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SCHEDULE 14A - INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Security-Connecticut Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, of other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE>
SECURITY-CONNECTICUT CORPORATION
April 7, 1997
Dear Shareholder:
We are pleased to invite you to attend the Annual Meeting of Shareholders of
Security-Connecticut Corporation scheduled to be held on Thursday, May 15, 1997,
at 10:30 a.m. at the offices of the Company, 20 Security Drive, Avon,
Connecticut.
The matters to be acted upon at the meeting are described in the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.
On February 24, 1997, the Company announced that it has entered into an
Agreement and Plan of Merger (the "Merger Agreement") with ReliaStar Financial
Corp. Please note that the Merger Agreement will not be considered at the Annual
Meeting but, rather, will be considered at a Special Meeting of shareholders
expected to be called and held shortly after the Annual Meeting. Separate
notification will be sent to all shareholders with the Special Meeting date,
time and location.
Whether or not you expect to attend the Annual Meeting, it is important that
you sign and date the enclosed proxy card and return it in the envelope provided
for your convenience.
On behalf of the Board of Directors, thank you for your continued support.
Cordially,
/s/ Ronald D. Jarvis
--------------------
Ronald D. Jarvis
Chairman
<PAGE>
SECURITY-CONNECTICUT CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1997
Notice is hereby given that the Annual Meeting of Shareholders of
Security-Connecticut Corporation will be held at the offices of the Company, 20
Security Drive, Avon, Connecticut on Thursday, May 15, 1997 at 10:30 a.m., local
time, for the following purposes:
(1) To elect two directors for a term of three years;
(2) To ratify the appointment of Ernst & Young LLP as the Company's
independent accountants for the 1997 fiscal year;
(3) To approve the Company's Long-Term Incentive Plan; and
(4) To act upon such other matters as may properly come before the meeting
or any postponements or adjournments thereof.
Only shareholders of record at the close of business on April 2, 1997 are
entitled to notice of and to vote at the meeting or at any postponements or
adjournments thereof.
By Order of the Board of Directors,
/s/ Patricia A. DeVita
----------------------
Patricia A. DeVita
Corporate Secretary
April 7, 1997
Avon, Connecticut
<PAGE>
SECURITY-CONNECTICUT CORPORATION
20 Security Drive
Avon, Connecticut 06001-4237
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors and management of Security-Connecticut Corporation, a
Delaware corporation (the "Company"), of proxies for use at the Annual Meeting
of Shareholders of the Company (the "Annual Meeting") to be held at the offices
of the Company, 20 Security Drive, Avon, Connecticut, on Thursday, May 15, 1997
at 10:30 a.m., local time, and at any and all postponements or adjournments
thereof, for the purposes set forth in the accompanying Notice of Meeting.
This Proxy Statement, Notice of Meeting and accompanying proxy card are
first being mailed to shareholders on or about April 7, 1997.
GENERAL
On February 2, 1994, Lincoln National Life Insurance Company ("LNL"), which
company is a subsidiary of Lincoln National Corporation ("LNC") sold all of the
outstanding Common Stock of the Company in a public offering. As used in this
Proxy Statement, "Security-Connecticut" means the Company's wholly owned
subsidiaries, Arrowhead Ltd. (a Bermuda insurance corporation) and
Security-Connecticut Life Insurance Company ("SCL") and SCL's wholly owned
subsidiary, Lincoln Security Life Insurance Company ("LSL"). Unless the context
otherwise requires, the "Company" means Security-Connecticut Corporation and its
subsidiaries.
On February 23, 1997, Security-Connecticut entered into a statutory merger
agreement with ReliaStar Financial Corp. ("ReliaStar") which provides that
Security-Connecticut Corporation ("SCC") will merge with and into ReliaStar.
After the merger, the separate corporate existence of SCC will cease and each
outstanding share of common stock of SCC will be converted into the right to
receive a fraction of a share of the common stock of ReliaStar, all in
accordance with the terms and conditions of the merger agreement. Completion of
the merger is subject to normal closing conditions, including approval by the
Company's shareholders and various regulatory approvals.
Only shareholders of record at the close of business on April 2, 1997 are
entitled to notice of and to vote the shares of common stock, par value $.01 per
share, of the Company (the "Common Stock") held by them on that date at the
Annual Meeting or at any postponements or adjournments thereof.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote for the nominees
proposed by the Board of Directors, for ratification of the appointment of Ernst
& Young LLP as the Company's independent accountants for the fiscal year ending
December 31, 1997, for approval of the Long-Term Incentive Plan, and as
recommended by the Board of Directors with regard to all other matters or, if no
such recommendation is given, in their own discretion. Each shareholder may
revoke a previously granted proxy at any time before it is exercised by filing
with the Secretary of the Company 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 Annual Meeting in person and so requests.
Attendance at the Annual Meeting will not, in itself, constitute revocation of a
previously granted proxy.
-1-
<PAGE>
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the shares of Common Stock outstanding on April 2, 1997 will
constitute a quorum. Each outstanding share entitles its holder to cast one vote
on each matter to be voted upon at the Annual Meeting. As of February 28, 1997,
there were 8,572,115 shares of Common Stock outstanding. Each matter to be
submitted to shareholders requires the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on the matter. For the purposes of determining the
number of affirmative votes cast with respect to any matter submitted to
shareholders, only those votes cast "for" the matters are included. Abstentions
will be treated as shares present and entitled to vote for the purpose of
determining the presence of a quorum, but will not be considered as votes cast
in determining whether a matter has been approved by shareholders. Abstentions,
therefore, will have the same effect as a negative vote for the purposes of
determining whether a matter submitted to the shareholders has been approved. If
a broker or other record holder or nominee indicates on a proxy that it does not
have authority as to certain shares to vote on a particular matter, those shares
will not be considered as present and entitled to vote with respect to that
matter. As a result, so called "broker non-votes" will have no effect on the
outcome of the voting for a particular matter.
STOCK OWNERSHIP
Stock Ownership of Certain Beneficial Owners
As of February 28, 1997, with the exception of the persons listed below, no
person was known by the Company to own more than 5% of the outstanding Common
Stock.
Number of Percent
Shares of Class
--------- --------
Boston Partners Asset Management, L.P. (1) 566,180 6.38%
One Financial Center, 43rd Floor
Boston, MA 02111
Greenhaven Associates, Inc. (2) 536,000 6.04%
Three Manhattanville Road
Purchase, NY 10577
Tweedy, Browne Company L.P. (3) 449,653 5.07%
52 Vanderbilt Avenue
New York, NY 10017
__________
(1) Boston Partners Asset Management, L.P., Boston Partners, Inc., and Desmond
John Heathwood, all with a principal place of business at One Financial
Center, 43rd Floor, Boston, MA 02111, have each filed a Schedule 13G under
the Securities Exchange Act of 1934, as amended, dated February 7, 1997,
stating that each holds sole voting power with respect to zero shares of
Common Stock, shared voting power with respect to 566,180 shares of Common
Stock, sole dispositive power with respect to zero shares of Common Stock
and shared dispositive power with respect to 566,180 shares of Common
Stock.
(2) Greenhaven Associates, Inc. has filed a Schedule 13G under the Securities
Exchange Act of 1934, as amended, dated January 6, 1997, stating that it
holds sole voting power with respect to 37,000 shares of Common Stock,
shared voting power with respect to zero shares of Common Stock, sole
dispositive power with respect to 37,000 shares of Common Stock and shared
dispositive power with respect to 499,000 shares of Common Stock.
-2-
<PAGE>
(3) Tweedy, Browne Company L.P. ("TBC"), a Delaware limited partnership, TBK
Partners, L.P. ("TBK"), a Delaware limited partnership, and Vanderbilt
Partners, L.P. ("Vanderbilt"), a Delaware limited partnership, all with a
principal place of business at 52 Vanderbilt Avenue, New York, New York
10017, have filed a joint Schedule 13D under the Securities Exchange Act
of 1934, as amended, dated April 24, 1996, disclosing that TBC, TBK and
Vanderbilt may be deemed to be the beneficial owners of an aggregate of
449,653 shares of Common Stock, constituting approximately 5.26% of the
8,555,994 shares of Common Stock which the filing persons believed to be
the total number of shares of Common Stock outstanding on the date of the
filing. TBC holds sole voting power with respect to 376,810 shares of
Common Stock, shared voting power with respect to zero shares of Common
Stock, sole dispositive power with respect to zero shares of Common Stock
and shared dispositive power with respect to 422,153 shares of Common
Stock. TBK holds sole voting power with respect to 15,000 shares of Common
Stock, shared voting power with respect to zero shares of Common Stock,
sole dispositive power with respect to 15,000 shares of Common Stock and
shared dispositive power with respect to zero shares of Common Stock.
Vanderbilt holds sole voting power with respect to 12,500 shares of Common
Stock, shared voting power with respect to zero shares of Common Stock,
sole dispositive power with respect to 12,500 shares of Common Stock and
shared dispositive power with respect to zero shares of Common Stock. Each
of TBC, TBK and Vanderbilt disclaim beneficial ownership of Common Stock
held by the other.
Stock Ownership of Directors and Executive Officers
The following table reflects shares of Common Stock beneficially owned (or
deemed to be beneficially owned pursuant to the rules of the Securities and
Exchange Commission) as of February 28, 1997 by each director of the Company,
each of the executive officers ("Named Executive Officers") named in the Summary
Compensation Table included elsewhere herein and the current directors and
executive officers of the Company as a group.
Number of Percent
Shares (1) of Class
------------ --------
J. Michael Divney 1,303 (2) *
Daniel F. Flynn 2,000 *
Ronald D. Jarvis 162,519 (3)(4) 1.83
Harvey S. Levenson 10,500 (5) *
William P. Norris, Jr. 43,063 (6) *
Richard D. Mocarski 14,393 (7) *
John E. Silliman 3,000 (5) *
Barry J. St. Pierre 59,883 (8) *
Robert J. Voight 62,263 (9) *
All current directors 358,924 (10) 4.04
and executive officers
as a group. (9 persons)
* Represents less than 1% of the Company's outstanding Common Stock.
__________
(1) Includes interests in shares held in the Security-Connecticut Corporation
Savings and Profit Sharing Plan as of February 28, 1997, with respect to
which participants have sole voting power.
(2) Mr.Divney disclaims beneficial ownership of 270 of such shares held by his
children directly.
-3-
<PAGE>
(3) Includes 95,031 shares issuable upon the exercise of stock options to
purchase shares of Common Stock of the Company which are exercisable within
60 days of February 28, 1997.
(4) Mr. Jarvis disclaims beneficial ownership of 8,000 of such shares held by
his wife directly.
(5) Mr. Levenson and Mr. Silliman disclaim beneficial ownership of 500 of such
shares held by their respective wives directly.
(6) Includes 26,982 shares issuable upon the exercise of stock options to
purchase shares of Common Stock of the Company which are exercisable within
60 days of February 28, 1997.
(7) Includes 8,000 shares issuable upon the exercise of stock options to
purchase shares of Common Stock of the Company which are exercisable within
60 days of February 28, 1997.
(8) Includes 28,683 shares issuable upon the exercise of stock options to
purchase shares of Common Stock of the Company which are exercisable within
60 days of February 28, 1997.
(9) Includes 27,682 shares issuable upon the exercise of stock options to
purchase shares of Common Stock of the Company which are exercisable within
60 days of February 28, 1997.
(10) Includes 186,378 shares issuable upon the exercise of stock options to
purchase shares of Common Stock of the Company which are exercisable within
60 days of February 28, 1997.
ITEM 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes, as
nearly equal in number as possible. Each class serves three years, with the
terms of office of the respective classes expiring in successive years. The term
of office of directors in Class 1 expires at the 1997 Annual Meeting. The Board
of Directors proposes that the nominees described below, who are currently
serving as Class 1 directors, be elected to Class 1 for a new term of three
years and until their successors are duly elected and qualified. The Board of
Directors has no reason to believe that the nominees will not serve if elected,
but if one or both should become unavailable to serve as a director, and if the
Board designates a substitute nominee(s), the persons named as proxies will vote
for the substitute nominee(s) designated by the Board.
Directors are elected by a majority of the votes cast at the Annual Meeting.
If elected, the nominees are expected to serve until the year 2000 Annual
Meeting and until their successors are duly elected and qualified.
Class 1 - Directors Standing for Election
Ronald D. Jarvis Age 60 Director since 1993
Mr. Jarvis is Chairman, President and Chief Executive Officer of the
Company, of SCL and of LSL and is Director and President of Arrowhead Ltd. He
has been with SCL for 32 years. He is a director and member of the Executive
Committee of Saint Francis Hospital and Medical Center in Hartford, Connecticut;
a director of Saint Francis Physician Hospital Organization; a director of Saint
Francis Indemnity Co., Ltd.; and is a member of the Advisory Board for the Bank
of Boston Connecticut. Mr. Jarvis was formerly a director of Society for Savings
Bancorp and of LNL.
-4-
<PAGE>
Harvey S. Levenson Age 56 Director since 1993
Mr. Levenson had been, until his retirement in December 1995, Director,
President and Chief Operating Officer of Kaman Corporation which serves defense,
industrial and commercial markets. From 1982 to 1990, Mr. Levenson served as
Senior Vice President and Chief Financial Officer of Kaman Corporation. He
continues to serve as a director of Kaman Corporation and is also a director of
Connecticut Natural Gas Corporation.
Class 2 - Term Expires at the 1998 Annual Meeting
J. Michael Divney Age 58 Director since 1993
Mr. Divney has been a director of the Company's LSL subsidiary since April
1990. Since 1972, he has been Principal of Divney Consulting, a real estate
consulting firm based in White Plains, New York.
Class 3 - Term Expires at the 1999 Annual Meeting
Daniel E. Flynn Age 62 Director since 1993
Mr. Flynn has been President and Chief Executive Officer of Resources
Management Corp., a registered investment advisor, and two affiliated companies,
known together as Resources Management Group since 1970. These companies are
based in Farmington, Connecticut, and involve asset management and the
acquisition and development of real estate and other assets.
John E. Silliman Age 63 Director since 1993
Mr. Silliman had been, until his retirement in November 1993, a partner with
Murtha, Cullina, Richter and Pinney, a law firm located in Hartford,
Connecticut. He has been a director of LSL since 1984.
Directors' Remuneration; Attendance
Directors who are also full-time employees of the Company receive no
additional compensation for service as directors. Directors of the Company who
are not employees of the Company or its subsidiaries or affiliates are paid a
$15,000 annual retainer and $900 for each board or committee meeting attended.
In addition, the Company reimburses all directors for reasonable travel expenses
incurred in attending meetings.
The Board of Directors met four times during fiscal 1996. No director
attended fewer than 75% of the total number of meetings of the board and
committees on which such director served.
Committees of the Board
The Board has standing Compensation and Audit/Finance Committees. The entire
Board serves as the Nominating Committee.
Compensation Committee - The Compensation Committee, composed of Messrs.
Flynn, Levenson and Silliman (Chairman), met four times during 1996. Its
functions are to review the Company's general compensation strategy; establish
salaries and review benefit programs (including pensions) for the Chief
Executive Officer and those persons who report directly to him; review, approve,
recommend and administer the Company's incentive compensation and stock option
plans and certain other compensation plans; and approve certain employment
contracts.
-5-
<PAGE>
Audit/Finance Committee - The Audit/Finance Committee composed of Messrs.
Divney (Chairman), Flynn, Levenson and Silliman, met two times during 1996. Its
functions are to recommend the appointment of independent accountants; review
the arrangements for and scope of the audit by independent accountants; review
the independence of the independent accountants; consider the adequacy of the
system of internal accounting controls and review any proposed corrective
actions; review and monitor the Company's policies regarding business ethics and
conflicts of interests and discuss with management and the independent
accountants the Company's annual financial statements and key accounting and/or
reporting matters.
Nominating Committee - The Nominating Committee is composed of all the
members of the Board of Directors. The Board of Directors, acting in such
capacity, met once during 1996. The Nominating Committee nominates candidates
for the Board and considers the qualifications and retirement of existing
members of the Board.
The Bylaws of the Company establish an advance notice procedure which
permits shareholders to nominate candidates for election to the Board of
Directors at any annual meeting of shareholders of the Company. This procedure
provides that notice of a recommendation for election to the Board must be
timely given in writing to the Secretary of the Company prior to the meeting. In
all cases, to be timely, notice relating to an annual meeting must be received
at the principal executive office of the Company not less than 120 days before
the first anniversary of the prior year's annual meeting. Such notice shall be
in conformance with, and subject to, the Bylaws of the Company.
The Nominating Committee considers shareholder recommendations of nominees
for election to the Board of Directors if they are accompanied by a
comprehensive written resume of the recommended nominee's business experience
and background and a consent in writing signed by the recommended nominee that
he or she is desirous of being considered as a nominee and, if nominated and
elected, he or she will serve as a director. Shareholders should send their
written recommendations of nominees accompanied by the aforesaid documents to
the Secretary of the Company at the principal executive office of the Company.
-6-
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities to the Company or subsidiaries of
the Company for the fiscal year ended December 31, 1996 of the chief executive
officer and the other four most highly compensated executive officers of the
Company (all five officers are collectively referred to as the "Named Executive
Officers").
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term Compensation
--------------------------
Awards Payouts
------------------ -------
Restricted
Annual Compensation (1)
----------------------- Stock Options/ LTIP All Other
Salary Bonus Awards SARs Payouts Compensation
Name and Principal Position Year ($) ($)(2) ($)(3) (#)(4) ($)(5) ($)
- --------------------------- ---- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald D. Jarvis, Chairman, 1996 363,000 270,494 0 19,000 297,750 64,698 (6)
President and CEO 1995 331,000 0 0 16,000 4,965 (7)
1994 315,000 234,675 600,006 61,364 18,900 (7)
William P. Norris, Jr. 1996 157,900 82,670 0 6,000 81,900 10,248 (6)
Sr. V.P., Sales & Marketing 1995 151,300 25,976 0 7,200 2,270 (7)
1994 144,100 53,763 149,996 20,182 8,646 (7)
Barry J. St. Pierre 1996 158,050 82,670 0 7,000 81,900 11,567 (6)
Sr. V.P., Operations 1995 150,600 15,694 0 7,000 2,259 (7)
1994 143,350 66,357 149,996 21,682 8,601 (7)
Robert J. Voight 1996 164,950 82,670 0 11,000 81,900 11,733 (6)
Executive V.P. 1995 152,200 26,142 0 6,000 2,283 (7)
1994 146,200 70,529 149,996 21,682 8,772 (7)
Richard D. Mocarski 1996 104,900 41,011 0 1,500 33,300 8,895 (6)
V.P., Controller and 1995 102,300 8,116 0 0 1,535 (7)
Treasurer 1994 92,600 48,635 0 7,500 5,556 (7)
<FN>
__________
(1) Perquisites and other personal benefits are not included as they need not
be disclosed unless the aggregate amount is the lesser of $50,000 or 10% of
the total of base salary and annual bonus for the Named Executive Officer.
(2) Bonuses are paid in March of each year for services performed in the prior
year. Amounts shown are bonuses received in 1997 for services performed in
1996, bonuses received in 1996 for services performed in 1995 and bonuses
received in 1995 for services performed in 1994.
(3) Consists of shares of restricted stock that vest solely on the basis of
lapse of time. Values shown are based on the date of grant. All shares have
fully vested.
(4) See "Options/SAR Grants in Last Fiscal Year."
-7-
<PAGE>
(5) Payout amounts are for the 1994-1996 performance cycle. Such amounts are
paid in cash and common stock; 50% in March 1997 and 50% in March 1998.
(6) Includes (a) contributions made or accrued by Security-Connecticut for
fiscal year 1996 under the Security-Connecticut Corporation Employees'
Savings and Profit Sharing Plan as follows: Mr. Jarvis, $9,000; Mr. Norris,
$9,000; Mr. St. Pierre, $9,000; Mr. Voight, $9,000; and Mr. Mocarski,
$6,295; (b) contributions made or accrued for non-qualified retirement
plans as follows: Mr. Jarvis, $55,698; Mr. Norris, $1,248; Mr. St. Pierre,
$2,567; Mr. Voight, $2,733; and (c) lump sum payment made to Mr. Mocarski,
$2,600.
(7) Amounts include contributions made or accrued by Security-Connecticut for
fiscal years 1995 and 1994 for the Named Executive Officers under the
Security-Connecticut Corporation Employees' Savings and Profit-Sharing Plan
and the related supplemental savings plans.
Option Exercises and Fiscal Year-End Values - Shown below is information
with respect to option exercises in fiscal year 1996 and unexercised
options to purchase the Company's Common Stock and Common Stock granted in
fiscal year 1996 under the Company's 1993 Stock Incentive Plan ("Stock
Incentive Plan ") to the Named Executive Officers. In September 1996, the
Stock Incentive Plan was amended to provide for accelerated vesting of
issued options by written agreement between the Participant and the Board
of Directors.
</FN>
</TABLE>
Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SAR at
Shares FY-End (#) FY-End ($) (1)
Acquired on Value ------------------------- -------------------------
Name Exercise(#) Realized($)Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Jarvis 0 0 93,698 (2) 2,666 1,132,576 29,326
William P. Norris, Jr. 0 0 15,856 17,526 206,677 199,909
Barry J. St. Pierre 0 0 16,790 18,892 221,826 215,873
Robert J. Voight 0 0 16,456 22,226 218,152 217,797
Richard D. Mocarski 0 0 5,000 4,000 65,624 47,062
</TABLE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Individual Grants Value at Assumed
------------------------ Annual Rates of
Number of % of Total Stock Price
Securities Options/SARs Exercise Appreciation for
Underlying Granted to or Base Option Term(6)
Options/SARs Employees in Price Expiration -------------------
Name Granted(#)(1) Fiscal Year(3) ($/Sh)(4) Date(5) 5%($) 10%($)
- ---- ------------- -------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Jarvis 19,000 (2) 21.7 25.625 02/22/2006 306,191 775,952
William P. Norris, Jr. 6,000 6.9 25.625 02/22/2006 96,691 245,037
Barry J. St. Pierre 7,000 8.0 25.625 02/22/2006 112,807 285,877
Robert J. Voight 6,000 6.9 25.625 02/22/2006 96,691 245,037
5,000 5.7 31.375 09/12/2006 98,657 250,017
Richard D. Mocarski 1,500 1.7 25.625 02/22/2006 24,172 61,259
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Option/SAR Grants in Fiscal Year 1997
Potential Realizable
Individual Grants Value at Assumed
------------------------ Annual Rates of
Number of % of Total Stock Price
Securities Options/SARs Exercise Appreciation for
Underlying Granted to or Base Option Term(6)
Options/SARs Employees in Price Expiration -------------------
Name Granted(#)(1) Fiscal Year(3) ($/Sh)(4) Date(5) 5%($) 10%($)
- ---- ------------- -------------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Jarvis 19,000 25.4 36.50 02/20/2007 436,135 1,105,258
William P. Norris, Jr. 6,000 8.0 36.50 02/20/2007 137,727 349,029
Barry J. St. Pierre 6,000 8.0 36.50 02/20/2007 137,727 349,029
Robert J. Voight 7,000 9.4 36.50 02/20/2007 160,681 407,200
Richard D. Mocarski 1,500 2.0 36.50 02/20/2007 34,431 87,257
<FN>
(1) Options granted are exercisable with respect to 33% of the option shares on
the first anniversary of the grant date with an additional 33% of the
option shares becoming exercisable on each of the next two successive
anniversary dates.
(2) 19,000 unexercisable options granted in 1996, 8,000 unexercisable options
granted in 1995 and 20,454 unexercisable options granted in 1994 were fully
vested and exercisable on September 12, 1996.
(3) The Company granted options representing 87,550 and 74,800 shares to SCL
employees in fiscal 1996 and 1997, respectively.
(4) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
(5) The options were granted for a term of 10 years, subject to earlier
termination in certain events related to termination of employment.
(6) Amounts represent the potential realizable value of each grant of options,
assuming that the market price of the underlying shares appreciates in
value from the date of grant to the end of the option term, at annualized
rates of 5% and 10%.
</FN>
</TABLE>
Executive Salary Continuation Plan
The Company has adopted the Security-Connecticut Corporation Executive
Salary Continuation Plan for certain key executives as a vehicle to retain their
services until retirement, and to deter employment by any competitor of the
Company after retirement. The amount of the salary continuation benefit is 2% of
the executive's final monthly salary multiplied by the total number of years of
participation in the plan, up to a maximum of 10% of the executive's final
monthly salary. This benefit is contingent upon the executive refraining from
competing with the Company while receiving the benefit. In the event of a
participating executive's death before retirement and the attainment of age 65,
the executive's surviving spouse shall receive annual payments during the
spouse's lifetime equal to 25% of the Executive's final annual rate of pay until
the later of the date on which the Executive would have attained age 65 or 10
years.
-9-
<PAGE>
Employment Contracts
The Company has entered into separate employment agreements with the Named
Executive Officers (the "Employment Agreements"). Pursuant to the Employment
Agreements, Mr. Jarvis is employed as the President and Chief Executive Officer
of the Company, and each of the others are employed as designated in the Summary
Compensation Table.
Mr. Jarvis' employment agreement is for a rolling three-year term. Pursuant
to the terms of his employment agreement, upon a change in control of the
Company, if Mr. Jarvis is terminated for any reason other than "for cause," or
resigns for "good reason" within two years of a change in control of the
Company, the Company has agreed to pay Mr. Jarvis an amount equal to three
years' base salary in effect at the date of termination plus an average bonus
for the previous three fiscal years. In addition, the agreement provides for
other benefits, such as outplacement services, medical benefits for three years
after the termination date, credit for three additional years of service after
the date of termination under the Company's retirement plans and other fringe
benefits. A voluntary termination within one year of a change of control will be
considered a resignation for "good reason." "Good reason" includes the
assignment to Mr. Jarvis of duties or responsibilities which are materially
inconsistent with his current duties or responsibilities, a change in his
current reporting responsibilities, titles or offices, or requiring Mr. Jarvis
to relocate outside of the Hartford, Connecticut metropolitan area. If Mr.
Jarvis resigns for "good reason" after two years have elapsed following a change
in control of the Company, the Company has agreed to pay Mr. Jarvis an amount
equal to one year's base salary plus average bonus.
Pursuant to the terms of the Employment Agreements, upon a change in control
of the Company, if Mr. Norris, Mr. St. Pierre or Mr. Voight is terminated for
any reason other than "for cause," or resigns for "good reason" within two years
of a change in control of the Company, the Company has agreed to pay such
executive officer an amount equal to two years' average base salary plus average
bonus for the three fiscal years preceding the date of termination. In addition,
the agreement provides for other benefits, such as outplacement services,
medical benefits for two years after termination (or until reemployed, if
sooner), and credit for three additional years of service after the date of
termination under the Company's retirement plans. "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 requiring such officer to relocate outside of the Hartford,
Connecticut metropolitan area. If such executive officer resigns for "good
reason" after two years have elapsed following a change in control of the
Company, the Company has agreed to pay such officer one year's base salary plus
average bonus.
Upon a change in control of the Company, if Mr. Mocarski is terminated for
any reason other than "for cause," or resigns for "good reason" within two years
of a change in control of the Company, the Company has agreed to pay Mr.
Mocarski an amount equal to one year's base salary. In addition, the agreement
provides for other benefits, such as outplacement services, medical benefits for
one year after termination (or until reemployed, if sooner), and credit for an
additional year of service under the Company's retirement plans. "Good reason"
includes the assignment of duties or responsibilities which are materially
inconsistent with Mr. Mocarski's current duties or responsibilities, a change in
current reporting responsibilities, titles or offices, or requiring Mr. Mocarski
to relocate outside of the Hartford, Connecticut metropolitan area.
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 a change in control, the maximum aggregate amount of severance cash
compensation payable under such agreements would be approximately $3,000,000.
-10-
<PAGE>
Each employee's base salary for fiscal 1997 is as follows:
1997
Base
Name Salary($)
---- ---------
Ronald D. Jarvis $400,000
William P. Norris, Jr. 163,500
Barry J. St. Pierre 162,850
Robert J. Voight 181,300
Richard D. Mocarski 109,100
The base salary may be increased annually at the discretion of the Board of
Directors of the Company. Employees are also entitled to participate in and
receive all benefits under any and all bonus and benefit programs maintained by
the Company.
Retirement Plans
The Company has adopted the Employees' Retirement Plan which is a
noncontributory, defined benefit plan (the "Retirement Plan") intended to
qualify under Section 401(a) of the Code. All employees of the Company, and
those subsidiaries as may be designated by the Company, who meet the age and
service requirements are covered by the Retirement Plan. Benefits are generally
payable upon retirement at or after normal retirement age (the later of age 65
or the fifth anniversary of the employee's participation in the Retirement Plan)
or upon other termination of employment with at least 10 years of active
service.
Benefits provided by the Retirement Plan are based upon a final average pay
formula generally using the highest 60 consecutive months compensation out of
the 120 months preceding termination and the employee's months of credited
service. The monthly benefit formula is 1/12 of (i) 1.3% of the participant's
final average pay multiplied by the number of years of credited service not in
excess of 35 plus 0.4% of final average pay above the participant's average
social security covered compensation multiplied by the years of credited service
not in excess of 35; (ii) 0.4% of the amount, if any, by which final average
compensation exceeds 1/12th of Social Security Covered Compensation multiplied
by years of credited service not in excess of 35 years; and, (iii) 0.5% of final
average pay multiplied by the number of years of credited service over 35.
The Company has adopted supplemental retirement plans in which certain
employees, whose benefits under the Retirement Plan are limited by the
provisions of Sections 401(a)(17) and 415 of the Code and for whom compensation
is deferred, will participate. These supplemental retirement plans are not
intended to meet the qualification requirements of Section 401 of the Code. A
trust agreement has been adopted to provide a potential source of funds for the
payment of benefits under the supplemental retirement plans; however, the assets
of such trust are subject to the claims of creditors in the event the Company
becomes insolvent or bankrupt. No funds were contributed to the trust during
1996.
The following table shows estimated annual retirement benefits payable under
the retirement and supplemental retirement plans as a straight life annuity to
persons, and specified compensation and years of service classifications
assuming retirement in 1997 at age 65. For the Named Executive Officers, the
respective years of credited service at the end of 1996 and current base
salaries (base salaries are the salaries for such fiscal year as established by
the Company but do not include bonuses or other forms of compensation included
in the cash compensation table below) are as follows:
-11-
<PAGE>
Pension Table
Estimated Annual Retirement Benefits
Final Average For Credited Years of Service (1)
----------------------------------------------------
Salary (2) 10 Years 20 Years 30 Years 35 Years 40 Years
- ------------- -------- -------- -------- -------- --------
$100,000.................. $ 16,091 $ 32,183 $ 48,274 $ 50,320 $ 58,820
150,000.................. 24,591 49,183 73,774 86,070 89,820
200,000.................. 33,091 66,183 99,274 115,820 120,820
300,000 (3).............. 50,091 100,183 150,274 175,320 182,820
400,000 (3).............. 67,091 134,183 201,274 234,820 244,820
__________
(1) This table assumes retirement at age 65 (current normal retirement date),
and at age 65, the following individuals will have the number of years of
credited service indicated: Mr. Jarvis, 36; Mr. Norris, 22; Mr. St. Pierre,
40; Mr. Voight, 34; and Mr. Mocarski, 19.
(2) Final average annual salary is the annual average of an employee's base
salary paid in any consecutive 60 month period during an employee's last 10
years of active employment which produces the highest average annual
salary. Current compensation should be used in estimating the benefits of
the individuals named on the Summary Compensation Table as follows: Mr.
Jarvis, $400,000; Mr. Norris, $163,500; Mr. St. Pierre, $162,850; Mr.
Voight, $181,300; and Mr. Mocarski $109,100.
(3) As a result of limitations under the Code, a portion of these amounts will
be paid under a supplemental benefit plan established by the Company to
provide benefits (included in this table) which would exceed these limits.
Deferral of Compensation
Certain officers of the Company and its subsidiaries may defer regular
compensation or bonuses. The amounts deferred, together with amounts credited
thereto, will be paid in a lump sum or in periodic payments beginning on the
earlier of death, disability or termination. The deferred amounts will be
credited under the plan with earnings that would have otherwise accrued if the
amounts had been invested in the investment options selected by the officer from
the options offered from time to time by the Company. A trust agreement has been
adopted to provide a potential source of funds for the payment of benefits under
the plan; however, the assets of such trust are subject to the claims of
creditors in the event the Company becomes insolvent or bankrupt. Contributions
of $395 were made to the trust during 1996.
Compensation Committee Interlocks and Insider Participation
Executive compensation levels during 1994 were established by the Board of
Directors of SCL, upon the recommendations of an executive officer of LNL and
Mr. Jarvis. Executive compensation levels during 1995 and 1996 were established
by the Compensation Committee of the Board of Directors of the Company.
John E. Silliman, a director of the Company and Chairman of the Compensation
Committee, was a partner with the law firm of Murtha, Cullina, Richter and
Pinney until his retirement on November 15, 1993. SCL has retained, and the
Company intends to retain in the future, Murtha, Cullina, Richter and Pinney to
serve as general outside legal counsel.
-12-
<PAGE>
Compensation Committee Report on Executive Compensation
The Company's executive compensation programs are administered by the
Compensation Committee (the "Committee"), a committee of the Board of Directors
comprised exclusively of non-employee directors. The Committee approves payment
amounts and award levels for the Company's senior executives and key personnel
including payments under incentive plans approved by the Board of Directors. The
Committee's decisions assist the Company in attracting and retaining the highest
caliber executives while providing appropriate compensation programs that
reinforce the attainment of superior financial results for the benefit of the
shareholders, customers and employees of the Company. Except as discussed above,
these non-employee directors do not have any interlocking or other relationships
that would call into question their independence as Committee members.
The Company's primary objective is to maximize long-term shareholder value.
To accomplish this objective, the Company has adopted a comprehensive business
strategy. The overall goal of the Committee is to develop executive compensation
that is consistent with and linked to the Company's strategic business
objectives. Thus, the Company's executive compensation program has been designed
to provide a strong and direct link between executive pay and the Company's
financial performance and total long-term shareholder return. Consistent with
this objective, the Committee establishes performance criteria, evaluates
performance against this criteria and determines actual incentive awards.
Total Compensation Principles
The key principles to which the Committee adheres in structuring the
compensation program for its senior executives are:
Equity Orientation - Equity-based plans comprise a significant part of total
compensation to instill ownership thinking and to link compensation to long-term
shareholder return. Consistent with this philosophy, the Company strongly
encourages officers to meet certain share ownership guidelines.
Management Development - Compensation opportunities are structured to
attract and retain those individuals who can maximize the creation of
shareholder value. The compensation structure facilitates the Company's
philosophy of developing leaders.
Competitiveness - Base pay will be competitive with selected companies
within the Company's size and insurance market. However, the development of
at-risk pay policies is driven more by corporate strategy than by competitive
practice.
The Committee has utilized these key principles in the design and
administration of the executive compensation program. Recognizing that many
factors bear on corporate performance, the Committee believes that the total
executive compensation approach encourages the creation of shareholder value
over the long-term.
Components of Executive Compensation
There are three components of executive compensation: base salary,
contingent yearly cash payments and long-term incentive awards. Each year the
Committee sets an annual base salary for senior executives; sets threshold,
target and maximum payment amounts under the Management Incentive Plan for the
current year; approves Management Incentive Plan payments for the prior year;
and approves awards of stock options and restricted stock.
-13-
<PAGE>
Base Pay - The Company's executive base pay bands, including the pay band
for the Chief Executive Officer, are established to be fully competitive with a
group of comparable life insurance companies adjusted for differences in asset
size and revenues. These pay bands were established by using methodology and
data provided by an independent compensation consulting firm and data gathered
by the Company.
Base compensation levels for 1994 were established prior to the initial
public offering by the Board of Directors of SCL, a wholly owned subsidiary of
LNL, upon the recommendations of an executive officer of LNL and Mr. Jarvis. The
Committee reviews the salary of Mr. Jarvis on an annual basis to determine
increases in base salary, if any. Base salary increases for Mr. Jarvis are based
on sustained individual performance, achieving a market competitive position and
salary levels among Chief Executive Officers of comparable life insurance
companies, adjusted for differences in asset size and revenues. Based on these
factors, the increase in Mr. Jarvis' base pay for 1997 is 10.2%.
Contingent Cash Incentives - Contingent incentives are an important element
of executive compensation. These incentives are provided through the
Security-Connecticut Corporation Management Incentive Plan ("Management
Incentive Plan"). The objective of the plan is to motivate executives to make
changes in the performance of the Company that will enhance long-term
shareholder returns. Incentives are based on individual performance, Company
performance and performance relative to other comparable life insurance
companies.
Long-Term Incentives - Long-term incentives comprise a significant part of
total compensation for executive officers. These incentives are provided through
the 1993 Stock Incentive Plan ("Stock Incentive Plan"). The objective of the
plan is to motivate executives to make changes in the performance of the Company
that will enhance long-term total return to shareholders.
The Compensation Committee, effective February 2, 1994, March 31, 1994,
February 22, 1995, February 22, 1996, September 12, 1996, December 6, 1996, and
February 20, 1997 made grants of stock options to Mr. Jarvis, the executive
officers of the Company and its subsidiaries as a group, and all eligible
employees of the Company and its subsidiaries as a group, under the Stock
Incentive Plan to purchase shares of common stock as of such date in the amounts
shown under "Stock Ownership of Directors and Executive Officers."
The Company also adopted the Security-Connecticut Corporation Long-Term
Incentive Plan ("LTIP") for management positions whose level of responsibility
is such as to impact significantly on Company results. The participants are
measured on the attainment of established target adjusted return on equity goals
during a three year performance cycle. The participants' award percentage is
determined by their level of responsibility. The awards are paid out 80% in
Company stock and 20% in cash. Each participant may elect to receive a greater
portion of their award in stock. The total amount awarded for the 1994-1996
performance cycle was $710,000.
-14-
<PAGE>
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to a
corporation's chief executive officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. The Company
currently intends to structure the performance-based portion of the compensation
of its executive officers in a manner that complies with Section 162(m),
although the Company reserves the right to grant compensation that would not be
deductible to the Company as a result of the application of Section 162(m).
John E. Silliman, Chairman
Daniel E. Flynn
Harvey S. Levenson
Performance Graph
The following graph compares the cumulative total shareholder return
(assuming reinvestment of dividends) to the holders of Common Stock of the
Company, a broad equity market index (Standard & Poor's 500 Stock Index) and a
peer group index (Dow Jones Life Insurance Index) of a $100 investment from
January 27, 1994 (the date the Common Stock began trading publicly) through
December 31, 1996. The lines represent quarterly index levels derived from the
compounded daily returns, including dividends. If the quarterly interval is not
a trading day, the preceding trading day is used. There can be no assurance that
the Company's stock performance will continue into the future with the same or
similar trends depicted in the following graph:
[PERFORMANCE GRAPH]
1/27/94 12/31/94 12/31/95 12/31/96
-------- -------- -------- --------
Security-Connecticut Corporation $ 100.00 $ 103.51 $ 127.24 $ 167.67
S&P 500 $ 100.00 $ 97.99 $ 134.82 $ 165.77
Dow Jones Life Insurance Index $ 100.00 $ 88.46 $ 122.26 $ 162.02
-15-
<PAGE>
ITEM 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed Ernst & Young LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1997 ("Fiscal 1997").
Ernst & Young LLP served as the Company's independent public accountants for
1996. Representatives of Ernst & Young LLP will be present at the Annual Meeting
to respond to appropriate questions and to make such statements as they may
desire.
Ratification of the appointment of Ernst & Young LLP as the Company's
independent accountants for Fiscal 1997 will require the affirmative vote of a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the Annual Meeting. In the event shareholders do not ratify
the appointment of Ernst & Young LLP as the Company's independent accountants
for the forthcoming fiscal year, such appointment will be reconsidered by the
Audit/Finance Committee and the Board of Directors.
The Board of Directors recommends that shareholders vote "FOR" ratification
of the appointment of Ernst & Young LLP as the Company's independent public
accountants for Fiscal 1997.
ITEM 3 - APPROVAL OF THE SECURITY-CONNECTICUT CORPORATION LONG-TERM INCENTIVE
PLAN
The Board has adopted and is required to seek shareholder approval of the
Long-Term Incentive Plan (the "Plan") which, as described below, provides for
stock and cash payment awards intended to qualify as performance-based
compensation under the requirements of Section 162(m) of the Internal Revenue
Code (the "Code"). The full text of the Plan is included as Exhibit A to this
Proxy Statement.
The Plan is administered by the Compensation Committee. At the current time,
the Committee is comprised of three outside directors. The Plan operates with
three-year overlapping performance cycles. The participants in the Plan are
chosen by the Board from among Company executives. Additional executives may
participate in the Plan upon the recommendation of the Chief Executive Officer
of the Company and the approval of the Board. Once an employee is selected as a
participant, such participation continues until such individual is no longer an
employee of the Company; the individual is no longer in a position to have
significant impact on the achievement of the Company's long-term performance
results; or the Plan is terminated. The Board may amend, suspend or terminate
the Plan or any portion thereof at any time.
The Committee establishes threshold, target and maximum performance goals.
The business criterion on which the performance goals are based is the Company's
return on equity, adjusted for investment gains (losses) and mortality
aberrations. Investment gains (losses) are amortized over five years and
mortality aberrations are amortized over three years. Awards are referenced as a
percentage of a participant's salary range midpoint. A participant's salary
range midpoint is determined based on an analysis of salaries of comparable
positions in the industry. Actual awards are based on the result of the
Company's performance related to pre-established threshold, target or maximum
performance goals. To the extent allowable under the regulations under Code
Section 162(m), the Committee may, in its sole discretion, revise the amount
payable under an award downward, if, in the business judgment of the Committee,
it is in the best interests of the Company and its shareholders, and an
inequitable payment will otherwise result.
-16-
<PAGE>
Each award is split as follows: 20% cash and 80% common stock of the
Company; however, each participant is permitted to elect a greater portion of
their award in common stock of the Company. Fifty percent of any award
determined for a participant with respect to a performance cycle is paid
following the last year of the performance cycle when audited results are
available and can be certified by the Committee. The remaining 50% of the award
is paid one year after the end of the performance cycle. Payment will not be
made if the participant is not employed on the date of payment and termination
was for cause. In the case of termination of employment following a change of
control of the Company, the amount credited to the participant's account and any
amounts earned by the participant with respect to the performance cycles in
progress shall be paid immediately upon termination of employment.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
LONG-TERM INCENTIVE PLAN
Maximum
Payment
For '96-'98
Participant Title Performance Cycle*
- ----------------------- -------------------------------------------------- ------------------
<S> <C> <C>
Ronald D. Jarvis Chairman, President & Chief Executive Officer $ 466,738
Robert J. Voight Executive Vice President 165,200
Barry J. St. Pierre Senior Vice President, Operations 128,393
William P. Norris Jr. Senior Vice President, Sales 128,393
William J. Casill Vice President and Actuary 56,310
Richard D. Mocarski Vice President, Controller and Treasurer 52,190
Edward P. Scheuy Vice President, Underwriting and Policy Administration 52,190
Eugene M. Grayson Vice President, Marketing 52,190
Marianne P. Rice Vice President, Human Resources and Staff Services 52,190
Executive Officer Group 1,153,794
<FN>
* Presumes a salary range midpoint increase of 3% per year. The presumption is
based upon the Company's analysis of past salary range midpoint increases.
</FN>
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSAL TO APPROVE
THE LONG-TERM INCENTIVE PLAN. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES
OF COMMON STOCK ENTITLED TO VOTE AND PRESENT IN PERSON OR BY PROXY AT THE ANNUAL
MEETING IS REQUIRED TO APPROVE THE LONG-TERM INCENTIVE PLAN. ALL PROXIES
RECEIVED BY THE COMPANY WILL BE VOTED TO APPROVE THE LONG-TERM INCENTIVE PLAN
UNLESS A CONTRARY VOTE IS INDICATED ON THE PROXY CARD.
-17-
<PAGE>
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items referred to above. Proxies in the enclosed form will be voted in respect
of any other business that is properly brought before the Annual Meeting in
accordance with the judgment of the person or persons voting the proxies.
SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Company's 1998
Annual Meeting of Shareholders must be received by the Secretary of the Company,
for inclusion in the Company's proxy, notice of meeting and proxy statement
relating to the 1998 Annual Meeting, by December 3, 1997. Any such proposal must
comply with the requirements of Regulation 14A of the Securities Exchange Act of
1934, as amended.
The Bylaws of the Company also establish an advance notice procedure with
regard to business proposed to be submitted by a shareholder at any annual or
special meeting of shareholders of the Company, including the nomination of
candidates for election as directors. This procedure provides that a notice of
proposed shareholder business must be timely given in writing to the Secretary
of the Company prior to the meeting. In all cases, to be timely, notice relating
to an annual meeting must be received at the principal executive office of the
Company not less than 120 days before the first anniversary of the prior year's
annual meeting. Such notice shall be in conformance with, and subject to, the
Bylaws of the Company.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 1996 FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE COMPANY'S OFFICE OF INVESTOR RELATIONS, 20
SECURITY DRIVE, AVON, CONNECTICUT 06001, TELEPHONE (860) 674-7686.
-18-
<PAGE>
ADDITIONAL INFORMATION
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Officers and regular employees of the Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex or facsimile. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of stock.
By Order of the Board of Directors,
/s/ Patricia A. DeVita
----------------------
Patricia A. DeVita
Corporate Secretary
April 7, 1997
-19-
<PAGE>
Exhibit A
SECURITY-CONNECTICUT CORPORATION
LONG-TERM INCENTIVE PLAN
The Board of Directors of Security-Connecticut Corporation recognizes that
certain executives are employed in key management positions within the Company
or its Affiliates and are in a position to influence its long-term direction and
performance. The Board of Directors also believes that the establishment of a
long-term incentive plan for the benefit of these executives will attract and
retain outstanding executive talent; establish a strong alignment between
performance and pay; and deliver a total compensation package which is
financially and tax effective. In addition, the Board of Directors believes that
the long-term incentive plan will enable the Company and its Affiliates to
reinforce parallel interests between stockholders and the executive team through
the establishment of equity ownership guidelines and the use of stock-based pay
plans. Accordingly, Security-Connecticut Corporation hereby establishes the
Security-Connecticut Corporation Long-Term Incentive Plan (the "Plan") to be
governed in accordance with the terms and conditions hereinafter set forth.
1. Definitions. For purposes of the Plan, the following terms shall be defined
as set forth below:
a. "Account" means the account established for each Participant in the
Plan.
b. "Affiliate" means any corporation in a chain or corporations connected
through stock ownership to a common parent corporation if each
corporation other than the last corporation in the chain owns at least
fifty percent (50%) of the voting stock of another corporation in the
chain.
c. "Board" means the Board of Directors of the Company.
d. "Cause" means (i) conviction of a felony or (ii) a determination by
the Board that the Executive has engaged in material misconduct,
neglect of duties or failure to act which materially and adversely
affects the business of the Company or has willfully refused to carry
out the reasonable instructions of the Board.
e. "Change of Control" means:
i. The acquisition by any individual, entity, or Group (within the
meaning of Section 13(d)(3) or 14(d)(2) or the Securities
Exchange Act of 1934, as amended ( The "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (1) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control:
(1) any acquisition directly from the Company, (2) any
acquisition by the Company, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (4) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection (iii) of
this subsection (e).
ii. Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board; or
-20-
<PAGE>
iii. Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (1) all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be (2) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of
the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination and (3) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination;
iv. Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
f. "Code" means the Internal Revenue Code of 1986, as amended from time
to time and any successor thereto.
g. "Committee" means the Compensation Committee of the Board.
h. "Company" means Security-Connecticut Corporation.
i. "Disability" means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which can be
expected to last for a continuous period of not less than twelve (12)
months. The determination of whether a Participant's employment
terminated on account of disability shall be made by the Committee
based on the opinion of a qualified physician (or other medical
certificate) and other evidence acceptable to the Committee.
j. "Effective Date" means January 1, 1996. Provided, however, that the
effectiveness of this Plan is conditioned on its approval by an
affirmative vote of the holders of Company Stock represented at a
meeting duly held in accordance with Delaware law prior to the payment
of any amounts the Plan. All award under this Plan shall be null an
void if the Plan is not approved by such stockholders within such time
period.
k. "Executive" means an employee of the Company or any participating
Affiliate, as designated by the Board, with a title of Vice President
or higher.
l. "Participant" means an Executive designated by the Board to
participate in the Plan. Subsequent to the Effective Date, additional
Executives may participate in the Plan upon the recommendation of the
Chief Executive Officer of the Company and the approval of the Board.
m. "Performance Cycle" means the three-year period during which
performance is measured for the purpose of the determining awards
under the Plan.
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<PAGE>
n. "Plan" means the Security-Connecticut Long-Term Incentive Plan as set
forth herein and as may be amended from time to time.
2. Administration
a. The Plan shall be administered by the Committee, which shall consist
solely of two or more directors each of whom is an outside director
within the meaning of the applicable regulations under Code Section
162(m). The members of the Committee shall be appointed by, and may be
changed from time to time at the discretion of the Board.
b. The Committee shall have the authority (i) to exercise all of the
powers granted to it under the Plan, (ii) to construe, interpret, and
implement the Plan, (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan, (iv) to make all determinations
necessary or advisable in administering the Plan, and (v) to correct
any defect, supply any omission and reconcile any inconsistency in the
Plan.
c. The Committee shall maintain written minutes of its meetings,
including minutes regarding the performance goals established by the
Committee pursuant to Section 5, and any certification regarding the
satisfaction of performance goals made pursuant to Section 7.
d. Solely for purposes of satisfying the shareholder approval requirement
of Code Section 162(m)(4)(c)(ii), the Committee shall cause the
material terms under which awards are to be paid to be disclosed to
shareholders for approval by a majority of the vote in a separate
shareholder vote before the payment of the award. In order to prevent
the disclosure of confidential competitive information, such
disclosure shall be limited to the disclosure of only those material
terms necessary to satisfy the requirements of Code Section 162(m) and
the regulations thereunder.
e. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan.
3. Eligibility for Participation. The Participants in the Plan with respect to
each Performance Cycle shall be documented by the Committee. Once an
employee is selected as a Participant, such participation shall continue
until such individual is no longer an employee of the Company; or the
individual is no longer in a position to have significant impact on the
achievement of the Company's long-term performance results; or the Plan is
terminated.
4. Performance Cycle. The Plan shall operate with three-year overlapping
Performance Cycles (e.g., Cycle 1: 1994, 1995, 1996; Cycle 2: 1996, 1997,
1998; and Cycle 3: 1998, 1999, 2000).
5. Performance Goals. With respect to each Performance Cycle, the Committee
shall establish the threshold, target and maximum performance goals and the
corresponding awards with respect to each Participant. Awards shall be
referenced as a percentage of the salary range midpoint with respect to
each Participant. The performance goals and the corresponding awards shall
be documented by the Committee pursuant to Section 2(c).
6. Performance Measurements. With respect to each Performance Cycle, the
Committee shall establish performance measurements. The Committee shall
also establish the relative weight to be assigned to each performance
measurement with respect to each Participant. The performance measurements
and their corresponding weights shall be documented by the Committee
pursuant to Section 2(c).
7. Committee Certification. As soon as practicable after the close of a
Performance Cycle, and prior to the payment of any award, the Committee
will certify in writing that the performance goals set forth in Section 5
and any other material terms within the meaning of the regulations under
Code Section 162(m) were in fact satisfied.
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<PAGE>
8. Communication to Participants. Each Participant shall receive a written
description of the performance goals and the corresponding pay-outs,
performance measurements and their relative weights not later than ninety
(90) days after the commencement of the Performance Cycle. With respect to
the first and second Performance Cycles, a written description of the
performance goals and the corresponding pay-outs, performance measurements
and their relative weight shall be distributed to each Participant as soon
as practicable after the adoption of the Plan.
9. Adjustment to Awards. To the extent allowable under the regulations under
Code Section 162(m), the Committee may, in its sole discretion, revise the
amount payable under an award downward, if, in the business judgment of the
Committee, it is in the best interests the Company and its shareholders,
and an unintended windfall, or inequitable payment will otherwise result.
10. Employment.
a. In the event a Participant is hired or becomes a Participant during a
Performance Cycle, the Participant will be entitled to earn a pro rata
award based on the number of full calendar months of employment during
the Performance Cycle; provided, however, that in order to be eligible
to earn an award, the Participant must complete a minimum of twelve
full calendar months of employment with respect to a Performance
Cycle.
b. If a Participant's employment is terminated for Cause the Participant
shall forfeit any rights to any payments with respect to any
Performance Cycle in progress.
c. In the event the Participant's employment with the Company is
terminated voluntarily or involuntarily without Cause or by reason of
retirement, death, Disability, or Change in Control, the Participant
shall be entitled to receive a pro rata distribution based on the
number of full calendar months of employment during the Performance
Cycle; provided, however, that in order to be entitled to an award, a
Participant must complete a minimum of twelve full calendar months of
employment with respect to a Performance Cycle.
11. Distribution of Awards.
a. Awards under the Plan shall be payable in cash and stock.
b. Awards shall be credited to a Participant's Account after the
Committee has received and certified the audited financial results and
certified the satisfaction of the performance goals, according to
Section 7. Awards shall be payable according to this Section 11.
c. Each award should be split as follows: twenty percent (20%) cash and
eighty percent (80%) stock. However, each Participant shall be
permitted to elect a greater portion of their award in stock.
d. Fifty-percent (50%) of any award determined for a Participant with
respect to a Performance Cycle shall be paid following the year end of
each Performance Cycle when audited results are available and can be
certified by the Committee. Typically payment will occur within two
(2) months following the year end of each Performance Cycle. However,
this payment is subject to the continued employment of the Participant
through the date of payment, except as described below in Sections
11(f), (g) and (h).
e. Fifty-percent (50%) of any award determined for a Participant with
respect to a Performance Cycle shall be paid one (1) year after the
end of the Performance Cycle for which the payment is being made.
However, this payment is subject to the continued employment of the
Participant through date of payment, except as described below in
Sections 11(f), (g) and (h).
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<PAGE>
f. Payment upon death and Disability. In the event of a Participant's
death or Disability, the amount credited to the Participant's Account
shall be distributed to the Participant or his designated beneficiary
within ninety (90) days of the Participant's death or Disability. With
respect to amounts earned by the Participant with respect to
Performance Cycles in progress, any such amount shall be distributed
to the Participant or the Participant's designated beneficiary
following the year end of the last Performance Cycle. Typically
payment will occur within two (2) months following the year end of the
last Performance Cycle. In the event the Participant does not
designate a beneficiary in accordance with the procedures established
by the Committee, the balance of the Participant's Account and any
amounts earned with respect to Performance Cycles in progress shall be
paid to the Participant's estate.
g. Payment upon retirement or voluntary or involuntary termination by the
Company without Cause. In the event of a Participant's retirement or
voluntary or involuntary termination by the Company without Cause, the
amount credited to the Participant's Account and any amounts earned by
the Participant with respect to Performance Cycles in progress shall
be paid according to Sections 11 (c) through (e).
h. Payment upon Change of Control. In the event of a Change of Control,
the amount credited to the Participant's Account and any amounts
earned by the Participant with respect to Performance Cycles in
progress shall be paid immediately upon termination.
i. Notwithstanding the foregoing, in no event shall payment be made prior
to shareholder approval of the Plan as set forth in Section 1(j).
13. Continuity of Plan. Although it is the intention of the Company to continue
the Plan for an indefinite period of time, the Company reserves the right
to terminate the Plan in its entirety at any time or to modify the Plan
from time to time, provided that no such action shall adversely affect any
Performance Cycle in progress or any awards previously earned.
14. Notices. Any notice to a Participant required or permitted under the Plan
shall be deemed received if personally delivered or deposited in the United
States mail, registered or certified, postage prepaid, addressed to the
Participant, his or her heirs, executors, administrators, successors,
assigns or transferees at the last address shown for the Participant on the
records of the Company.
15. Miscellaneous Provisions.
a. No award payable under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge prior to actual receipt thereof by the
Participant; and any attempt to so anticipate, alienate, sell ,
transfer, assign, pledge, encumber or charge prior to such receipt
shall be null and void.
b. Nothing contained herein will confer upon a Participant the right to
be retained in the service of the Company or limit the right of the
Company to discharge a Participant.
c. The Company shall deduct from all amounts paid, any taxes required by
law to be withheld with respect to such payments.
d. The Board may amend, suspend or terminate the Plan or any portion
thereof at any time.
e. The Plan shall at all times be entirely unfunded and no provision
shall at any time be made with respect to segregating assets of the
Company for payment of or any awards hereunder. Neither the
Participant nor any other person shall have any interest in any
particular assets of the Company by reason of the right to receive an
award under the Plan and the Participant or any other person claiming
under him shall have only the rights of a general unsecured creditor
of the Company with respect to any rights under the Plan.
f. The Plan shall be governed by and construed and administered in
accordance with the laws of the State of Delaware.
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<PAGE>
g. All questions of interpretation, construction, or application arising
under the Plan shall be decided in good faith by the Committee, whose
decisions shall be final and conclusive upon all persons.
h. The Plan shall be binding upon the Participants and the Company, their
heirs, executors, administrators, successors and assigns. In the event
of a merger, consolidation or reorganization involving the Company,
this Plan shall continue in force and become an obligation of the
Company's successor or successors.
i. If any provision of this Plan is held invalid or unenforceable, its
invalidity or unenforceability shall not affect any other provision of
the Plan, and the Plan shall be construed and enforced as if such
provision had not been included herein.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by a duly
authorized officer on this 27th day of June , 1996.
ATTEST SECURITY-CONNECTICUT CORPORATION
June 27, 1996 By: /s/ Ronald D. Jarvis
- ------------- ------------------------
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<PAGE>
ANNEX A
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
SECURITY-CONNECTICUT CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - MAY 15, 1997
KNOW ALL MEN BY THESE PRESENTS, that the undersigned holder of shares of
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 vote the
said shares of stock at the Annual Meeting of Shareholders of the Company to be
held on Thursday, May 15, 1997, at 10:30 a.m., local time, at the offices of the
Company, 20 Security Drive, Avon, Connecticut 06001, and at any adjourned or
postponed meeting or meetings thereof, held for the same purposes, in the manner
set forth on the reverse side.
(Continued and to be signed and dated on the reverse side)
[See Reverse Side]
<PAGE>
<TABLE>
<CAPTION>
[X] Please mark your
votes as in this
example.
FOR WITHHELD Nominees: Ronald D. Jarvis
Harvey S. Levenson
<S> <C>
1. Election of
TWO Directors [ ] [ ]
For all nominees except as noted below FOR AGAINST ABSTAIN
2. APPROVAL OF ERNST & YOUNG LLP AS [ ] [ ] [ ]
INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1997.
_______________________________
3. APPROVAL OF THE LONG-TERM [ ] [ ] [ ]
INCENTIVE PLAN.
4. In their discretion, upon other matters as may
properly come before said meeting.
UNLESS DIRECTED TO THE CONTRARY BY SPECIFICATION IN THE SPACES
PROVIDED ABOVE, THE SAID INDIVIDUALS ARE HEREBY AUTHORIZED
AND EMPOWERED BY THE UNDERSIGNED TO VOTE IN THE AFFIRMATIVE
ON PROPOSALS NOS. 1, 2 AND 3 AND 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 MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED
POSTAGE PAID ENVELOPE
MARK HERE IF
MARK HERE FOR [ ] YOU PLAN TO [ ]
ADDRESS CHANGE ATTEND THE
AND NOTE AT LEFT MEETING
Signature ________________________________ Date _____________ Signature ______________________________________ Date _____________
Note: This proxy must be signed exactly as the name of the undersigned appears hereon. Executors, administrators, trustees or
other representatives should give full title as such. If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
</TABLE>
