<PAGE>
Filed Pursuant to Rule 424(b)(3)
File No. 333-26881
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 27, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 27, 1997)
5,000,000 PREFERRED SECURITIES
RELIASTAR FINANCING II
% TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRSSM")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
RELIASTAR FINANCIAL CORP.
-----------
The % Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the assets
of ReliaStar Financing II, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"). ReliaStar Financial Corp., a Delaware
corporation ("ReliaStar" or the "Company"), will directly or indirectly own all
the common securities (the "Common
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED
SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing, subject to notice of
issuance, on the New York Stock Exchange, Inc. (the "NYSE"). Trading of the
Preferred Securities on the NYSE is expected to commence within a 30-day period
after the initial delivery of the Preferred Securities. See "Underwriting".
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security............ $25.00 (3) $25.00
- --------------------------------------------------------------------------------
Total............................. $125,000,000 (3) $125,000,000
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from , 1997.
(2) The Trust and the Company have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debt Securities (as
defined herein), the Company has agreed to pay to the Underwriters as
compensation (the "Underwriters' Compensation") for their arranging the
investment therein of such proceeds $. per Preferred Security (or
$ in the aggregate). See "Underwriting".
(4) Expenses of the offering which are payable by the Company are estimated to
be $225,000.
-----------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form, through the facilities of The Depository Trust Company, on or about
, 1997.
-----------
MERRILL LYNCH & CO.
DAIN BOSWORTH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
-----------
The date of this Prospectus Supplement is , 1997.
SM"Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
(continued from previous page)
Securities" and, together with the Preferred Securities, the "Trust
Securities") representing undivided beneficial interests in the assets of the
Trust. The Trust exists for the sole purpose of issuing the Preferred
Securities and Common Securities and investing the proceeds thereof in an
equivalent amount of % Subordinated Deferrable Interest Notes due
, 2027 (the "Junior Subordinated Debt Securities") of the
Company. The Junior Subordinated Debt Securities will mature on ,
2027 (or such date to which the maturity of the Junior Subordinated Debt
Securities may be extended as described under "Description of the Junior
Subordinated Debt Securities--General.") The obligations of the Company under
the Junior Subordinated Debt Securities are unsecured and are subordinate and
junior in right of payment to all present and future Senior Debt (as defined
herein) of the Company, which aggregated approximately $449.1 million at March
31, 1997 and will rank pari passu with the Trust Related Securities (as
defined herein) of the Company. As of March 31, 1997, there was approximately
$125.0 million of outstanding Trust Related Securities. Upon an event of
default under the Declaration (as defined herein), the holders of Preferred
Securities will have a preference over the holders of the Common Securities
with respect to payments in respect of distributions and payments upon
redemption, liquidation and otherwise. The Junior Subordinated Debt Securities
purchased by the Trust may be subsequently distributed pro rata to holders of
the Preferred Securities and Common Securities in connection with the
dissolution of the Trust, upon the occurrence of certain events.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of
each year, commencing , 1997 ("distributions"). The payment
of distributions out of moneys held by the Trust or payments upon the
redemption of Preferred Securities and payments on liquidation of the Trust,
as set forth below, are guaranteed by the Company (the "Preferred Securities
Guarantee") to the extent described herein and under the heading "The
Preferred Securities Guarantee" in the accompanying Prospectus. The Preferred
Securities Guarantee covers distributions and other payments on the Preferred
Securities only if and to the extent that ReliaStar has made a payment of
interest or principal, as the case may be, on the Junior Subordinated Debt
Securities held by the Trust. The Preferred Securities Guarantee, when taken
together with ReliaStar's obligations under the Junior Subordinated Debt
Securities and the Junior Subordinated Indenture (as defined herein) and its
obligations under the Declaration, including its obligations to pay costs,
expenses and certain liabilities of the Trust, provides a full and
unconditional guarantee of amounts due on the Preferred Securities. See "Risk
Factors--Rights Under the Preferred Securities Guarantee." The obligations of
the Company under the Preferred Securities Guarantee are subordinate and
junior in right of payment to all other liabilities of the Company and pari
passu with the Company's guarantee of Trust Related Securities and the most
senior preferred stock issued, from time to time, if any, by the Company.
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Junior Subordinated Debt
Securities, which will be the sole assets of the Trust. As a result, if
principal or interest is not paid on the Junior Subordinated Debt Securities,
no amounts will be paid on the Preferred Securities. If the Company does not
make principal or interest payments on the Junior Subordinated Debt
Securities, the Trust will not have sufficient funds to make distributions on
the Preferred Securities, in which event the Preferred Securities Guarantee
will not apply to such distributions until the Trust has sufficient funds
available therefor.
The Company has the right to defer payments of interest on the Junior
Subordinated Debt Securities by extending the interest payment period on the
Junior Subordinated Debt Securities at any time for up to 20 consecutive
quarters (each, an "Extension Period"). If interest payments are so deferred,
distributions on the Preferred Securities will also be deferred. During such
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at an annual rate of % per
annum, compounded quarterly, and during any Extension Period, holders of
Preferred Securities will be required to
(continued on next page)
S-2
<PAGE>
(continued from previous page)
include deferred interest income in their gross income for United States
federal income tax purposes in advance of receipt of the cash distributions
with respect to such deferred interest payments. There could be multiple
Extension Periods of varying lengths throughout the term of the Junior
Subordinated Debt Securities. See "Risk Factors--Option to Extend Interest
Payment Period", "Description of the Junior Subordinated Debt Securities
- --Option to Extend Interest Payment Period", and "United States Federal Income
Taxation--Original Issue Discount". In the event of any such deferral, the
holders of Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
The Junior Subordinated Debt Securities are redeemable by the Company, in
whole or in part, from time to time, on or after , 2002, or at
any time in certain circumstances upon the occurrence of a Tax Event (as
defined herein). If the Company redeems Junior Subordinated Debt Securities,
the Trust must redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Junior Subordinated Debt
Securities so redeemed at $25 per Preferred Security plus accrued and unpaid
distributions thereon (the "Redemption Price") to the date fixed for
redemption. See "Description of the Preferred Securities--Mandatory
Redemption". The Preferred Securities will be redeemed upon maturity of the
Junior Subordinated Debt Securities. In addition, upon the occurrence of a Tax
Event arising from a change in law or a change in legal interpretation
regarding tax matters, unless the Junior Subordinated Debt Securities are
redeemed in the limited circumstances described herein, the Trust shall be
dissolved, with the result that the Junior Subordinated Debt Securities will
be distributed to the holders of the Preferred Securities, on a pro rata
basis, in lieu of any cash distribution. See "Description of the Preferred
Securities--Tax Event Redemption or Distribution". If the Junior Subordinated
Debt Securities are distributed to the holders of the Preferred Securities,
the Company will use its best efforts to have the Junior Subordinated Debt
Securities listed on the NYSE or on such other exchange, the Nasdaq National
Market or other organization on which the Preferred Securities are then
listed. See "Description of the Preferred Securities--Tax Event Redemption or
Distribution" and "Description of the Junior Subordinated Debt Securities".
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest thereon) to
the date of payment, unless, in connection with such dissolution, the Junior
Subordinated Debt Securities are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution".
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE PREFERRED
SECURITIES OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING
TRANSACTIONS, THE PURCHASE OF PREFERRED SECURITIES TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
The following information concerning the Company, the Trust, the Preferred
Securities, the Preferred Securities Guarantee and the Junior Subordinated
Debt Securities supplements, and should be read in conjunction with, the
information contained in the accompanying Prospectus. Capitalized terms used
in this Prospectus Supplement and not otherwise defined herein have the same
meaning as in the accompanying Prospectus.
S-3
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained or incorporated by reference elsewhere in this
Prospectus Supplement and in the accompanying Prospectus and should
particularly consider the following matters:
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE PREFERRED SECURITIES GUARANTEE
AND JUNIOR SUBORDINATED DEBT SECURITIES
The Company's obligations under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all other liabilities of the
Company and pari passu with the Company's guarantee of Trust Related
Securities and the most senior preferred stock issued, from time to time, if
any, by the Company. See "Description of Capital Stock--Preferred Stock" in
the accompanying Prospectus. The obligations of the Company under the Junior
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Debt of the Company and will rank pari passu
with any Trust Related Securities. As of March 31, 1997, Senior Debt
aggregated approximately $449.1 million and approximately $125.0 of Trust
Related Securities were outstanding. There are no terms in the Preferred
Securities, the Junior Subordinated Debt Securities or the Preferred
Securities Guarantee that limit the Company's ability to incur additional
indebtedness, including indebtedness that ranks senior to the Junior
Subordinated Debt Securities and the Preferred Securities Guarantee. See
"Description of the Junior Subordinated Debt Securities--Subordination", and
"Particular Terms of Junior Subordinated Debt Securities Issued in Connection
with Preferred Securities" and "The Preferred Securities Guarantee--Status of
the Preferred Securities Guarantee" in the accompanying Prospectus.
RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will be qualified as an indenture under
the Trust Indenture Act. The Property Trustee will act as indenture trustee
under the Preferred Securities Guarantee for the purposes of compliance with
the provisions of the Trust Indenture Act. The Guarantee Trustee (as defined
herein) will hold the Preferred Securities Guarantee on behalf of the Trust
for the benefit of the holders of the Preferred Securities.
The Preferred Securities Guarantee guarantees to the holders of the
Preferred Securities the payment of (i) any accrued and unpaid distributions
that are required to be paid on the Preferred Securities, to the extent the
Trust has funds available therefor, (ii) the Redemption Price, including all
accrued and unpaid distributions with respect to Preferred Securities called
for redemption by the Trust, to the extent the Trust has funds available
therefor, and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Junior Subordinated Debt Securities to the holders of Preferred Securities or
a redemption of all the Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities to the date of the payment, to the extent the Trust has
funds available therefor, or (b) the amount of assets of the Trust remaining
available for distribution to holders of the Preferred Securities in
liquidation of the Trust. The holders of a majority in liquidation amount of
the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
or to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Preferred Securities Guarantee. If the Company fails to make
any payments under the Preferred Securities Guarantee, any holder of Preferred
Securities may institute a legal proceeding directly against the Company to
enforce such holder's rights under the Preferred Securities Guarantee to
receive such payments without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity. If the Company
were to default on its obligation to pay amounts payable on the Junior
Subordinated Debt Securities, the Trust would lack available funds for the
payment of distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of the Preferred
Securities would not be able to rely upon the Preferred Securities Guarantee
for payment of such amounts. Instead, holders of the Preferred Securities
would rely on the enforcement (i) by the Property Trustee (as defined herein)
of its rights as
S-4
<PAGE>
registered holder of the Junior Subordinated Debt Securities against the
Company pursuant to the terms of the Junior Subordinated Debt Securities or
(ii) by such holder of the holder's rights against the Company to enforce the
Junior Subordinated Debt Securities. See "Description of the Junior
Subordinated Debt Securities-- Subordination", "Particular Terms of the Junior
Subordinated Debt Securities Issued in Connection with Preferred Securities"
and "The Preferred Securities Guarantee" in the accompanying Prospectus. The
Declaration provides that each holder of Preferred Securities, by acceptance
thereof, agrees to the provisions of the Preferred Securities Guarantee and
the Junior Subordinated Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the Junior
Subordinated Debt Securities against the Company. The holders of a majority in
liquidation amount of the Preferred Securities will have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it
as a holder of the Junior Subordinated Debt Securities. If the Property
Trustee fails to enforce its rights under the Junior Subordinated Debt
Securities, a holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce the Property Trustee's rights under
the Junior Subordinated Debt Securities without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if the Company has failed to pay interest or
principal on the Junior Subordinated Debt Securities on the date such interest
or principal is otherwise payable, then a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such holder of
the principal of or interest on the Junior Subordinated Debt Securities having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
date specified in the Junior Subordinated Debt Securities. In connection with
such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Preferred Securities in such
Direct Action. The holders of Preferred Securities will not be able to
exercise directly any other remedy available to the Holders of the Junior
Subordinated Debt Securities unless the Property Trustee fails to do so. See
"Description of the Preferred Securities--Voting Rights" and "Description of
the Junior Subordinated Securities--Indenture Events of Default".
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Junior Subordinated Indenture to defer
payments of interest on the Junior Subordinated Debt Securities by extending
the interest payment period at any time, and from time to time, on the Junior
Subordinated Debt Securities. As a consequence of such an extension, quarterly
distributions on the Preferred Securities would be deferred (but despite such
deferral would continue to accrue with interest thereon compounded quarterly)
by the Trust during any such extended interest payment period. Such right to
extend the interest payment period for the Junior Subordinated Debt Securities
is limited to a period not exceeding 20 consecutive quarters. In the event
that the Company exercises this right to defer interest payments, then (i) the
Company shall not declare or pay dividends on, make any distribution with
respect to, redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock, provided, however, the Company may
declare and pay a stock dividend where the dividend is the same stock as that
on which the dividend is being paid, and (ii) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company that rank pari passu with or
junior to the Junior Subordinated Debt Securities. Prior to the termination of
any such Extension Period, the Company may further delay payment of interest
by further extending the interest payment period; provided, that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
of the Junior Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a
S-5
<PAGE>
new Extension Period, subject to the above requirements. See "Description of
the Preferred Securities-- Distributions" and "Description of the Junior
Subordinated Debt Securities--Option to Extend Interest Payment Period".
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities
will continue to accrue income (as original issue discount ("OID")) in respect
of the deferred interest allocable to its Preferred Securities for United
States federal income tax purposes, which will be allocated but not
distributed to holders of record of Preferred Securities. As a result, each
such holder of Preferred Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive the cash from the Trust related to such income if such holder disposes
of its Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. The Company has no current intention
of exercising its right to defer payments of interest by extending the
interest payment period on the Junior Subordinated Debt Securities. However,
should the Company determine to exercise such right in the future, the market
price of the Preferred Securities is likely to be affected. A holder that
disposes of its Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its Preferred Securities. In addition, as a result of the existence of
the Company's right to defer interest payments, the market price of the
Preferred Securities (which represents an undivided beneficial interest in the
Junior Subordinated Debt Securities) may be more volatile than other
securities on which OID accrues that do not have such rights. See "United
States Federal Income Taxation-- Original Issue Discount".
PROPOSED CHANGES TO U.S. TAX LAWS; POSSIBLE TAX EVENT
On February 6, 1997, the Clinton Administration released its budget proposal
for fiscal year 1998. The proposal contains certain tax law changes that, if
enacted, would prohibit an issuer from deducting interest payments or original
issue discount on an instrument that has a maximum weighted average maturity
of more than 40 years. Under the proposal, for purposes of determining the
term of an instrument, any right to extend would be treated as exercised. The
Administration's proposal, if enacted, would also treat a corporate issuer
that files annual financial statements with the Commission as having
characterized an instrument as equity for purposes of Section 385(c) of the
Internal Revenue Code of 1986, as amended (the "Code"), if the instrument (i)
has a maximum term exceeding 15 years and (ii) is not shown as indebtedness on
the applicable balance sheet of the issuer or, in the case of indebtedness
issued to a related party that issues a related instrument, such related
instrument is not reflected as indebtedness on the applicable consolidated
balance sheet. Under Section 385(c), the characterization by the issuer of an
instrument as equity is binding on the issuer and all holders of the
instrument unless a holder discloses on his tax return that he is treating
such instrument in a manner inconsistent with the issuer's characterization.
The Administration's proposal specifies that the changes would be effective
for instruments issued on or after the date of first Congressional committee
action.
There can be no assurance that legislation affecting the Company's ability
to deduct interest paid on the Junior Subordinated Debt Securities or the
characterization of the Junior Subordinated Debt Securities for U.S. federal
income tax purposes, including legislation similar to the proposals described
above, will not be enacted in the future or that any such legislation would
not be effective retroactively. In the event tax law changes are enacted and
apply retroactively to the Junior Subordinated Debt Securities, such changes
could give rise to a Tax Event, which would, in certain circumstances, require
the dissolution of the Trust or permit the Company to redeem the Preferred
Securities. See "Risk Factors--Tax Event Redemption or Distribution",
"Description of the Preferred Securities--Tax Event Redemption or
Distribution", "Description of the Junior Subordinated Debt Securities--
Interest" and "--Proposed Tax Legislation" and "United States Federal Income
Taxation--Proposed Tax Legislation".
TAX EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event, the Trust shall be dissolved, except in
the limited circumstance described below, with the result that the Junior
Subordinated Debt Securities would be distributed to the holders
S-6
<PAGE>
of the Trust Securities in connection with the liquidation of the Trust. In
certain circumstances, the Company shall have the right to redeem the Junior
Subordinated Debt Securities, in whole or in part, in lieu of a distribution
of the Junior Subordinated Debt Securities by the Trust, in which event the
Trust will redeem the Trust Securities on a pro rata basis to the same extent
as the Junior Subordinated Debt Securities are redeemed by the Company. See
"Description of the Preferred Securities--Tax Event Redemption or
Distribution".
Under current United States federal income tax law, a distribution of Junior
Subordinated Debt Securities upon the dissolution of the Trust would not be a
taxable event to holders of the Preferred Securities. However, a dissolution
of the Trust in which holders of the Preferred Securities receive cash would
be a taxable event to such holders. See "United States Federal Income
Taxation--Receipt of Junior Subordinated Debt Securities or Cash Upon
Liquidation of the Trust".
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed
in exchange for Preferred Securities if a dissolution or liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Junior Subordinated Debt Securities that a holder of Preferred
Securities may receive on dissolution and liquidation of the Trust, may trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Junior Subordinated Debt Securities upon the occurrence of a Tax Event,
prospective purchasers of Preferred Securities are also making an investment
decision with regard to the Junior Subordinated Debt Securities and should
carefully review all the information regarding the Junior Subordinated Debt
Securities contained herein. See "Description of the Preferred Securities--Tax
Event Redemption or Distribution", "Description of the Junior Subordinated
Debt Securities" and "Description of Debt Securities" in the accompanying
Prospectus.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, ReliaStar Trustees (as defined herein), due to such voting
rights being vested exclusively in the Company, as the holder of the Common
Securities. See "Description of the Preferred Securities--Voting Rights".
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debt Securities. A holder who disposes of Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debt Securities
through the date of disposition in income as ordinary income (i.e., OID), and
to add such amount to the holder's adjusted tax basis in such holder's pro
rata share of the underlying Junior Subordinated Debt Securities deemed
disposed of. To the extent the selling price is less than the holder's
adjusted tax basis (which will include, in the form of OID, all accrued but
unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "United States Federal
Income Taxation--Original Issue Discount" and "--Sales of Preferred
Securities".
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Junior Subordinated Debt Securities do not contain provisions that
afford holders protection in the event of a highly leveraged transaction,
including a change of control, or other similar transactions involving the
Company that may adversely affect such holders. See "Description of the Junior
Subordinated Debt Securities--General".
S-7
<PAGE>
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there as been no public market for the Preferred
Securities. There can be no assurance that an active trading market will
develop for the Preferred Securities or that, if such market develops, the
market price will equal or exceed the public offering price set forth on the
cover page of this Prospectus Supplement.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of May 8, 1997, executed by ReliaStar,
as sponsor (the "Sponsor"), and the trustees of the Trust (the "ReliaStar
Trustees") and (ii) the filing of a certificate of trust with the Secretary of
State of the State of Delaware on May 8, 1997. Such declaration will be
amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. ReliaStar will directly or
indirectly acquire all of the Common Securities which constitute an aggregate
liquidation amount equal to 3% of the total capital of the Trust. The Trust
exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Junior
Subordinated Debt Securities, and (iii) engaging in only those other
activities necessary or incidental thereto.
Pursuant to the Declaration, the number of ReliaStar Trustees will initially
be three. Two of the ReliaStar Trustees (the "Regular Trustees") will be
persons who are employees or officers of, or who are affiliated with,
ReliaStar. The third trustee will be a financial institution that maintains
its principal place of business in the State of Delaware and is unaffiliated
with ReliaStar, which trustee will serve as property trustee under the
Declaration and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). Initially,
Wilmington Trust Company, a Delaware banking corporation, will be the Property
Trustee until removed or replaced by the holder of the Common Securities. The
Property Trustee will also act as indenture trustee under the Preferred
Securities Guarantee for the purposes of compliance with the provisions of the
Trust Indenture Act (the "Guarantee Trustee"). See "The Preferred Securities
Guarantee" in the accompanying Prospectus.
The Property Trustee will hold title to the Junior Subordinated Debt
Securities on behalf of the Trust for the benefit of the holders of the Trust
Securities and the Property Trustee will have the power to exercise all
rights, powers and privileges under the Junior Subordinated Indenture (as
defined herein) as the holder of the Junior Subordinated Debt Securities. In
addition, the Property Trustee will maintain exclusive control of a segregated
non-interest bearing trust account (the "Property Account") to hold all
payments made in respect of the Junior Subordinated Debt Securities for the
benefit of the holders of the Trust Securities. The Property Trustee will make
payments of distributions and payments on liquidation, redemption and
otherwise to the holders of the Trust Securities out of funds from the
Property Account. The Guarantee Trustee will hold the Preferred Securities
Guarantee on behalf of the Trust for the benefit of the holders of the
Preferred Securities. ReliaStar, as the direct or indirect holder of all the
Common Securities, will have the right to appoint, remove or replace any
ReliaStar Trustee subject to the limitations set forth in the Declaration and
to increase or decrease the number of ReliaStar Trustees. See "Description of
the Preferred Securities--Voting Rights."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities".
RELIASTAR FINANCIAL CORP.
The Company is a holding company whose subsidiaries specialize in life
insurance and related financial services businesses. Through ReliaStar Life
Insurance Company, Minneapolis, Minnesota, and other subsidiaries,
S-8
<PAGE>
the Company issues and distributes individual life insurance and annuities;
group life and health insurance; life and health reinsurance; and markets and
manages mutual funds. The Company operates in four business segments:
Individual Insurance, Employee Benefits, Life and Health Reinsurance and
Pension.
The Company's strategy is to compete by focusing on the needs of its
customers and striving to provide innovative products in a service-oriented,
cost-efficient manner. It is the Company's goal to form lifetime partnerships
with its customers and deliver integrated financial solutions.
Other life insurance subsidiaries, each of which is owned directly or
indirectly by ReliaStar Life, are Northern Life Insurance Company, Seattle,
Washington; ReliaStar United Services Life Insurance Company, Arlington,
Virginia; and ReliaStar Bankers Security Life Insurance Company, Woodbury, New
York. ReliaStar Life, United Services and Bankers Security were formerly known
as Northwestern National Life Insurance Company, United Services Life
Insurance Company and Bankers Security Life Insurance Society, respectively.
Additional subsidiaries include Washington Square Advisors, Inc., Minneapolis,
Minnesota; Washington Square Securities, Inc., Minneapolis, Minnesota;
ReliaStar Mortgage Corporation, West Des Moines, Iowa; NWNL Northstar, Inc.,
Greenwich, Connecticut; PrimeVest Financial Services, Inc., St. Cloud,
Minnesota; and Successful Money Management Seminars, Inc., Portland, Oregon.
On February 23, 1997, ReliaStar agreed to acquire (the "SCC Acquisition")
Security-Connecticut Corporation ("SCC"), an insurance holding company, in a
stock for stock exchange in which SCC will merge with and into ReliaStar. The
SCC Acquisition is valued at approximately $488 million and is expected to be
completed in late June or early July 1997. For more information on the SCC
Acquisition, see the Company's Current Report on Form 8-K dated February 23,
1997 which is incorporated herein by reference.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following pro forma combined condensed financial statements reflect the
acquisition of SCC. The SCC Acquisition will be accounted for as a "purchase"
of SCC by ReliaStar under generally accepted accounting principles. The pro
forma combined condensed financial statements are unaudited and combine the
operations of ReliaStar and SCC for the three months ended March 31, 1997 and
for the year ended December 31, 1996. The pro forma balance sheet assumes the
SCC Acquisition occurred at March 31, 1997. The pro forma statements of income
assume the SCC Acquisition occurred on January 1, 1996. The pro forma combined
condensed financial statements have not been compiled, reviewed or audited by
independent accountants.
The unaudited pro forma combined condensed financial statements have been
included for information only and were prepared pursuant to the rules and
regulations of the Commission. As further discussed in the accompanying notes,
the pro forma combined condensed financial statements do not purport to be
indicative of the financial position or operating results that would have been
achieved had the SCC Acquisition been consummated as of the dates indicated
and should not be construed as representative of future financial position or
operating results.
S-9
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF MARCH 31, 1997
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- ADJUSTMENTS
INCREASE NOTE
RELIASTAR SCC (DECREASE) REFERENCE PRO FORMA
--------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments.............. $11,920.6 $1,793.3 $ 3.7 (a) $13,717.6
Deferred Policy
Acquisition
Costs/Present Value of
Future Profits.......... 1,299.0 414.2 (65.3) (b) 1,647.9
Other Assets............. 1,143.8 125.0 (20.4) (b) 1,335.3
101.5 (c)
(7.8) (d)
(6.8) (e)
Participation Fund
Account Assets.......... 315.9 0.0 0.0 315.9
Assets Held in Separate
Accounts................ 2,254.6 0.0 0.0 2,254.6
--------- -------- ------ ---------
TOTAL ASSETS........... $16,933.9 $2,332.5 $ 4.9 $19,271.3
========= ======== ====== =========
LIABILITIES
Future Policy and
Contract Benefits....... $11,902.2 $1,811.9 $(52.3) (b) $13,661.8
Notes and Mortgages
Payable................. 449.1 75.0 0.0 524.1
Other Liabilities........ 512.3 95.4 4.9 (f) 603.9
0.0 (g)
(8.7) (h)
Participation Fund
Account Liabilities..... 315.9 0.0 0.0 315.9
Liabilities Related to
Separate Accounts....... 2,249.1 0.0 0.0 2,249.1
--------- -------- ------ ---------
TOTAL LIABILITIES...... 15,428.6 1,982.3 (56.1) 17,354.8
--------- -------- ------ ---------
Trust-Originated
Preferred Securities.... 121.0 0.0 0.0 121.0
SHAREHOLDERS' EQUITY
Common Stock............. 578.9 0.1 (0.1) (i) 990.1
411.2 (j),(q)
Additional Paid-In
Capital................. 0.0 83.1 (83.1) (i) 0.0
Net Unrealized Investment
Gains (Losses).......... 60.1 (2.1) 2.1 (i) 60.1
Retained Earnings........ 834.5 269.1 (269.1) (i) 834.5
Other, Net............... (89.2) 0.0 0.0 (89.2)
--------- -------- ------ ---------
TOTAL SHAREHOLDERS'
EQUITY................ 1,384.3 350.2 61.0 1,795.5
--------- -------- ------ ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.. $16,933.9 $2,332.5 $ 4.9 $19,271.3
========= ======== ====== =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
S-10
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------- ADJUSTMENTS
INCREASE NOTE
RELIASTAR SCC (DECREASE) REFERENCE PRO FORMA
--------- ----- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Premiums....................... $204.7 $13.0 $ 0.0 $217.7
Net Investment Income.......... 234.7 33.9 0.0 (k) 268.6
Realized Investment Gains...... 2.2 0.2 0.0 2.4
Other Income................... 121.6 34.8 0.0 (l) 156.4
------ ----- ----- ------
TOTAL........................ 563.2 81.9 0.0 645.1
------ ----- ----- ------
BENEFITS AND EXPENSES
Benefits to Policyholders...... 317.5 44.7 0.0 362.2
Sales and Operating Expenses... 121.4 11.6 0.0 (m) 133.6
0.6 (n)
Amortization of Deferred Policy
Acquisition Costs/Present
Value of Future Profits....... 28.4 10.9 (4.7) (o) 34.6
Interest Expense............... 7.4 1.4 0.0 8.8
Dividends and Experience
Refunds to Policyholders...... 7.1 0.1 0.0 7.2
------ ----- ----- ------
TOTAL........................ 481.8 68.7 (4.1) 546.4
------ ----- ----- ------
Income Before Income Taxes..... 81.4 13.2 4.1 98.7
Income Tax Expense............. 28.4 4.6 1.6 (p) 34.6
Dividends on Preferred
Securities of Subsidiary, Net
of Tax........................ 1.7 0.0 0.0 1.7
------ ----- ----- ------
Net Income..................... $ 51.3 $ 8.6 $ 2.5 (q) $ 62.4
====== ===== ===== ======
PER COMMON SHARE
Net Income:
Primary...................... $ 1.26 $0.99 N/A $ 1.31
Fully Diluted................ $ 1.26 $0.99 N/A (q) $ 1.31
WEIGHTED AVERAGE SHARES
Common and Common Equivalent
Shares (Primary).............. 40.7 8.6 (1.7) 47.6
Common Shares Assuming Maximum
Dilution (Fully Diluted)...... 40.7 8.7 (1.8) 47.6
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
S-11
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
---------------- INCREASE NOTE
RELIASTAR SCC (DECREASE) REFERENCE PRO FORMA
--------- ------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Premiums..................... $ 836.9 $ 58.3 $0.0 $ 895.2
Net Investment Income........ 940.7 135.3 (0.1) (k) 1,075.9
Realized Investment Gains.... 11.2 7.3 0.0 18.5
Other Income................. 401.8 137.4 0.0 (l) 539.2
-------- ------ ---- --------
TOTAL...................... 2,190.6 338.3 (0.1) 2,528.8
-------- ------ ---- --------
BENEFITS AND EXPENSES
Benefits to Policyholders.... 1,287.7 192.9 0.0 1,480.6
Sales and Operating Expenses. 437.4 49.9 0.0 (m) 489.8
2.5 (n)
Amortization of Deferred
Policy Acquisition
Costs/Present Value of
Future Profits.............. 113.0 36.2 (5.3) (o) 143.9
Interest Expense............. 28.7 5.4 0.0 34.1
Dividends and Experience
Refunds to Policyholders.... 19.7 0.4 0.0 20.1
-------- ------ ---- --------
TOTAL...................... 1,886.5 284.8 (2.8) 2,168.5
-------- ------ ---- --------
Income Before Income Taxes... 304.1 53.5 2.7 360.3
Income Tax Expense........... 106.1 18.2 1.8 (p) 126.1
Dividends on Preferred
Securities of Subsidiary,
Net of Tax.................. 5.0 0.0 0.0 5.0
-------- ------ ---- --------
Net Income................... $ 193.0 $ 35.3 $0.9 (q) $ 229.2
======== ====== ==== ========
PER COMMON SHARE
Net Income:
Primary.................... $ 5.03 $ 4.10 N/A $ 5.07
Fully Diluted.............. $ 4.73 $ 4.07 N/A (q) $ 4.81
WEIGHTED AVERAGE SHARES
Common and Common Equivalent
Shares (Primary)............ 37.3 8.6 (1.7) 44.2
Common Shares Assuming
Maximum Dilution (Fully
Diluted).................... 40.1 8.7 (1.8) 47.0
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
S-12
<PAGE>
Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
The pro forma combined condensed financial statements assume all shares of
Common Stock of SCC, as described, are converted, pursuant to the SCC
Acquisition, into shares of Common Stock of ReliaStar at an exchange ratio of
.7932 and at an assumed market price of $59.25 per share of ReliaStar Common
Stock, the closing sale price per share of Common Stock of ReliaStar on
February 21, 1997, the last trading day prior to the public announcement of
the SCC Acquisition. It is further assumed that cash to be paid for fractional
shares will not be significant.
ReliaStar's preliminary allocation of the purchase price was based upon the
estimated fair value of the assets acquired and liabilities assumed. The
actual allocation will be based on further studies and valuations as of the
effective time of the SCC Acquisition (the "Effective Time") and will be
primarily affected by the impact of market interest rates as of the Effective
Time upon the valuation of assets and liabilities of SCC, the effect of the
ReliaStar Common Stock price as of the Effective Time upon the determination
of the purchase price and the accrual at the Effective Time of estimated costs
to eliminate duplicative facilities and equipment and to record the estimated
liability for severance and other employee termination costs. The actual
adjustments (other than those related to the accruals of certain costs at the
Effective Time described above) are not, at the present time, expected to be
significantly different, however, there can be no assurance that significant
differences will not arise.
The pro forma combined condensed financial statements do not include all
adjustments to conform the accounting policies of SCC to those followed by
ReliaStar. The nature and extent of such adjustments, if any, will be based
upon further study and analysis and would not be expected to be significant to
the pro forma financial results.
The following describes the pro forma adjustments reflected in the
accompanying unaudited pro forma combined condensed financial statements:
(a) To value SCC's commercial mortgage loans at estimated fair value.
(b) To eliminate SCC's deferred policy acquisition costs, goodwill,
acquired insurance in-force and unearned revenue balances and to record the
present value of future profits of the in-force business acquired. Present
value of future profits reflects the estimated fair value of the business
in-force and represents the portion of the cost to acquire SCC that is
allocated to the value of the right to receive future cash flows from
insurance contracts existing at the assumed date of acquisition. Such value
is the present value of the actuarially determined projected cash flows
from the acquired policies.
The 15% discount rate used to determine such value is the rate of return
required by ReliaStar to invest in the business being acquired. In determining
the rate of return used to value the policies purchased, the following factors
are considered:
. The magnitude of the risk associated with each of the actuarial
assumptions used in determining expected future cash flows.
. Cost of capital available to fund the acquisition.
. The perceived likelihood of changes in insurance regulations and tax
laws.
. Complexity of the acquired company.
The value allocated to present value of future profits is based on a
preliminary determination of such value; accordingly, this allocation may be
adjusted upon final determination of such value. On a pro forma basis,
assuming an acquisition date of March 31, 1997, expected gross amortization
using current assumptions and accretion of interest based on an interest rate
equal to the liability or contract rate (such rates ranging from 5.25%
S-13
<PAGE>
to 7.0% ) on the cost of policies purchased for each of the years in the five
year period ended March 31, 2002, is as follows (dollars in millions):
<TABLE>
<CAPTION>
YEAR
ENDED BEGINNING GROSS ACCRETION OF NET ENDING
MARCH 31, BALANCE AMORTIZATION INTEREST AMORTIZATION BALANCE
--------- --------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
1998.................... $348.9 $50.8 $19.9 $30.9 $318.0
1999.................... 318.0 43.2 18.3 24.9 293.1
2000.................... 293.1 37.9 16.8 21.1 272.0
2001.................... 272.0 32.5 15.8 16.7 255.3
2002.................... 255.3 29.7 14.7 15.0 240.3
</TABLE>
(c) To record the excess of the cost to acquire SCC over the sum of the
amounts assigned to identifiable assets acquired less liabilities assumed.
(d) To record the direct out-of-pocket costs of acquisition.
(e) To remove SCC's capitalized software costs to conform to ReliaStar's
accounting policies.
(f) To record lease related fair value adjustments, net.
(g) At the Effective Time, the estimated liability for severance and
other employee costs for certain executive officers and employees of SCC
and the estimated costs to eliminate duplicative facilities and equipment
and merge such operations will be accrued. These estimated costs have not
been accrued on the pro forma balance sheet. The present estimate of these
costs to be accrued at the Effective Time is approximately $8.0 million.
The estimated $8.0 million liability will be accrued on the initial post-
acquisition balance sheet of SCC and will increase annual goodwill
amortization by approximately $130,000.
(h) To adjust the deferred tax liability of SCC to the tax effected
difference between the estimated fair value of the net assets acquired and
the estimated tax basis of the net assets acquired.
(i) To eliminate SCC equity.
(j) To record the fair value of the pro forma 6.94 million shares of
Common Stock of ReliaStar to be issued to acquire SCC, using a share price
of $59.25 per share of ReliaStar Common Stock.
(k) To record the amortization of the pro forma fair value adjustment to
the cost basis of SCC investments. The pro forma adjustments to investments
and investment income are based upon interest rates at March 31, 1997 and
are not likely to be reflective of future results as the actual fair value
adjustment and related future income statement effects will be dependent
upon the interest rate environment at the time the SCC Acquisition is
completed. The fair value adjustment to the cost basis of investments has
been amortized over the estimated average remaining investment life.
(l) It is expected that cross-selling of life insurance products between
ReliaStar and SCC will produce incremental profits to the combined company.
For purposes of the pro forma combined condensed statements of income,
these incremental profits have not been included because they are not
assured.
(m) It is expected that certain costs and expenses of the combined
companies will be less than those reflected in the accompanying pro forma
combined condensed statements of income due to consolidation of operations.
The estimated expense reductions are primarily related to the elimination
of duplicative facilities, equipment and other personnel and functions. For
purposes of the pro forma combined condensed statements of income, these
expense reductions have not been included because they are not assured
until ReliaStar takes affirmative actions to implement the cost reductions
which cannot take place until the Effective Time. Until such time, they are
not permitted to be reflected in the pro forma financial information
according to accounting rules. The pro forma pre-tax annualized expense
reductions are currently estimated to total approximately $7.0 million. In
addition to the $7.0 million, the combined company expects to realize cost
savings from the potential merger of the New York operations of ReliaStar
and SCC.
(n) To record the amortization of goodwill over the estimated periods to
be benefited (40 years).
S-14
<PAGE>
(o) To record the adjustment to historical amortization of deferred
policy acquisition costs to reflect the new amortization of the present
value of future profits intangible asset established on the pro forma
combined condensed balance sheet as of March 31, 1997.
(p) To record income tax expense (benefit) of the pro forma adjustments
(excluding goodwill amortization) at the applicable statutory federal
effective rate of 35%.
(q) Pro Forma Net Income and Fully Diluted Net Income per share for the
year ended December 31, 1996, and the pro forma increase to shareholders'
equity using the pro forma share price of $59.25 per share of ReliaStar
Common Stock and the floor and ceiling share price of $49.00 and $64.30 are
shown in the following table:
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------------
RELIASTAR COMMON INCREASE TO FULLY DILUTED
STOCK PRICE EXCHANGE SHAREHOLDERS' NET NET INCOME
ASSUMED RATIO EQUITY INCOME PER SHARE
---------------- -------- ------------- ------ -------------
<S> <C> <C> <C> <C>
$59.25 .7932 $411.2 $229.2 $4.81
$49.00 .8927 $382.1 $229.9 $4.73
$64.30 .7749 $436.5 $228.6 $4.81
</TABLE>
CERTAIN FORWARD-LOOKING INFORMATION
This Prospectus Supplement contains certain forward-looking information
including information provided in "Unaudited Pro Forma Combined Condensed
Financial Statements." The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for forward-looking information to encourage
companies to provide prospective information about their companies without
fear of litigation so long as such information is identified as forward-
looking and is accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ materially from
those projected in the information. ReliaStar identifies the following
important factors which could cause actual results to differ materially from
any such results which might be projected, forecast, estimated or budgeted by
ReliaStar in forward-looking information. All of such factors are difficult to
predict and many are beyond the control of ReliaStar. Accordingly, while
ReliaStar believes that the assumptions underlying the forward-looking
information are reasonable, there can be no assurances that such assumptions
will approximate actual experience. These important factors include: (i)
general economic conditions, changes in interest rates and the performance of
stock markets, each of which may impact the profitability of the combined
company, the market value of the combined company's investment portfolio, the
credit quality of the combined company's loan portfolio and the demand for
life insurance products; (ii) regulatory developments affecting financial
institutions, generally, and life insurance companies, specifically; (iii)
changes in federal and state income tax laws and regulations which affect the
relative tax advantage of life insurance products; (iv) industry consolidation
and increased competition; (v) the combined company's ability to control costs
and realize estimated cost savings; (vi) the integration of ReliaStar's and
SCC's products, sales and operations in a timely and cost effective manner;
and (vii) the timing, cost and successful completion of ReliaStar's announced
stock repurchase program. Investors are also directed to consider other risks
and uncertainties discussed in documents filed by ReliaStar with the
Commission. ReliaStar disclaims any obligation to update forward-looking
information.
S-15
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following selected financial data for the five years ended December 31,
1996 and three months ended March 31, 1997 and 1996 are derived from the
consolidated financial statements of ReliaStar. The table below reflects the
consolidated results of operations and financial position of ReliaStar. All
material intercompany transactions and balances have been eliminated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Premiums............... $ 204.7 $ 205.0 $ 836.9 $ 851.5 $ 726.9 $ 659.6 $ 589.9
Net Investment Income.. 234.7 232.3 940.7 891.1 618.3 635.0 606.7
Realized Investment
Gains (Losses)........ 2.2 6.2 11.2 4.9 (27.4) (32.4) (33.7)
Other Income........... 121.6 89.9 401.8 342.9 253.0 228.2 215.1
--------- --------- --------- --------- -------- -------- --------
Total Revenues...... 563.2 533.4 2,190.6 2,090.4 1,570.8 1,490.4 1,378.0
Benefits and Expenses.. 481.8 459.1 1,886.5 1,830.6 1,404.2 1,361.8 1,288.4
Income Tax Expense..... 28.4 26.2 106.1 90.7 58.9 46.1 29.0
Dividends on Preferred
Securities of
Subsidiary, Net of
Tax................... 1.7 .1 5.0 -- -- -- --
--------- --------- --------- --------- -------- -------- --------
Income from Continuing
Operations............ 51.3 48.0 193.0 169.1 107.7 82.5 60.6
Loss from Discontinued
Operations............ -- -- -- (5.4) (2.6) -- --
--------- --------- --------- --------- -------- -------- --------
Income Before
Extraordinary Charges
and Cumulative Effect
of Accounting Changes. 51.3 48.0 193.0 163.7 105.1 82.5 60.6
Extraordinary Charges.. -- -- -- -- -- (9.7) (1.3)
Cumulative Effect of
Accounting Changes.... -- -- -- -- -- (7.5) --
--------- --------- --------- --------- -------- -------- --------
Net Income............. $ 51.3 $ 48.0 $ 193.0 $ 163.7 $ 105.1 $ 65.3 $ 59.3
========= ========= ========= ========= ======== ======== ========
Net Income Available to
Common Shareholders... $ 51.3 $ 45.9 $ 187.8 $ 155.4 $ 96.8 $ 57.0 $ 50.1
========= ========= ========= ========= ======== ======== ========
BALANCE SHEET DATA
(end of period):
Invested Assets......... $11,920.6 $11,785.4 $11,996.3 $11,814.2 $7,918.2 $7,716.3 $7,159.6
Other Assets............ 5,013.3 3,986.9 4,710.7 3,705.0 2,448.6 2,196.6 1,915.6
--------- --------- --------- --------- -------- -------- --------
Total Assets.......... 16,933.9 15,772.3 16,707.0 15,519.2 10,366.8 9,912.9 9,075.2
Notes and Mortgages
Payable................ 449.1 423.3 407.5 422.3 194.6 230.3 220.5
Other Liabilities....... 14,979.5 13,884.2 14,760.9 13,676.8 9,373.7 8,882.0 8,174.9
--------- --------- --------- --------- -------- -------- --------
Total Liabilities..... 15,428.6 14,307.5 15,168.4 14,099.1 9,568.3 9,112.3 8,395.4
Trust-Originated
Preferred Securities... 121.0 120.8 120.9 -- -- -- --
Shareholders' Equity:
Preferred............. -- 69.0 -- 68.7 67.9 66.7 65.8
Common................ 1,384.3 1,275.0 1,417.7 1,351.4 730.6 733.9 614.0
</TABLE>
S-16
<PAGE>
CAPITALIZATION OF THE COMPANY
The following table sets forth the consolidated summary capitalization at
March 31, 1997 of the Company and its consolidated subsidiaries on a
historical basis, as adjusted to reflect the application of the proceeds
(without giving effect to the payment of Underwriters' Compensation or other
offering expenses) from the sale of the Preferred Securities (the "Offering")
and as adjusted on a pro forma basis to reflect the SCC Acquisition. See "Use
of Proceeds." The table should be read in conjunction with the Company's
consolidated financial statements and notes thereto, other financial data
incorporated by reference herein, and the "Unaudited Pro Forma Combined
Condensed Financial Statements" included herein. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------
AS AS ADJUSTED
ADJUSTED FOR OFFERING
FOR AND THE SCC
ACTUAL OFFERING ACQUISITION
-------- -------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Notes and Mortgages Payable--Current (a)..... $ 211.3 $ 211.3 $ 211.3
Notes and Mortgages Payable--Noncurrent...... 237.8 237.8 312.8
-------- -------- --------
Total Notes and Mortgages Payable......... 449.1 449.1 524.1
Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary ReliaStar
Financing I Holding Solely Junior
Subordinated Debt Securities of the Company
(b)......................................... 121.0 121.0 121.0
Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary ReliaStar
Financing II Holding Solely Junior
Subordinated Debt Securities of the Company
(b)......................................... -- 125.0 125.0
Shareholders' Equity:
Preferred Stock (c).......................... -- -- --
Common Stock--100.0 million Shares
Authorized; 42.6 million Shares Issued (49.5
million as adjusted for SCC Acquisition).... 578.9 578.9 990.1
Note Receivable from ESOP.................... (21.2) (21.2) (21.2)
Unauthorized Restricted Stock Awards......... (1.7) (1.7) (1.7)
Net Unrealized Investment Gains.............. 60.1 60.1 60.1
Retained Earnings............................ 834.5 834.5 834.5
Less Treasury Common Stock, at cost--2.4
million Shares Held (4.0 million as adjusted
for SCC Acquisition)........................ (66.3) (66.3) (166.3)
-------- -------- --------
Total Shareholders' Equity................ 1,384.3 1,384.3 1,695.5
-------- -------- --------
Total Capitalization...................... $1,954.4 $2,079.4 $2,465.6
======== ======== ========
</TABLE>
(a) "Notes and Mortgages Payable--Current" consists primarily of $164.0
million of commercial paper and $47.3 million of short term bank debt,
each as of March 31, 1997.
(b) One hundred percent of the assets of the ReliaStar Financing I Trust
consists of approximately $126.9 million in principal amount of the Junior
Subordinated Debt Securities of ReliaStar with an interest rate of 8.2%
and maturity date of March 15, 2016.
One hundred percent of the assets of the ReliaStar Financing II Trust
consists of approximately $ million in principal amount of the Junior
Subordinated Debt Securities of ReliaStar with an interest rate of % and
maturity date of , 2027.
(c) There are reserved for insurance up to 2,600,000 shares of Series A Junior
participating Preferred Stock issuable upon exercise of certain preferred
share purchase rights.
S-17
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ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated into the
Company's consolidated financial statements, with the Preferred Securities
treated as minority interest and shown in the Company's consolidated balance
sheet as "Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary ReliaStar Financing II Holding Solely Junior Subordinated Debt
Securities of the Company." The financial statement footnotes of the Company
will reflect that the sole asset of the Trust will be $ million
principal amount of the Junior Subordinated Debt Securities, bearing interest
at % and maturing on . All reports filed by the Company
under the Exchange Act present information regarding the Trust, ReliaStar
Financing I and other similar trusts in the manner described above. In
addition, a footnote to the Company's audited financial statements reflects
that (i) each trust is wholly-owned by the Company; (ii) the sole assets of
each trust are junior subordinated debt securities, in each case specifying as
to each trust the principal amount, interest rate and maturity date of the
junior subordinated debt securities held; and (iii) the Preferred Securities
Guarantee, when taken together with the Company's obligations under the Junior
Subordinated Debt Securities and the Junior Subordinated Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Company (other than with respect to the
Trust Securities), and the corresponding obligations of the Company with
respect to such other trusts, provide a full and unconditional guarantee of
amounts on the Preferred Securities and the preferred securities issued by
such other trusts. See "Capitalization."
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities will be invested by
the Trust in Junior Subordinated Debt Securities issued pursuant to the Junior
Subordinated Indenture described herein and ultimately will be used by the
Company to repurchase up to an aggregate of $100 million of shares of the
Company's Common Stock after consummation of the SCC Acquisition and for
general corporate purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, Wilmington Trust Company, will act as
indenture trustee under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
will include those stated in the Declaration and those made part of the
Declaration by the Trust Indenture Act. The following summary of the principal
terms and provisions of the Preferred Securities does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Declaration (a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part), the Trust Act and
the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue, on behalf of the
Trust, the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned by the
Company. The Common Securities rank pari passu, and payments will be made
thereon on a pro rata basis, with the Preferred Securities, except that upon
the occurrence and during the continuance of a Declaration Event of Default,
the rights of the holders of the Common Securities to receive payment of
periodic distributions and payments upon redemption, liquidation and otherwise
will be subordinated to the rights to payment of the holders of the Preferred
Securities. The Declaration does not permit the issuance by the Trust of any
securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Property Trustee
will hold legal title to the Junior Subordinated Debt Securities purchased by
the Trust for the benefit of the holders of the Trust Securities. The payment
of distributions out of money held by the Trust, and payments upon redemption
of the Preferred Securities or liquidation of the Trust, are guaranteed by the
Company to the extent described under "The Preferred Securities Guarantee" in
the accompanying Prospectus.
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<PAGE>
The Preferred Securities Guarantee will be held by Wilmington Trust Company,
the Guarantee Trustee, for the benefit of the holders of the Preferred
Securities. The Preferred Securities Guarantee does not cover payment of
distributions when the Trust does not have sufficient available funds to pay
such distributions. In such event, the remedy of a holder of Preferred
Securities is to vote (i) to direct the Property Trustee to enforce the
Property Trustee's rights under the Junior Subordinated Debt Securities, or
(ii) if the failure of the Trust to pay distributions is attributable to the
failure of the Company to pay interest or principal on the Junior Subordinated
Debt Securities, to institute a proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest on the
Junior Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the respective due date specified in the Junior Subordinated Debt
Securities. See "Description of the Preferred Securities--Voting Rights" and
"Description of the Junior Subordinated Debt Securities--Indenture Events of
Default".
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon
at the rate per annum of % thereof compounded quarterly (to the extent
permitted by applicable law). The term "distribution" as used herein includes
such cash distributions and any such interest payable unless otherwise stated.
The amount of distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from , 1997, and will be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing ,
1997 when, as and if available for payment. Distributions will be made by the
Property Trustee, except as otherwise described below.
The Company has the right under the Junior Subordinated Indenture to defer
payments of interest on the Junior Subordinated Debt Securities by extending
the interest payment period from time to time on the Junior Subordinated Debt
Securities, which, if exercised, would defer quarterly distributions on the
Preferred Securities (though such distributions would continue to accrue
interest since interest would continue to accrue on the Junior Subordinated
Debt Securities) during any such extended interest payment period. Such right
to extend the interest payment period for the Junior Subordinated Debt
Securities is limited to a period not exceeding 20 consecutive quarters. In
the event that the Company exercises this right, then (a) the Company shall
not declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock, provided, however, the Company may declare and pay a
stock dividend where the dividend is the same stock as that on which the
dividend is being paid, and (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company that rank pari passu with or junior to
such Junior Subordinated Debt Securities. Prior to the termination of any such
Extension Period, the Company may further extend the interest payment period;
provided, that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarters or extend
beyond the maturity of the Junior Subordinated Debt Securities. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Company may select a new Extension Period, subject to the above
requirements. See "Description of the Junior Subordinated Debt Securities--
Interest" and "--Option to Extend Interest Payment Period". If distributions
are deferred, the deferred distributions and accrued interest thereon shall be
paid to holders of record of the Preferred Securities as they appear on the
books and records of the Trust on the record date next following the
termination of such Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from the Company on the Junior Subordinated Debt Securities.
See "Description of the Junior Subordinated Debt Securities". The payment of
distributions out of moneys held by the Trust is guaranteed by the Company to
the extent set forth under "The Preferred Securities Guarantee" in the
accompanying Prospectus.
S-19
<PAGE>
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day prior to the relevant payment dates, which
payment dates correspond to the interest payment dates on the Junior
Subordinated Debt Securities. Such distributions will be paid through the
Property Trustee who will hold amounts received in respect of the Junior
Subordinated Debt Securities in the Property Account for the benefit of the
holders of the Trust Securities. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment will be
made as described under "Book-Entry Only Issuance--The Depository Trust
Company" below. In the event that the Preferred Securities do not continue to
remain in book-entry only form, the relevant record dates for the Preferred
Securities shall conform to the rules of any stock exchange on which the
securities are listed, and, if none, the Regular Trustees shall have the right
to select relevant record dates, which shall be more than one Business Day but
less than 60 Business Days prior to the relevant payment dates. In the event
that any date on which distributions are to be made on the Preferred
Securities is not a Business Day, then payment of the distributions payable on
such date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such payment date. A "Business
Day" shall mean any day other than Saturday, Sunday or any other day on which
banking institutions in New York City (in the State of New York) or Wilmington
(in the State of Delaware) are permitted or required by any applicable law to
close.
MANDATORY REDEMPTION
The Junior Subordinated Debt Securities will mature on 2027 (or
such other date to which the maturity of the Junior Subordinated Debt
Securities may be extended, as described under "Description of Junior
Subordinated Debt Securities--General") and may be redeemed, in whole or in
part, at any time on or after 2002, or at any time in certain
circumstances upon the occurrence of a Tax Event. Upon the repayment of the
Junior Subordinated Debt Securities, whether at maturity or upon redemption,
the proceeds from such repayment or payment shall simultaneously be applied to
redeem Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Junior Subordinated Debt Securities so
repaid or redeemed at the Redemption Price; provided, that holders of Trust
Securities shall be given not less than 30 nor more than 60 days notice of
such redemption. See "Description of the Junior Subordinated Debt Securities--
Optional Redemption". In the event that fewer than all of the outstanding
Preferred Securities are to be redeemed, the Preferred Securities will be
redeemed pro rata as described under "Book-Entry Only Issuance--The Depository
Trust Company" below.
TAX EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that, on or after the date of this
Prospectus Supplement, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein or (b) any amendment to or change in an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after the date of this Prospectus Supplement),
(c) any interpretation or pronouncement by any such body, court, agency or
authority that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position, or
(d) any action taken by any governmental agency or regulatory authority, which
amendment or change is enacted, promulgated or effective, or which
interpretation or pronouncement is issued or announced, or which action is
taken, in each case on or after the date of this Prospectus Supplement, there
is more than an insubstantial risk that (i) the Trust is, or within 90 days of
the date thereof would be, subject to United States federal income tax with
respect to income accrued or received on the Junior Subordinated Debt
Securities, (ii) interest payable to the Trust on the Junior Subordinated Debt
Securities is not, or within 90 days of the date thereof would not be,
deductible by the Company for United States federal
S-20
<PAGE>
income tax purposes or (iii) the Trust is, or within 90 days of the date
thereof would be, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
If, at any time, a Tax Event shall occur and be continuing, the Trust shall,
except in the limited circumstances described below, be dissolved with the
result that the Junior Subordinated Debt Securities with an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the Trust Securities,
would be distributed to the holders of the Trust Securities in liquidation of
such holders' interests in the Trust on a pro rata basis within 90 days
following the occurrence of such Tax Event; provided, that such dissolution
and distribution shall be conditioned on (i) the Regular Trustees' receipt of
an opinion of nationally recognized independent tax counsel experienced in
such matters (a "No Recognition Opinion"), which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that the
holders of the Trust Securities will not recognize any gain or loss for United
States federal income tax purposes as a result of such dissolution and
distribution of Junior Subordinated Debt Securities and (ii) the Company being
unable to avoid such Tax Event within such 90 day period by taking some
ministerial action or pursuing some other reasonable measure that will have no
adverse effect on the Trust, the Company or the holders of the Trust
Securities. Furthermore, if after receipt of a Dissolution Tax Opinion by the
Regular Trustees (i) the Company has received an opinion (a "Redemption Tax
Opinion") of nationally recognized independent tax counsel experienced in such
matters that, as a result of a Tax Event, there is more than an insubstantial
risk that the Company would be precluded from deducting the interest on the
Junior Subordinated Debt Securities for United States federal income tax
purposes, even after the Junior Subordinated Debt Securities were distributed
to the holders of Trust Securities in liquidation of such holders' interests
in the Trust as described above, or (ii) the Regular Trustees shall have been
informed by such tax counsel that it cannot deliver a No Recognition Opinion
to the Trust, the Company shall have the right, upon not less than 30 nor more
than 60 days notice, to redeem the Junior Subordinated Debt Securities, in
whole or in part, for cash within 90 days following the occurrence of such Tax
Event, and, following such redemption, Trust Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debt Securities so redeemed shall be redeemed by the Trust at the
Redemption Price on a pro rata basis; provided, however, that if at the time
there is available to the Company or the Trust the opportunity to eliminate,
within such 90 day period, the Tax Event by taking some ministerial action,
such as filing a form or making an election or pursuing some other similar
reasonable measure that has no adverse effect on the Trust, the Company or the
holders of the Trust Securities, the Company or the Trust will pursue such
measure in lieu of redemption.
If the Junior Subordinated Debt Securities are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to cause the
Junior Subordinated Debt Securities to be listed on the NYSE or on such other
exchange, the Nasdaq National Market or other organization on which the
Preferred Securities are then listed.
After the date for any distribution of Junior Subordinated Debt Securities
upon dissolution of the Trust, (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debt
Securities to be delivered upon such distribution, and (iii) any certificates
representing Preferred Securities not held by the depositary or its nominee
will be deemed to represent Junior Subordinated Debt Securities having an
aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and accrued
and unpaid interest equal to accrued and unpaid distributions on, such
Preferred Securities until such certificates are presented to the Company or
its agent for transfer or reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed
in exchange for the Preferred Securities if a dissolution and liquidation of
the Trust were to occur. Accordingly, the Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Junior Subordinated Debt Securities
S-21
<PAGE>
that an investor may receive if a dissolution and liquidation of the Trust
were to occur, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time,
on the redemption date, provided that the Company has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption
or maturity of the Junior Subordinated Debt Securities, the Trust will
irrevocably deposit with the depositary funds sufficient to pay the applicable
Redemption Price and will give the depositary irrevocable instructions and
authority to pay the Redemption Price to the holders of the Preferred
Securities. See "Book-Entry Only Issuance--The Depository Trust Company"
below. If notice of redemption shall have been given and funds deposited as
required, then, immediately prior to the close of business on the date of such
deposit, distributions will cease to accrue and all rights of holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price but
without interest on such Redemption Price. In the event that any date fixed
for redemption of Preferred Securities is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next succeeding
day that is a Business Day (without any interest or other payment in respect
of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the Trust,
or by the Company pursuant to the Preferred Securities Guarantee,
distributions on such Preferred Securities will continue to accrue at the then
applicable rate from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata as
described below under "Book-Entry Only Issuance--The Depository Trust
Company".
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then
holders of the Preferred Securities will be entitled to receive out of the
assets of the Trust, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $25 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Junior Subordinated Debt Securities in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, the
Preferred Securities have been distributed on a pro rata basis to the holders
of the Preferred Securities in exchange for such Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive distributions
upon any such dissolution pro rata with the holders of the
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<PAGE>
Preferred Securities, except that if a Declaration Event of Default has
occurred and is continuing, the Preferred Securities shall have a preference
over the Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on
2046, the expiration of the term of the Trust, (ii) upon the
bankruptcy of the Company or the holder of the Common Securities, (iii) upon
the filing of a certificate of dissolution or its equivalent with respect to
the holder of the Common Securities or the Company, the filing of a
certificate of cancellation with respect to the Trust, or the revocation of
the charter of the holder of the Common Securities or the Company and the
expiration of 90 days after the date of revocation without a reinstatement
thereof, (iv) upon the distribution of Junior Subordinated Debt Securities
upon the occurrence of a Tax Event, (v) upon the entry of a decree of a
judicial dissolution of the holder of the Common Securities, the Company or
the Trust, or (vi) upon the redemption of all the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An Event of Default under the Junior Subordinated Indenture constitutes an
event of default under the Declaration with respect to the Trust Securities (a
"Declaration Event of Default"); provided, that pursuant to the Declaration,
the holder of the Common Securities will be deemed to have waived any
Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have
been cured, waived or otherwise eliminated. Until such Declaration Events of
Default with respect to the Preferred Securities have been so cured, waived,
or otherwise eliminated, the Property Trustee will be deemed to be acting
solely on behalf of the holders of the Preferred Securities and only the
holders of the Preferred Securities will have the right to direct the Property
Trustee with respect to certain matters under the Declaration, and therefore
the Junior Subordinated Indenture. If the Property Trustee fails to enforce
its rights under the Declaration, any holder of Preferred Securities may
institute a legal proceeding against the Company to enforce the Property
Trustee's rights under the Declaration and the Junior Subordinated Debt
Securities. Notwithstanding the foregoing, if the Company has failed to pay
interest or principal on the Junior Subordinated Debt Securities on the date
such interest or principal is otherwise payable, then a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder directly of the principal of or interest on the Junior
Subordinated Debt Securities having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Junior Subordinated Debt Securities. In
connection with such Direct Action, the Company will be subrogated to the
rights of such holder of Preferred Securities under the Declaration to the
extent of any payment made by the Company to such holder of Preferred
Securities in such Direct Action. The holders of Preferred Securities will not
be able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debt Securities unless the Property Trustee fails to do
so.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Junior Subordinated Debt Securities will have the
right under the Junior Subordinated Indenture to declare the principal of and
interest on the Junior Subordinated Debt Securities to be immediately due and
payable. The Company and the Trust are each required to file annually with the
Property Trustee an officer's certificate as to its compliance with all
conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "The Preferred Securities Guarantee--Modifications of the Preferred
Securities Guarantee; Assignment" in the accompanying Prospectus, and as
otherwise required by law and the Declaration, the holders of the Preferred
Securities will have no voting rights. In the event that the Company elects to
defer payments of interest on the Junior Subordinated Debt Securities, the
holders of the Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
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<PAGE>
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee, or direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration including the right to direct the Property Trustee, as holder of
the Junior Subordinated Debt Securities, to (i) exercise the remedies
available under the Junior Subordinated Indenture with respect to the Junior
Subordinated Debt Securities, (ii) waive any past Indenture Event of Default
that is waivable under Section 513 of the Junior Subordinated Indenture, or
(iii) exercise any right to rescind or annul a declaration that the principal
of all the Junior Subordinated Debt Securities shall be due and payable. In
addition, if the Company fails to make interest and/or principal payments on
the Junior Subordinated Debt Securities when due (taking account of any
Extension Period), a holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such holder of the principal or
interest on the Junior Subordinated Debt Securities having a principal amount
equal to the aggregate liquidation amount of the Preferred Securities of such
holder on or after the respective due dates specified in the Junior
Subordinated Debt Securities. With respect to the Property Trustee's rights
other than the right to receive payment on the Junior Subordinated Debt
Securities, if the Property Trustee fails to enforce its rights under the
Junior Subordinated Debt Securities, any record holder of Preferred Securities
may, after such holder's written request to the Property Trustee to enforce
such rights, institute a legal proceeding directly against the Company to
enforce the Property Trustee's rights under the Junior Subordinated Debt
Securities without first instituting any legal proceeding against the Property
Trustee or any other person or entity. The Property Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Indenture Trustee with respect to the Junior Subordinated Debt Securities.
Such notice shall state that such Indenture Event of Default also constitutes
a Declaration Event of Default. Except with respect to directing the time,
method and place of conducting a proceeding for a remedy, the Property Trustee
shall not take any of the actions described in clauses (i), (ii) or (iii)
above unless the Property Trustee has obtained an opinion of tax counsel to
the effect that, as a result of such action, the Trust will not fail to be
classified as a grantor trust for United States federal income tax purposes
and each holder of Trust Securities will be treated as owning an undivided
interest in the Junior Subordinated Debt Securities.
In the event the consent of the Property Trustee, as the holder of the
Junior Subordinated Debt Securities, is required under the Junior Subordinated
Indenture with respect to any amendment, modification or termination of the
Junior Subordinated Indenture, the Property Trustee shall request the
direction of the holders of the Trust Securities with respect to such
amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a majority in
liquidation amount of the Trust Securities voting together as a single class;
provided, however, that where a consent under the Junior Subordinated
Indenture would require the consent of all the holders, the Property Trustee
may only give such consent at the direction of all the holders of the Trust
Securities outstanding. The Property Trustee shall be under no obligation to
take any such action in accordance with the directions of the holders of the
Trust Securities unless the Property Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United States federal income
tax the Trust will not be classified as other than a grantor trust and each
holder of Trust Securities will be treated as owning an undivided interest in
the Junior Subordinated Debt Securities.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth the following information:
(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Junior Subordinated Debt Securities in accordance with the Declaration.
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Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, the Company shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "Description of the Preferred
Securities--Book-Entry Only Issuance--The Depository Trust Company".
Holders of the Preferred Securities will have no rights to appoint or remove
the ReliaStar Trustees, who may be appointed, removed or replaced solely by
the Company as the holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of the
Regular Trustees (and in certain circumstances the Property Trustee), provided
that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way
of amendment to the Declaration or otherwise or (ii) the dissolution, winding-
up or termination of the Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected
thereby; provided, that a reduction in the principal amount or the
distribution rate, or a change in the payment dates or maturity, of the
Preferred Securities shall not be permitted without the consent of each holder
of Preferred Securities. If any amendment or proposal referred to in clause
(i) above would adversely affect only the Preferred Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the Investment Company Act
of 1940, as amended (the "1940 Act").
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. The Trust may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) such successor entity either
(x) expressly assumes all of the obligations of the Trust under the Trust
Securities or (y) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Trust
Securities rank with respect to distributions and payments upon redemption,
liquidation and otherwise, (ii) the Company expressly acknowledges a trustee
of such successor entity possessing the same powers and duties as the Property
Trustee as the holder of the Junior Subordinated Debt Securities, (iii) the
Preferred Securities or any Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange, the Nasdaq National Market or other organization on which
the Preferred Securities are listed or admitted for trading, (iv) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), (v) such
successor entity has a purpose identical to that of the
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Trust, (vi) prior to such merger, consolidation, amalgamation or replacement,
the Company has received an opinion of a nationally recognized independent
counsel to the Trust experienced in such matters to the effect that (A) such
merger, consolidation, amalgamation or replacement does not adversely affect
the rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), and (B)
following such merger, consolidation, amalgamation or replacement, neither the
Trust nor such successor entity will be required to register as an investment
company under the 1940 Act, and (vii) the Company guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Preferred Securities Guarantee. Notwithstanding the foregoing,
the Trust shall not, except with the consent of holders of 100% in liquidation
amount of the Trust Securities, consolidate, amalgamate, merge with or into,
or be replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause the Trust or the Successor
Entity to be classified as other than a grantor trust for United States
federal income tax purposes or any holder of Trust Securities not to be
treated as owning an undivided interest in the Junior Subordinated Debt
Securities.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities
certificates, representing the total aggregate number of Preferred Securities,
will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the NYSE, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others, such as securities
brokers and dealers, banks and trust companies that clear transactions through
or maintain a direct or indirect custodial relationship with a Direct
Participant either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
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To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Preferred Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Preferred Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy). The Company and the Trust believe that the arrangements
among DTC, Direct and Indirect Participants, and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in the
Trust.
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name", and such payments will be the responsibility of such
Participant and not of DTC, the Trust or the Company, subject to any statutory
or regulatory requirements to the contrary that may be in effect from time to
time. Payment of distributions to DTC is the responsibility of the Trust,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to
be printed and delivered. Additionally, the Regular Trustees (with the consent
of the Company) may decide to discontinue use of the system of book-entry
transfers through DTC (or any successor depositary) with respect to the
Preferred Securities. In that event, certificates for the Preferred Securities
will be printed and delivered.
PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions would apply:
The Property Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time.
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Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care
as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The holders of Preferred Securities will not be
required to offer such indemnity in the event such holders, by exercising
their voting rights, direct the Property Trustee to take any action it is
empowered to take under the Declaration following a Declaration Event of
Default. The Property Trustee also serves as trustee under the Preferred
Securities Guarantee.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an
"investment company" under the 1940 Act or characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Junior Subordinated
Debt Securities will be treated as indebtedness of the Company for United
States federal income tax purposes. In this connection, the Company and the
Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the Declaration or the certificate of incorporation of the
Company, that each of the Company and the Regular Trustees determines in their
discretion to be necessary or desirable to achieve such end, as long as such
action does not materially and adversely affect the interests of the holders
of the Preferred Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Junior
Subordinated Debt Securities in which the Trust will invest the proceeds from
the issuance and sale of the Trust Securities. This description supplements
the description of the general terms and provisions of Junior Subordinated
Debt Securities set forth in the accompanying Prospectus under the caption
"Description of Debt Securities". The following description does not purport
to be complete and is subject to, and is qualified in its entirety by
reference to, the description in the accompanying Prospectus and the Junior
Subordinated Indenture, dated as of March 29, 1996 between the Company and
Wilmington Trust Company, as trustee (the "Indenture Trustee"), as
supplemented by the First Supplemental Indenture, dated as of March 29, 1996
and the Second Supplemental Indenture dated as of , 1997 (as so
supplemented, the "Junior Subordinated Indenture"), the forms of which are
filed as Exhibits to the Registration Statement of which this Prospectus
Supplement and the accompanying Prospectus form a part. Certain capitalized
terms used herein are defined in the Junior Subordinated Indenture.
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Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Tax Event, Junior Subordinated Debt Securities may be
distributed to the holders of the Trust Securities in Liquidation of the
Trust. See "Description of the Preferred Securities--Tax Event Redemption or
Distribution".
If the Junior Subordinated Debt Securities are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to have the
Junior Subordinated Debt Securities listed on the NYSE or on such other
exchange, the Nasdaq National Market or other organization on which the
Preferred Securities are then listed.
GENERAL
The Junior Subordinated Debt Securities will be issued as unsecured
subordinated debt under the Junior Subordinated Indenture. The Junior
Subordinated Debt Securities will be limited in aggregate principal amount to
approximately $ million, such amount being the sum of the aggregate
stated liquidation amount of the Preferred Securities and the capital
contributed by the Company in exchange for the Common Securities (the "Company
Payment").
The Junior Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debt
Securities will mature and become due and payable, together with any accrued
and unpaid interest thereon including Compound Interest (as defined herein)
and Additional Interest (as defined herein), if any, on , 2027. The
stated maturity date may be extended at any time by the Company to any date
not later than , 2046; provided, that at the time such election is made
and at the time of extension (i) the Company is not in bankruptcy, otherwise
insolvent or in liquidation, (ii) the Company is not in default in the payment
of any interest or principal on the Junior Subordinated Debt Securities, and
(iii) in the case of Junior Subordinated Debt Securities held by the Trust,
the Trust is not in arrears on payments of distributions on the Preferred
Securities and no deferred distributions are accumulated. In the event the
Company elects to extend the stated maturity of the Junior Subordinated Debt
Securities, it shall give notice to the Indenture Trustee, and the Indenture
Trustee shall give notice of such extension to the holders of the Junior
Subordinated Debt Securities not more than 90 and nor less than 30 days prior
to the effectiveness thereof.
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in the Trust,
such Junior Subordinated Debt Securities will initially be issued as a Global
Security. As described herein, under certain limited circumstances, Junior
Subordinated Debt Securities may be issued in certificated form in exchange
for a Global Security. See "Description of the Junior Subordinated Debt
Securities--Book-Entry and Settlement". In the event that Junior Subordinated
Debt Securities are issued in certificated form, such Junior Subordinated Debt
Securities will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below. Payments on
Junior Subordinated Debt Securities issued as a Global Security will be made
to DTC, a successor depositary or, in the event that no depositary is used, to
a Paying Agent for the Junior Subordinated Debt Securities. In the event
Junior Subordinated Debt Securities are issued in certificated form, principal
and interest will be payable, the transfer of the Junior Subordinated Debt
Securities will be registrable and Junior Subordinated Debt Securities will be
exchangeable for Junior Subordinated Debt Securities of other denominations of
a like aggregate principal amount at the corporate trust office of the
Indenture Trustee in Wilmington, Delaware; provided, that at the option of the
Company payment of interest may be made by check mailed to the address of the
holder entitled thereto or by wire transfer to an account appropriately
designated by the holder entitled thereto. Notwithstanding the foregoing, so
long as the holder of any Junior Subordinated Debt Securities is the Property
Trustee, the payment of principal and interest on the Junior Subordinated Debt
Securities held by the Property Trustee will be made at such place and to such
account as may be designated by the Property Trustee.
The Junior Subordinated Indenture does not contain provisions that afford
the Junior Subordinated Debt Securities protection in the event of a highly
leveraged transaction involving the Company.
SUBORDINATION
The Junior Subordinated Indenture provides that the Junior Subordinated Debt
Securities are subordinate and junior in right of payment to all Senior Debt
of the Company. "Senior Debt" means all Debt of the Company except for Trust
Related Securities. "Trust Related Securities" are obligations evidenced by
debt securities (and guarantees in respect of those debt securities) initially
issued to any trust, or a trustee of a trust, partnership or other entity
affiliated with the Company that is, directly or indirectly, a financing
vehicle of the Company in connection with the issuance by such entity of
preferred securities or other similar securities. The
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Junior Subordinated Debt Securities will rank pari passu with such Trust
Related Securities, if any. "Debt" has the meaning set forth under the heading
"Description of Debt Securities--Subordination" in the accompanying
Prospectus. In the event that the Company shall default in the payment of any
principal, premium, if any, or interest, if any, on any Senior Debt when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration of acceleration or otherwise, then, unless and
until such default shall have been cured or waived or shall have ceased to
exist, no direct or indirect payment (in cash, property, securities, by set-
off or otherwise) may be made or agreed to be made for principal, premium, if
any, or interest, if any, on the Junior Subordinated Debt Securities, or in
respect of any redemption, repayment, retirement, purchase or other
acquisition of any of the Junior Subordinated Debt Securities. In the event of
(i) any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to the Company,
its creditors or its property, (ii) any proceeding for the liquidation,
dissolution or other winding up of the Company, voluntary or involuntary,
whether or not involving insolvency or bankruptcy proceedings, (iii) any
assignment by the Company for the benefit of creditors, or (iv) any other
marshalling of the assets of the Company, all Senior Debt (including any
interest thereon accruing after the commencement of any such proceedings) must
first be paid in full before any payment or distribution, whether in cash,
securities or other property, may be made on account of the principal of or
interest on the Junior Subordinated Debt Securities. If any payment or
distribution on account of the principal of or interest on the Junior
Subordinated Debt Securities of any character or any security, whether in
cash, securities or other property (other than securities of the Company or
any other company provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in the
subordination provisions with respect to the Junior Subordinated Debt
Securities, to the payment of all Senior Debt at the time outstanding and to
any securities issued in respect thereof under any such plan of reorganization
or readjustment) shall be received by any Holder of the Junior Subordinated
Debt Securities in contravention of any of the terms of the Junior
Subordinated Indenture and before all the Senior Debt has been paid in full,
such payment or distribution or security shall be received in trust for the
benefit of, and shall be paid over or delivered and transferred to, the
holders of the Senior Debt at the time outstanding in accordance with the
priorities then existing among such holders for application to the payment of
all Senior Debt remaining unpaid to the extent necessary to pay all such
Senior Debt in full.
As of March 31, 1997, the Company had approximately $449.1 million of Senior
Debt and $125.0 million of Trust Related Securities outstanding.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Junior Subordinated Debt
Securities, in whole or in part, from time to time, on or after
2002, or at any time in certain circumstances upon the occurrence
of a Tax Event as described under "Description of the Preferred Securities--
Tax Event Redemption or Distribution", upon not less than 30 nor more than 60
days notice, at a redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest, including Additional Interest
(as defined herein), if any, to the redemption date. If a partial redemption
of the Preferred Securities resulting from a partial redemption of the Junior
Subordinated Debt Securities would result in the delisting of the Preferred
Securities, the Company may only redeem the Junior Subordinated Debt
Securities in whole.
INTEREST
Each Junior Subordinated Debt Security shall bear interest at the rate of
% per annum from the original date of issuance, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year (each
an "Interest Payment Date"), commencing , 1997, to the person in
whose name such Junior Subordinated Debt Security is registered, subject to
certain exceptions, at the close of business on the Business Day next
preceding such Interest Payment Date. In the event the Junior Subordinated
Debt Securities are not represented by one or more Global Securities, the
Company shall have the right to select record dates, which shall be more than
one Business Day prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the Junior
Subordinated Debt Securities is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is
a Business Day, except that, if such Business Day is in the next succeeding
calendar year, then such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date.
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PROPOSED TAX LEGISLATION
On February 6, 1997, the Clinton Administration released its budget proposal
for fiscal year 1998. The proposal contains certain tax law changes that, if
enacted, would prohibit an issuer from deducting interest payments or original
issue discount on an instrument that has a maximum weighted average maturity
of more than 40 years. Under the proposal, for purposes of determining the
term of an instrument, any right to extend would be treated as exercised. The
Administration's proposal, if enacted, would also treat a corporate issuer
that files annual financial statements with the Commission as having
characterized an instrument as equity for purposes of Section 385(c) of the
Code, if the instrument (i) has a maximum term exceeding 15 years and (ii) is
not shown as indebtedness on the applicable balance sheet of the issuer or, in
the case of indebtedness issued to a related party that issues a related
instrument, such related instrument is not reflected as indebtedness on the
applicable consolidated balance sheet. Under Section 385(c), the
characterization by the issuer of an instrument as equity is binding on the
issuer and all holders of the instrument unless a holder discloses on his tax
return that he is treating such instrument in a manner inconsistent with the
issuer's characterization. The Administration's proposal specifies that the
changes would be effective for instruments issued on or after the date of
first Congressional committee action.
There can be no assurance that legislation affecting the Company's ability
to deduct interest paid on the Junior Subordinated Debt Securities or the
characterization of the Junior Subordinated Debt Securities for U.S. federal
income tax purposes, including legislation similar to the proposals described
above, will not be enacted in the future or that any such legislation would
not be effective retroactively. In the event tax law changes are enacted and
apply retroactively to the Junior Subordinated Debt Securities, such changes
could give rise to a Tax Event, which would, in certain circumstances, require
the dissolution of the Trust or permit the Company to redeem the Junior
Subordinated Debt Securities within 90 days of the date thereof. See "Risk
Factors--Proposed Changes to U.S. Tax Laws; Possible Tax Event", "--Tax Event
Redemption or Distribution", "Description of the Preferred Securities--Tax
Event Redemption or Distribution", "Description of the Junior Subordinated
Debt Securities--Proposed Tax Legislation", "United States Federal Income
Taxation--Proposed Tax Legislation".
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, during
the term of the Junior Subordinated Debt Securities to defer payments of
interest by extending the interest payment period for a period not exceeding
20 consecutive quarters, at the end of which Extension Period the Company
shall pay all interest then accrued and unpaid (including any Additional
Interest) together with interest thereon compounded quarterly at the rate
specified for the Junior Subordinated Debt Securities to the extent permitted
by applicable law ("Compound Interest"); provided, that during any such
Extension Period, (a) the Company shall not declare or pay dividends on, make
any distribution with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to any of its capital stock, and (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by the Company
that rank pari passu with or junior to the Junior Subordinated Debt
Securities, provided however, the Company may declare and pay a stock dividend
where the dividend is the same stock as that on which the dividend is being
paid. Prior to the termination of any such Extension Period, the Company may
further defer payments of interest by further extending the interest payment
period; provided, however, that, such Extension Period, including all such
previous and further extensions, may not exceed 20 consecutive quarters or
extend beyond the maturity of the Junior Subordinated Debt Securities. Upon
the termination of any Extension Period and the payment of all amounts then
due, the Company may commence a new Extension Period, subject to the terms set
forth in this section. No interest during an Extension Period, except at the
end thereof, shall be due and payable. The Company has no present intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Junior Subordinated Debt Securities. If the Property
Trustee shall be the sole holder of the Junior Subordinated Debt Securities,
the Company shall give the Regular Trustees and the Property Trustee notice of
its selection of such Extension Period one Business Day prior to the earlier
of (i) the date distributions on the Preferred Securities are payable or (ii)
the date the Regular Trustees are required to give notice to the NYSE (or
other applicable self-regulatory organization) or to holders of the Preferred
Securities of the record
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date or the date such distribution is payable. The Regular Trustees shall give
notice of the Company's selection of such Extension Period to the holders of
the Preferred Securities. If the Property Trustee shall not be the sole holder
of the Junior Subordinated Debt Securities, the Company shall give the holders
of the Junior Subordinated Debt Securities notice of its selection of such
Extension Period ten Business Days prior to the earlier of (i) the Interest
Payment Date or (ii) the date upon which the Company is required to give
notice to the NYSE (or other applicable self-regulatory organization) or to
holders of the Junior Subordinated Debt Securities of the record or payment
date of such related interest payment.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, the Company will pay as additional interest ("Additional
Interest") such additional amounts as shall be required so that the net
amounts received and retained by the Trust after paying any such taxes,
duties, assessments or other governmental charges will be not less than the
amounts the Trust would have received had no such taxes, duties, assessments
or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
In addition to the Events of Default described in the Prospectus, an Event
of Default for purposes of the Junior Subordinated Debt Securities shall
include the voluntary or involuntary dissolution or winding up of the business
of the Trust or other termination of the existence of the Trust, other than in
connection with (i) the distribution of the Junior Subordinated Debt
Securities to holders of the Trust Securities in liquidation of their
interests in the Trust, (ii) the redemption of all of the outstanding Trust
Securities, or (iii) certain mergers, consolidations or amalgamations, each as
permitted by the Declaration.
If any Event of Default shall occur and be continuing, the Property Trustee,
as the holder of the Junior Subordinated Debt Securities, will have the right
to declare the principal of and the interest on the Junior Subordinated Debt
Securities (including any Compounded Interest and Additional Interest, if any)
and any other amounts payable under the Junior Subordinated Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debt Securities. See "Description of Debt
Securities--Events of Default" in the accompanying Prospectus for a
description of the Events of Default. An Event of Default also constitutes a
Declaration Event of Default. The holders of Preferred Securities in certain
circumstances have the right to direct the Property Trustee to exercise its
rights as the holder of the Junior Subordinated Debt Securities. See
"Description of the Preferred Securities--Declaration Events of Default" and
"--Voting Rights".
Notwithstanding the foregoing, if the Company has failed to pay interest or
principal on the Junior Subordinated Debt Securities on the date such interest
or principal is otherwise payable, then a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such holder
directly of the principal of or interest on the Junior Subordinated Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Junior Subordinated Debt Securities. The holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debt Securities unless the Property
Trustee fails to do so.
ADDITIONAL COVENANTS
The Company has covenanted, with respect to the Junior Subordinated Debt
Securities, that if (i) there has occurred any event that would constitute an
Event of Default, (ii) the Company is in default with respect to its payment
of any obligations under the Preferred Securities Guarantee or Common
Securities Guarantee relating to the Trust, or (iii) the Company has given
notice of its election to defer payments of interest on the Junior
Subordinated Debt Securities by extending the interest payment period as
provided in the Indenture and such period, or any extension thereof, shall be
continuing, then (A) the Company will not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to
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any of its capital stock, and (B) the Company will not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank pari passu with or junior to
the Junior Subordinated Debt Securities; provided, however, that restriction
(A) above will not apply to any stock dividends paid by the Company where the
dividend stock is the same as that on which the dividend is being paid.
The Company has also covenanted, with respect to the Junior Subordinated
Debt Securities, that for so long as the Preferred Securities and Common
Securities remain outstanding, the Company will (i) maintain 100% direct or
indirect ownership of the Common Securities, provided, however, that any
permitted successor of the Company under the Junior Subordinated Indenture may
succeed to the Company's ownership of the Common Securities, (ii) use its
reasonable efforts to cause the Trust (a) to remain a business trust, except
in connection with a distribution of the Junior Subordinated Debt Securities,
the redemption of all of the Preferred Securities and Common Securities of the
Trust or certain mergers, consolidations or amalgamations, each as permitted
by the Declaration, and (b) to otherwise continue not to be treated as an
association taxable as a corporation or partnership for United States federal
income tax purposes, and (iii) to use its reasonable efforts to cause each
holder of Preferred Securities and Common Securities to be treated as owning
an individual beneficial interest in the Junior Subordinated Debt Securities.
LIMITATION ON WAIVERS AND CONSENTS UNDER THE JUNIOR SUBORDINATED INDENTURE
Notwithstanding anything to the contrary contained in the Junior
Subordinated Indenture, if the Junior Subordinated Debt Securities are held by
the Trust or a ReliaStar Trustee, (i) a waiver of a past default or any
modification to a waiver of a past default under the Junior Subordinated
Indenture will not be effective until the holders of a majority in liquidation
preference of Trust Securities have consented to such waiver or modification;
provided, however, that if the consent of the Holder (as defined in the Junior
Subordinated Indenture) of each Junior Subordinated Debt Security Outstanding
is required in connection with such waiver or modification, such waiver or
modification shall not be effective until each holder of the Trust Securities
shall have consented to such waiver or modification, and (ii) an indenture
supplemental to the Junior Subordinated Indenture will not be effective until
the holders of a majority in liquidation preference of Trust Securities have
consented to such supplemental indenture; provided, however, that if the
consent of the Holder of each Junior Subordinated Debt Security Outstanding is
required in connection with a supplemental indenture, such supplemental
indenture shall not be effective until each holder of the Trust Securities
shall have consented to such supplemental indenture.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence of a Tax Event, the Junior Subordinated Debt
Securities will be issued in the form of one or more global certificates (each
a "Global Security") registered in the name of a depositary (the "depositary")
or its nominee. Except under the limited circumstances described below, Junior
Subordinated Debt Securities represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior Subordinated
Debt Securities in definitive form. The Global Securities described above may
not be transferred except by the depositary to a nominee of the depositary or
by a nominee of the depositary to the depositary or another nominee of the
depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debt Securities in definitive form and will not be considered the
Holders thereof for any purpose under the Junior Subordinated Indenture, and
no Global Security representing Junior Subordinated Debt Securities shall be
exchangeable, except for another Global Security of
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<PAGE>
like denomination and tenor to be registered in the name of the depositary or
its nominee or to a successor depositary or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the depositary or, if such
person is not a Direct Participant, on the procedures of the Direct
Participant through which such person owns its interest to exercise any rights
of a holder under the Junior Subordinated Indenture.
THE DEPOSITARY
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in the Trust,
DTC will act as securities depositary for the Junior Subordinated Debt
Securities. For a description of DTC and the specific terms of the depositary
arrangements, see "Description of the Preferred Securities--Book-Entry Only
Issuance--The Depository Trust Company". As of the date of this Prospectus
Supplement, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depositary in the
event DTC or such successor depositary is unable or unwilling to continue as
the depositary for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security for such Junior Subordinated Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Junior Subordinated Debt
Securities registered in the names of persons other than the depositary or its
nominee only if (i) the depositary notifies the Company that it is unwilling
or unable to continue as the depositary for such Global Security and no
successor depositary shall have been appointed, (ii) the depositary, at any
time, ceases to be a clearing agency registered under the Exchange Act at
which time the depositary is required to be so registered to act as such
depositary and no successor depositary shall have been appointed, (iii) the
Company, in its sole discretion, determines that such Global Security shall be
so exchangeable or (iv) there shall have occurred an Event of Default with
respect to such Junior Subordinated Debt Securities. Any Global Security that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
Junior Subordinated Debt Securities registered in such names as the depositary
shall direct. It is expected that such instructions will be based upon
directions received by the depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
MISCELLANEOUS
The Junior Subordinated Indenture will provide that the Company will pay all
fees and expenses related to (i) the offering of the Trust Securities and the
Junior Subordinated Debt Securities, (ii) the organization, maintenance and
dissolution of the Trust, (iii) the retention of the ReliaStar Trustees and
(iv) the enforcement by the Property Trustee of the rights of the holders of
the Preferred Securities. The payment of such fees and expenses will be fully
and unconditionally guaranteed by the Company.
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<PAGE>
EFFECT OF OBLIGATIONS UNDER THE JUNIOR SUBORDINATED
DEBT SECURITIES AND THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets
of the Trust, to invest the proceeds from such issuance and sale in the Junior
Subordinated Debt Securities and to engage in only those activities necessary
or incidental thereto.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Junior Subordinated
Debt Securities will be equal to the sum of the aggregate stated liquidation
amount of the Trust Securities; (ii) the interest rate and the interest and
other payment dates on the Junior Subordinated Debt Securities will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) the Company shall pay all, and the Trust shall not be
obligated to pay, directly or indirectly, any, costs and expenses of the
Trust; and (iv) the Declaration further provides that the ReliaStar Trustees
shall not cause or permit the Trust to, among other things, engage in any
activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by the Company as and to the extent set forth
under "The Preferred Securities Guarantee" in the accompanying Prospectus. If
the Company does not make interest payments on the Junior Subordinated Debt
Securities purchased by the Trust, it is expected that the Trust will not have
sufficient funds to pay distributions on the Preferred Securities. The
Preferred Securities Guarantee does not apply to any payment of distributions
unless and until the Trust has sufficient funds for the payment of such
distributions. The Preferred Securities Guarantee is a guarantee from the time
of its issuance, but will not apply to the payment of distributions and other
payments on the Preferred Securities when the Trust does not have sufficient
funds to make such distributions or other payments.
If the Company fails to make interest and/or principal payments on the
Junior Subordinated Debt Securities when due (taking account of any Extension
Period) a record holder of Preferred Securities may institute a proceeding
directly against the Company for enforcement of payment to the holder of the
principal of or interest on the Junior Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due dates specified in
the Junior Subordinated Debt Securities. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of
Preferred Securities under the Declaration to the extent of any payment made
by the Company to such holder of Preferred Securities in such Direct Action.
If a Declaration Event of Default occurs and is continuing, the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using
the procedures described in "Description of the Preferred Securities--Voting
Rights", may direct the Property Trustee to enforce its rights under the
Junior Subordinated Debt Securities. If, with respect to other than principal
and interest payments on the Junior Subordinated Debt Securities, the Property
Trustee fails to enforce its rights under the Junior Subordinated Debt
Securities, a holder of Preferred Securities may institute a legal proceeding
directly against any person to enforce such holder's rights under the Junior
Subordinated Debt Securities without first instituting any legal proceeding
against the Property Trustee or any other person or entity.
If the Company fails to make payments to holders of Preferred Securities
under the Preferred Securities Guarantee, any such holder of the Preferred
Securities may institute a legal proceeding directly against the Company to
enforce the Company's obligation to make such payments.
The Company's obligations under the Declaration, the Preferred Securities
Guarantee, the Junior Subordinated Debt Securities and the Junior Subordinated
Indenture, taken together, constitute a full and unconditional guarantee by
the Company of payments due on the Preferred Securities. See "The Preferred
Securities Guarantee" in the accompanying Prospectus.
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<PAGE>
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of
Preferred Securities. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets by holders who purchase the
Preferred Securities upon original issuance ("Initial Holders"). It does not
deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that
will hold the Preferred Securities as a position in a "straddle", as part of a
"synthetic security" or "hedge", as part of a "conversion transaction" or
other integrated investment, or as other than a capital asset. This summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. Dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Preferred Securities. Further, it
does not include any description of any alternative minimum tax consequences
or the tax laws of any state or local government or of any foreign government
that may be applicable to the holders of Preferred Securities. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly
on a retroactive basis.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
In connection with the issuance of the Junior Subordinated Debt Securities,
Faegre & Benson LLP, counsel to the Company and the Trust, will render its
opinion generally to the effect that, although not entirely free from doubt,
under then current law and assuming full compliance with the terms of the
Junior Subordinated Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, the Junior
Subordinated Debt Securities held by the Trust will be classified for United
States federal income tax purposes as indebtedness of the Company.
PROPOSED TAX LEGISLATION
On February 6, 1997, the Clinton Administration released its budget proposal
for fiscal year 1998. The proposal contains certain tax law changes that, if
enacted, would prohibit an issuer from deducting interest payments or original
issue discount on an instrument that has a maximum weighted average maturity
of more than 40 years. Under the proposal, for purposes of determining the
term of an instrument, any right to extend would be treated as exercised. The
Administration's proposal, if enacted, would also treat a corporate issuer
that files annual financial statements with the Commission as having
characterized an instrument as equity for purposes of Section 385(c) of the
Code if the instrument (i) has a maximum term exceeding 15 years and (ii) is
not shown as indebtedness on the applicable balance sheet of the issuer or, in
the case of indebtedness issued to a related party that issues a related
instrument, such related instrument is not reflected as indebtedness on the
applicable consolidated balance sheet. Under Section 385(c), the
characterization by the issuer of an instrument as equity is binding on the
issuer and all holders of the instrument unless a holder discloses on his tax
return that he is treating such instrument in a manner inconsistent with the
issuer's characterization. The Administration's proposal specifies that the
changes would be effective for instruments issued on or after the date of
first Congressional committee action.
There can be no assurance that legislation affecting the Company's ability
to deduct interest paid on the Junior Subordinated Debt Securities or the
characterization of the Junior Subordinated Debt Securities for U.S. federal
income tax purposes, including legislation similar to the proposals described
above, will not be enacted in the future or that any such legislation would
not be effective retroactively. In the event tax law changes are enacted and
apply retroactively to the Junior Subordinated Debt Securities, such changes
could give rise to a Tax Event, which would, in certain circumstances, require
the dissolution of the Trust or permit the Company to redeem the Junior
Subordinated Debt Securities within 90 days of the date thereof. See "Risk
Factors--Proposed Changes to U.S. Tax Laws; Possible Tax Event", "--Tax Event
Redemption or Distribution" and "Description of the Preferred Securities--Tax
Event Redemption or Distribution", "Description of the Junior Subordinated
Debt Securities--Interest", and "--Proposed Tax Legislation".
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<PAGE>
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Faegre & Benson
LLP will render its opinion generally to the effect that, under then current
law and assuming full compliance with the terms of the Declaration and the
Junior Subordinated Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, the Trust will be
classified for United States federal income tax purposes as a grantor trust
and not as an association taxable as a corporation. Accordingly, for United
States federal income tax purposes, each holder of Preferred Securities
generally will be considered the owner of an undivided beneficial interest in
the Junior Subordinated Debt Securities, and each holder will be required to
include in its gross income any OID accrued with respect to its allocable
share of the Junior Subordinated Debt Securities.
ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Junior
Subordinated Debt Securities, to defer payments of interest by extending
interest payment periods for up to 20 quarters, all of the stated interest
payments on the Junior Subordinated Debt Securities will be treated as
"original issue discount". Holders of debt instruments issued with OID must
include that discount in income on an economic accrual basis before the
receipt of cash attributable to the interest, regardless of their method of
tax accounting. Generally, all of a holder's taxable interest income with
respect to the Junior Subordinated Debt Securities will be accounted for as
OID, and actual distributions of stated interest will not be separately
reported as taxable income. The amount of OID that accrues in any month will
approximately equal the amount of the interest that accrues on the Junior
Subordinated Debt Securities in that month at the stated interest rate. In the
event that the interest payment period is extended, holders will continue to
accrue OID approximately equal to the amount of the interest payment due at
the end of the extended interest payment period on an economic accrual basis
over the length of the extended interest period.
Because income on the Preferred Securities will constitute OID, corporate
holders of Preferred Securities will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Preferred Securities other than Initial Holders may be considered
to have acquired their undivided interests in the Junior Subordinated Debt
Securities with market discount or acquisition premium as such phrases are
defined for United States federal income tax purposes. Such holders are
advised to consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF THE
TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Tax Event Redemption or Distribution", Junior
Subordinated Debt Securities may be distributed to holders in exchange for the
Preferred Securities and in liquidation of the Trust. Under current law, such
a distribution, for United States federal income tax purposes, would be
treated as a non-taxable event to each holder, and each holder would receive
an aggregate tax basis in the Junior Subordinated Debt Securities equal to
such holder's aggregate tax basis in its Preferred Securities. A holder's
holding period in the Junior Subordinated Debt Securities so received in
liquidation of the Trust would include the period during which the Preferred
Securities were held by such holder.
Under certain circumstances described under the caption "Description of the
Preferred Securities-- Mandatory Redemption" and "--Tax Event Redemption or
Distribution", the Junior Subordinated Debt Securities may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption
of their Preferred Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition of
the redeemed Preferred Securities, and a holder could recognize gain or loss
as if it sold such redeemed Preferred Securities for cash. See "Sales of
Preferred Securities" below.
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<PAGE>
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities
and the amount realized on the sale of such Preferred Securities. A holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price increased by OID previously includible in such holder's gross
income to the date of disposition and decreased by payments received on the
Preferred Securities. Such gain or loss generally will be a capital gain or
loss and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Junior Subordinated Debt Securities. A holder who disposes of his
Preferred Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the Junior
Subordinated Debt Securities through the date of disposition in income as
ordinary income, and to add such amount to his adjusted tax basis in his pro
rata share of the underlying Junior Subordinated Debt Securities deemed
disposed of. To the extent the selling price is less than the holder's
adjusted tax basis (which will include, in the form of OID, all accrued but
unpaid interest) a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership, or a non-resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i) payments by the
Trust or any of its paying agents to any holder of a Preferred Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the
Preferred Security does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (b) the beneficial owner of the Preferred Security is not a controlled
foreign corporation that is related to the Company through stock ownership,
and (c) either (A) the beneficial owner of the Preferred Security certifies to
the Trust or its agent, under penalties of perjury, that it is not a United
States holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Preferred Security in such capacity, certifies to
the Trust or its agent, under penalties of perjury, that such statement has
been received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent with
a copy thereof; and (ii) a United States Alien Holder of a Preferred Security
will not be subject to United States federal withholding tax on any gain
realized upon the sale or other disposition of a Preferred Security.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to holders on Forms 1099, which forms should be
mailed to holders of Preferred Securities by January 31 following each
calendar year.
The Trust will be obligated to report annually to Cede & Co., as holder of
record of the Preferred Securities, the OID related to the Junior Subordinated
Debt Securities that accrued during the year. The Trust currently intends to
report such information on Form 1099 prior to January 31 following each
calendar year even though the Trust is not legally required to report to
record holders until April 15 following each calendar year. The Underwriters
have indicated to the Trust that, to the extent that they hold Preferred
Securities as nominees for beneficial holders, they currently expect to report
to such beneficial holders on Forms 1099 by January 31 following each calendar
year. Under current law, holders of Preferred Securities who hold as nominees
for beneficial holders will not have any obligation to report information
regarding the beneficial holders to the Trust. The Trust, moreover, will not
have any obligation to report to beneficial holders who are not also record
holders. Thus, beneficial holders of Preferred Securities who hold their
Preferred Securities through the Underwriters will receive Forms 1099
reflecting the income on their Preferred Securities from such nominee holders
rather than the Trust.
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<PAGE>
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided
the required information is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named herein, and each of the Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Dain Bosworth Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, The Robinson-Humphrey
Company, Inc. and Smith Barney Inc. (the "Representatives"), has severally
agreed to purchase the number of Preferred Securities set forth opposite its
name below. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
the Preferred Securities offered hereby if any of the Preferred Securities are
purchased. In the event of default by an Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitments of
the nondefaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
Dain Bosworth Incorporated.....................................
Donaldson, Lufkin & Jenrette Securities Corporation............
The Robinson-Humphrey Company, Inc.............................
Smith Barney Inc...............................................
---------
Total..................................................... 5,000,000
</TABLE>
The Underwriters have advised the Trust that they propose initially to offer
the Preferred Securities to the public at the public offering price set forth
on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of $. per Preferred Security.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $. per Preferred Security to certain other dealers. After the
initial public offering, the public offering price, concession and discount
may be changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debt Securities of
the Company, the Underwriting Agreement provides that the Company will agree
to pay as compensation ("Underwriters' Compensation") for the Underwriters'
arranging the investment therein of such proceeds, an amount of $. per
Preferred Security (or $ in the aggregate) for the accounts of the
several Underwriters.
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During a period of 90 days from the date of this Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of
the Representatives, directly or indirectly, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, any Preferred Securities, any
security convertible into or exchangeable into or exercisable for Preferred
Securities or any equity securities substantially similar to the Preferred
Securities (except for the Junior Subordinated Debt Securities and the
Preferred Securities offered hereby).
The Preferred Securities have been approved for listing, subject to notice
of issuance, on the NYSE. Trading of the Preferred Securities on the NYSE is
expected to commence within a 30-day period after the initial delivery of the
Preferred Securities. The Representatives have advised the Trust that they
intend to make a market in the Preferred Securities prior to the commencement
of trading on the NYSE. The Representatives have no obligation to make a
market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
In connection with this offering and in compliance with applicable law and
industry practice, the Underwriters may overallot or effect transactions which
stabilize, maintain or otherwise affect the market price of the Preferred
Securities at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids. A stabilizing bid means the
placing of any bid, or the effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of a security.
In general, purchases of a security for the purpose of stabilization could
cause the price of the security to be higher than it might be in the absence
of such purchases.
Neither the Company, the Trust nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Preferred
Securities. In addition, neither the Company, the Trust nor any of the
Underwriters makes any representation that the Underwriters will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Company and the Trust have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities
Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Company and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Trust by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Trust. The
validity of the Junior Subordinated Debt Securities, the Preferred Securities
Guarantee and certain matters relating thereto, including United States
federal income tax matters, will be passed upon on behalf of the Company and
the Trust by Faegre & Benson LLP, Minneapolis, Minnesota. Certain legal
matters will be passed upon for the Underwriters by Sidley & Austin, Chicago,
Illinois.
S-40
<PAGE>
PROSPECTUS
$400,000,000
RELIASTAR FINANCIAL CORP.
DEBT SECURITIES AND OTHER SECURITIES
----------------
RELIASTAR FINANCING II
RELIASTAR FINANCING III
RELIASTAR FINANCING IV
RELIASTAR FINANCING V
PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED BY
RELIASTAR FINANCIAL CORP.
----------------
ReliaStar Financial Corp., a Delaware corporation (the "Company"), may
offer, from time to time, (i) its unsecured debt securities consisting of
debentures or notes, which may be senior ("Senior Debt Securities"), senior
subordinated ("Senior Subordinated Debt Securities") or junior subordinated
("Junior Subordinated Debt Securities," and together with the Senior
Subordinated Debt Securities, "Subordinated Debt Securities," and the
Subordinated Debt Securities together with the Senior Debt Securities, "Debt
Securities"); (ii) warrants to purchase Debt Securities ("Debt Warrants");
(iii) shares of its preferred stock, without par value ("Preferred
(continued on the following page)
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
The Company's Common Stock is traded on the New York Stock Exchange ("NYSE")
under the symbol "RLR."
The Offered Securities (as defined herein) may be offered directly, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution." If any agents or underwriters are involved in the
sale of any Offered Securities, their names, and any applicable fees,
commissions, purchase prices or discount arrangements with them, will be set
forth, or will be calculable from the information set forth, in a Prospectus
Supplement.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement applicable to the Offered
Securities being sold.
The date of this Prospectus is May 27, 1997.
<PAGE>
(continued from previous page)
Stock"), interests in which may be represented by depositary shares
("Depositary Shares"); (iv) warrants to purchase Preferred Stock or Depositary
Shares ("Preferred Stock Warrants"); or (v) warrants to purchase shares of its
common stock, without par value ("Common Stock"), ("Common Stock Warrants,"
and, together with Debt Warrants and Preferred Stock Warrants, "Securities
Warrants"). Debt Securities, Preferred Stock, Depositary Shares, Securities
Warrants, Preferred Securities (referred to below) and the Preferred
Securities Guarantee (also referred to below) may be offered separately or as
a part of units consisting of one or more such securities ("Units"), in each
case in one or more series and in amounts, on terms and at prices to be
determined at or prior to the time of sale and described in a supplement
accompanying this Prospectus (a "Prospectus Supplement"), and may be
convertible into or exchangeable for Common Stock, Debt Securities, Preferred
Stock, Depositary Shares or Preferred Securities. Senior Debt Securities will
rank on par with all other unsecured Debt (as defined herein) of the Company
other than Debt that by its terms is subordinated to the Senior Debt
Securities. Senior Subordinated Debt Securities will be subordinated to all
existing and future Debt of the Company other than Debt evidenced by Junior
Subordinated Debt Securities, which includes debt securities (and guarantees
in respect of those debt securities) initially issued to any trust, or a
trustee of a trust, partnership or other entity affiliated with the Company
that is, directly or indirectly, a financing vehicle of the Company ("Trust
Related Securities") in connection with the issuance by that entity of
preferred securities or other securities. Junior Subordinated Debt Securities
will be subordinated to all existing and future Debt of the Company other than
Trust Related Securities and will rank on par with such Trust Related
Securities.
Debt Securities may be issued in registered or bearer form, or both. The
offer, sale and issuance of securities in bearer form, and payment thereof, to
United States Persons are restricted as discussed under "Description of Debt
Securities" and "Plan of Distribution."
ReliaStar Financing II, ReliaStar Financing III, ReliaStar Financing IV, and
ReliaStar Financing V, each a statutory business trust formed under Delaware
law (each, a "Financing Trust" and collectively, the "Financing Trusts"), may
offer, from time to time, in one or more series, preferred securities
representing undivided beneficial interests in the assets of a Financing Trust
("Preferred Securities"). The Financing Trusts were formed by the Company
solely to issue Preferred Securities and to loan the net proceeds from the
sale thereof to the Company. Accordingly, the net proceeds received from the
sale of an offering of Preferred Securities, together with all capital
contributions made to the Financing Trusts by the Company, will be loaned to
the Company in exchange for Junior Subordinated Debt Securities having terms
described herein and in a Prospectus Supplement. These Junior Subordinated
Debt Securities subsequently may be distributed pro rata to holders of
Preferred Securities in connection with the dissolution of the Financing
Trusts upon the occurrence of certain events as may be described in a
Prospectus Supplement. Interest and principal payments on these Junior
Subordinated Debt Securities are intended to fund the payment of periodic cash
distributions ("distributions") and liquidation and redemption amounts on such
Preferred Securities. The payment of distributions and payments on liquidation
or redemption with respect to the Preferred Securities will be guaranteed by
the Company to the extent set forth herein and in a Prospectus Supplement
("Preferred Securities Guarantee"). See "The Financing Trusts" and "The
Preferred Securities Guarantee." The Preferred Securities Guarantee, when
taken together with the Company's obligations under any Junior Subordinated
Debt Securities, the Junior Subordinated Indenture and the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of the
Financing Trusts (other than with respect to the Preferred Securities and the
Common Securities (as defined herein)), will provide a full and unconditional
guarantee, on a subordinated basis, by the Company of payments due on the
Preferred Securities.
The specific amounts, terms and prices of particular Debt Securities,
Preferred Stock, Depositary Shares, Securities Warrants, Preferred Securities,
Preferred Securities Guarantee and Units (collectively, "Offered Securities")
for which this Prospectus is being delivered will be set forth in an
accompanying Prospectus Supplement or Supplements and may include the initial
public offering price and such other terms as (i) in the case of Debt
Securities, the designation, aggregate principal amount, currency,
denominations, maturity, interest rate (which may be fixed or variable) and
time and method of calculating interest payments, any conversion,
2
<PAGE>
exchange or sinking fund provisions, any provisions for redemption at the
option of the Company or repayment at the option of the holder, any premium
provisions, any subordination terms, the right of the Company, if any, to
defer payment of interest on Subordinated Debt Securities and the maximum
length of any such deferral period; (ii) in the case of Preferred Stock, the
designation, number of shares, stated value, any dividend, redemption,
conversion, exchange, sinking fund and liquidation provisions, voting and
other rights and whether interests in the Preferred Stock will be represented
by Depositary Shares; (iii) in the case of Securities Warrants, the duration,
exercise price and detachability; and (iv) in the case of Preferred
Securities, the designation, number of securities, and any distribution,
redemption, exchange, sinking fund and liquidation provisions, voting and
other rights and the terms upon which the proceeds from the sale of the
Preferred Securities will be loaned to the Company in exchange for Junior
Subordinated Debt Securities. Units may be issued in amounts, at prices, on
terms and containing such conditions, covenants and other provisions, and
consisting of Offered Securities and other securities, as are set forth in a
Prospectus Supplement. A Prospectus Supplement also will contain, where
applicable, information about certain United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Offered Securities covered by the Prospectus Supplement. The aggregate initial
public offering price (including the exercise price of any Securities
Warrants) of the Offered Securities in respect of which this Prospectus may be
delivered will not exceed $400,000,000 or the equivalent thereof in one or
more foreign currencies or composite currencies, including European Currency
Units.
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at 75 Park Place, 14th Floor, New York, New York 10007, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials
can be obtained by mail from the public reference section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy statements and other information filed by the Company at:
http://www.sec.gov. In addition, these materials may be inspected and copied
at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company and the Financing Trusts with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement for further information with respect to the Company, the Financing
Trusts and the Offered Securities. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of the document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
No separate financial statements of the Financing Trusts are included
herein. The Company and the Financing Trusts do not consider that such
financial statements would be material to holders of the Preferred Securities
because (i) the Financing Trusts are special purpose entities, have no
independent operations and are not engaged in, and do not propose to engage
in, any activity other than the issuance of the Common Securities (as defined
herein), the Preferred Securities, and the lending of the net proceeds from
the sale of the Common Securities and Preferred Securities to the Company
pursuant to loans evidenced by Junior Subordinated Debt Securities; (ii) the
Company, a reporting company under the Exchange Act, owns, directly or
indirectly, all of the voting securities of the Financing Trusts; and (iii)
under the Preferred Securities Guarantee, the Company will guarantee the
payment of distributions and amounts on liquidation and redemption of
Preferred Securities to the extent described herein. See "The Financing
Trusts" and "The Preferred Securities Guarantee." The Preferred Securities
Guarantee, when taken together with the Company's obligations under any Junior
Subordinated Debt Securities, the Junior Subordinated Indenture (as described
herein) and the Declaration (as defined herein), including its obligations to
pay costs, expenses and certain liabilities of the Financing Trusts (other
than with respect to the Preferred Securities and Common Securities), provides
a full and unconditional guarantee of amounts due on any Preferred Securities
for which this Prospectus and accompanying Prospectus Supplement or
Supplements is being delivered. See "Particular Terms of Junior Subordinated
Debt Securities Issued in Connection with Preferred Securities." The Financing
Trusts are not currently subject to the informational requirements of the
Exchange Act. The Financing Trusts will become subject to those requirements
upon the effectiveness of the Registration Statement, although they intend to
seek and expect to receive an exemption therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-10640) pursuant to the Exchange Act are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1996 (which incorporates by reference certain portions of the Company's
1996 Annual Report to Shareholders, including financial statements and
accompanying information, and certain portions of the Company's definitive
proxy statement for the Company's 1997 Annual Meeting of Shareholders);
4
<PAGE>
(ii) The Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1997, and its Current Report on Form 8-K dated February 23, 1997;
(iii) the Company's Form 8-K/A dated May 20, 1993 to the Company's
Current Report on Form 8-K dated January 17, 1989 filed by the Company in
lieu of a Registration Statement on Form 8-B and Amendment on Form 8A/A
dated September 12, 1994 to a Registration Statement on Form 8-A dated
October 4, 1989, as amended on February 15, 1990 (File No. 0-17441), which
contain a description of the Company's Common Stock and related Rights to
Purchase Preferred Stock of the Company; and
(iv) all other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of an offering of Offered
Securities.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document that also is or is deemed
to be incorporated herein or in an accompanying Prospectus Supplement by
reference) modifies or supersedes that statement. Any such statement so
modified or superseded shall not be deemed to constitute a part hereof or an
accompanying Prospectus Supplement except as so modified or superseded.
The Company will provide without charge to each person, including any
beneficial holder, to whom a copy of this Prospectus is delivered, upon the
written or oral request of that person, a copy of any or all of the documents
which are incorporated herein by reference (other than exhibits to those
documents, unless the exhibits are specifically incorporated therein by
reference). Requests should be directed to ReliaStar Financial Corp., 20
Washington Avenue South, Minneapolis, Minnesota 55401, Attn: Secretary,
telephone (612) 342-3514.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR A PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN AND THEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT
CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT APPLICABLE TO THE OFFERED
SECURITIES BEING SOLD. THE DELIVERY OF THIS PROSPECTUS AND A PROSPECTUS
SUPPLEMENT RELATING TO PARTICULAR OFFERED SECURITIES SHALL NOT CONSTITUTE AN
OFFER OF ANY OF THE OTHER OFFERED SECURITIES COVERED BY THIS PROSPECTUS. THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE OFFERED SECURITIES
IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION OF AN OFFER TO BUY
THE OFFERED SECURITIES IS UNLAWFUL.
THE COMPANY
The Company is a holding company whose subsidiaries specialize in life
insurance and related financial services. Through ReliaStar Life Insurance
Company ("ReliaStar Life"), Minneapolis, Minnesota, and other subsidiaries,
the Company issues and distributes individual life insurance and annuities,
group life and health insurance, life and health reinsurance, mutual funds,
residential mortgages, and personal finance education. The Company operates in
four business segments: Individual Insurance, Employee Benefits, Life and
Health Reinsurance, and Pension.
Other principal subsidiaries are Northern Life Insurance Company, ReliaStar
United Services Life Insurance Company, ReliaStar Bankers Security Life
Insurance Society, Northstar Investment Management Corporation, Successful
Money Management Seminars, Inc., and PrimeVest Financial Services, Inc.
On February 23, 1997, the Company entered into a definitive agreement to
merge Security-Connecticut Corporation, an insurance holding company, with and
into the Company. The merger is valued at approximately
5
<PAGE>
$488 million and is expected to close during late June or early July 1997. For
more information on the merger, see the Company's Current Report on Form 8-K
dated February 23, 1997.
The Company, which was incorporated in Delaware in 1988, became the parent
of ReliaStar Life and its subsidiaries pursuant to a Plan of Conversion and
Reorganization which became effective on January 3, 1989. Under this plan,
ReliaStar Life, which was organized in 1885 (as "Northwestern National Life
Insurance Company"), was converted from a combined stock and mutual life
insurance company to a stock life insurance company.
The Company's principal executive offices are located at 20 Washington
Avenue South, Minneapolis, Minnesota 55401, telephone (612) 372-5432.
References herein to the Company relate to ReliaStar Financial Corp. and its
subsidiaries.
THE FINANCING TRUSTS
Each Financing Trust is a statutory business trust formed under Delaware law
pursuant to (i) a separate declaration of trust executed by the Company, as
sponsor for the trust (the "Sponsor"), and Trustees (as defined herein) of the
Financing Trust and (ii) the filing of a certificate of trust with the
Delaware Secretary of State on May 8, 1997. Each declaration will be amended
and restated in its entirety (as so amended and restated, the "Declaration")
substantially in the form filed as an exhibit to the Registration Statement.
The Financing Trusts exist for the exclusive purposes of (i) issuing the
Preferred Securities and common securities representing undivided beneficial
interests in the assets of the Financing Trusts (the "Common Securities," and
together with the Preferred Securities, the "Trust Securities"), (ii) lending
the net proceeds from the sale of the Preferred Securities together with the
capital contributions made in respect of the Common Securities to the Company
in exchange for Junior Subordinated Debt Securities and (iii) engaging in only
those other activities necessary or incidental thereto. The distribution rate
and the disbursement payment dates and other payment dates for the Preferred
Securities will correspond to the interest rate and interest payment dates and
other payment dates on the Junior Subordinated Debt Securities, which will be
the sole assets of each Financing Trust.
All of the Common Securities will be directly or indirectly owned by the
Company. The Common Securities will rank on par, and payments will be made
thereon pro rata, with the Preferred Securities, except that, upon an event of
default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and amounts upon
liquidation, redemption and otherwise will be subordinated to the rights of
the holders of the Preferred Securities. The Company will directly or
indirectly acquire Common Securities in an aggregate liquidation amount equal
to 3% of the total capital of each Financing Trust. Each Financing Trust has a
term of approximately 55 years, but may terminate earlier, as provided in the
Declaration.
Each Financing Trust's business and affairs will be conducted by the
trustees (the "ReliaStar Trustees") appointed by the Company, as the direct or
indirect holder of all the Common Securities. The duties and obligations of
the ReliaStar Trustees shall be governed by the Declaration. The holder of the
Common Securities will be entitled to appoint, remove or replace any of, or
increase or reduce the number of, the ReliaStar Trustees. The Financing Trusts
will have two ReliaStar Trustees who are employees or officers of or who are
affiliated with the Company (the "Regular Trustees"). One ReliaStar Trustee
will be a financial institution that is not affiliated with the Company and
has a specified minimum amount of aggregate capital, surplus, and undivided
profits of not less than $50,000,000, which shall act as property trustee (the
"Property Trustee") and as indenture trustee for the purposes of the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), pursuant to the
terms set forth in a Prospectus Supplement. In addition, unless the Property
Trustee maintains a principal place of business in the State of Delaware and
otherwise meets the requirements of applicable law, one Trustee of each Trust
will have a principal place of business or reside in the State of Delaware
(the "Delaware Trustee"). The Company will pay all fees and expenses related
to each Financing Trust and the offering of the Trust Securities, the payment
of which will be guaranteed by the Company. The office of the Property Trustee
for each of the Financing Trusts is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, telephone (302) 651-8504.
6
<PAGE>
Under the Preferred Securities Guarantee, the Company will guarantee the
payment of distributions and amounts on liquidation and redemption of
Preferred Securities to the extent described herein. See "The Preferred
Securities Guarantee." The Preferred Securities Guarantee, when taken together
with the Company's obligations under the Junior Subordinated Debt Securities,
the Junior Subordinated Indenture and the Declaration, including its
obligations to pay costs, expenses and certain liabilities of the Financing
Trusts (other than with respect to the Trust Securities), provides a full and
unconditional guarantee of amounts due on the Preferred Securities. See
"Particular Terms of Junior Subordinated Debt Securities Issued in Connection
with Preferred Securities" and the information set forth in a Prospectus
Supplement with respect to any offering of Preferred Securities.
The principal place of business of each Financing Trust is c/o ReliaStar
Financial Corp., 20 Washington Avenue South, Minneapolis, Minnesota 55401,
telephone (612) 372-5432.
USE OF PROCEEDS
The Company intends to add the net proceeds from the sale of Offered
Securities, including the proceeds from the exchange of Junior Subordinated
Debt Securities for the net proceeds from the Trust Securities issued by the
Financing Trusts, to its general funds to be used for general corporate
purposes, including the repurchase of its Common Stock, investments in or
advances to existing or future subsidiaries, repayment of maturing obligations
and purchase or redemption of outstanding indebtedness. Each Financing Trust
will use all proceeds received by the trust from the sale of its Trust
Securities to purchase Junior Subordinated Debt Securities of the Company. A
more detailed description of the use of proceeds received from the sale of
specific Offered Securities shall be set forth in the Prospectus Supplement
relating thereto.
RATIOS OF EARNINGS TO FIXED CHARGES
AND TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following are the Company's consolidated ratios of earnings to fixed
charges and to combined fixed charges and preferred stock dividends for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED DECEMBER 31
MARCH 31, -------------------------
1997 1996 1995 1994 1993 1992
------------ ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 8.20 8.34 9.44 11.46 6.76 4.20
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.. 8.20 7.43 7.17 7.12 4.73 3.16
</TABLE>
For purposes of calculating the ratios of earnings to fixed charges,
earnings (consisting of income from continuing operations before income taxes,
extraordinary charges and accounting changes plus fixed charges, amortization
of previously capitalized interest and adjustments for less than 50%-owned
persons) have been divided by fixed charges. For purposes of calculating the
ratios of earnings to combined fixed charges and preferred stock dividends,
earnings have been divided by fixed charges and pre-tax earnings required to
cover preferred stock dividends. Fixed charges consist of interest on short-
term borrowings and long-term debt, dividends on trust-originated preferred
securities amortization of debt expense and discount, capitalized interest and
the interest factor of rental expense (generally deemed to be one-third of net
rental expense). Pre-tax earnings required to cover preferred stock dividends
have been calculated by dividing preferred stock dividends by one minus the
Company's effective income tax rate.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms and provisions of the
Debt Securities offered by any Prospectus Supplement and the extent, if any,
to which these general terms
7
<PAGE>
and provisions may apply to the Debt Securities so offered will be described
in a Prospectus Supplement relating to the Debt Securities. See also
"Particular Terms of Junior Subordinated Debt Securities Issued in Connection
with Preferred Securities."
The Senior Debt Securities are to be issued under an indenture (the "Senior
Indenture") between the Company and the trustee named in the applicable
Prospectus Supplement as trustee (the "Senior Trustee"). The Senior
Subordinated Debt Securities are to be issued under an indenture (the "Senior
Subordinated Indenture") between the Company and the trustee named in the
applicable Prospectus Supplement as trustee (the "Senior Subordinated
Trustee"). The Junior Subordinated Debt Securities are to be issued under an
indenture (the "Junior Subordinated Indenture," and together with the Senior
Subordinated Indenture, the "Subordinated Indentures") between the Company and
the trustee named in the applicable Prospectus Supplement as trustee (the
"Junior Subordinated Trustee," and together with the Senior Trustee and the
Senior Subordinated Trustee, the "Trustees"). The forms of Senior Indenture
and Subordinated Indentures (collectively, the "Indentures") are exhibits to
the Registration Statement. The following summaries of certain provisions of
the Indentures do not purport to be complete and are qualified in their
entirety by reference to the respective provisions of the Indentures.
Numerical references in parentheses below are to sections of the Indentures.
Wherever particular sections or defined terms of the Indentures are referred
to, it is intended that those sections or defined terms shall be incorporated
herein by reference. Unless otherwise indicated, capitalized terms are defined
in the Indentures.
GENERAL
The amount of Debt Securities offered by this Prospectus will be limited to
the amount set forth on the cover of this Prospectus. Each Indenture provides
that Debt Securities in an unlimited aggregate principal amount may be issued
thereunder from time to time in one or more series (Section 301).
Senior Debt Securities will be unsecured and will rank on par with all other
unsecured Debt of the Company other than Debt that by its terms is
subordinated to the Senior Debt Securities. Senior Subordinated Debt
Securities will be unsecured, except as described in a Prospectus Supplement
relating thereto, will rank on par with all other Senior Subordinated Debt
Securities of the Company, and will be subordinated to all existing and future
Debt of the Company, other than Debt evidenced by the Junior Subordinated Debt
Securities and Trust Related Securities. Junior Subordinated Debt Securities
will be unsecured, except as described in a Prospectus Supplement relating
thereto, will rank on par with any existing or future Trust Related
Securities, and will be subordinated to all existing and future Debt of the
Company. See "Subordination" below.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Debt Securities for the terms of the Debt Securities,
including, where applicable, (i) the designation and any limit on the
aggregate principal amount of the Debt Securities; (ii) the price (which may
be expressed as a percentage of the aggregate principal amount thereof) at
which the Debt Securities will be issued; (iii) the date or dates on which the
Debt Securities will mature or the method by which such dates can be
determined; (iv) the currency or currencies in which the Debt Securities are
being sold and are denominated and the circumstances, if any, under which any
such Debt Securities may be payable in a currency other than the currency in
which the Debt Securities are denominated, and, if so, the exchange rate, the
exchange rate agent and, if the Holder of any such Debt Securities may elect
the currency in which payments thereon are to be made, the manner of that
election; (v) the denominations in which any Debt Securities which are
Registered Securities will be issuable, if other than denominations of $1,000
and any integral multiple thereof with respect to Debt Securities, and the
denomination or denominations in which any Debt Securities that are Bearer
Securities will be issuable, if other than the denomination of $5,000; (vi)
the rate or rates (which may be fixed or variable) at which the Debt
Securities will bear interest, which may be zero in the case of certain Debt
Securities issued at an issue price representing a discount from the principal
amount payable at maturity; (vii) the date from which interest on the Debt
Securities will accrue, the dates on which that interest will be payable or
the method by which such dates can be determined, the date on which payment of
that interest will commence and the circumstances, if any, in which the
Company may defer interest payments; (viii) the date or dates on which, and
the price or prices at
8
<PAGE>
which, the Debt Securities will, pursuant to any mandatory sinking fund
provision, or may, pursuant to any optional redemption or required repayment
provisions, be redeemed or repaid and the other terms and provisions of any
such optional redemption or required repayment; (ix) in the case of
Subordinated Debt Securities, any terms by which those securities may be
convertible into Preferred Stock, Depositary Shares or Common Stock (see
"Description of Capital Stock") and, in the case of Subordinated Debt
Securities convertible into Preferred Stock or Depositary Shares, the terms of
the Preferred Stock or Depositary Shares; (x) whether the Debt Securities are
to be issuable as Bearer Securities and/or Registered Securities and, if
issuable as Bearer Securities, the terms upon which any Bearer Securities may
be exchanged for Registered Securities; (xi) whether the Debt Securities are
to be issued in the form of one or more temporary or permanent Global
Securities and, if so, the identity of the depositary for that Global Security
or Securities; (xii) if a temporary Global Security is to be issued with
respect to the Debt Securities, the extent to which, and the manner in which,
any interest thereon payable on an interest payment date prior to the issuance
of a permanent Global Security or definitive Bearer Securities will be
credited to the accounts of the persons entitled thereto on that interest
payment date; (xiii) if a temporary Global Security is to be issued with
respect to the Debt Securities, the terms upon which interests in such
temporary Global Security may be exchanged for interests in a permanent Global
Security or for definitive Debt Securities and the terms upon which interests
in a permanent Global Security, if any, may be exchanged for definitive Debt
Securities; (xiv) any additional restrictive covenants included for the
benefit of Holders of such Debt Securities; (xv) any additional Events of
Default provided with respect to such Debt Securities; (xvi) information with
respect to book-entry procedures, if any; (xvii) whether the Debt Securities
will be repayable at the option of the Holder; (xviii) any other terms of the
Debt Securities not inconsistent with the provisions of the applicable
Indenture; (xix) the right of the Company to defease such Debt Securities or
certain covenants under the applicable Indenture; and (xx) the terms of any
securities being offered together with or separately from the Debt Securities.
The Prospectus Supplement will also describe any special provisions for the
payment of additional amounts with respect to the Debt Securities and certain
United States federal income tax consequences and other special considerations
applicable to the Debt Securities. If a Debt Security is denominated in a
foreign currency, the Debt Security may not trade on a United States national
securities exchange unless and until the Commission has approved appropriate
rule changes to accommodate the such trading.
Because the Company is primarily a holding company, its rights and the
rights of its creditors, including the Holders of Debt Securities, to
participate in the assets of any Subsidiary (as defined below) upon its
liquidation or recapitalization would be subject to the prior claims of the
Subsidiary's creditors (including policyholders of the Company's insurance
company Subsidiaries), provided that, in certain instances, the Company may
itself be a creditor with recognized claims against the Subsidiary. There is
no restriction in the Indentures against Subsidiaries of the Company incurring
unsecured indebtedness or issuing unsecured securities. The ability of the
Company to pay principal of and interest on Debt Securities will be dependent
upon the payment to it of dividends, interest payments on the Surplus Note
(referred to below) or other charges by the Subsidiaries. The payment of
dividends, interest or other charges by ReliaStar Life, and other insurance
company Subsidiaries, is subject to legal restrictions, primarily imposed by
applicable insurance laws and regulations. See "Description of Capital Stock--
Dividends."
The Company holds a surplus note issued by ReliaStar Life in the amount of
$100 million (the "Surplus Note"). Interest on the Surplus Note at the annual
rate of 6 5/8% is payable semi-annually. The Surplus Note matures in September
2003. The terms of the Surplus Note provide that ReliaStar Life must secure
the approval of the Commissioner of the Minnesota Department of Commerce (the
"Commissioner") prior to making any payments of principal or interest. The
requirement for prior regulatory approval of such payments is a condition for
the Surplus Note to be considered "surplus" for statutory accounting purposes.
The Company is not aware of any basis for the Commissioner to disapprove any
scheduled interest payment under the Surplus Note.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Unless otherwise indicated in the Prospectus
Supplement, Bearer Securities, other than Bearer Securities in temporary or
permanent global form,
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will have interest coupons attached (Section 201). Each Indenture also
provides that Bearer Securities or Registered Securities of a series may be
issuable in permanent global form (Section 203). See "Permanent Global
Securities" below.
Registered Securities of any series will be exchangeable for other
Registered Securities of such series of any authorized form and denomination
and of a like aggregate principal amount, tenor and terms. In addition, if
Debt Securities of any series are issuable as both Registered Securities and
Bearer Securities, at the option of the Holder upon request confirmed in
writing, and subject to the terms of the applicable Indenture, Bearer
Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of that series will be exchangeable into
Registered Securities of such series of any authorized form and denomination
and of a like aggregate principal amount, tenor and terms. Bearer Securities
surrendered in exchange for Registered Securities between the close of
business on a Regular Record Date or a Special Record Date and the relevant
date for payment of interest shall be surrendered without the coupon relating
to that date for payment of interest, and interest will not be payable in
respect of the Registered Security issued in exchange for that Bearer
Security, but will be payable only to the Holder of the coupon when due in
accordance with the terms of the applicable Indenture. Bearer Securities will
not be issued in exchange for Registered Securities (Section 305). Each Bearer
Security, other than one in temporary global form, and each interest coupon
will bear substantially the following legend: "Any United States Person who
holds this obligation will be subject to limitations under the United States
federal income tax laws including the limitations provided in Sections 165(j)
and 1287(a) of the Internal Revenue Code." Additional information regarding
restrictions on the issuance, exchange and transfer of and special United
States federal income tax considerations relating to Bearer Securities will be
set forth in the applicable Prospectus Supplement.
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented for registration of transfer (duly
endorsed or accompanied by a satisfactory written instrument of transfer) at
the office of the Security Registrar or at the office of any transfer agent
designated by the Company for that purpose, without service charge and upon
payment of any taxes and other governmental charges (Section 305). If the
applicable Prospectus Supplement refers to any transfer agent (in addition to
the Security Registrar) initially designated by the Company with respect to
any series of Debt Securities, the Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent (or Security Registrar) acts, except
that, if Debt Securities of a series are issuable solely as Registered
Securities, the Company will be required to maintain a transfer agent in each
Place of Payment for that series and, if Debt Securities of a series are
issuable as Bearer Securities, the Company will be required to maintain (in
addition to the Security Registrar) a transfer agent in a Place of Payment for
that series located outside the United States. The Company may at any time
designate additional transfer agents with respect to any series of Debt
Securities (Section 1002).
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series which are issuable as Bearer Securities
initially will be represented by one or more temporary Global Securities,
without interest coupons, to be deposited with a common depositary for the
benefit of the Euroclear System and Cedel S.A. for credit to designated
accounts. On and after the date determined as provided in any such temporary
Global Security and described in the applicable Prospectus Supplement, but
within a reasonable time, each such temporary Global Security will be
exchangeable for definitive Bearer Securities, definitive Registered
Securities or all or a portion of a permanent global Bearer Security, or any
combination thereof, as specified in the Prospectus Supplement. No definitive
Bearer Security or permanent global Bearer Security delivered in exchange for
a portion of a temporary Global Security shall be mailed or otherwise
delivered to any location in the United States in connection with such
exchange.
Additional information regarding restrictions on and special United States
federal income tax consequences relating to temporary Global Securities will
be set forth in the applicable Prospectus Supplement.
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PERMANENT GLOBAL SECURITIES
If any Debt Securities of a series are issuable in permanent global form,
the applicable Prospectus Supplement will describe the circumstances, if any,
under which beneficial owners of interests in any such permanent Global
Security may exchange those interests for Debt Securities of such series of
any authorized form and denomination and of a like aggregate principal amount,
tenor and terms. Principal of and any premium and interest on a permanent
Global Security will be payable in the manner described in the Prospectus
Supplement relating thereto.
PAYMENTS AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payments
of principal of and any premium and interest on Bearer Securities will be
payable in the currency designated in the Prospectus Supplement, subject to
any applicable laws and regulations, at such paying agencies outside the
United States as the Company may designate from time to time. Unless otherwise
provided in the Prospectus Supplement, these payments may be made, at the
option of the Holder, by a check in the designated currency or by transfer to
an account in the designated currency maintained by the payee with a bank
located outside the United States. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of interest on Bearer Securities on
any Interest Payment Date will be made only against surrender of the coupon
relating to that Interest Payment Date to a paying agent outside the United
States (Section 1001). No payment with respect to any Bearer Security will be
made at any office or paying agency maintained by the Company in the United
States nor will any such payment be made by transfer to an account, or by mail
to an address, in the United States. Notwithstanding the foregoing, payments
of principal of and any premium and interest on Bearer Securities denominated
and payable in U.S. dollars will be made in U.S. dollars at an office or
agency of, and designated by, the Company located in the United States, if
payment of the full amount thereof in U.S. dollars at all paying agencies
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions, and the applicable Trustee receives an
opinion of counsel that such payment within the United States is legal
(Section 1002).
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of and any premium and interest on a Registered Security will be
payable in the currency designated in the Prospectus Supplement, and interest
will be payable at the office of such paying agent or paying agents as the
Company may designate from time to time, except that at the option of the
Company payment of any interest may be made by a check in such currency mailed
to the Holder at the Holder's registered address or by wire transfer to an
account in such currency designated by the Holder in writing not less than ten
days prior to the date of the payment. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of any installment of interest on a
Registered Security will be made to the Person in whose name such Registered
Security is registered at the close of business on a Regular Record Date or a
Special Record Date for the payment (Section 307). Unless otherwise indicated
in the applicable Prospectus Supplement, principal payable at maturity will be
paid to the Holder upon surrender of the Registered Security at the office of
a duly designated paying agent.
The paying agents outside the United States initially designated by the
Company for a series of Debt Securities will be named in the applicable
Prospectus Supplement. The Company may terminate the designation of any of the
paying agents from time to time, except that, so long as any Bearer Securities
are outstanding, the Company will maintain at least one paying agent outside
the United States where Bearer Securities may be presented for payment and may
be surrendered for exchange, provided that, so long as any Debt Securities of
a series are listed on The Stock Exchange of the United Kingdom and the
Republic of Ireland or the Luxembourg Stock Exchange or any other stock
exchange located outside the United States and such stock exchange shall so
require, the Company will maintain a paying agent in London or Luxembourg or
any other required city located outside the United States, as the case may be,
for Debt Securities of such series (Section 1002).
All moneys paid by the Company to a paying agent for the payment of
principal of or any premium or interest on any Debt Security that remain
unclaimed at the end of two years after that principal, premium or
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interest shall have become due and payable will, at the request of the
Company, be repaid to the Company, and the Holder of that Debt Security or any
coupon appertaining thereto will thereafter look only to the Company for
payment thereof (Section 1003).
COVENANTS CONTAINED IN INDENTURES
The Company has covenanted in the Senior Indenture that it will not, and
will not permit any Restricted Subsidiary (as defined herein) to, create,
incur, issue, assume or guarantee any indebtedness for borrowed money
("indebtedness") that is secured by a mortgage, pledge, lien or security
interest (a "Lien") of or upon any shares of capital stock or indebtedness of
any Restricted Subsidiary or any indebtedness of any Restricted Subsidiary
owned by the Company or any Subsidiary, whether existing or issued on
September 30, 1994 or thereafter created or issued, without effectively
providing that any Debt Securities issued under the Senior Indenture (together
with, if the Company shall so determine, any other indebtedness created,
incurred, issued, assumed or guaranteed by the Company or any Restricted
Subsidiary then existing or thereafter created) shall be secured equally and
ratably with (or, at the option of the Company, prior to) such indebtedness,
so long as such indebtedness shall be so secured. The foregoing restrictions,
however, shall not apply to: (i) Liens of or upon any indebtedness or shares
of capital stock acquired by the Company or any Restricted Subsidiary after
September 30, 1994 to secure the payment of all or part of the purchase price
of such shares of capital stock or indebtedness upon the acquisition thereof
by the Company or any Restricted Subsidiary; (ii) Liens of or upon any
indebtedness or shares of capital stock existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary; (iii) Liens of or upon
indebtedness or shares of capital stock of any Person existing at the time
that Person became a Restricted Subsidiary; (iv) Liens to secure indebtedness
of any Restricted Subsidiary to the Company or any Restricted Subsidiary; and
(v) under certain circumstances, extensions, renewals or replacements of any
Liens existing on September 30, 1994 or any Lien referred to in the foregoing
clauses (i) through (iv), inclusive (Section 1007 of the Senior Indenture).
The term "Restricted Subsidiary" means: (i) so long as they are Subsidiaries
of the Company, ReliaStar Life and Northern Life Insurance Company; (ii) any
other company, so long as it is a Subsidiary of the Company, which is a
Subsidiary and which has Consolidated Total Assets equal to or greater than
20% of the Consolidated Total Assets of the Company (as of the date hereof,
ReliaStar United Services Life Insurance Company is the only such subsidiary);
and (iii) any successor, by merger or otherwise, to all or a principal part
(as determined in good faith by the Company's Board of Directors or an
appropriate committee thereof) of the business or properties of any Subsidiary
referred to or described in the foregoing clauses (i) or (ii).
The term "Consolidated Total Assets" means, in respect of the Company as of
any date of determination, the amount of total assets shown on the
consolidated balance sheet of the Company and its consolidated subsidiaries
contained in the most recent annual report to shareholders and, in respect of
any Subsidiary as of any date of determination, the amount of total assets of
the Subsidiary and its consolidated subsidiaries from which such consolidated
balance sheet of the Company and its consolidated subsidiaries was derived.
The term "Subsidiary" means any company more than 50% of the outstanding
voting stock of which is at the time owned, directly or indirectly, by the
Company and/or one or more of its other Subsidiaries (Section 101).
The Company also has covenanted in the Senior Indenture that, so long as any
Debt Securities of any series shall be Outstanding, the Company will not, nor
will it permit any Restricted Subsidiary to, issue, sell, transfer or
otherwise dispose of (except to the Company or to another Restricted
Subsidiary) any shares of capital stock of any Restricted Subsidiary, unless
(i) such shares so issued, sold, transferred or otherwise disposed of
constitute directors' qualifying shares; (ii) the entire outstanding capital
stock of that Restricted Subsidiary then owned by the Company and its
Restricted Subsidiaries is disposed of at the same time for a consideration,
whether in cash or property, which, in the opinion of the Company's Board of
Directors or an appropriate committee thereof, is at least equal to the fair
value of such capital stock; or (iii) after giving effect to such issuance,
sale, transfer or other disposition, the Company and its Restricted
Subsidiaries would own, directly or indirectly, at least 80% of the issued and
outstanding capital stock of that Restricted Subsidiary (Section 1008 of the
Senior Indenture).
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The Company is not restricted by the Indentures from incurring, assuming or
becoming liable for any type of debt or other obligations, or, except as
specified above, from creating liens on its property for any purpose or from
paying dividends or making distributions on its capital stock or purchasing or
redeeming its capital stock, or, except as described under "Consolidation,
Merger and Sale of Assets" below, from engaging in corporate transactions or
reorganizations that could result in the Company's involvement in a highly
leveraged transaction. The Indentures do not require the maintenance of any
financial ratios or specified levels of net worth or liquidity. In addition,
the Indentures do not contain any provision that would require the Company to
repurchase or redeem or otherwise modify the terms of any of its Debt
Securities upon a change in control or other events involving the Company that
may adversely affect the creditworthiness of the Debt Securities.
The applicable Prospectus Supplement may describe other covenants. See also
"Particular Terms of Junior Subordinated Debt Securities Issued in Connection
with Preferred Securities."
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge with or into, or convey,
transfer or lease its assets substantially as an entirety to, any Person
unless the successor Person is a corporation organized and validly existing
under the laws of a domestic jurisdiction and expressly assumes the Company's
obligations on the Debt Securities and under the applicable Indenture; after
giving effect to the transaction no Event of Default, and no event which,
after notice or lapse of time, or both, would become an Event of Default,
shall have occurred and be continuing; and, in the case of the Senior
Indenture, if, upon or as a result of any such consolidation, merger,
conveyance, transfer or lease, any shares of capital stock or indebtedness of
any Restricted Subsidiary would thereupon become subject to any mortgage,
security interest, pledge or lien securing any indebtedness for borrowed money
of, or guaranteed by, such Person (other than any mortgage, security interest,
pledge or lien permitted by the Senior Indenture), the successor Person, prior
to such consolidation, merger, conveyance, transfer or lease, shall expressly
assume the Company's obligations on the Debt Securities and under the Senior
Indenture (together with, if the Company shall so determine, any other
indebtedness of, or guaranteed by, the Company or any Restricted Subsidiary
ranking equally with the Debt Securities and then existing or thereafter
created) equally and ratably with (or, at the option of the Company, prior to)
the indebtedness secured by such mortgage, security interest, pledge or lien
(Section 801).
MODIFICATION AND WAIVER
Unless otherwise stated in the applicable Prospectus Supplement, except as
to certain modifications and amendments not adverse to Holders of Debt
Securities, modifications and amendments of and waivers of compliance with
certain restrictive provisions under each Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of each series thereunder affected by that
modification, amendment or waiver; provided that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security or coupon affected thereby, (i) change the Stated Maturity of the
principal or any installment of principal or any installment of interest, if
any; (ii) reduce the amount of principal or interest thereon, or any premium
payable upon redemption or repayment thereof, or in the case of an Original
Issue Discount Security the amount of principal payable upon acceleration of
the Maturity thereof; (iii) change the Place of Payment or the currency in
which principal or any interest is payable; (iv) impair the right to institute
suit for the enforcement of any payment of the principal and any premium and
interest, or adversely affect the right of any repayment at the option of the
Holder; (v) reduce the percentage in principal amount of Outstanding Debt
Securities of any series the consent of whose Holders is required for
modification or amendment of the applicable Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver
of certain defaults; (vi) reduce the requirements contained in the applicable
Indenture for quorum or voting; (vii) in the case of Subordinated Debt
Securities convertible into Common Stock, impair any right to convert those
Subordinated Debt Securities; or (viii) modify any of the above provisions
(Section 902).
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series issued thereunder if Debt Securities of such
series are issuable in whole or in part as Bearer Securities (Section 1401). A
meeting may be called at any time by the Trustee for the Debt Securities, or
upon the request of the Company or the Holders of at least 10% in principal
amount of the Outstanding Debt Securities of such series, in any such case
upon notice given in accordance with the applicable Indenture (Section 1402).
Except as limited by the proviso in the preceding paragraph, any resolution
presented at a meeting or adjourned meeting at which a quorum is present may
be adopted by the affirmative vote of the Holders of a majority in principal
amount of
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the Outstanding Debt Securities of a series; provided, that, except as limited
by the proviso in the preceding paragraph, any resolution with respect to any
demand, consent, waiver or other action which may be made, given or taken by
the Holders of not less than a majority in principal amount of the Outstanding
Debt Securities of a series issued under an Indenture may be adopted at a
meeting or an adjourned meeting at which a quorum is present only by the
affirmative vote of the Holders of a majority in principal amount of the
Outstanding Debt Securities of such series; and provided further, that, except
as limited by the proviso in the preceding paragraph, any resolution with
respect to any demand, consent, waiver or other action which may be made,
given or taken by the Holders of a specified percentage that is less than a
majority in principal amount of the Outstanding Debt Securities of a series
issued under an Indenture may be adopted at a meeting or adjourned meeting at
which a quorum is present by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Debt Securities of
such series (Section 1404).
Any resolution passed or decision taken at any meeting of Holders of Debt
Securities of a series duly held in accordance with the applicable Indenture
will be binding on all Holders of Debt Securities of that series and the
related coupons issued under such Indenture. The quorum at any meeting of
Holders of a series of Debt Securities called to adopt a resolution, and at
any adjourned meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of such series (Section
1404).
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of a series may on behalf of the Holders of all Debt
Securities of that series waive (insofar as that series is concerned)
compliance by the Company with certain restrictive covenants of the Indenture
under certain circumstances. Unless otherwise stated in the applicable
Prospectus Supplement, the Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series may on behalf of the
Holders of all Debt Securities of that series waive any past default under the
Indenture with respect to that series, except a default in the payment of the
principal of or premium, if any, or any interest on any Debt Security of that
series or in respect of a provision which under the Indenture cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security of the series affected (Sections 513 and 1005).
EVENTS OF DEFAULT
Unless otherwise stated in the applicable Prospectus Supplement, any series
of Senior Debt Securities issued under the Senior Indenture will provide that
the following shall constitute Events of Default with respect to such series:
(i) default in payment of principal of or premium, if any, on any Senior Debt
Security of such series when due; (ii) default for 30 days in payment of
interest, if any, on any Senior Debt Security of such series or related
coupon, if any, when due; (iii) default in the deposit of any sinking fund
payment on any Senior Debt Security of such series when due; (iv) default in
the performance of any covenants in such Indenture continued for 90 days after
written notice thereof by the Trustee thereunder or the Holders of at least
25% in principal amount of the Outstanding Senior Debt Securities of such
series issued under such Indenture; (v) certain events of bankruptcy,
insolvency or reorganization of the Company; and (vi) default by the Company
or any Restricted Subsidiary in the payment of any amount due under other
indebtedness of the Company or any Restricted Subsidiary for money borrowed
having unpaid principal in excess of $20,000,000 or under any indenture or
other instrument under which any such indebtedness has been issued or by which
it is governed, whether now existing or hereafter created, which default shall
have resulted in the acceleration of the maturity thereof without such
acceleration having been rescinded after due notice to the Company of such
default by the Trustee or by such notice to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Debt Securities
of such series; provided, however, that for purposes of this clause (vi) no
Event of Default shall be deemed to have occurred with respect to Senior Debt
Securities of any series if (a) such default in the payment of any amount due
or under any such indenture or other instrument relates solely to indebtedness
that has been issued, assumed or guaranteed on terms which provide that the
creditor with respect thereto shall have no recourse of any nature whatsoever
to the whole of the property and assets or any portion thereof (other than the
property specifically pledged to secure such indebtedness) of the Company and
any Restricted Subsidiary in the event of any such default, (b) in the opinion
of the Board of Directors (or an appropriate committee thereof) of the Company
or such Restricted Subsidiary, as the case may be, which shall have issued,
assumed or guaranteed
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such indebtedness, such default, the acceleration of the maturity of such
indebtedness and the enforcement by such creditor of all of its other rights
and remedies as a result of such default and acceleration of indebtedness
shall not adversely affect the financial condition of the Company or such
Restricted Subsidiary, as the case may be, and (c) in the opinion of the
Company's Board of Directors (or an appropriate committee thereof) such
default and the acceleration of such indebtedness do not adversely affect the
interest of the Holders of any series of Senior Debt Securities (Section 501
of the Senior Indenture).
Unless otherwise stated in the applicable Prospectus Supplement, any series
of Subordinated Debt Securities issued under the Subordinated Indentures will
provide that the only Events of Default will be (i) default in payment of
principal of or premium, if any, on any Subordinated Debt Security of such
series when due; (ii) default for 30 days in payment of interest, if any, on
any Subordinated Debt Security of such series or related coupon, if any, when
due; (iii) failure to convert any Subordinated Debt Security into Common Stock
upon the election of a Holder to convert such Subordinated Debt Security if
the terms of such Subordinated Debt Security provide for conversion; and (iv)
certain events of bankruptcy of the Company (Section 501 of the Subordinated
Indentures). Unless specifically stated in the applicable Prospectus
Supplement for a particular series of Subordinated Debt Securities, there is
no right of acceleration of the payment of principal of the Subordinated Debt
Securities upon a default in the payment of principal, premium, if any, or
interest, if any, or in the performance of any covenant or agreement in the
Subordinated Debt Securities or Subordinated Indentures. In the event of a
default in the payment of principal, premium, if any, or interest, if any, or
the performance of any covenant or agreement in the Subordinated Debt
Securities or Subordinated Indentures, the Trustee, subject to certain
limitations and conditions, may institute judicial proceedings to enforce
payment of such principal, premium or interest or to obtain the performance of
such covenant or agreement or any other proper remedy (Section 503 of the
Subordinated Indentures).
The Company is required to file annually with each Trustee an Officers'
Certificate concerning the absence of certain defaults under the terms of the
Indentures (Section 1004). Each Indenture provides that if an Event of Default
specified therein shall occur and be continuing, either the Trustee thereunder
or the Holders of not less than 25% in principal amount of the Outstanding
Debt Securities of such series issued under such Indenture may declare the
principal of all such Debt Securities (or in the case of Original Issue
Discount Securities, such portion of the principal amount thereof as may be
specified in the terms thereof) to be due and payable (Section 502). In
certain cases, the Holders of a majority in principal amount of the
Outstanding Debt Securities of a series may, on behalf of the Holders of all
Senior Debt Securities of such series and any related coupons, waive any past
default or Event of Default, except a default (i) in payment of the principal
of or premium, if any, or interest, if any, on any of the Debt Securities of
such series and (ii) in respect of a covenant or provision of the Indenture
which cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security of such series or coupon affected (Section 513).
Each Indenture contains a provision entitling the Trustee thereunder,
subject to the duty of the Trustee during default to act with the required
standard of care, to be indemnified by the Holders of the Debt Securities of a
series thereunder or any related coupons before proceeding to exercise any
right or power under the Indenture with respect to such series at the request
of such Holders. (Section 603) Each Indenture provides that no Holder of any
Debt Securities of a series thereunder or any related coupons may institute
any proceeding, judicial or otherwise, to enforce the Indenture except in the
case of failure of the Trustee thereunder, for 60 days, to act after it is
given notice of default, a request to enforce such Indenture by the Holders of
not less than 25% in aggregate principal amount of the Outstanding Debt
Securities of such series and an offer of reasonable indemnity (Section 507).
This provision will not prevent any Holder of Debt Securities or any related
coupons from enforcing payment of the principal thereof and premium, if any,
and interest, if any, thereon at the respective due dates thereof (Section
508). The Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series issued under an Indenture may direct
the time, method and place of conducting any proceedings for any remedy
available to the Trustee for such Debt Securities or exercising any trust or
power conferred on it with respect to the Debt Securities of such series.
However, such Trustee may refuse to follow any direction that conflicts with
law or the Indenture under which it serves or which would be unjustly
prejudicial to Holders not joining therein (Section 512).
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Each Indenture provides that the Trustee thereunder will give to the Holders
of Debt Securities notice of a default if not cured or waived, but, except in
the case of a default in the payment of principal of or premium, if any, or
interest, if any, on any Debt Securities of such series or any related coupons
or in the payment of any sinking fund installment with respect to Debt
Securities of such series, the Trustee for such Debt Securities shall be
protected in withholding such notice if it determines in good faith that the
withholding of such notice is in the interest of the Holders of such Debt
Securities (Section 602).
DEFEASANCE AND DISCHARGE
Except for Junior Subordinated Debt Securities issued in connection with
Preferred Securities, the Company may be discharged from any and all
obligations in respect of the Debt Securities of a series (except for certain
obligations relating to temporary Debt Securities and exchange of Debt
Securities, registration of transfer or exchange of Debt Securities of such
series, replacement of stolen, lost or mutilated Debt Securities of such
series, maintenance of paying agencies, holding monies for payment in trust
and payment of additional amounts, if any, required in consequence of United
States withholding taxes imposed on payments to non-U.S. persons) upon the
deposit with the Trustee, in trust, of money and/or, to the extent such Debt
Securities are denominated and payable in U.S. dollars only, Eligible
Instruments that, through the payment of principal and interest in respect
thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and premium, if any, each installment of
interest, if any, on, and any mandatory sinking fund, repayment or analogous
payments on, the Debt Securities of such series on the scheduled due dates
therefor or upon redemption (if the Debt Securities of such series are subject
to redemption and the Company shall have given irrevocable instructions to the
Trustee to effect such redemption) in accordance with the terms of the
applicable Indenture and the Debt Securities of such series. Such a trust may
be established only if, among other things, (i) the Company has delivered to
the Trustee an Opinion of Counsel to the effect that (a) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (b) since the date of the applicable Indenture there has been a
change in applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the
Holders of Debt Securities of such series will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit, defeasance
and discharge, and will be subject to federal income tax on the same amounts
and in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge had not occurred; and (ii) the Debt
Securities of such series, if then listed on any domestic or foreign
securities exchange, will not be delisted as a result of such deposit,
defeasance and discharge (Section 403). In the event of any such defeasance
and discharge of Debt Securities of such series, Holders of Debt Securities of
such series would be able to look only to such trust fund for payment of
principal of and any premium and interest on their Debt Securities until
Maturity.
Except for Junior Subordinated Debt Securities issued in connection with
Preferred Securities, the Company may terminate certain of its obligations
under each Indenture with respect to the Debt Securities of a series
thereunder, including its obligations to comply with the covenants described
above under "Covenants Contained in Indentures," with respect to Debt
Securities of such series, on the terms and subject to the conditions
contained in such Indenture, by depositing in trust with the Trustee money
and/or, to the extent such Debt Securities are denominated and payable in U.S.
dollars only, Eligible Instruments that, through the payment of principal and
interest in respect thereof in accordance with their terms, will provide money
in an amount sufficient to pay the principal of and premium, if any, each
installment of interest, if any, on, and any mandatory sinking fund, repayment
or analogous payments on, the Debt Securities of such series on the scheduled
due dates therefor. This deposit and termination is conditioned, among other
things, upon the Company's delivery of an Opinion of Counsel that the Holders
of such Debt Securities will have no federal income tax consequences as a
result of the deposit and termination. Termination will not relieve the
Company of its obligation to pay when due the principal of or any interest on
such Debt Securities if such Debt Securities of such series are not paid from
the money or Eligible Instruments held by the Trustee for the payment thereof
(Section 1501). The applicable Prospectus Supplement may further describe the
provisions, if any, permitting or restricting such defeasance with respect to
Debt Securities of a series. In the event the Company exercises its option to
omit
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compliance with the covenants described above under "Covenants Contained in
Indentures" with respect to the Debt Securities of a series as described above
and the Debt Securities of such series are declared due and payable because of
the occurrence of an Event of Default, then the amount of money and Eligible
Instruments on deposit with the Trustee will be sufficient to pay amounts due
on the Debt Securities of such series at the time of the scheduled due dates
therefor but may not be sufficient to pay amounts due on the Debt Securities
of such series at the time of the acceleration resulting from such Event of
Default. The Company shall in any event remain liable for such payments as
provided in the applicable Indenture.
SUBORDINATION
The Senior Subordinated Debt Securities shall be subordinate to all existing
and future Debt of the Company other than Debt evidenced by the Junior
Subordinated Debt Securities and the Trust Related Securities. The Junior
Subordinated Debt Securities shall rank on par with any Trust Related
Securities and shall be subordinate to all existing and future Debt of the
Company other than the Trust Related Securities. In the event that the Company
shall default in the payment of any principal, premium, if any, or interest,
if any, on any Debt to which the Senior Subordinated Debt Securities or the
Junior Subordinated Debt Securities are subordinated when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, unless and until such default
shall have been cured or waived or shall have ceased to exist, no direct or
indirect payment (in cash, property, securities, by set-off or otherwise)
shall be made or agreed to be made for principal, premium, if any, or
interest, if any, on the Senior Subordinated Debt Securities or the Junior
Subordinated Debt Securities, as the case may be, or in respect of any
redemption, repayment, retirement, purchase or other acquisition of any of the
Senior Subordinated Debt Securities or the Junior Subordinated Debt
Securities, as the case may be (Section 1601 of the Subordinated Indentures).
"Debt" means, with respect to the Company, (i) the principal, premium, if any,
and interest in respect of (a) indebtedness of the Company for money borrowed;
(b) indebtedness evidenced by securities, debentures, bonds or other similar
instruments issued by the Company; (ii) all capital lease obligations of the
Company; (iii) all obligations of the Company issued or assumed as the
deferred purchase price of property, all conditional sale obligations of the
Company and all obligations of the Company under any title retention agreement
(but excluding trade accounts payable arising in the ordinary course of
business); (iv) all obligations of the Company for the reimbursement on any
letter of credit, banker's acceptance, security purchase facility or similar
credit transaction; (v) all obligations of the type referred to in clauses (i)
through (iv) of other Persons for the payment of which the Company is
responsible or liable as obligor, guarantor or otherwise; and (vi) all
obligations of the type referred to in clauses (i) through (v) of other
Persons secured by any lien on any property or asset of the Company (whether
or not such obligation is assumed by the Company) (Section 101 of the
Subordinated Indentures). As of December 31, 1996, the Company had
approximately $407.5 million of Debt outstanding to which the Subordinated
Debt Securities would be subordinated. The term "Senior Debt" means a Debt to
which the Senior Subordinated Debt Securities or the Junior Subordinated Debt
Securities, as the case may be, are subordinated.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Company, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Company for the benefit of creditors, or (iv) any
other marshalling of the assets of the Company, all Senior Debt (including any
interest thereon accruing after the commencement of any such proceedings)
shall first be paid in full before any payment or distribution, whether in
cash, securities or other property, shall be made on account of the principal
of or interest on the Junior Subordinated Debt Securities. In such event, any
payment or distribution on account of the principal of or interest on the
Senior Subordinated Debt Securities or Junior Subordinated Debt Securities, as
the case may be, whether in cash, securities or other property (other than
securities of the Company or any other company provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least
to the extent provided in the subordination provisions with respect to such
Subordinated Debt Securities, to the payment of all Senior Debt at the time
outstanding, and to any securities issued in respect thereof under any such
plan of reorganization or readjustment), which would otherwise (but for the
subordination provisions) be payable or
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deliverable in respect of such Subordinated Debt Securities shall be paid or
delivered directly to the holders of Senior Debt in accordance with the
priorities then existing among such holders until all Senior Debt (including
any interest thereon accruing after the commencement of any such proceedings)
shall have been paid in full (Section 1601 of the Subordinated Indentures).
In the event of any such proceeding, after payment in full of all sums owing
with respect to Senior Debt, the Holders of Senior Subordinated Debt
Securities or Junior Subordinated Debt Securities, as the case may be,
together with the holders of any obligations of the Company ranking on par
with Senior Subordinated Debt Securities or Junior Subordinated Debt
Securities, as the case may be, shall be entitled to be repaid from the
remaining assets of the Company the amounts at the time due and owing on
account of unpaid principal, premium, if any, and interest, if any, on such
Subordinated Debt Securities and such other obligations before any payment or
other distribution, whether in cash, property or otherwise, shall be made on
account of any capital stock or obligations of the Company ranking junior to
such Subordinated Debt Securities and such other obligations. If any payment
or distribution on account of the principal of or interest on the Senior
Subordinated Debt Securities or Junior Subordinated Debt Securities, as the
case may be, of any character or any security, whether in cash, securities or
other property (other than securities of the Company or any other company
provided for by a plan of reorganization or readjustment the payment of which
is subordinate, at least to the extent provided in the subordination
provisions with respect to such Subordinated Debt Securities, to the payment
of all Senior Debt at the time outstanding and to any securities issued in
respect thereof under any such plan of reorganization or readjustment) shall
be received by any Holder of any such Subordinated Debt Securities in
contravention of any of the terms of the applicable Subordinated Indenture and
before all the Senior Debt shall have been paid in full, such payment or
distribution or security shall be received in trust for the benefit of, and
shall be paid over or delivered and transferred to, the holders of the Senior
Debt at the time outstanding in accordance with the priorities then existing
among such holders for application to the payment of all Senior Debt remaining
unpaid to the extent necessary to pay all such Senior Debt in full (Section
1601 of the Subordinated Indentures). By reason of such subordination, in the
event of the insolvency of the Company, holders of Senior Debt may receive
more, ratably, and holders of the Subordinated Debt Securities having a claim
pursuant to such securities may receive less, ratably, than the other
creditors of the Company. Such subordination will not prevent the occurrence
of any Event of Default in respect of the Subordinated Debt Securities.
The Subordinated Indentures may be modified or amended as provided under
"Modification and Waiver" above, provided that no such modification or
amendment may, without the consent of the holders of all Senior Debt
outstanding, modify any of the provisions of the Subordinated Indentures
relating to the subordination of the Subordinated Debt Securities and any
related coupons in a manner adverse to such holders (Section 902 of the
Subordinated Indentures).
CONVERSION OF SUBORDINATED CONVERTIBLE SECURITIES
The Holders of Subordinated Debt Securities of a specified series that are
convertible into Preferred Stock, Depositary Shares or Common Stock of the
Company ("Subordinated Convertible Securities") will be entitled at certain
times specified in the applicable Prospectus Supplement, subject to prior
redemption, repayment or repurchase, to convert any Subordinated Convertible
Securities of such series (in denominations set forth in the Prospectus
Supplement) into Preferred Stock, Depositary Shares or Common Stock, as the
case may be, at the conversion price set forth in the applicable Prospectus
Supplement, subject to adjustment as described below and in the Prospectus
Supplement. Except as described below, no adjustment will be made on
conversion of any Subordinated Convertible Securities for interest accrued
thereon or for dividends on any Preferred Stock, Depositary Shares or Common
Stock issued on such conversion (Section 1703 of the Subordinated Indentures).
If any Subordinated Convertible Securities not called for redemption or
submitted for repayment are converted between a Regular Record Date for the
payment of interest and the next succeeding Interest Payment Date, such
Subordinated Convertible Securities must be accompanied by funds equal to the
interest payable on such succeeding Interest Payment Date on the principal
amount so converted (Section 1703 of the Subordinated Indentures). The Company
is not required to issue fractional shares of Common Stock upon conversion of
Subordinated Convertible Securities that are convertible into Common Stock
and, in lieu thereof, will pay a cash
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adjustment based upon the Closing Price (as defined in the Subordinated
Indentures) of the Common Stock on the last business day prior to the date of
conversion (Section 1704 of the Subordinated Indentures). In the case of
Subordinated Convertible Securities called for redemption or submitted for
repayment, conversion rights will expire at the close of business on the
redemption date or repayment date, as the case may be (Section 1702 of the
Subordinated Indentures).
Unless otherwise indicated in the applicable Prospectus Supplement, the
conversion price for Subordinated Convertible Securities that are convertible
into Common Stock is subject to adjustment under formulas set forth in the
Subordinated Indentures in certain events, including (i) the issuance of
capital stock as a dividend or distribution on the Common Stock; (ii)
subdivisions and combinations of the Common Stock; (iii) the issuance to all
holders of Common Stock of certain rights or warrants entitling them to
subscribe for or purchase Common Stock within 45 days after the date fixed for
the determination of the shareholders entitled to receive such rights or
warrants, at less than the current market price (as defined in the
Subordinated Indentures); and (iv) the distribution to all holders of Common
Stock of evidences of indebtedness or assets of the Company (excluding certain
cash dividends and distributions described in the next paragraph) or rights or
warrants (excluding those referred to above) (Section 1706 of the Subordinated
Indentures). In the event that the Company shall distribute any rights or
warrants to acquire capital stock ("Capital Stock Rights") pursuant to which
separate certificates representing such Capital Stock Rights will be
distributed subsequent to the initial distribution of such Capital Stock
Rights (whether or not such distribution shall have occurred prior to the date
of the issuance of a series of Subordinated Convertible Securities), such
subsequent distribution shall be deemed to be the distribution of such Capital
Stock Rights; provided that the Company may, in lieu of making any adjustment
in the conversion price upon a distribution of separate certificates
representing such Capital Stock Rights, make proper provision so that each
Holder of such a Subordinated Convertible Security who converts such
Subordinated Convertible Security (or any portion thereof) (a) before the
record date for such distribution of separate certificates shall be entitled
to receive upon such conversion shares of Common Stock issued with Capital
Stock Rights and (b) after such record date and prior to the expiration,
redemption or termination of such Capital Stock Rights shall be entitled to
receive upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion, the same number of such Capital Stock Rights as
would a holder of the number of shares of Common Stock that such Subordinated
Convertible Security so converted would have entitled the holder thereof to
acquire in accordance with the terms and provisions applicable to the Capital
Stock Rights if such Subordinated Convertible Security were converted
immediately prior to the record date for such distribution. Common Stock owned
by or held for the account of the Company or any majority owned subsidiary
shall not be deemed outstanding for the purpose of any adjustment.
No adjustment in the conversion price of Subordinated Convertible Securities
that are convertible into Common Stock will be made for regular quarterly or
other periodic or recurring cash dividends or distributions or for cash
dividends or distributions to the extent paid from retained earnings. No
adjustment will be required unless such adjustment would require a change of
at least 1% in the conversion price then in effect; provided that any such
adjustment not so made will be carried forward and taken into account in any
subsequent adjustment; and provided further that any such adjustment not so
made shall be made no later than three years after the occurrence of the event
requiring such adjustment to be made or carried forward. Notwithstanding any
of the foregoing, the issuance of Common Stock under the Company's Dividend
Reinvestment and Optional Cash Payment Plan (the "DRIP") shall not require an
adjustment in the conversion price of Subordinated Convertible Securities that
are convertible into Common Stock. The Company reserves the right to make such
reductions in the conversion price in addition to those required in the
foregoing provisions as the Company in its discretion shall determine to be
advisable in order that certain stock-related distributions thereafter made by
the Company to its shareholders shall not be taxable (Section 1706 of the
Subordinated Indentures). Except as stated above, the conversion price will
not be adjusted for the issuance of Common Stock or any securities convertible
into or exchangeable for Common Stock, or securities carrying the right to
purchase any of the foregoing.
In the case of (i) a reclassification or change of the Common Stock, (ii) a
consolidation or merger involving the Company, or (iii) a sale or conveyance
to another corporation of the property and assets of the Company as
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an entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock will be entitled to receive stock, securities, other
property or assets (including cash) in respect of, or in exchange for, such
Common Stock, the Holders of the Subordinated Convertible Securities then
outstanding that are convertible into Common Stock will be entitled thereafter
to convert such Subordinated Convertible Securities into the kind and amount
of shares of stock and other securities or property which they would have
received upon such reclassification, change, consolidation, merger, sale or
conveyance had such Subordinated Convertible Securities been converted into
Common Stock immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance (Section 1707 of the Subordinated
Indentures).
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price of
Subordinated Convertible Securities that are convertible into Common Stock,
the Holders of such Subordinated Convertible Securities may, in certain
circumstances, be deemed to have received a distribution subject to United
States federal income tax as a dividend; in certain other circumstances, the
absence of such an adjustment may result in a taxable dividend to the holders
of Common Stock or such Subordinated Convertible Securities.
PARTICULAR TERMS OF JUNIOR SUBORDINATED DEBT SECURITIES
ISSUED IN CONNECTION WITH PREFERRED SECURITIES
The statements under this caption are brief summaries of certain provisions
of the Junior Subordinated Indenture that will be applicable to Junior
Subordinated Debt Securities issued in connection with Preferred Securities
(unless otherwise provided in the Prospectus Supplement relating to such
Preferred Securities) and do not purport to be complete and are qualified in
their entirety by reference to the Junior Subordinated Indenture.
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Junior Subordinated Debt
Securities, which will be the sole assets of the Financing Trusts.
In the event Junior Subordinated Debt Securities are issued to a Financing
Trust (or a Trustee of a Financing Trust) in connection with the issuance of
Trust Securities by the Financing Trust, such Junior Subordinated Debt
Securities subsequently may be distributed pro rata to the Holders of the
Trust Securities in connection with the dissolution of the Financing Trust
upon the occurrence of certain events described in a Prospectus Supplement
relating to such Trust Securities. Only one series of Junior Subordinated Debt
Securities will be issued to the Financing Trust, or a Trustee of such
Financing Trust, in connection with the issuance of Trust Securities by the
Financing Trust.
If Junior Subordinated Debt Securities are issued to a Financing Trust or to
a Trustee of a Financing Trust in connection with the issuance of Trust
Securities and (i) there shall have occurred any event that would constitute
an Event of Default under the Junior Subordinated Indenture, (ii) the Company
shall be in default with respect to its payment of any obligations under the
related Preferred Securities Guarantee or limited guarantee of the Common
Securities, or (iii) the Company shall have given notice of its election to
defer payments of interest on such Junior Subordinated Debt Securities by
extending the interest payment period as provided in the Junior Subordinated
Indenture and such period, or any extension thereof, shall be continuing, then
(a) the Company shall not declare or pay dividends on, or make a distribution
with respect to or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of its capital stock, and (b) the Company shall not make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities issued by the Company that rank on par with or
junior to such Junior Subordinated Debt Securities; provided, however, that,
restriction (a) above does not apply to any stock dividends paid by the
Company where the dividend stock is the same stock as that on which the
dividend is being paid.
If the Company fails to make interest or other payments on the Junior
Subordinated Debt Securities when due, the Declaration provides a mechanism
whereby the holders of the Preferred Securities may direct the Property
Trustee to enforce its rights under the Junior Subordinated Debt Securities.
If the Property Trustee fails
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to enforce its rights under the Junior Subordinated Debt Securities, any
holder of Preferred Securities may institute a legal proceeding against the
Company to enforce the Property Trustee's rights under the Junior Subordinated
Debt Securities without first instituting any legal proceeding against the
Property Trustee or any other person or entity. Notwithstanding the foregoing,
if the Company has failed to pay interest or principal on the Junior
Subordinated Debt Securities on the date such interest or principal is
otherwise payable, then, pursuant to the terms of the Junior Subordinated
Indenture, a holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such holder directly of the principal
of or interest on the Junior Subordinated Debt Securities having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities
of such holder on or after the respective due date specified in the Junior
Subordinated Debt Securities.
In the event Junior Subordinated Debt Securities are issued to a Financing
Trust or a Trustee of a Financing Trust, in connection with the issuance of
Trust Securities, for so long as the Trust Securities remain outstanding, the
Company will covenant (i) to directly or indirectly maintain 100% ownership of
the Common Securities; provided, however, that any permitted successor of the
Company under the Junior Subordinated Indenture may succeed to the Company's
ownership of such Common Securities; and (ii) to use its reasonable efforts to
cause the Financing Trust (a) to remain a statutory business trust, except in
connection with the distribution of Junior Subordinated Debt Securities to the
holders of Trust Securities in liquidation of the Financing Trust, the
redemption of all of the Trust Securities, or certain mergers, consolidations
or amalgamations, each as permitted by the Declaration, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of the Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), the By-Laws
of the Company (the "By-Laws") and a Rights Agreement between the Company and
Norwest Bank Minnesota, National Association, as Rights Agent (as amended, the
"Rights Agreement"), does not purport to be complete and is qualified in its
entirety by reference to such documents, copies of which are included as
exhibits to the Registration Statement.
Rule 13e-4 and Rule 14e-1 of the Commission's rules and regulations relating
to tender offers, as currently in effect and interpreted by the Commission's
staff, may be applicable to certain repurchases of Offered Securities that are
equity securities or exchange or conversion of Offered Securities for such
equity securities. If, at the time of any such repurchase, exchange or
conversion, Rule 13e-4 or Rule 14e-1 (or any successor rule) applies to such
transaction, the Company will comply with such rule (or any successor rule)
and will afford holders of such Offered Securities all rights and will make
all filings required by such rule (or successor rule). Rule 13e-4 and Rule
14e-1 may also be deemed to apply to Offered Securities that are mandatorily
convertible into equity securities.
GENERAL
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock and 7,000,000 shares of Preferred Stock, all without par
value.
All issued and outstanding shares of Common Stock are, and the shares
issuable upon conversion of or in exchange for any Offered Securities will be,
fully paid and non-assessable. Holders of shares of Common Stock and holders
of shares of Preferred Stock do not have any preemptive rights to subscribe
for or purchase any securities of the Company, except, with respect to shares
of Preferred Stock, such preemptive rights as may be provided in the
resolution or resolutions of the Board of Directors of the Company or a
committee designated by the Board of Directors of the Company providing for
the issuance thereof. Holders of shares of Common Stock have the rights
described below under "Share Rights Plan."
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PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors of the
Company to issue, without action or approval of the Company's shareholders,
one or more series of Preferred Stock with such designations, voting powers,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated in the
resolution or resolutions providing for the issuance thereof.
There are also currently reserved for issuance up to 2,500,000 shares of
Series A Junior Participating Preferred Stock ("Junior Participating Preferred
Stock") of the Company issuable under the Rights Agreement referred to below
under "Share Rights Plan."
DIVIDENDS
Under Delaware law, subject to restrictions contained in the Certificate of
Incorporation discussed in the following paragraph, dividends may be declared
or paid out of surplus of the Company or, if there is no such surplus, out of
net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year.
The Certificate of Incorporation provides that so long as there are
outstanding any shares of Preferred Stock entitled to cumulative dividends, no
dividends (other than dividends payable in shares of Common Stock) may be paid
or declared, nor may any distribution be made, on shares of Common Stock, nor
may any shares of Common Stock be purchased, redeemed or otherwise acquired
for value by the Company (other than in exchange for, or through application
of the proceeds of the sale of, shares of Common Stock) if the Company is in
default with respect to any dividend payable on, or obligation to redeem or to
maintain a purchase, retirement or sinking fund with respect to, shares of
Preferred Stock.
The Company is primarily a holding company owning, directly or indirectly,
the capital stock of ReliaStar Life, other insurance company subsidiaries, and
other subsidiaries. There are legal limitations on the extent to which
ReliaStar Life and the Company's other insurance company subsidiaries may pay
dividends or lend or otherwise supply funds to the Company or ReliaStar Life.
The payment of future dividends by the Company will be largely dependent
upon the ability of ReliaStar Life to pay dividends to the Company. Under
Minnesota insurance law regulating the payment of dividends by ReliaStar Life,
any such payments shall be in an amount deemed prudent by ReliaStar Life's
board of directors and, unless otherwise approved by the Commissioner, must be
paid solely from the adjusted earned surplus of ReliaStar Life. Adjusted
earned surplus means the earned surplus as determined in accordance with
statutory accounting principles (unassigned funds) less 25% of the amount of
such earned surplus that is attributable to net unrealized capital gains.
Further, without approval of the Commissioner, ReliaStar Life may not pay in
any calendar year any dividend that, when combined with other dividends paid
within the preceding 12 months, exceeds the greater of (i) 10% of ReliaStar
Life's statutory surplus at the prior year end or (ii) 100% of ReliaStar
Life's statutory net gain from operations (not including realized capital
gains) for the prior calendar year.
The payment of future dividends by the Company may be affected by the
foregoing limitations, further restrictions and limitations in the event of
statutory or regulatory changes and by such other factors as the Board of
Directors of the Company may deem relevant. See also "Particular Terms of
Junior Subordinated Debt Securities Issued in Connection with Preferred
Securities."
VOTING RIGHTS
The Certificate of Incorporation provides that, except as otherwise provided
by law or the Certificate of Incorporation, holders of shares of Common Stock
are entitled to one vote per share. Holders of shares of Common Stock do not
have any cumulative voting rights.
Except as otherwise provided by law or by the resolution or resolutions
providing for the issuance thereof, holders of shares of Preferred Stock have
no voting rights.
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The Certificate of Incorporation requires the affirmative vote of 75% of the
Company's outstanding capital stock entitled to vote, voting as a single
class, (i) to approve certain "Business Combinations" involving an "Interested
Shareholder" unless the transaction is approved by a majority of the
"Continuing Directors," as these terms are defined in the Certificate of
Incorporation (the "Fair Price Provision"), (ii) to remove directors, (iii) to
effect certain amendments to the Certificate of Incorporation, and (iv) in
order for the shareholders of the Company to amend its By-Laws.
SHARE RIGHTS PLAN
Pursuant to the Rights Agreement, each share of Common Stock issued by the
Company has attached one preferred share purchase right (a "Right"). Each
Right entitles the registered holder to purchase from the Company one-tenth of
a share of Junior Participating Preferred Stock at an exercise price of $200,
subject to adjustment.
Until the Distribution Date, the Rights will be evidenced by certificates
representing shares of Common Stock and will be transferred only with the
shares of Common Stock. The Rights will separate from the shares of Common
Stock and a Distribution Date for the Rights will occur upon the earlier of
(i) the close of business on the 15th day following a public announcement that
a person or group of affiliated or associated persons (an "Acquiring Person")
has acquired, or obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding shares of Common Stock, or (ii) the close of business
on the 15th day following the commencement or announcement of a tender or
exchange offer the consummation of which would result in a person or group of
affiliated or associated persons becoming the beneficial owner of 20% or more
of the outstanding shares of Common Stock.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on September 8, 2004, unless extended or earlier redeemed by the
Company.
In the event that (i) the Company is the surviving corporation in a merger,
consolidation or statutory share exchange with an Acquiring Person and
outstanding shares of the Company are not changed or exchanged, (ii) an
Acquiring Person engages in one of a number of self-dealing transactions
specified in the Rights Agreement, (iii) an Acquiring Person increases by more
than 1% its proportion of beneficial ownership of the outstanding shares of
any class of equity securities or securities exercisable for or convertible
into equity securities of the Company or any of its subsidiaries pursuant to a
recapitalization, reclassification or similar transaction, or (iv) a person
(other than the Company and certain of its affiliates) becomes a beneficial
owner of 20% or more of the outstanding shares of Common Stock, each holder of
a Right (other than Rights beneficially owned by an Acquiring Person or, in
certain circumstances, transferees) will thereafter have the right to receive,
upon exercise thereof at the then current exercise price of the Right, that
number of shares of Common Stock having a market value of two times the
exercise price of the Right, subject to certain possible adjustments.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of the assets or earning power of the
Company and its subsidiaries (taken as a whole) are sold after a public
announcement that a person has become an Acquiring Person, each holder of a
Right will thereafter have the right to receive, upon exercise thereof at the
then current exercise price of the Right, that number of common shares of the
Acquiring Person (or in certain cases, one of its affiliates) having a market
value of two times the exercise price of the Right.
In certain instances, the Company may exchange Rights for shares of Common
Stock or reduce the 20% stock ownership threshold to not less than 10%.
The Rights are redeemable at a price of one cent per Right at any time prior
to the 30th day after a public announcement that a person has become an
Acquiring Person, provided, however, that such redemption may occur after any
person has become an Acquiring Person only if there has not been a change in
control of the Board of Directors of the Company. The redemption period may be
extended if no such change in control has occurred or if no person has become
an Acquiring Person.
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LIQUIDATION
Subject to preferential payments due or other rights with respect to any
shares of Preferred Stock that may then be issued and outstanding, in the
event of any liquidation of the Company the holders of Common Stock are
entitled to share, in proportion to the number of shares of Common Stock held,
in the assets remaining after discharge of all obligations and liabilities of
the Company.
LIMITATIONS ON CHANGE IN CONTROL
The Certificate of Incorporation and the By-Laws provide that the Board of
Directors of the Company will be divided into three classes serving staggered
terms, with one class of directors to be elected for a three-year term at each
annual meeting of shareholders. As a result, at least two meetings of the
Company's shareholders will generally be required for the Company's
shareholders to effect a change in control of the Board of Directors of the
Company. The Certificate of Incorporation and the By-Laws also provide that
shareholder action may be taken only at annual or special meetings of
shareholders, and may not be taken by shareholder consent, and that
shareholders are not permitted to call, or to require the Company's Board of
Directors to call, special meetings of shareholders. The Certificate of
Incorporation provides that, when considering a merger, consolidation, sale of
assets, business combination (including a Business Combination under the Fair
Price Provision) or other transaction (including a tender or exchange offer),
the Company's Board of Directors, any committee thereof and the directors and
the officers of the Company may, in considering the best interests of the
Company and its shareholders, consider the interests of and the effects of
such transaction upon the employees, customers and suppliers of the Company
and its subsidiaries and upon communities in which the Company and its
subsidiaries are located or do business. The By-Laws provide that advance
notice of nominations for the election of directors to be made at, and
business to be brought before, an annual meeting of shareholders by a
shareholder must be received by the Secretary of the Company not less than 60
days in advance of such meeting (except that if public disclosure of such
meeting is made less than 75 days prior to the meeting, the notice need only
be received within 15 days following such public disclosure). The Company has
entered into agreements with certain of its executive employees for certain
financial arrangements that the Company will provide upon termination of
employment under certain circumstances following a change in control of the
Company. In addition, certain retirement and other employee benefit
arrangements provide for accelerated vesting of benefits and allocation to
participants of surplus retirement plan benefits upon a change in control of
the Company. The foregoing provisions and agreements, the voting provisions,
including the Fair Price Provision, referred to above under "Voting Rights,"
the Rights Agreement and the authority of the Board of Directors of the
Company to issue additional shares of capital stock, without action or
approval of the shareholders, could have the effect of discouraging, delaying
or preventing a tender or exchange offer, proxy contest or other attempt to
gain control of or change the management of the Company.
LIMITATION ON CERTAIN LIABILITY OF DIRECTORS AND INDEMNIFICATION
The Certificate of Incorporation and the By-Laws contain provisions limiting
the liability of directors for monetary damages to the Company and its
shareholders for breach of fiduciary duty of care to the Company and
authorizing the indemnification of directors, officers and employees to the
fullest extent permitted by Delaware law. The Company maintains a directors'
and officers' liability insurance policy.
TRANSFER AGENT
The Transfer Agent for the Company's Common Stock is Norwest Bank Minnesota,
National Association.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of Depositary
Shares and Depositary Receipts does not purport to be complete
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and is subject to and qualified in its entirety by reference to the Deposit
Agreement and Depositary Receipts relating to a series of Preferred Stock,
which will be filed with the Commission at or prior to the time of the
offering of such series.
GENERAL
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock rather than full shares. In the event such option is
exercised, the Company will provide for the issuance by a Depositary to the
public of Depositary Receipts evidencing Depositary Shares, each of which will
represent a fractional interest (to be set forth in the Prospectus Supplement
relating to a particular series of Depositary Shares) in a share of a
particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock underlying Depositary Shares
will be deposited under a separate deposit agreement (the "Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). The Prospectus Supplement
relating to a series of Depositary Shares will set forth the name and address
of the Depositary. Subject to the terms of the Deposit Agreement, each owner
of a Depositary Share will be entitled, in proportion to the applicable
fractional interest in a share of Preferred Stock underlying such Depositary
Share, to all the rights and preferences of the shares of Preferred Stock
underlying such Depositary Share (including dividend, voting, redemption,
conversion and liquidation rights).
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts
but not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will
be exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of the Depositary Receipts at the principal office of the
Depositary in Minneapolis (unless the related Depositary Shares have
previously been called for redemption), the holder of the Depositary Shares
evidenced thereby is entitled to delivery at such office, to or upon the
holder's order, of the number of shares of Preferred Stock and any money or
other property represented by such Depositary Shares. Fractional shares will
not be issued. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of whole shares of Preferred Stock to be withdrawn,
the Depositary will deliver to such holder at the same time a new Depositary
Receipt evidencing such excess number of Depositary Shares. Holders of shares
of Preferred Stock thus withdrawn will not thereafter be entitled to deposit
such shares under the Deposit Agreement or to receive Depositary Shares
therefor. The Company does not expect that there will be any public trading
market for underlying shares of Preferred Stock except as represented by the
Depositary Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the underlying shares of Preferred Stock
to the record holders of related Depositary Shares in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction
of one cent, and any balance not so distributed shall be added to and treated
as part of the next sum received by the Depositary for distribution to record
holders of Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute to such holders the net
proceeds received from such sale.
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The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
the shares of Preferred Stock shall be made available to holders of Depositary
Shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of Preferred Stock underlying Depositary Shares is subject to
redemption, the Depositary Shares will be redeemed from the proceeds received
by the Depositary resulting from the redemption, in whole or in part, of such
series of Preferred Stock held by the Depositary. The Depositary shall mail
notice of redemption not less than 30 and not more then 60 days prior to the
date fixed for redemption to the record holders of the Depositary Shares to be
so redeemed at their respective addresses appearing in the Depositary's books.
The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such series
of Preferred Stock. Whenever the Company redeems shares of Preferred Stock
held by the Depositary, the Depositary will redeem as of the same redemption
date the number of Depositary Shares relating to the shares so redeemed. If
less than all the Depositary Shares are to be redeemed, the Depositary Shares
to be redeemed will be selected by lot or pro rata as may be determined by the
Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of such Depositary Shares will cease, except the right to receive the
moneys payable upon such redemption and any money or other property to which
the holders of such Depositary Shares were entitled upon such redemption upon
surrender to the Depositary of the Depositary Receipts evidencing such
Depositary Shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the shares of
any series of Preferred Stock are entitled to vote, the Depositary will mail
the information contained in such notice of meeting to the record holders of
the Depositary Shares relating to such shares. Each record holder of such
Depositary Shares on the record date (which will be the same date as the
record date for the shares) will be entitled to instruct the Depositary as to
the exercise of the voting rights pertaining to the number of shares of
Preferred Stock underlying such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the number of shares underlying
such Depositary Shares in accordance with such instructions, and the Company
will agree to take all action that may be deemed necessary by the Depositary
in order to enable the Depositary to do so. The Depositary will abstain from
voting shares to the extent it does not receive specific instructions from the
recordholders of related Depositary Shares.
TAXATION
Owners of Depositary Shares will be treated for federal income tax purposes
as if they were owners of the shares of Preferred Stock represented by such
Depositary Shares and, accordingly, will be entitled to take into account for
federal income tax purposes income and deductions to which they would be
entitled if they were holders of such shares. In addition, (i) no gain or loss
will be recognized for federal income tax purposes upon the withdrawal of
shares in exchange for Depositary Shares as provided in the Deposit Agreement,
(ii) the tax basis of each share to an exchanging owner of Depositary Shares
will, upon such exchange, be the same as the aggregate tax basis of the
Depositary Shares exchanged therefor, and (iii) the holding period for the
shares in the hands of an exchanging owner of Depositary Shares who held such
Depositary Shares as a capital asset at the time of the exchange thereof for
shares will include the period during which such person owned such Depositary
Shares.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any
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amendment which materially and adversely alters the rights of the existing
holders of Depositary Shares will not be effective unless such amendment has
been approved by the record holders of at least a majority of the Depositary
Shares then outstanding. A Deposit Agreement may be terminated by the Company
or the Depositary only if (i) all outstanding Depositary Shares relating
thereto have been redeemed or (ii) there has been a final distribution in
respect of the shares of Preferred Stock of the relevant series in connection
with any liquidation, dissolution or winding up of the Company and such
distribution has been distributed to the holders of the related Depositary
Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of
the shares of Preferred Stock and any redemption of such shares. Holders of
Depositary Shares will pay other transfer and other taxes and governmental
charges and such other charges as are expressly provided in the Deposit
Agreement to be for their accounts.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Company which are delivered to the Depositary and
which the Company is required to furnish to the holders of underlying shares
of Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares
or shares of Preferred Stock unless satisfactory indemnity is furnished. They
may rely upon written advice of counsel or accountants, or information
provided by holders of Depositary Shares or other persons believed to be
competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Stock, Depositary Shares or Common Stock. Securities
Warrants may be issued independently or together with Debt Securities,
Preferred Stock or Depositary Shares offered by any Prospectus Supplement and
may be attached to or separate from such Debt Securities, Preferred Stock or
Depositary Shares. Each series of Securities Warrants will be issued under a
separate warrant agreement (a "Securities Warrant Agreement") to be entered
into between the Company and a bank or trust company, as Securities Warrant
Agent, all as set forth in the Prospectus Supplement relating to the
particular issue of offered Securities Warrants. The Securities Warrant Agent
will act solely as an agent of the Company in connection with the Securities
Warrant Certificates and will not assume any obligation or relationship of
agency or trust for or with any holders of Securities Warrant Certificates or
beneficial owners of Securities Warrants. Copies of the forms of Securities
Warrant Agreements, including the forms of Securities Warrant Certificates
representing the Securities Warrants, are filed as exhibits to the
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Registration Statement. The following summaries of certain provisions of the
forms of Securities Warrant Agreements and Securities Warrant Certificates do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Securities Warrant
Agreements and the Securities Warrant Certificates.
GENERAL
If Securities Warrants are offered, the applicable Prospectus Supplement
will describe the terms of such Securities Warrants, including, in the case of
Securities Warrants for the purchase of Debt Securities, the following where
applicable: (i) the offering price; (ii) the currencies in which such
Securities Warrants are being offered; (iii) the designation, aggregate
principal amount, currencies, denominations and terms of the series of Debt
Securities purchasable upon exercise of such Securities Warrants; (iv) the
designation and terms of any series of Debt Securities, Preferred Stock or
Depositary Shares with which such Securities Warrants are being offered and
the number of such Securities Warrants being offered with each such Debt
Security, share of Preferred Stock or Depositary Share; (v) the date on and
after which such Securities Warrants and the related series of Debt
Securities, Preferred Stock or Depositary Shares will be transferable
separately; (vi) the principal amount of the series of Debt Securities
purchasable upon exercise of each such Securities Warrant and the price at
which and currencies in which such principal amount of Debt Securities of such
series may be purchased upon such exercise; (vii) the date on which the right
to exercise such Securities Warrants shall commence and the date (the
"Expiration Date") on which such right shall expire; (viii) whether the
Securities Warrants will be issued in registered or bearer form; (ix) United
States federal income tax consequences; and (x) any other terms of such
Securities Warrants.
In the case of Securities Warrants for the purchase of Preferred Stock,
Depositary Shares or Common Stock, the applicable Prospectus Supplement will
describe the terms of such Securities Warrants, including the following where
applicable: (i) the offering price; (ii) the aggregate number of shares
purchasable upon exercise of such Securities Warrants and, in the case of
Securities Warrants for Preferred Stock or Depositary Shares, the designation,
aggregate number of shares and terms of the series of Preferred Stock
purchasable upon exercise of such Securities Warrants or underlying the
Depositary Shares purchasable upon exercise of such Securities Warrants; (iii)
the designation and terms of the series of Debt Securities, Preferred Stock or
Depositary Shares with which such Securities Warrants are being offered and
the number of such Securities Warrants being offered with each such Debt
Security, share of Preferred Stock or Depositary Share; (iv) the date on and
after which such Securities Warrants and the related series of Debt
Securities, shares of Preferred Stock or Depositary Shares will be
transferable separately; (v) the number of shares of Preferred Stock,
Depositary Shares or shares of Common Stock purchasable upon exercise of each
such Securities Warrant and the price at which such number of shares of
Preferred Stock or Depositary Shares of such series or shares of Common Stock
may be purchased upon each exercise; (vi) the date on which the right to
exercise such Securities Warrants shall commence and the Expiration Date;
(vii) United States federal income tax consequences; and (viii) any other
terms of such Securities Warrants. Securities Warrants for the purchase of
Preferred Stock, Depositary Shares or Common Stock will be offered and
exercisable for U.S. dollars only and will be in registered form only.
Securities Warrant Certificates may be exchanged for new Securities Warrant
Certificates of different denominations, may (if in registered form) be
presented for registration of transfer and may be exercised at the corporate
trust office of the Securities Warrant Agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrant to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of Holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal of or any
premium or interest on the Debt Securities purchasable upon such exercise or
to enforce covenants in the applicable Indenture. Prior to the exercise of any
Securities Warrants to purchase Preferred Stock, Depositary Shares or Common
Stock, holders of such Securities Warrants will not have any of the rights of
holders of the Preferred Stock, Depositary Shares or Common Stock purchasable
upon such exercise, including the right to receive payments of dividends, if
any, on the Preferred Stock, Depositary Shares or Common Stock purchasable
upon such exercise or to exercise any applicable right to vote.
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EXERCISE OF SECURITIES WARRANTS
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or number of shares of Preferred Stock,
Depositary Shares or shares of Common Stock, as the case may be, at such
exercise price as shall in each case be set forth in, or calculable from, the
applicable Prospectus Supplement. After the close of business on the
Expiration Date (or such later date to which such Expiration Date may be
extended by the Company), unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivering to the Securities Warrant
Agent payment as provided in the applicable Prospectus Supplement of the
amount required to purchase the Debt Securities, Preferred Stock, Depositary
Shares or Common Stock, as the case may be, purchasable upon such exercise
together with certain information set forth on the reverse side of the
Securities Warrant Certificate. Securities Warrants will be deemed to have
been exercised upon receipt of payment of the exercise price, subject to the
receipt, within five business days, of the Securities Warrant Certificate
evidencing such Securities Warrants. Upon receipt of such payment and the
Securities Warrant Certificate properly completed and duly executed at the
corporate trust office of the Securities Warrant Agent or any other office
indicated in the Prospectus Supplement, the Company will, as soon as
practicable, issue and deliver the Debt Securities, Preferred Stock,
Depositary Shares or Common Stock, as the case may be, purchasable upon such
exercise. If fewer than all of the Securities Warrants represented by such
Securities Warrant Certificate are exercised, a new Securities Warrant
Certificate will be issued for the remaining amount of Securities Warrants.
AMENDMENTS AND SUPPLEMENTS TO SECURITIES WARRANT AGREEMENTS
The Securities Warrant Agreements may be amended or supplemented without the
consent of the holders of the Securities Warrants issued thereunder to effect
changes that are not inconsistent with the provisions of the Securities
Warrants and that do not adversely affect the interests of the holders of the
Securities Warrants.
COMMON STOCK WARRANT ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by, a
Common Stock Warrant are subject to adjustment in certain events, including
(i) the issuance of capital stock as a dividend or distribution on the Common
Stock; (ii) subdivisions and combinations of the Common Stock; (iii) the
issuance to all holders of Common Stock of certain rights or warrants
entitling them to subscribe for or purchase Common Stock within 45 days after
the date fixed for the determination of the shareholders entitled to receive
such rights or warrants, at less than the current market price (as defined in
the Warrant Agreement for such series of Common Stock Warrants); and (iv) the
distribution to all holders of Common Stock of evidences of indebtedness or
assets of the Company (excluding certain cash dividends and distributions
described in the next paragraph) or rights or warrants (excluding those
referred to above). In the event that the Company shall distribute any rights
or warrants to acquire capital stock pursuant to clause (iv) above (the
"Capital Stock Rights") pursuant to which separate certificates representing
such Capital Stock Rights will be distributed subsequent to the initial
distribution of such Capital Stock Rights (whether or not such distribution
shall have occurred prior to the date of the issuance of a series of Common
Stock Warrants), such subsequent distribution shall be deemed to be the
distribution of such Capital Stock Rights; provided that the Company may, in
lieu of making any adjustment in the exercise price of and the number of
shares of Common Stock covered by a Common Stock Warrant upon a distribution
of separate certificates representing such Capital Stock Rights, make proper
provision so that each holder of such a Common Stock Warrant who exercises
such Common Stock Warrant (or any portion thereof) (a) before the record date
for such distribution of separate certificates shall be entitled to receive
upon such exercise shares of Common Stock issued with Capital Stock Rights and
(b) after such record date and prior to the expiration, redemption or
termination of such Capital Stock Rights shall be entitled to receive upon
such exercise, in addition to the shares of Common Stock issuable upon such
exercise, the same number of such Capital Stock Rights as would a holder of
the number of shares of Common Stock that such Common Stock Warrant so
exercised would have entitled the holder thereof
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to acquire in accordance with the terms and provisions applicable to the
Capital Stock Rights if such Common Stock Warrant was exercised immediately
prior to the record date for such distribution. Common Stock owned by or held
for the account of the Company or any majority owned subsidiary shall not be
deemed outstanding for the purpose of any adjustment.
No adjustment in the exercise price of and the number of shares of Common
Stock covered by a Common Stock Warrant will be made for regular quarterly or
other periodic or recurring cash dividends or distributions or for cash
dividends or distributions to the extent paid from retained earnings. No
adjustment will be required unless such adjustment would require a change of
at least 1% in the exercise price then in effect; provided that any such
adjustment not so made will be carried forward and taken into account in any
subsequent adjustment; and provided further that any such adjustment not so
made shall be made no later than three years after the occurrence of the event
requiring such adjustment to be made or carried forward. Notwithstanding any
of the foregoing, the issuance of Common Stock under the DRIP shall not
require an adjustment in the exercise price of or number of shares of Common
Stock covered by a Common Stock Warrant. Except as stated above, the exercise
price of and the number of shares of Common Stock covered by a Common Stock
Warrant will not be adjusted for the issuance of Common Stock or any
securities convertible into or exchangeable for Common Stock, or securities
carrying the right to purchase any of the foregoing.
In the case of (i) a reclassification or change of the Common Stock, (ii) a
consolidation or merger involving the Company or, (iii) a sale or conveyance
to another corporation of the property and assets of the Company as an
entirety or substantially as an entirety, in each case as a result of which
holders of the Company's Common Stock will be entitled to receive stock,
securities, other property or assets (including cash) in respect of or in
exchange for such Common Stock, the holders of the Common Stock Warrants then
outstanding will be entitled thereafter to convert such Common Stock Warrants
into the kind and amount of shares of stock and other securities or property
which they would have received upon such reclassification, change,
consolidation, merger, sale or conveyance had such Common Stock Warrants been
exercised immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance.
DESCRIPTION OF PREFERRED SECURITIES OF THE FINANCING TRUSTS
Each Financing Trust may issue, from time to time, only one series of
Preferred Securities having terms described in a Prospectus Supplement
relating thereto. The Declaration of each Financing Trust will be qualified as
an indenture under the Trust Indenture Act.
The Preferred Securities will have such terms, including distributions,
redemption, exchange, sinking fund and liquidation provisions, voting and
other rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act. Reference is made to a Prospectus
Supplement relating to the Preferred Securities for specific terms, including
(i) the distinctive designation of the Preferred Securities, (ii) the number
of Preferred Securities and the date or dates upon which distributions shall
be payable (provided, however, that distributions on the Preferred Securities
shall be payable on a quarterly basis to holders of the Preferred Securities
as of a record date in each quarter during which the Preferred Securities are
outstanding), (iii) whether distributions on Preferred Securities issued by
the Financing Trust shall be cumulative, and, in the case of Preferred
Securities having such cumulative distribution rights, the date or dates or
method of determining the date or dates from which distributions on Preferred
Securities shall be cumulative, (iv) the amount or amounts which shall be paid
out of the assets of the Financing Trust to the holders of Preferred
Securities upon voluntary or involuntary dissolution, winding-up or
termination of the Trust, (v) the obligation, if any, of the Financing Trust
to purchase or redeem Preferred Securities and the price or prices at which,
the period or periods within which and the terms and conditions upon which the
Preferred Securities shall be purchased or redeemed, in whole or in part,
pursuant to such obligation, (vi) the voting rights, if any, of Preferred
Securities in addition to those required by law, including the number of votes
per Preferred Security and any requirement for the approval by the holders of
Preferred Securities as a
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condition to specified action or amendments to the Declaration, and (vii) any
other relevant rights, preferences, or privileges of, or limitations or
restrictions on, Preferred Securities consistent with the Declaration and
applicable law. The distribution rate and the distribution payment dates and
other payment dates for the Preferred Securities will correspond to the
interest rate and interest payment dates and other payment dates on the Junior
Subordinated Debt Securities, which will be the sole assets of the Financing
Trust.
All Preferred Securities offered hereby will be guaranteed by the Company to
the extent set forth below under "The Preferred Securities Guarantee." Certain
United States federal income tax considerations applicable to any offering of
Preferred Securities will be described in the Prospectus Supplement relating
thereto.
In connection with the issuance of Preferred Securities, each Financing
Trust will issue one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be set forth therein. The terms of the Common Securities will be
substantially identical to the terms of the Preferred Securities and the
Common Securities will rank on par, and payments will be made thereon pro
rata, with the Preferred Securities except that, upon an event of default
under the Declaration, the rights of the holders of the Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the
Preferred Securities. Except in certain limited circumstances, the Common
Securities will also carry the right to vote and to appoint, remove or replace
any of the ReliaStar Trustees. All of the Common Securities will be directly
or indirectly owned by the Company.
THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by the Company for
the benefit of the holders, from time to time, of Preferred Securities. The
Preferred Securities Guarantee will be qualified as an indenture under the
Trust Indenture Act. Wilmington Trust Company will act as indenture trustee
under the Preferred Securities Guarantee (the "Guarantee Trustee"). The terms
of the Preferred Securities Guarantee will be those set forth in the Preferred
Securities Guarantee and those made part of the Preferred Securities Guarantee
by the Trust Indenture Act. This summary does not purport to be complete and
is subject in all respects to the provisions of, and is qualified in its
entirety by reference to, the form of Preferred Securities Guarantee, which is
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and the Trust Indenture Act. The Preferred Securities Guarantee
will be held by the Guarantee Trustee for the benefit of the holders of the
Preferred Securities.
GENERAL
Pursuant to the Preferred Securities Guarantee, the Company will agree, to
the extent set forth herein, to pay in full to the holders of the Preferred
Securities the Guarantee Payments (as defined herein) (except to the extent
paid by the Financing Trust), as and when due, regardless of any defense,
right of set-off or counterclaim which the Financing Trust may have or assert.
The following payments or distributions with respect to Preferred Securities
(the "Guarantee Payments"), to the extent not paid or made by the Financing
Trust, will be subject to
the Preferred Securities Guarantee (without duplication): (i) any accrued and
unpaid distributions that are required to be paid on the Preferred Securities,
to the extent the Financing Trust shall have funds available therefor, (ii)
the redemption price, including all accrued and unpaid distributions (the
"Redemption Price"), to the extent the Financing Trust has funds available
therefor with respect to any Preferred Securities called for redemption by the
Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Financing Trust (other than in connection with the
distribution of Junior Subordinated Debt Securities to the holders of
Preferred Securities or the redemption of all the Preferred Securities) the
lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on the Preferred Securities to the date of payment to the
extent the Financing Trust has funds available therefor or (b) the amount of
assets of the Financing Trust remaining available for distribution to holders
of the Preferred Securities in liquidation of the Financing Trust. The
Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of Preferred
Securities or by causing the Financing Trust to pay such amounts to such
holders.
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The Preferred Securities Guarantee will be a guarantee on a subordinated
basis of the Guarantee Payments from the time of issuance, but will not apply
to any payment of distributions except to the extent the Financing Trust shall
have funds available therefor. If the Company does not make interest payments
on the Junior Subordinated Debt Securities purchased by the Financing Trust,
the Financing Trust will not pay distributions on the Preferred Securities and
will not have funds available therefor. See "Particular Terms of Junior
Subordinated Debt Securities Issued in Connection with Preferred Securities."
The Preferred Securities Guarantee, when taken together with the Company's
obligations under the Junior Subordinated Debt Securities, the Junior
Subordinated Indenture and the Declaration, including its obligations to pay
costs, expenses and certain liabilities of the Financing Trust (other than
with respect to the Trust Securities), provides a full and unconditional
guarantee of amounts due on the Preferred Securities.
CERTAIN COVENANTS OF THE COMPANY
In the Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the Financing Trust remain
outstanding, if there shall have occurred any event that would constitute an
event of default under the Preferred Securities Guarantee or the Declaration,
then (a) the Company shall not declare or pay any dividend on, or make any
distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock and (b) shall
not make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that which rank on par with or junior to such Junior Subordinated Debt
Securities. However, the Preferred Securities Guarantee will except from the
foregoing any stock dividends paid by the Company where the dividend stock is
the same as that on which the dividend is being paid.
MODIFICATIONS OF THE PREFERRED SECURITIES GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
the Preferred Securities Guarantee may be amended only with the prior approval
of the holders of a majority in liquidation amount of the Preferred Securities
then outstanding. All guarantees and agreements contained in a Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Company and shall inure to the benefit of the
holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Preferred Securities Guarantee will occur upon
the failure of the Company to make any of the payments required by the
Preferred Securities Guarantee or to perform its other obligations thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Preferred Securities Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Preferred Securities Guarantee.
If the Company fails to make any of the payments required by the Preferred
Securities Guarantee, a holder of Preferred Securities may directly institute
a proceeding against the Company for enforcement of such holder's rights to
receive such payments under the Preferred Securities Guarantee without first
instituting a legal proceeding against the Financing Trust, the Guarantee
Trustee or any other person or entity.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Preferred Securities Guarantee and as to any default in such
performance.
The Company is required to file annually with the Guarantee Trustee an
officer's certificate as to the Company's compliance with all conditions under
the Preferred Securities Guarantee.
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INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Preferred Securities Guarantee and after curing all such defaults that may
have occurred, undertakes to perform only such duties as are specifically set
forth in the Preferred Securities Guarantee and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to such provisions, the Guarantee Trustee
is under no obligation to exercise any of the powers vested in it by the
Preferred Securities Guarantee at the request of any holder of Preferred
Securities, unless offered reasonable indemnity against the costs, expenses
and liabilities which might be incurred thereby.
TERMINATION
The Preferred Securities Guarantee will terminate as to the Preferred
Securities upon full payment of the Redemption Price of all Preferred
Securities, upon distribution of the Junior Subordinated Debt Securities held
by the Financing Trust to the holders of the Preferred Securities or upon full
payment of the amounts payable in accordance with the Declaration upon
liquidation of the Financing Trust. The Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities must restore payment of any sums paid
under the Preferred Securities or the Preferred Securities Guarantee.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will constitute an unsecured obligation
of the Company and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Company, (ii) on par with the most senior
preferred or preference stock hereafter issued by the Company and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company and (iii) senior
to the Common Stock. The terms of the Preferred Securities provide that each
holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Preferred Securities
Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
Preferred Securities Guarantee without instituting a legal proceeding against
any other person or entity).
GOVERNING LAW
The Preferred Securities Guarantee will be governed by and construed in
accordance with the internal laws of the State of New York.
PLAN OF DISTRIBUTION
The Company may offer and sell the Offered Securities in any of three ways:
(i) through agents; (ii) through underwriters or dealers; or (iii) directly to
one or more purchasers. The Prospectus Supplement with respect to any of the
Offered Securities will set forth the terms of the offering of such Offered
Securities, including the name or names of any underwriters or agents, the
purchase price of such Offered Securities, the proceeds to the Company from
such sale, any underwriting discounts or agency fees and other items
constituting underwriters' or agents' compensation, the initial public
offering price, any discounts or concessions allowed or reallowed or paid to
dealers, and any securities exchanges on which such Offered Securities may be
listed.
The distribution of the Offered Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
33
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Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contributions with respect to payments which the underwriters, dealers or
agents may be required to make in respect thereof. Such underwriters, dealers
and agents, and affiliates thereof, may be customers of, engage in
transactions with, or perform services for the Company and its affiliates in
the ordinary course of business.
Each underwriter, dealer and agent participating in the distribution of any
Debt Securities that are issuable as Bearer Securities will agree that, in
connection with the original issuance of such Bearer Securities, it will not
offer, sell or deliver, directly or indirectly, Bearer Securities to a United
States Person or to any person within the United States, except to the extent
permitted under United States Treasury regulations.
All Offered Securities will be new issues of securities with no established
trading market. Any underwriters to whom Offered Securities are sold by the
Company for public offering and sale may make a market in such Offered
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given concerning the liquidity of the trading market for any Offered
Securities.
VALIDITY OF SECURITIES
The validity of the Debt Securities, Preferred Stock, Depository Shares and
Securities Warrants will be passed upon for the Company by Faegre & Benson
LLP, Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements of the Company and related financial
statement schedules as of December 31, 1996 and 1995 and for each of the three
years in the period ended December 31, 1996, incorporated herein by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
1996, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THE PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.............................................................. S-4
The Trust................................................................. S-8
ReliaStar Financial Corp.................................................. S-8
Capitalization of the Company............................................. S-17
Accounting Treatment...................................................... S-18
Use of Proceeds........................................................... S-18
Description of the Preferred Securities................................... S-18
Description of the Junior Subordinated Debt Securities.................... S-28
Effect of Obligations under the Junior Subordinated Debt Securities and
the Preferred Securities Guarantee....................................... S-35
United States Federal Income Taxation..................................... S-36
Underwriting.............................................................. S-39
Legal Matters............................................................. S-40
PROSPECTUS
Available Information..................................................... 4
Incorporation of Certain Documents by Reference........................... 4
The Company............................................................... 5
The Financing Trusts...................................................... 6
Use of Proceeds........................................................... 7
Ratios of Earnings to Fixed Charges and to Combined Fixed Charges and
Preferred Stock Dividends................................................ 7
Description of Debt Securities............................................ 7
Particular Terms of Junior Subordinated Debt Securities Issued in
Connection with Preferred Securities..................................... 20
Description of Capital Stock.............................................. 21
Description of Depositary Shares.......................................... 24
Description of Securities Warrants........................................ 27
Description of Preferred Securities of the Financing Trusts............... 30
The Preferred Securities Guarantee........................................ 31
Plan of Distribution...................................................... 33
Validity of Securities.................................................... 34
Experts................................................................... 34
</TABLE>
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5,000,000 PREFERRED SECURITIES
RELIASTAR FINANCING II
% TRUST ORIGINATED
PREFERRED SECURITIES ("TOPRSSM")
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
RELIASTAR FINANCIAL CORP.
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
DAIN BOSWORTH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
, 1997
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