================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
RELIASTAR FINANCIAL CORP.
AND
SECURITY-CONNECTICUT CORPORATION
DATED AS OF FEBRUARY 23, 1997
================================================================================
TABLE OF CONTENTS
(NOT PART OF THE AGREEMENT)
PAGE
INTRODUCTION AND RECITALS.........................................................................................1
I. CONTEMPLATED BUSINESS COMBINATION..............................................................................1
1.1 THE MERGER...........................................................................................1
1.2 EFFECT OF THE MERGER.................................................................................1
1.3 CONSUMMATION OF THE MERGER...........................................................................2
1.4 CLOSING..............................................................................................2
1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS.............................................................2
1.6 CONVERSION OF SECURITIES.............................................................................2
1.7 LETTERS OF TRANSMITTAL...............................................................................5
1.8 LOST, STOLEN OR DESTROYED CERTIFICATE................................................................5
1.9 FURTHER ACTION.......................................................................................5
II. REPRESENTATIONS AND WARRANTIES................................................................................5
2.1 REPRESENTATIONS AND WARRANTIES OF RELIASTAR..........................................................5
(A) ORGANIZATION AND COMPLIANCE WITH LAW........................................................5
(B) CAPITALIZATION..............................................................................6
(C) AUTHORIZATION AND VALIDITY OF AGREEMENTS....................................................7
(D) NO NOTICES OR APPROVALS REQUIRED AND NO CONFLICTS...........................................7
(E) RELIASTAR REPORTS AND FINANCIAL STATEMENTS..................................................8
(F) CONDUCT OF BUSINESS IN THE ORDINARY COURSE AND ABSENCE OF CERTAIN CHANGES AND
EVENTS.................................................................................9
(G) CERTAIN FEES...............................................................................10
(H) LITIGATION.................................................................................10
(I) EMPLOYEE BENEFIT PLANS.....................................................................10
(J) TAXES......................................................................................11
(K) INTELLECTUAL PROPERTY......................................................................12
(L) ENVIRONMENTAL MATTERS......................................................................13
(M) OPINION OF FINANCIAL ADVISOR...............................................................14
(N) INVESTIGATION BY RELIASTAR.................................................................14
2.2 REPRESENTATIONS AND WARRANTIES OF SECURITY..........................................................15
(A) ORGANIZATION AND COMPLIANCE WITH LAW.......................................................15
(B) CAPITALIZATION.............................................................................15
(C) AUTHORIZATION AND VALIDITY OF AGREEMENTS...................................................17
(D) NO NOTICES OR APPROVALS REQUIRED AND NO CONFLICTS..........................................17
(E) SECURITY REPORTS AND FINANCIAL STATEMENTS..................................................18
(F) CONDUCT OF BUSINESS IN THE ORDINARY COURSE AND ABSENCE OF CERTAIN CHANGES AND
EVENTS................................................................................19
(G) CERTAIN FEES...............................................................................20
(H) LITIGATION.................................................................................20
(I) EMPLOYEE BENEFIT PLANS.....................................................................20
(J) TAXES......................................................................................21
(K) INTELLECTUAL PROPERTY......................................................................22
(L) NO SECURED DEBT............................................................................22
(M) ENVIRONMENTAL MATTERS......................................................................23
(N) OPINION OF FINANCIAL ADVISOR...............................................................23
(O) INVESTIGATION BY SECURITY..................................................................23
III. COVENANTS OF SECURITY.......................................................................................24
3.1 CONDUCT OF BUSINESS BY SECURITY AND SECURITY SUBSIDIARIES PENDING THE MERGER........................24
3.2 PROXY STATEMENT.....................................................................................26
3.3 MEETING OF STOCKHOLDERS OF SECURITY.................................................................26
3.4 NO SOLICITATION OF ACQUISITION TRANSACTIONS.........................................................26
3.5 ACCESS TO INFORMATION; CONFIDENTIALITY..............................................................28
3.6 DISSENTERS' RIGHTS..................................................................................28
3.7 TAX CERTIFICATE.....................................................................................28
3.8 AMENDMENT TO RIGHTS PLAN............................................................................28
IV. COVENANTS OF RELIASTAR.......................................................................................29
4.1 CONDUCT OF BUSINESS BY RELIASTAR AND RELIASTAR SUBSIDIARIES PENDING THE MERGER......................29
4.2 PROXY STATEMENT.....................................................................................30
4.3 REGISTRATION STATEMENT..............................................................................30
4.4 ACCESS TO INFORMATION; CONFIDENTIALITY..............................................................31
4.5 RESERVATION OF RELIASTAR CAPITAL STOCK..............................................................31
4.6 TAX CERTIFICATE.....................................................................................31
4.7 EMPLOYEE BENEFITS...................................................................................31
4.8 INDEMNIFICATION....................................................................................32
4.9 SECURITY OPTIONS...................................................................................33
4.10 TAX MATTER.........................................................................................33
V. MUTUAL COVENANTS..............................................................................................33
5.1 EXPENSES............................................................................................33
5.2 REIMBURSEMENT OF EXPENSES; SECURITY FEE.............................................................33
5.3 ADDITIONAL AGREEMENTS...............................................................................34
5.4 NOTIFICATION OF CERTAIN MATTERS.....................................................................34
5.5 AGREEMENT TO DEFEND.................................................................................34
5.6 COMPLIANCE WITH HSR ACT.............................................................................34
5.7 SECURITIES LAWS.....................................................................................35
VI. CONDITIONS...................................................................................................35
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER........................................35
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF RELIASTAR...................................................36
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SECURITY....................................................37
VII. MISCELLANEOUS...............................................................................................38
7.1 TERMINATION.........................................................................................38
7.2 EFFECT OF TERMINATION...............................................................................39
7.3 WAIVER AND AMENDMENT................................................................................39
7.4 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.......................................................39
7.5 PUBLIC STATEMENTS...................................................................................39
7.6 KNOWLEDGE...........................................................................................39
7.7 ASSIGNMENT..........................................................................................39
7.8 NOTICES.............................................................................................39
7.9 GOVERNING LAW.......................................................................................41
7.10 SEVERABILITY.......................................................................................41
7.11 COUNTERPARTS.......................................................................................41
7.12 HEADINGS...........................................................................................41
7.13 ENTIRE AGREEMENT...................................................................................41
7.14 LIMITED LIABILITY..................................................................................41
7.15 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL......................................................41
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
INDEX OF DEFINED TERMS
(NOT PART OF THE AGREEMENT)
SECTION
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.......................................................................................................Recitals
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)
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)
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 COMBINATIONI.CONTEMPLATEDBUSINESSCOMBINATION"
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 MERGER1. 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
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 & Xxxxxx LLP, 2200 Norwest Center, 00
Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, 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;
(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.
(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
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.
(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;
(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 Xxxx-Xxxxx-Xxxxxx
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 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 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
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation, Milliman and
Xxxxxxxxx, 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 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 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 xxx 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.
ss. 9601 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. ss. 6901 et seq., the Federal Water Pollution Control Act,
33 U.S.C. ss. 1201 et seq., the Clean Water Act, 33 U.S.C. ss.
1321 et seq., the Clean Air Act, 42 U.S.C. ss. 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;
(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 Xxxxxxxxx, Lufkin & Xxxxxxxx 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
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 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;
(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.
(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 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
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, Xxxxxxxx and Xxxxxxxxx
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 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.
(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 xxx 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.
(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
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx 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:
(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,
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 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, Xxxxxxx and Xxxxxx 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, Xxxxxxx
and Xxxxxx 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 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 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.
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 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.
(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 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 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.
(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 Xxxxxxxxx, Xxxxxx & Xxxxxxxx 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, Xxxxxxx and Xxxxxx, 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 Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx 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 Xxxxxxx X. Xxxxx,
Senior Vice President, General Counsel and Secretary of RELIASTAR and
Faegre & Xxxxxx LLP, counsel to RELIASTAR, dated as of the Closing Date,
substantially to the effect set forth in Exhibit 6.3(d) hereto.
(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).
(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 NON SURVIVAL 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.
00 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Telephone Number: 612/000-0000
Telecopy Number: 612/342-3160
with a copy to:
Faegre & Xxxxxx LLP
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telephone Number: 612/000-0000
Telecopy Number: 612/336-3026
and if to SECURITY:
SECURITY-CONNECTICUT CORPORATION
00 Xxxxxxxx Xxxxx
Xxxx, Xxxxxxxxxxx 00000
Attention: President
Telephone Number: 860/000-0000
Telecopy Number: 860/674-6097
with a copy to:
Murtha, Cullina, Xxxxxxx and Xxxxxx
CityPlace 1
185 Asylum Street
Hartford, Connecticut 06103
Attention: Xxxxxxx X. Xxxxxx
Telephone Number: 860/000-0000
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.
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.
Attest: By:/S/ XXXX X. XXXXXX
------------------------------------------
Xxxx X. Xxxxxx
Chairman and Chief Executive Officer
/S/ XXXXXXX X. XXXXX
--------------------
Xxxxxxx X. Xxxxx
Secretary
SECURITY-CONNECTICUT CORPORATION
Attest: By: /S/ XXXXXX X. XXXXXX
--------------------
Xxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
/S/ XXXXXXXX X. XXXXXX
----------------------
Xxxxxxxx X. Xxxxxx
Secretary
M1:0231894.01
