminate this
Agreement shall exist only if the failure to satisfy such condition is not
cured within 30 days after written notice by RELIASTAR to SECURITY of such
condition.
(f) By the RELIASTAR Board or the SECURITY Board, if a final unappealable
order to restrain, enjoin or otherwise prevent, or awarding substantial
damages in connection with, the consummation of the Merger or the other
transactions contemplated hereby shall have been entered by a court of
competent jurisdiction or other regulatory authority.
(g) By the RELIASTAR Board or the SECURITY Board, if the SECURITY Board
does not make to the stockholders of SECURITY a favorable recommendation
with respect to the Merger or such recommendation is modified or withdrawn
in a way detrimental to RELIASTAR (and RELIASTAR and SECURITY agree that a
determination by the SECURITY Board not to call the meeting of stockholders
contemplated by Section 3.3 or the cancellation or adjournment of such
meeting without a vote on the Merger and this Agreement being taken (except
under circumstances where SECURITY is otherwise attempting to secure a vote
of its stockholders in favor of approval and adoption of the Merger and
this Agreement) shall be deemed to be such a failure to make or a
withdrawal of such recommendation).
(h) By the SECURITY Board (during the period commencing on the Approval
Date and ending on the fourth business day following the Approval Date), if
the Exchange Price is less than $49.00 and RELIASTAR shall not have
designated the Exchange Ratio set forth in Clause (B) of Section
1.6(b)(iv).
A-36
<PAGE>
(i) By the RELIASTAR Board (during the period commencing on the Approval
Date and ending on the fourth business day following the Approval Date), if
the Exchange Price is greater than $64.30 and SECURITY shall not have
designated the Exchange Ratio set forth in Clause (B) of Section 1.6(b)(v).
(j) By the RELIASTAR Board or the SECURITY Board, if the Rights are
triggered and are not redeemed, so that they may be exercised and traded
separately pursuant to the RELIASTAR Rights Agreement or the SECURITY
Rights are triggered and are not redeemed so that they may be exercised and
traded separately pursuant to the SECURITY Rights Agreement.
(k) By the RELIASTAR Board or the SECURITY Board if SECURITY shall have
entered into a definitive agreement for an Acquisition Proposal with a
Potential Acquirer in accordance with Section 3.4.
7.2 Effect of Termination. In the event of any termination of this Agreement
pursuant to Section 7.1, RELIASTAR and SECURITY shall have no obligation or
liability to each other except that (a) the provisions of the last two
sentences of Sections 3.5 and 4.4 and the provisions of Sections 5.1 and 5.2
shall survive any such termination, and (b) nothing herein and no termination
pursuant hereto shall relieve any party from liability for any breach of any
covenant or agreement of such party contained in this Agreement.
7.3 Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is, or whose stockholders or stockholders are,
entitled to the benefits thereof. This Agreement may not be amended or
supplemented at any time, except by an instrument in writing signed on behalf
of each party hereto; provided however, that after this Agreement has been
approved and adopted by the stockholders of SECURITY this Agreement may be
amended only as may be permitted by applicable provisions of the Delaware Law.
7.4 Nonsurvival of Representations and Warranties. No representation or
warranty in this Agreement shall survive the consummation of the Merger.
7.5 Public Statements. RELIASTAR and SECURITY agree to consult with each
other prior to issuing any press release or otherwise making any public
statement or disclosure with respect to the transactions contemplated hereby,
and neither will issue any such press release or make any such public
statement or disclosure prior to such consultation, except as may be required
by law or applicable stock exchange policy.
7.6 Knowledge. All references in this Agreement to knowledge of a
corporation shall be deemed to mean knowledge of any one or more of its
executive officers.
7.7 Assignment. This Agreement will not be assignable by the parties hereto.
7.8 Notices. All notices, requests, claims, demands and other communications
hereunder will be in writing and will be given (and will be deemed to have
been duly received if so given) by delivery by cable, telegram, telex,
telecopy or by registered or certified mail, postage prepaid, return receipt
requested, to the respective parties as follows:
if to RELIASTAR:
RELIASTAR FINANCIAL CORP.
20 Washington Avenue South
Minneapolis, Minnesota 55401
Attention: General Counsel
Telephone Number: 612/372-5479
Telecopy Number: 612/342-3160
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Thomas G. Morgan
A-37
<PAGE>
Telephone Number: 612/336-3171
Telecopy Number: 612/336-3026
and if to SECURITY:
SECURITY-CONNECTICUT CORPORATION
20 Security Drive
Avon, Connecticut 06001
Attention: President
Telephone Number: 860/674-6214
Telecopy Number: 860/674-6097
with a copy to:
Murtha, Cullina, Richter and Pinney
CityPlace 1
185 Asylum Street
Hartford, Connecticut 06103
Attention: Timothy L. Largay
Telephone Number: 860/240-6000
Telecopy Number: 860/240-6150
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
7.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAW OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
7.10 Severability. If any term, provision, covenant, agreement or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, agreements and restrictions of this Agreement will continue in full
force and effect and will in no way be affected, impaired or invalidated.
7.11 Counterparts. This Agreement may be executed in counterparts, each of
which will be an original, but all of which together will constitute one and
the same agreement.
7.12 Headings. The section headings herein are for convenience only and will
not affect the construction hereof.
7.13 Entire Agreement. This Agreement (a) constitutes the entire agreement
between the parties hereto and supersedes all other prior agreements and
understandings, both oral and written, between the parties relating to the
subject matter hereof and thereof, and (b) except as provided in Section
4.8(e), does not confer upon any person or entity not a party hereto or
thereto any rights or remedies hereunder or thereunder.
7.14 Limited Liability. Notwithstanding any other provision of this
Agreement, no stockholder, director, officer, affiliate or representative of
SECURITY or RELIASTAR shall have any personal liability in respect of or
relating to the covenants, obligations, representations or warranties of such
party under this Agreement or in respect of any certificate delivered with
respect hereto or thereto, except to the extent that such person or entity has
engaged in fraud with respect to such matters. Except as set forth in the
preceding sentence, to the fullest extent legally permissible, each of
SECURITY and RELIASTAR, for itself and its stockholders, directors, officers
and affiliates, waives and agrees not to seek to assert or enforce any such
liability that any such person otherwise might have pursuant to applicable
law.
A-38
<PAGE>
7.15 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. EACH PARTY IRREVOCABLY
CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR PROCEEDING BY OR AGAINST IT
WITH RESPECT TO ITS RIGHTS, OBLIGATIONS OR LIABILITIES UNDER THIS AGREEMENT OR
ANY OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT SHALL BE
BROUGHT BY SUCH PARTY ONLY IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF DELAWARE. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT THAT IT MAY HAVE TO A JURY TRIAL IN ANY LEGAL ACTION, SUIT OR PROCEEDING
WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT.
IN WITNESS WHEREOF, RELIASTAR has caused this Agreement to be signed by its
Chairman or its President or a Vice President and attested by its Secretary or
an Assistant Secretary, and SECURITY has caused this Agreement to be signed by
its Chairman or its President or a Vice President and attested by its
Secretary or an Assistant Secretary, all as of the date first above written.
Reliastar Financial Corp.
/s/ John G. Turner
Attest: _____________________________ By:__________________________________
Chairman and Chief Executive Officer
/s/ Richard R. Crowl
- -------------------------------------
Secretary
Security-Connecticut Corporation
/s/ Ronald D. Jarvis
Attest: _____________________________ By: _________________________________
Chairman and Chief Executive Officer
/s/ Patricia A. DeVita
- -------------------------------------
Secretary
A-39
<PAGE>
EXHIBIT B
LOGO
May 22, 1997
Board of Directors
Security-Connecticut Corporation
20 Security Drive
Avon, Connecticut 06001
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of the common stock, par value
$.01 per share (the "Shares"), of Security-Connecticut Corporation (the
"Company"), of the proposed consideration, taken as a whole, to be received by
such holders in accordance with the terms and subject to the conditions of the
Agreement and Plan of Merger dated February 23, 1997 (the "Agreement") between
ReliaStar Financial Corp. ("ReliaStar") and the Company pursuant to which the
Company will be merged with and into ReliaStar (the "Merger"). The Merger is
expected to be considered by such holders at a special stockholders' meeting
which will be held June .
Pursuant to the Agreement, and subject to the satisfaction or waiver of each
of the conditions to closing set forth therein, each Share will be converted
into the right to receive a fraction of a share of ReliaStar common stock,
without par value (the "ReliaStar Shares"). Such fraction expressed decimally
(the "Exchange Ratio") is calculated based on the average of the per share
closing sale prices of the ReliaStar Shares on the New York Stock Exchange
Composite Tape for the 20 trading days prior to the fifth business day
following the approval date on which each condition to closing has been either
satisfied or waived, as more fully set forth in the Agreement (the "Exchange
Price"). If the Exchange Price is equal to or greater than $52.65 and not
greater than $60.65, the Exchange Ratio shall be determined by dividing $47.00
by the Exchange Price. If the Exchange Price is less than $52.65 but equal to
or greater than $49.00, the Exchange Ratio shall be .8927. If the Exchange
Price is greater than $60.65 but equal to or less than $64.30, the Exchange
Ratio shall be .7749. If the Exchange Price is less than $49.00, the Exchange
Ratio shall be either .8927 or, if ReliaStar so elects, determined by dividing
$43.74 by the Exchange Price. If the Exchange Price is greater than $64.30, the
Exchange Ratio shall be either .7749 or, if the Company so elects, determined
by dividing $49.83 by the Exchange Price. In addition, if the Exchange Price is
greater than $64.30 and the Company has not made such election, ReliaStar shall
have the right to terminate the Agreement, and if the Exchange Price is less
than $49.00 and ReliaStar has not made such election, the Company shall have
the right to terminate the Agreement.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed certain publicly available business and financial information
relating to the Company and ReliaStar which we deemed to be relevant;
2. Reviewed certain information, including financial forecasts, relating
to the business, earnings, assets, equity and prospects of the Company
and ReliaStar, as well as the amount and timing of the cost savings
and related expenses expected to result from the Merger (the "Expected
Synergies") furnished to us by the Company and ReliaStar;
3. Conducted discussions with members of senior management of the Company
and ReliaStar concerning their respective businesses and prospects
before and after giving effect to the Merger and the Expected
Synergies;
B-1
<PAGE>
4. Reviewed the historical market prices and valuation multiples for the
Shares and ReliaStar Shares and compared them with those of certain
publicly traded companies which we deemed to be relevant;
5. Reviewed the results of operations of the Company and ReliaStar and
compared them with those of certain companies which we deemed to be
relevant;
6. Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
7. Reviewed the potential pro forma impact of the Merger;
8. Reviewed the Agreement dated February 23, 1997;
9. Reviewed ReliaStar's Form S-4 Registration Statement dated May ; and
10. Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us or
publicly available, and we have not assumed any responsibility for
independently verifying such information or undertaken an independent
evaluation or appraisal of any of the assets or liabilities of the Company or
ReliaStar. In addition, we have relied on an actuarial appraisal (the
"Actuarial Appraisal") of the insurance company subsidiaries of the Company.
With respect to the Actuarial Appraisal of the insurance company subsidiaries
of the Company which was supplied to us, we have assumed that it was reasonably
prepared on a basis reflecting: (i) the best available estimates and judgments
of the management of the Company as to the future operating and financial
performance of the insurance subsidiaries of the Company as of January 24,
1997, and (ii) the best judgment of the consulting actuarial firm as to the
proper analysis to be applied based on the assumptions provided to it by the
management of the Company as to the future operating and financial performance
of such insurance subsidiaries. We have also assumed that there have been no
material changes to the business of the Company since such date that would
materially affect such actuarial analysis. In addition, we have not conducted
any physical inspection of the properties or facilities of the Company or
ReliaStar. With respect to the financial forecast information and the Expected
Synergies furnished to or discussed with us by the Company or ReliaStar, we
have assumed that they have been reasonably prepared and reflect the best
currently available estimates and judgment of the Company's or ReliaStar's
management as to the expected future financial performance of the Company or
ReliaStar, as the case may be, and the Expected Synergies. We have further
assumed that the Merger will qualify as a tax-free reorganization for U.S.
federal income tax purposes.
Our opinion, as set forth herein, relates to the relative values of ReliaStar
and the Company. We are not expressing any opinion as to what value the
ReliaStar Shares will have when they are issued pursuant to the Merger or as to
the price the ReliaStar Shares will trade at subsequent to the Merger.
Our opinion is necessarily based on information available to us, and
financial, stock market and economic and other conditions and circumstances as
they exist and can be evaluated by us as of the date hereof. It should be
understood that, although subsequent developments may affect this opinion, we
do not have any obligation to update, revise or reaffirm this opinion.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to broadly solicit, nor
have we broadly solicited, third-party indications of interest of the
acquisition of all or any part of the Company.
We have been retained by the Board of Directors of the Company as an
independent contractor to act as financial advisor to the Company with respect
to the Merger and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Merger. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of our
engagement. We have within the past two years provided financial advisory,
investment banking and other services to the Company and ReliaStar and have
received
B-2
<PAGE>
customary fees for the rendering of such services. We have recently been
engaged to act as managing underwriter for a proposed offering of preferred
securities to be issued by ReliaStar, a portion of the proceeds of which may
be used by ReliaStar to purchase up to $100,000,000 of ReliaStar Shares after
the Merger has been consummated. We are also currently on retainer with
ReliaStar to provide financial advisory services unrelated to the Merger. In
addition, in the ordinary course of our securities business, we may actively
trade debt and/or equity securities of the Company and ReliaStar and their
respective affiliates for our own account and the accounts of our customers,
and we therefore may, from time to time, hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger, and does not constitute a recommendation
to any shareholder as to how such shareholder should vote on the proposed
Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed consideration to be received by the holders of the Shares (other
than ReliaStar or its affiliates) pursuant to the Merger, taken as a whole, is
fair to such shareholders from a financial point of view.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
/s/ David C. Sherwood
By __________________________________
Managing Director
Investment Banking Group
B-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Section 145 of the General Corporation Law of the State
of Delaware which provides for indemnification of directors and officers in
certain circumstances.
Article VIII of the By-Laws of the Registrant provides for broad
indemnification of directors and officers of the Registrant.
The Registrant also maintains director and officer liability insurance
policies.
In addition, Section 7 of Article Sixth of the Registrant's Certificate of
Incorporation contains broad provisions limiting the liability of directors
for monetary damages for breach of fiduciary duty as a director.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The following Exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
2 --Agreement and Plan of Merger, dated as of February 23, 1997,
by and between ReliaStar Financial Corp. and Security-
Connecticut Corporation (included in the Proxy
Statement/Prospectus as Exhibit A).
5 --Opinion of Faegre & Benson LLP.
8(a) --Form of opinion of Faegre & Benson LLP regarding certain tax
matters.
8(b) --Form of opinion of Murtha, Cullina, Richter and Pinney
regarding certain tax matters.
23(a) --Consent of Deloitte & Touche LLP (relating to financial
statements of the Registrant).
23(b) --Consent of Ernst & Young LLP (relating to financial statements
of SCC).
23(c) --Consent of Faegre & Benson LLP (included in Exhibits 5 and
8(a)).
23(d) --Consent of Murtha, Cullina, Richter and Pinney.
24 --Powers of Attorney of directors and officers of the
Registrant.
99(a) --Form of Proxy of SCC.
99(b) --Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
(included in the Proxy Statement/Prospectus as Exhibit B).
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report*
Schedule I--Consolidated summary of investments--other than
investments in related parties*
Schedule III--Condensed financial information of registrant*
Schedule V--Supplementary insurance information*
Schedule VI--Reinsurance*
Schedule VII--Guarantees of securities of other issuers*
Schedule VII--Valuation and qualifying accounts*
- --------
*Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996 (File No. 1-10640).
II-1
<PAGE>
(c) REPORTS, OPINIONS OR APPRAISALS
Information requested hereunder is furnished as Exhibit 99(b) hereto and
as Exhibit B to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement provided, however, that paragraphs (1)(i) and
(1)(ii) do not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic reports
filed by the Company pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
The undersigned Registrant undertakes that every prospectus: (i) that is
filed pursuant to the immediately preceding paragraph, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to this Registration Statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore,
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<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
this Registration Statement when it became effective.
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF MINNEAPOLIS, STATE OF
MINNESOTA, ON THE 8TH DAY OF MAY, 1997.
Reliastar Financial Corp.
/s/ John G. Turner*
By: _________________________________
John G. Turner,
Chairman and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON THE 8TH DAY OF MAY, 1997, BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
<TABLE>
<S> <C>
/s/ John G. Turner* Chairman and Chief Executive Officer
___________________________________________ (Principal Executive Officer)
John G. Turner
/s/ Wayne R. Huneke* Senior Vice President, Chief Financial
___________________________________________ Officer and Treasurer (Principal
Wayne R. Huneke Financial Officer)
/s/ Chris D. Schreier* Second Vice President and Controller
___________________________________________ (Principal Accounting Officer)
Chris D. Schreier
</TABLE>
CAROLYN H. BALDWIN
F. CALEB BLODGETT
DAVID C. COX
JAYE F. DYER
JOHN H. FLITTIE
LUELLA GROSS GOLDBERG
WILLIAM A. HODDER
JAMES J. HOWARD III A majority of the Board of Directors*
RANDY C. JAMES
RICHARD L. KNOWLTON
DAVID A. KOCH
RICHARD M. KOVACEVICH
GLEN D. NELSON, M.D.
JAMES J. RENIER
JOHN G. TURNER
- --------
*Richard R. Crowl, by signing his name hereto, does hereby sign this document
on behalf of each of the other above-named officers or directors of the
Registrant pursuant to powers of attorney duly executed by such persons.
/s/ Richard R. Crowl
By: _________________________________
Richard R. Crowl,
Senior Vice President, General
Counsel and Secretary, Attorney-
in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
2 --Agreement and Plan of Merger, dated as of
February 23, 1997, by and between ReliaStar
Financial Corp. and Security-Connecticut
Corporation (included in the Proxy
Statement/Prospectus as Exhibit A)
5 --Opinion of Faegre & Benson LLP.............. Filed Electronically
8(a) --Form of opinion of Faegre & Benson LLP
regarding certain tax matters................ Filed Electronically
8(b) --Form of opinion of Murtha, Cullina, Richter
and Pinney regarding certain tax matters..... Filed Electronically
23(a) --Consent of Deloitte & Touche LLP (relating
to financial statements of the Registrant)... Filed Electronically
23(b) --Consent of Ernst & Young LLP (relating to
financial statements of SCC)................. Filed Electronically
23(c) --Consent of Faegre & Benson LLP (included in
Exhibits 5 and 8(a))......................... Filed Electronically
23(d) --Consent of Murtha, Cullina, Richter and
Pinney....................................... Filed Electronically
24 --Powers of Attorney of directors and officers
of the Registrant............................ Filed Electronically
99(a) --Form of Proxy of SCC........................ Filed Electronically
99(b) --Opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated (included in the Proxy
Statement/Prospectus as Exhibit B)
</TABLE>
<PAGE>
EXHIBIT 5
May 21, 1997
ReliaStar Financial Corp.
20 Washington Avenue South
Minneapolis, Minnesota 55401
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of
1933, as amended, of 6,650,557 shares of Common Stock, without par value, of
ReliaStar Financial Corp., a Delaware corporation (the "Company"), the assumed
maximum number of shares that may be issued by the Company in connection with a
proposed merger of Security-Connecticut Corporation, a Delaware corporation,
with and into the Company (the "Merger"), we have examined such corporate
records and other documents, including the Registration Statement on Form S-4,
dated the date hereof (the "Registration Statement") relating to such shares and
the rights to purchase preferred stock that are attached to such shares
("Rights"), and have reviewed such matters of law as we have deemed necessary
for this opinion, and we advise you that in our opinion:
1. The Company is a corporation duly organized and existing under the
laws of the State of Delaware.
2. All necessary corporate action on the part of the Company has been
taken to authorize the issuance of the shares and Rights to be issued by the
Company in connection with the Merger, and when such shares are issued pursuant
to the Merger as contemplated by the Registration Statement such shares will be
legally and validly issued and fully paid and nonassessable, with Rights
attached thereto.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to our firm wherever appearing therein.
Very truly yours,
/s/ Faegre & Benson LLP
FAEGRE & BENSON LLP
<PAGE>
EXHIBIT 8(a)
May , 1997
ReliaStar Financial Corp.
20 Washington Avenue South
Minneapolis, Minnesota 55401
Ladies and Gentlemen:
We have acted as counsel to ReliaStar Financial Corp., a Delaware
corporation ("RLR"), in connection with the Agreement and Plan of Merger, dated
as of February 23, 1997 (the "Merger Agreement"), by and between RLR and
Security-Connecticut Corporation, a Delaware corporation ("SCC"), providing for
the merger of SCC with and into RLR. This letter expresses our opinion regarding
the treatment of the merger of SCC with and into RLR (the "Merger") as a
reorganization pursuant to Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code"). Unless otherwise defined herein, capitalized
terms have the same meanings as defined in the Merger Agreement.
In connection with this opinion, we have reviewed the Merger Agreement and
such other documents and records, including (i) the Registration Statement of
RLR on Form S-4 (the "Registration Statement") relating to shares of RLR Common
Stock to be issued in the Merger, and (ii) certain representations and
warranties (the "Representations") of the managements of RLR and SCC as to
certain facts and circumstances, as referred to in the Registration Statement
and as contemplated by the Merger Agreement, and have reviewed such matters of
law as we have deemed necessary for this opinion.
Based on the foregoing, including the Representations, we advise you that,
if the Merger is consummated in accordance with the terms of the Merger
Agreement, in our opinion:
(i) The Merger will qualify as a "reorganization" within the meaning of
Section 368(a)(1)(A) of the Code.
(ii) No gain or loss will be recognized by RLR upon the receipt of the
assets of SCC solely in exchange for RLR Common Stock.
(iii) No gain or loss will be recognized by SCC upon the transfer of its
assets to RLR pursuant to the Merger.
(iv) The basis of the assets of SCC, in the hands of RLR, will be the
same as the basis of such assets in hands of SCC immediately prior to the
Merger.
(v) No gain or loss will be recognized by the stockholders of SCC upon
the receipt of RLR Common Stock solely in exchange for their shares of SCC
Common Stock.
<PAGE>
ReliaStar Financial Corp.
May __, 1997
Page 2
(vi) The payment of cash to a holder of SCC Common Stock in lieu of a
fractional share of RLR Common Stock will be treated for federal income tax
purposes as if the fractional share was distributed as part of the Merger and
then was redeemed by RLR. This cash payment will be treated as having been
received as a distribution in full payment for the stock redeemed. Gain or loss
will be realized and recognized by the SCC stockholder receiving cash in lieu of
a fractional share of RLR common Stock equal to the difference between the cash
received and the basis of the fractional share interest.
(vii) Gain or loss recognized by a holder of SCC Common Stock upon receipt
of cash exchange for the holder's fractional share interest will be capital gain
or loss, provided the shares of SCC Common Stock were held as capital assets on
the date of the Merger. If the shares of SCC Common Stock have been held for
longer than one year, the gain or loss will be long-term capital gain or loss.
(viii) The basis of the SCC stockholders in shares of RLR Common Stock to
be received in the Merger will be the same as the shares of SCC Common Stock
surrendered in exchange therefore, decreased by the amount of cash received and
loss recognized in the Merger and increased by the amount of gain recognized in
the Merger.
(ix) The holding period of the shares of RLR Common Stock to be received
in the merger by the stockholders of SCC will include the period during which
the shares of SCC Common Stock surrendered in exchange therefore were held,
provided that the shares of SCC Common Stock were held as capital assets on the
date of the Merger.
Our opinion is limited to the matter expressly addressed above. No opinion
is expressed, and none should be inferred, as to any other matter. Our opinion
is based upon existing law and currently applicable Treasury regulations
promulgated under the Code, published administrative positions of the Internal
Revenue Service contained in revenue rulings and revenue procedures currently in
effect, and judicial decisions, all of which are subject to change either
prospectively or retroactively. To the extent there are changes in such legal
authorities, our opinion is not applicable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to our firm wherever appearing therein.
Very truly yours,
FAEGRE & BENSON LLP
<PAGE>
Exhibit 8(b)
June , 1997
--
To The Stockholders of Security-Connecticut Corporation
Ladies and Gentlemen:
We have acted as counsel to Security-Connecticut Corporation ("SCC") in
connection with the contemplated merger of SCC with and into ReliaStar Financial
Corp. ("RLR") pursuant to an Agreement and Plan of Merger dated as of February
23, 1997 by and between SCC and RLR (the "Merger Agreement"). The delivery of
this opinion is a condition to the Merger pursuant to Section 6.3(e) of the
Merger Agreement. All capitalized terms used herein, unless otherwise specified,
have the meaning set forth in the Merger Agreement.
In rendering this opinion, we have examined and relied upon (without any
independent investigation or review thereof) the accuracy and completeness at
all relevant times of the facts, information, covenants and representations
contained in originals or copies, certified or otherwise identified to our
satisfaction, of the Merger Agreement, the Registration Statement on Form S-4
filed by RLR with the Securities and Exchange Commission (which contains a Proxy
Statement/Prospectus) (the "Registration Statement"), and such other documents
as we have deemed necessary or appropriate as a basis for the opinion set forth
below. In addition, we have relied upon certain statements and representations
made by SCC and RLR, as well as other statements, representations and
assumptions. Our opinion is conditioned on, among other things, the initial and
continuing accuracy of such facts, information, covenants, representations and
assumptions.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, the authenticity of the
originals of such documents and that there has been (or will be by the Effective
Time of the Merger) due execution and delivery of all documents where due
execution and delivery are prerequisites to effectiveness thereof. We have
assumed that the Merger will be consummated pursuant to applicable state law in
accordance with the Merger Agreement and as described in the
<PAGE>
To The Stockholders of
Security-Connecticut Corporation
June _____, 1997
Page 2
Registration Statement. We have also assumed that any representation
or statement made "to the best of our knowledge" or similarly qualified is
correct without such qualification. As to all matters in which a person or
entity making a representation referred to above has represented that such
person or entity either is not a party to, does not have, or is not aware of,
any plan or intention, understanding or agreement, we have assumed that there is
in fact no such plan, intention, understanding or agreement.
Of particular importance is our reliance upon the truth and accuracy of
representations made by SCC management that, to the best of its knowledge, there
is no plan or intention on the part of the SCC shareholders to sell or otherwise
dispose (by short sale or otherwise) of RLR shares received in the Merger that
would reduce the SCC shareholders' ownership of RLR stock to a number of shares
having a value, as of the Effective Time of the Merger, of less than 50% of the
value of all of the formerly outstanding stock of SCC immediately prior to the
Merger. We rely on these representations in concluding that the Merger meets
the "continuity of interest" requirement for reorganization treatment under
Section 368(a) of the Code. To satisfy this requirement, SCC shareholders must
not, pursuant to a plan or intent existing at or prior to the Merger, dispose of
or transfer so much of either (i) their SCC stock in anticipation of the Merger
(including upon exercise of dissenters' rights), or (ii) RLR shares received in
the Merger, such that SCC shareholders as a group would no longer hold, after
the Merger, RLR shares having a value equal to a percentage of the value of
total outstanding SCC stock prior to the Merger, that represents a significant
equity interest. Although the precise percentage of stock that constitutes a
significant equity interest in an enterprise is uncertain, the Internal Revenue
Service has published a revenue procedure indicating that the Internal Revenue
Service would issue a ruling that 50% continuity meets this requirement.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that for federal income tax purposes:
A. The Merger of SCC into RLR will constitute a reorganization within the
meaning of Section 368(a) of the Code.
B. No gain or loss will be recognized by RLR upon the receipt of the
assets of SCC solely in exchange for RLR Common Stock. Code Section 1032.
<PAGE>
To The Stockholders of
Security-Connecticut Corporation
June __, 1997
Page 3
C. No gain or loss will be recognized by SCC upon the transfer of its
assets to RLR pursuant to the Merger. Code Sections 361(a) and 361(b).
D. The basis of the assets of SCC, in the hands of RLR, will be the same
as the basis of such assets in the hands of SCC immediately prior to the Merger.
Code Section 362(b).
E. No gain or loss will be recognized by the stockholders of SCC upon the
receipt of RLR Common Stock solely in exchange for their shares of SCC Common
Stock. Code Section 354(a)(1).
F. The payment of cash to a holder of SCC Common Stock in lieu of a
fractional share of RLR Common Stock will be treated for federal income tax
purposes as if the fractional share was distributed as part of the Merger and
then was redeemed by RLR. This cash payment will be treated as having been
received as a distribution in full payment for the stock redeemed. Code Section
302(a); Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574.
Gain or loss will be realized and recognized by the SCC stockholder receiving
cash in lieu of a fractional share of RLR Common Stock equal to the difference
between the cash received and the basis of the fractional share interest. Code
Section 1001.
G. Gain or loss recognized by a holder of SCC Common Stock upon receipt of
cash in exchange for the holder's fractional share interest will be capital gain
or loss, provided the shares of SCC Common Stock were held as capital assets on
the date of the Merger. If the shares of SCC Common Stock have been held for
longer than one year, the gain or loss will be long-term capital gain or loss.
Code Section 1222.
H. The basis of the SCC stockholders in the shares of RLR Common Stock to
be received in the Merger will be the same as their basis in the shares of SCC
Common Stock surrendered in exchange therefore, decreased by the amount of cash
received and loss recognized in the Merger and increased by the amount of gain
recognized in the Merger. Code Section 358(a)(1).
I. The holding period of the shares of RLR Common Stock to be received in
the Merger by the stockholders of SCC will include the period during which the
shares of SCC Common Stock surrendered in exchange therefore were held, provided
that the shares of SCC Common Stock were held as capital assets on the date of
the Merger. Code Section 1223(1).
<PAGE>
To The Stockholders of
Security-Connecticut Corporation
June __, 1997
Page 4
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
This opinion represents and is based upon our best judgment regarding the
application of federal income tax laws arising under the Code, Treasury
Regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant. Our opinion is not binding upon the Internal Revenue
Service or the courts, and the Internal Revenue Service is not precluded from
successfully asserting a contrary position. It should be noted that statutes,
regulations, judicial decisions and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive effect. A
change in the authorities upon which our opinion is based could affect our
conclusion.
Except as set forth above, we express no opinion to any party as to the tax
consequences, whether federal, state, local or foreign, of the Merger or of any
transactions related thereto. We undertake no responsibility to update this
opinion for changes in the law or relevant facts subsequent to the date of
this letter. This opinion is solely for your benefit and is not to be used,
circulated, quoted or otherwise referred to for any purpose without our express
written permission.
In the event any one of statements, representations, warranties or
assumptions upon which we have relied to issue this opinion is incorrect, our
opinion might be adversely affected and may not be relied upon.
Very truly yours,
MURTHA, CULLINA, RICHTER AND PINNEY
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
On Form S-4 of ReliaStar Financial Corp. and subsidiaries of our reports dated
January 31, 1997, except for Note 14, as to which the date is February 23, 1997,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
ReliaStar Financial Corp. and subsidiaries for the year ended December 31, 1996
and to the reference to us under the heading "Experts" in the Proxy
Statement/Prospectus, which is part of this Registration Statement.
/S/ Deloitte & Touche LLP
Minneapolis, Minnesota
May 15, 1997
<PAGE>
Exhibit 23(b)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333- ) filed by ReliaStar Financial Corp.
for the registration of 6,650,557 shares of its common stock and to the
incorporation by reference therein of our report dated February 23, 1997, with
respect to the consolidated financial statements and schedule of Security-
Connecticut Corporation included in its Annual Report (Form 10-K) for the year
ended December 31, 1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Hartford, Connecticut
May 20, 1997
<PAGE>
Exhibit 23(d)
CONSENT OF MURTHA, CULLINA, RICHTER AND PINNEY
In connection with the contemplated merger of Security-Connecticut
Corporation ("SCC") with and into ReliaStar Financial Corp. ("RLR") pursuant to
an Agreement and Plan of Merger dated as of February 23, 1997 by and between SCC
and RLR, we hereby consent to the filing of our tax opinion as an exhibit to the
Registration Statement on Form S-4 to be filed by RLR with the Securities and
Exchange Commission and to all references to this firm under the caption
entitled "The Merger-Federal Income Tax Consequences" set forth in the Proxy
Statement/Prospectus comprising a part of such Registration Statement.
/S/ Murtha, Cullina, Richter and Pinney
May 21, 1997
<PAGE>
Exhibit 24
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp., a
Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 8th day of May, 1997.
/s/ Carolyn H. Baldwin
----------------------
Carolyn H. Baldwin
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 8th day of May, 1997.
/s/ Wayne R. Huneke
-------------------
Wayne R. Huneke
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Robert C. Salipante
-----------------------
Robert C. Salipante
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Steven W. Wishart
---------------------
Steven W. Wishart
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Michael J. Dubes
--------------------
Michael J. Dubes
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Kenneth U. Kuk
------------------
Kenneth U. Kuk
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Chris D. Schreier
---------------------
Chris D. Schreier
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Richard R. Crowl
--------------------
Richard R. Crowl
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ David A. Koch
-----------------
David A. Koch
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ John G. Turner
------------------
John G. Turner
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ John H. Flittie
-------------------
John H. Flittie
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Richard M. Kovacevich
-------------------------
Richard M. Kovacevich
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ James J. Howard
-------------------
James J. Howard
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ William A. Hodder
---------------------
William A. Hodder
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Randy C. James
------------------
Randy C. James
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ F. Caleb Blodgett
---------------------
F. Caleb Blodgett
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Richard Michael Conley
--------------------------
Richard Michael Conley
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ James J. Renier
-------------------
James J. Renier
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Richard L. Knowlton
-----------------------
Richard L. Knowlton
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Luella G. Goldberg
----------------------
Luella G. Goldberg
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ David C. Cox
----------------
David C. Cox
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Jaye F. Dyer
----------------
Jaye F. Dyer
<PAGE>
RELIASTAR FINANCIAL CORP.
Power of Attorney
of Director and Officer
The undersigned director and/or officer of ReliaStar Financial Corp.,
a Delaware corporation, does hereby make, constitute and appoint John G. Turner,
John H. Flittie, Wayne R. Huneke and Richard R. Crowl, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, on Form
S-4 or other applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, D.C., in connection with the registration under
the Securities Act of 1933, as amended, of shares of Common Stock or other
securities proposed to be issued or sold by said Company, and to file the same
with said Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform any and all acts necessary or
incidental to the performance and execution of the powers herein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's
hand this 8th day of May, 1997.
/s/ Glen D. Nelson
------------------
Glen D. Nelson
<PAGE>
Exhibit 99(a)
SECURITY-CONNECTICUT CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of common stock, par value $.01 per share
("Common Stock"), of SECURITY-CONNECTICUT CORPORATION, a Delaware corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
Ronald D. Jarvis and Patricia A. DeVita or either of them, as proxies, with full
power to act without the other and with full power of substitution, to represent
the undersigned at the Special Meeting of Stockholders of the Company to be held
on Tuesday, June 24, 1997 at 10:30 a.m., local time, at the principal executive
offices of the Company, 20 Security Drive, Avon, Connecticut 06001, and at any
adjournments or postponements thereof, and to vote all shares of Common Stock of
the Company which the undersigned is entitled to vote on the matter set forth on
the reverse and any other business that may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting and
the Proxy Statement, dated May 22, 1997, and instructs its attorneys and
proxies to vote as set forth on this Proxy.
(Continued and to be signed and dated on the reverse Side)
[X] Please mark your votes
as in this example.
FOR AGAINST ABSTAIN
1. Agreement and Plan of Merger. [ ] [ ] [ ]
2. To vote with discretionary authority upon any other business which may
properly come before the meeting or any adjournment thereof.
The shares represented by this Proxy will be voted as specified. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR OF THE AGREEMENT AND PLAN OF MERGER
AND THE PROXIES ARE GIVEN DISCRETIONARY AUTHORITY TO VOTE ON ANY OTHER MATTERS
UPON WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AND WHICH MAY PROPERLY COME
BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. THIS
PROXY CARD MUST BE PROPERLY COMPLETED, SIGNED, DATED AND RETURNED IN ORDER TO
HAVE YOUR SHARES VOTED.
- -----------------------
SHAREHOLDER NAME AND ADDRESS
DO NOT PRINT IN THIS AREA
SIGNATURE(s) DATE
----------- -----------
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, etc., indicate
title. If the signer is a corporation, sign in the corporate name by a duly
authorized officer.
