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ReliaStar Financial Corp.
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<PAGE>
[LOGO] RELIASTAR
RELIASTAR FINANCIAL CORP.
20 Washington Avenue South
Minneapolis, Minnesota 55401
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
MEETING DATE: MAY 13, 1999
Dear Shareholder:
You are cordially invited to attend our 1999 Annual Meeting of Shareholders. We
will meet in ReliaStar's offices in Minneapolis on Thursday, May 13, 1999 at
10:00 a.m.
The matters we will be acting on at the meeting are described in the attached
Notice of Meeting and Proxy Statement.
ReliaStar's activities and performance during 1998 are reviewed in our Annual
Report to Shareholders.
YOUR VOTE IS IMPORTANT. We encourage you to read this proxy statement and vote
your shares as soon as possible. A return envelope for your proxy card is
enclosed for convenience. Shareholders of record also have the option of voting
by telephone. A toll-free number and instructions are included on the proxy
card.
Sincerely,
/s/ John G. Turner
John G. Turner
CHAIRMAN AND CEO
March 26, 1999
<PAGE>
TABLE OF CONTENTS
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS..................................1
PROXY STATEMENT................................................................2
Voting Procedures...................................................2
Proposals To Be Voted On............................................5
Board of Directors..................................................8
Board Compensation........................................10
Board and Committee Meetings..............................12
Performance Graph..................................................13
Beneficial Ownership...............................................14
Executive Compensation.............................................16
Report of the Compensation Committee......................16
Summary Compensation Table................................20
Stock Option Grants in 1998...............................22
Option Exercises and Year-end Value.......................23
Long-term Incentive Program Awards........................23
Retirement Plans..........................................24
Change in Control and Termination Arrangements............26
Compliance with Section 16(a) Reporting............................27
<PAGE>
RELIASTAR FINANCIAL CORP.
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
DATE: THURSDAY, MAY 13, 1999
TIME: 10:00 A.M.
PLACE: AUDITORIUM
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401
- --------------------------------------------------------------------------------
At our Annual Meeting of Shareholders we will ask you
(1) to elect three directors for terms expiring in 2002 and elect
one director for a term expiring in 2000;
(2) to ratify the appointment of Deloitte & Touche LLP as
ReliaStar's independent public accountants for 1999; and
(3) to approve the ReliaStar Annual Incentive Bonus Plan for
Designated Executive Officers.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL THREE PROPOSALS.
In addition, we will transact any other business properly brought before the
meeting or any adjournment of the meeting.
If you were a shareholder of record at the close of business on March 16, 1999,
you may vote at our Annual Meeting or any adjournment of the meeting.
Please promptly complete, date, sign and return the enclosed proxy card. A
return envelope for your proxy card is enclosed for convenience. Shareholders of
record also have the option of voting by telephone. A toll-free number and
instructions are included on the proxy card. You may revoke your proxy at any
time before it is voted at the meeting.
On behalf of the Board of Directors,
/s/ Richard R. Crowl
Richard R. Crowl
SECRETARY
March 26, 1999
<PAGE>
PROXY STATEMENT
The Board of Directors of ReliaStar Financial Corp. ("Company" or "ReliaStar")
is soliciting the enclosed proxy for the 1999 Annual Meeting of the Company. The
proxy statement, proxy card and ReliaStar's 1999 Annual Report to Shareholders
are being distributed on or about March 26, 1999. SHAREHOLDERS MAY OBTAIN
ADDITIONAL COPIES OF THE ANNUAL REPORT AND COPIES OF THE FORM 10K WITHOUT CHARGE
FROM THE CORPORATE SECRETARY, RELIASTAR FINANCIAL CORP., 20 WASHINGTON AVENUE
SOUTH, MINNEAPOLIS, MINNESOTA 55401.
VOTING PROCEDURES
QUESTIONS AND ANSWERS
================================================================================
Q: WHAT AM I VOTING ON?
A:
o Re-election of directors Carolyn H. Baldwin and James J. Howard for
terms which expire in 2002; election of Richard U. De Schutter for a
term which expires in 2002 and re-election of John H. Flittie for a
term that expires in 2000;
o Ratification of the Appointment of Deloitte & Touche LLP as ReliaStar's
independent public accountants for 1999;
o Approval of the ReliaStar Annual Incentive Bonus Plan for Designated
Executive Officers.
================================================================================
Q: WHO IS ENTITLED TO VOTE?
A: Shareholders as of the close of business on March 16, 1999 (the "Record
Date") are entitled to vote at the Annual Meeting. Each share of common
stock is entitled to one vote.
================================================================================
Q: HOW MANY VOTES DO WE NEED TO HOLD THE ANNUAL MEETING?
A: As of the Record Date, 88,706,097 shares of ReliaStar's common stock
were outstanding. The holders of a majority of ReliaStar's outstanding
shares of common stock on the Record Date entitled to vote at the
Annual Meeting must be present in order to conduct business. This is
called a quorum. Shares are counted as present at the meeting if a
shareholder entitled to vote is present and votes in person at the
meeting, has submitted a properly signed proxy or has properly voted by
telephone. Shares are not considered present and entitled to vote for a
particular matter if a broker indicates that it does not have
discretionary authority to vote those shares regarding such matter. We
do count these shares for a quorum. Abstentions are counted for a
quorum. However, abstentions have the same effect as a vote against in
determining approval of any proposal.
2
<PAGE>
================================================================================
Q: HOW DO I VOTE?
A: Shareholders of record may vote by proxy card or telephone.
Shareholders of record who hold their shares through a bank or broker
can vote by telephone if that option is offered by the bank or broker.
Voting by Mail. Shareholders of record may sign, date and mail their
proxies in the postage-paid envelope provided. If you sign, date and
mail your proxy card without indicating how you want to vote, your
proxy will be voted FOR the three proposals.
Voting by Telephone. Shareholders of record may vote by using the
toll-free number and following the instructions listed on the proxy
card.
Revoking Your Proxy. Whether you vote by mail or telephone, you may
revoke your proxy any time before the Annual Meeting by (1) notifying
ReliaStar's Corporate Secretary in writing, (2) voting in person at the
Annual Meeting, (3) returning a later-dated proxy or (4) voting by
telephone at a later time.
================================================================================
Q: IS MY VOTE CONFIDENTIAL?
A: Yes. Proxy cards, ballots and voting tabulations that identify
individual shareholders are confidential. Only the inspector of
election and certain employees who assist with processing proxy cards
and counting the vote have access to your proxy card. All comments
directed to management (whether written on the proxy card or elsewhere)
will remain confidential unless you ask that your name be disclosed.
================================================================================
Q: WHO WILL COUNT THE VOTE?
A: Representatives of Norwest Bank Minnesota, N.A. will tabulate the votes
and act as the inspector of election.
================================================================================
Q: WHAT SHARES ARE INCLUDED IN THE PROXY CARD?
A: The shares on your proxy card represent all your shares held of record,
including those in ReliaStar's dividend reinvestment plan.
================================================================================
Q: HOW ARE SHARES UNDER THE RELIASTAR SUCCESS SHARING PLAN AND ESOP VOTED?
A: Separate voting cards are being furnished to plan participants under
the ReliaStar Success Sharing Plan and ESOP ("Plan"). Proxies executed
by Plan participants are voting instructions to Northern Trust Company,
the Trustee for the Plan, for shares allocated to a participant's
account. The Trustee must vote all shares in the Plan. If a participant
does not instruct the Trustee how to vote, the Trustee must vote these
shares and unallocated shares in the same proportion for which
instructions are received.
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================================================================================
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: It means that your shares are registered differently and are in more
than one account. Sign and return all proxy cards or vote each proxy
card by telephone to make sure that all your shares are voted. To
provide better shareholder services, we encourage you to have all
accounts registered in the same name and address. You may do this by
contacting our transfer agent, Norwest Bank Minnesota, N.A. at
800-468-9716.
================================================================================
Q: HOW WILL PROXIES BE SOLICITED AND HOW MUCH WILL THIS PROXY SOLICITATION
COST?
A: ReliaStar will solicit proxies mainly by mail. In addition, we may
solicit proxies by telephone or by special letter. We will pay all
costs of solicitation. Georgeson & Company Inc. was hired by the
Company to assist in the distribution of proxy materials and
solicitation of votes for $7,000 plus out-of-pocket expenses. We will
reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding
proxy and solicitation material to the owners of ReliaStar common
stock.
================================================================================
Q: WHEN ARE SHAREHOLDER PROPOSALS DUE IN ORDER TO BE INCLUDED IN THE
COMPANY'S PROXY STATEMENT FOR THE 2000 ANNUAL MEETING?
A: Shareholder proposals must be submitted in writing by November 26,
1999, to Richard R. Crowl, Corporate Secretary, ReliaStar Financial
Corp., 20 Washington Avenue South, Minneapolis, MN 55401 in order to be
considered for inclusion in next year's proxy statement. You must
include a brief description of the proposal, your name and address, the
number of shares of ReliaStar common stock you own and any interest you
have in the proposal.
================================================================================
Q: WHEN ARE SHAREHOLDER PROPOSALS CONSIDERED UNTIMELY?
A: The Company's bylaws require that any shareholder proposal must be
submitted in writing to the Corporate Secretary not less than 60 days
before an annual meeting to be considered from the floor of that annual
meeting. If a shareholder fails to notify the Company of a proposal to
be presented at an annual meeting at least 60 days prior to the meeting
date, the proposal will be considered untimely. The Company did not
receive notice of any shareholder proposals prior to March 14, 1999
which is 60 days before the 1999 Annual Meeting date of May 13, 1999.
================================================================================
Q: HOW DOES A SHAREHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF RELIASTAR?
A: Any shareholder may recommend any person as a nominee for director of
ReliaStar by writing to Richard R. Crowl, Corporate Secretary,
ReliaStar Financial Corp., 20 Washington Avenue South, Minneapolis, MN
55401. Recommendations must be received in writing by December 31
before the Annual Meeting. You must include information that will allow
the Board Affairs Committee of the Board of Directors to evaluate the
qualifications of your recommendation.
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<PAGE>
PROPOSALS TO BE VOTED ON
The shares represented by your proxy will be voted FOR each of the following
proposals unless you indicate to the contrary.
1. ELECTION OF DIRECTORS
Nominees for election are Carolyn H. Baldwin, Richard U. De Schutter and James
J. Howard for three-year terms expiring in 2002 and John H. Flittie for a
one-year term expiring in 2000. (See page 8 for more information.) Each nominee
has consented to serve. All nominees, except Mr. De Schutter, are currently
serving on the Board. If a nominee is not a candidate at the Annual Meeting, the
proxies plan to vote in favor of the remaining nominees and such other person as
the proxies may determine.
We need the affirmative vote of a majority of the outstanding shares of common
stock present in person or by proxy and entitled to vote at the Annual Meeting
in order to elect the nominees. Abstentions and votes withheld for directors
will have the same effect as votes against. If you do not want to vote for a
particular nominee, you may indicate this on the proxy card or during your
telephone vote. Your Board recommends a vote FOR these directors.
2. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR 1999
Deloitte & Touche LLP has served as our independent public accountants since
1987. We expect representatives of Deloitte & Touche to attend the Annual
Meeting. Deloitte & Touche will have a chance to answer appropriate questions
and make a statement if they wish.
We need the affirmative vote of a majority of outstanding shares of common stock
present in person or by proxy and entitled to vote at the Annual Meeting in
order to ratify Deloitte & Touche as our independent public accountants for
1999. The Board recommends a vote FOR Deloitte & Touche LLP as our independent
public accountants for 1999.
3. APPROVAL OF THE RELIASTAR ANNUAL INCENTIVE BONUS PLAN FOR DESIGNATED
EXECUTIVE OFFICERS
The Board of Directors finds it to be in the best interests of the Company and
its shareholders to preserve the Company's tax deduction for annual compensation
paid in excess of $1 million to its executive officers. The Board recommends
that shareholders vote FOR approval of the Reliastar Annual Incentive Bonus Plan
for Designated Executive Officers ("Bonus Plan").
INTRODUCTION
At the Annual Meeting, shareholders will consider and vote upon a proposal to
approve the Bonus Plan. The tax laws require shareholder approval of this Bonus
Plan every five years. The Bonus Plan was first approved by shareholders in
1994. The Bonus Plan proposed for approval has several nonmaterial amendments.
The Personnel and Compensation Policy Committee of the Board has approved these
amendments, subject to shareholder approval. If shareholders do not approve the
Bonus Plan by a majority vote of outstanding shares present or represented and
entitled to vote at the Annual Meeting, no bonuses will be paid under the Bonus
Plan. In such an event, the Committee expects to consider and pay compensation
to its key executive officers as it considers necessary or desirable to reward
performance and
5
<PAGE>
to retain their services. Such other compensation may not be tax deductible to
the Company under Section 162(m) of the Internal Revenue Code ("Code").
The Bonus Plan is designed to meet the requirements of Section 162(m) of the
Code. Section 162(m) limits the Company's income tax deduction for executive
compensation paid in excess of $1 million unless it qualifies as
performance-based compensation. Generally, compensation will be considered
"performance-based" if it is paid pursuant to a plan the material terms of which
are disclosed to and approved by shareholders before the compensation is paid.
Section 162(m) requires shareholder approval of the Bonus Plan within five years
of the shareholders' last approval if the compensation committee has authority
to change targets under a performance goal after shareholder approval of the
goal. The Bonus Plan does permit the Personnel and Compensation Policy Committee
of the Board to change goals. Shareholder approval of the Bonus Plan is
necessary at this time to preserve the deductibility of annual incentive
compensation paid to ReliaStar's executive officers.
We are proposing to amend several terms under the Bonus Plan (1) to reflect
certain financial reporting changes and (2) to reduce the bonus pool amount. The
reporting changes make the calculation of "return on equity-operating income
basis" and "pretax operating income" under the Bonus Plan consistent with the
way the Company currently measures these statistics in its financial statements.
The bonus pool amount is being reduced from 2% to 1 1/2% of the Company's pretax
operating income. These changes will not have a material impact on the Bonus
Plan.
SUMMARY OF PLAN
ADMINISTRATOR: The Bonus Plan is administered by the Personnel and Compensation
Policy Committee. This is a committee of nonemployee directors as required by
the Code.
PLAN YEAR: The plan year is the Company's fiscal year. This is the calendar
year.
EFFECTIVE DATE OF PLAN: The Bonus Plan, as amended and restated, is to be
effective as of January 1, 1999, subject to shareholder approval.
ELIGIBLE PARTICIPANTS: Executive officers are eligible to participate in the
Bonus Plan. The Committee must designate the executive officers who will
participate in the Bonus Plan for a plan year before the beginning of the year.
In 1998, eight executive officers of the Company were eligible to participate in
the Bonus Plan.
CORPORATE PERFORMANCE FACTOR: The Company will not pay any annual incentive
bonuses under the Bonus Plan to covered executive officers unless the Company
attains a return on equity-operating income basis for the year of at least
10.7%.
BONUS POOL AMOUNT: The total of all bonuses payable under the Bonus Plan may not
exceed 1 1/2% of the Company's pretax operating income. Pretax operating income
is the Company's income from continuing operations before (1) income taxes, (2)
the net earnings impact of realized investment gains and losses, (3)
extraordinary items and (4) the cumulative effect of accounting changes. Company
earnings are determined according to generally accepted accounting principles
adjusted to eliminate accounting restatements related to acquisitions treated as
"poolings" and any unusual non-recurring items separately identified in our
financial statements.
6
<PAGE>
INDIVIDUAL BONUS AMOUNTS: The Bonus Plan provides that the maximum bonuses that
can be paid for any plan year to the CEO and the COO are 20% and 17%,
respectively, of the bonus pool amount. Other executive officers covered under
the Bonus Plan may each receive bonuses not greater than the amount determined
by dividing 63% of the bonus pool amount by the number of executive officers,
excluding the CEO and the COO, who are covered under the Bonus Plan for that
plan year.
COMMITTEE DISCRETION: These bonus pool percentages are the maximum bonuses which
may be paid under the Bonus Plan to any covered executive for a plan year. The
Committee expects to exercise its discretion, as permitted under Section 162(m),
to pay lesser annual incentive bonuses. The Committee expects to do so by taking
into consideration the Company's return on equity, earnings per share and
capital gains for the plan year compared to goals set for these factors. The
Committee also considers the performance of covered executives' business units
and attainment of individual performance goals established for Bonus Plan
participants and approved by the Committee.
FORM OF PAYMENTS: Bonuses payable under the Bonus Plan may be payable in cash or
in shares of the Company's common stock. Bonuses paid in stock will be awarded
under and subject to the terms and conditions of the ReliaStar 1993 Stock
Incentive Plan, as amended.
AMENDMENT AND TERMINATION OF PLAN: The Committee may amend prospectively or
terminate the Bonus Plan at any time.
NEW PLAN BENEFITS
The benefits that will be paid to the following individuals or groups under the
Bonus Plan for 1999 are not determinable. It is not yet known whether the
Company will attain the Plan's minimum performance goal in 1999 and the size of
the bonus pool depends on the Company's pretax operating income for 1999. In
addition, the Committee expects to exercise its discretion to pay bonuses which
are less than the maximum bonuses provided for in the Bonus Plan. In 1998 the
Bonus Plan was in effect. The Committee exercised its discretion and awarded the
following executive bonuses. These bonuses are included in the Summary
Compensation Table on page 20. The proposed amendments would have had no effect
on these bonuses.
Name and Position Dollar Value of 1998 Bonuses ($)
- ----------------- --------------------------------
John G. Turner, Chairman and Chief Executive Officer 453,863
John H. Flittie, President and Chief Operating Officer 285,833
Robert C. Salipante, Senior Vice President 166,575
Michael J. Dubes, Senior Vice President 117,541
Wayne R. Huneke, Senior Vice President 123,462
All current executive officers, as a group 1,520,552
All current directors who are not executive officers, as a group 0
All employees who are not executive officers, as a group 0
4. OTHER BUSINESS
The Board knows of no other business for consideration at the meeting. Your
signed proxy or proper telephone vote gives authority to ReliaStar officers John
G. Turner, Chairman and Chief Executive Officer, John H. Flittie, President and
Chief Operating Officer and Richard R. Crowl, Senior Vice President, General
Counsel and Secretary, to vote at their discretion on other matters properly
presented at the meeting, or at any adjournment or postponement of the meeting.
7
<PAGE>
BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides that the Board of Directors
shall consist of not less than six nor more than eighteen persons. The Board is
divided into three classes. Directors of one class are elected each year for a
set term of up to three years. Each class consists of two to six directors. The
Board has set the class for terms expiring in 2002 at three directors and the
class for terms expiring in 2000 at six. The Board's nominees are as follows:
NOMINEES FOR ELECTION FOR TERMS EXPIRING IN 2002
CAROLYN H. BALDWIN. Director since 1993. Ms. Baldwin has been Vice President of
The Coca-Cola Company (manufacturer, distributor and marketer of non-alcoholic
beverages) and President of Coca-Cola Financial Corporation (provides loans and
leases to bottlers) since 1997. She was Vice President and Chief of Internal
Audits Worldwide of The Coca-Cola Company from 1993 to 1997. Age 50.
RICHARD U. DE SCHUTTER. Nominee for director. Mr. De Schutter has been Chairman,
President and Chief Executive Officer of G. D. Searle & Co. (pharmaceutical
research and manufacturer) since 1994. He has been Vice Chairman of Monsanto
(manufacturer of pharmaceutical, nutritional and agricultural products) since
1997. He was President and Chief Operating Officer of G. D. Searle & Co. from
1993 to 1994 and was President from 1991 to 1993. He is a director of General
Binding Corporation, Pharmaceutical Research and Manufacturers of America,
Evanston Northwestern Healthcare, and U.S.-Japan Business Council Inc., and a
trustee of Northwestern University. Age 58.
JAMES J. HOWARD. Director since 1993. Mr. Howard has been Chairman of the Board,
President and Chief Executive Officer of Northern States Power Company (electric
and gas utility company) since 1994 and Chairman and Chief Executive Officer
from 1988 to 1994. He is a director of Northern States Power Company, Ecolab,
Inc., Federal Reserve Bank of Minneapolis, Honeywell Inc. and Walgreen Company.
Age 63.
NOMINEE FOR ELECTION FOR A TERM EXPIRING IN 2000
JOHN H. FLITTIE. Director since 1993. Mr. Flittie has been President and Chief
Operating Officer of the Company and ReliaStar Life Insurance Company since
1993. He was Senior Executive Vice President and Chief Operating Officer from
1992 to 1993, Senior Executive Vice President from 1991 to 1992 and Executive
Vice President and Chief Financial Officer from 1989 to 1991. He was President
of subsidiaries ReliaStar United Services Life Insurance Company and ReliaStar
Life Insurance Company of New York from 1996 to 1998. Mr. Flittie is a director
of Community First Bankshares, Inc., Chronimed, Inc. and subsidiaries of the
Company. Age 62.
DIRECTORS WHOSE CURRENT TERMS EXPIRE IN 2001
WILLIAM A. HODDER. Director since 1979. Mr. Hodder was the Chairman and Chief
Executive Officer, Donaldson Company, Inc. (manufacturer of filters and noise
abatement equipment) from 1994 to 1996 and Chairman, President and Chief
Executive Officer from 1985 to 1994. Mr. Hodder is a director of Musicland
Stores Corporation, Wells Fargo & Co. and Supervalu Inc. Age 67.
8
<PAGE>
RICHARD L. KNOWLTON. Director since 1988. Mr. Knowlton has been Chairman of the
Board of The Hormel Foundation (charitable foundation that controls 41.7% of
Hormel Foods Corporation) since 1995. He was Chairman of the Board, Hormel Foods
Corporation from 1993 to 1995, Chairman and Chief Executive Officer from 1992 to
1993 and Chairman, President and Chief Executive Officer from 1981 to 1992. Mr.
Knowlton is a director of U. S. Bancorp, Mayo Foundation, Perth Corp. and
Supervalu Inc. Age 66.
JOHN G. TURNER. Director since 1983. Mr. Turner has been Chairman and Chief
Executive Officer of the Company and ReliaStar Life Insurance Company since
1993. Mr. Turner was Chairman, President and Chief Executive Officer in 1993,
President and Chief Executive Officer from 1991 to 1993, President and Chief
Operating Officer from 1986 to 1991 and President from 1983 to 1986. Mr. Turner
is a director of subsidiaries of the Company. Age 59.
DIRECTORS WHOSE CURRENT TERMS EXPIRE IN 2000
DAVID C. COX. Director since 1988. Mr. Cox was the President and Chief Executive
Officer, Cowles Media Company (communications and publishing) from 1985 to 1998.
Mr. Cox is a director of National Computer Systems, Inc. and Tennant Company.
Age 61.
LUELLA G. GOLDBERG. Director since 1976. Ms. Goldberg was the Chair, Board of
Trustees, University of Minnesota Foundation from 1996 to 1998 and has been a
Trustee since 1976. Ms. Goldberg has been Trustee Emerita of the Board of
Trustees of Wellesley College since 1996, Trustee from 1978 to 1996, Acting
President of the College during 1993 and Chair of the Board of Trustees from
1985 to 1993. Ms. Goldberg has been Life Director, Minnesota Orchestral
Association since 1977 and was Chair of the Board from 1980 to 1983. Ms.
Goldberg is a director of TCF Financial Corporation, Hormel Foods Corporation
and Communication Systems, Inc. Age 62.
RANDY C. JAMES. Director since 1994. Mr. James has been a management consultant
since 1993. He was Group Executive Vice President, Bank of America (banking and
financial services) from 1992 to 1993 and Chairman and Chief Executive Officer,
Bank of America, Oregon (banking and financial services) from 1991 to 1992. Mr.
James is a director of Charter Bank (founder) and P.P.F. Financial, Inc. Age 51.
DAVID A. KOCH. Director since 1981. Mr. Koch has been Chairman, Graco Inc.
(manufacturer of fluid handling equipment) since 1996 and Chairman and Chief
Executive Officer from 1985 to 1995. Mr. Koch is a director of Graco Inc., the
Federal Reserve Bank of Minneapolis and SurModics, Inc. Age 68.
JAMES J. RENIER. Director since 1985. Dr. Renier was the Chairman and Chief
Executive Officer, Honeywell Inc. (global controls company) from 1988 to 1993
and Chairman of the Executive Committee from 1993 to 1994. Dr. Renier is a
director of Deluxe Corporation. Age 69.
9
<PAGE>
BOARD COMPENSATION
We have changed our Board compensation practices beginning with the 1999-2000
Board year. (See below). For the 1998-1999 Board year, compensation for
nonemployee directors includes the following:
o an annual retainer of $24,000 of which at least 30% must be paid in
ReliaStar common stock,
o $1,000 for each Board or committee meeting attended,
o an annual retainer of $4,000 to nonemployee directors who are
committee chairs, and
o reasonable expenses of attending Board and committee meetings.
We do not pay directors who are also officers of the Company additional
compensation for their service as directors.
The ReliaStar Stock Ownership Plan for Nonemployee Directors ("Directors' Stock
Plan") allows directors to choose to receive all or part of their annual
retainer or meeting fees in ReliaStar common stock. This is in addition to the
30% of the annual retainer required to be paid in stock. The Directors' Stock
Plan also allows nonemployee directors to defer any payment in ReliaStar common
stock in deferred share units. Deferred share units are credited to a deferred
share account. The deferred share account is an unsecured bookkeeping account.
The Company has designated a rabbi trust as a funding vehicle for the deferred
share accounts. The trust is funded with ReliaStar common stock held by the
trustee in its name, on a commingled basis. All assets of the trust are subject
to the claims of the general creditors of the Company. The common shares held in
the trust are voted by the trustee in its discretion. However, each director
with units credited to a deferred share account may instruct the trustee how to
vote the director's proportionate interest. Deferred share units are payable in
ReliaStar common stock when a director leaves the Board. Directors may also
choose to defer any retainer or fees payable in cash in a deferred cash account.
STOCK OPTIONS
Under the current Directors' Stock Plan, nonemployee directors receive an annual
grant of options to purchase 3,500 shares of ReliaStar common stock at fair
market value on the date of grant. These options are subject to the following:
o "Fair Market Value" is the closing price of ReliaStar's common stock
on the date the option is granted.
o Each option granted is a nonqualified stock option.
o Each option granted is for a term of ten years.
On May 14, 1998 options to purchase 3,500 shares of ReliaStar's common stock at
$43.00 per share were granted to each nonemployee director.
10
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OTHER COMPENSATION
ReliaStar terminated its Retirement Plan for Nonemployee Directors as of May 13,
1999. The Retirement Plan provided directors who served on the Board at least
five years an annual benefit equal to the annual retainer in effect on the
director's last day of service on the Board. Benefits were paid for the lesser
of a director's number of years of service or 15 years. The payment of
retirement benefits will continue for directors who have retired as of
adjournment of the 1999 Annual Meeting. The present value of vested benefits
under this plan for directors who are serving on the Board as of the adjournment
of the 1999 Annual Meeting will be credited to a deferred cash account or a
deferred share account at the director's election.
Mr. James also received $7,000 ($1,000 per meeting) in meeting fees and $6,500
as a retainer for his service as Chairman of the Northern Life Advisory Board.
This Board is an advisory board of Northern Life Insurance Company, a subsidiary
of the Company. Mr. James has a consulting agreement, effective January 1, 1999,
with Northern Life Insurance Company, to continue his services as Chairman of
the Northern Life Advisory Board. Mr. James will receive a $6,500 retainer and
$1,000 per meeting fee in 1999 under this agreement. In addition, Mr. James has
a consulting agreement with the Company under which Mr. James is paid $200 per
hour on an as-needed basis with regard to the Company's subsidiary, ReliaStar
Bank. Mr. James was paid $2,500 under this consulting agreement in 1998.
CHANGES IN DIRECTORS' COMPENSATION
The Board modified its directors' compensation plans effective May 13, 1999. The
changes eliminate the directors' Retirement Plan and place more emphasis on
equity-based pay. Directors will receive an annual retainer of $50,000.
Committee chairs will receive an additional $5,000 in compensation. Directors
may elect to receive this annual retainer in cash, deferred cash, stock,
deferred share units or in ten-year nonqualified stock options valued under the
Black-Scholes method. In addition, ten-year nonqualified stock options valued at
$50,000 based on the Black-Scholes value will be awarded each year. The stock
options will vest one year from the date of grant.
11
<PAGE>
BOARD AND COMMITTEE MEETINGS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
MEMBERSHIP ROSTER
- ---------------------------------------------------------------------------------------------------------------------
Personnel and
Compensation
Name Board Audit Board Affairs Executive Finance Policy
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Carolyn H. Baldwin X X X
- ---------------------------------------------------------------------------------------------------------------------
David C. Cox X X X
- ---------------------------------------------------------------------------------------------------------------------
John H. Flittie X X X
- ---------------------------------------------------------------------------------------------------------------------
Luella G. Goldberg X X X X X
- ---------------------------------------------------------------------------------------------------------------------
William A. Hodder X X X X X
- ---------------------------------------------------------------------------------------------------------------------
James J. Howard X X X
- ---------------------------------------------------------------------------------------------------------------------
Randy C. James X X X
- ---------------------------------------------------------------------------------------------------------------------
Richard L. Knowlton X X X X
- ---------------------------------------------------------------------------------------------------------------------
David A. Koch X X X
- ---------------------------------------------------------------------------------------------------------------------
Richard M. Kovacevich* X X X X
- ---------------------------------------------------------------------------------------------------------------------
Glen D. Nelson* X X X
- ---------------------------------------------------------------------------------------------------------------------
James J. Renier X X X X
- ---------------------------------------------------------------------------------------------------------------------
John G. Turner X X X
- ---------------------------------------------------------------------------------------------------------------------
Number of Meetings Held in 1998 9 3 3 0 3 3
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
*Directors not standing for reelection.
The Company's Board of Directors has the following standing committees:
AUDIT COMMITTEE: Reviews annual financial statements of the Company prior to
release to the public; examines and reviews the internal and external audits of
our accounts and advises in the selection of our independent auditor. All
members are nonemployee directors.
BOARD AFFAIRS COMMITTEE: Considers and recommends nominees for election as
directors; reviews and evaluates the effectiveness, procedures and practices of
the Board and its members; advises the Board regarding committee structure and
director compensation; and approves guidelines for our charitable contributions
program. All members are nonemployee directors.
EXECUTIVE COMMITTEE: Has power to act on behalf of the Board whenever the Board
is not in session.
FINANCE COMMITTEE: Considers investment policy, shareholder dividends and
matters of corporate finance, including capitalization and financing policies.
PERSONNEL AND COMPENSATION POLICY COMMITTEE: Reviews ReliaStar's executive
compensation and employee benefit plans and programs, including their
establishment, modification and administration. This Committee assists the Board
in the evaluation of the Chief Executive Officer's performance, makes
recommendations for the Chief Executive Officer's compensation, evaluates
succession plans and provides oversight of equal employment opportunity
programs. All members are nonemployee directors.
The Board held eight regular meetings and one special meeting during 1998. Each
director attended at least 75% of the combined total number of meetings of the
Board and committees of the Board on which he or she served during 1998.
12
<PAGE>
PERFORMANCE GRAPH
1993 1994 1995 1996 1997 1998
- -------------------- --------- --------- --------- --------- --------- ---------
ReliaStar $100.00 $ 93.17 $146.39 $195.06 $283.38 $322.38
S&P Life Ins. Index 100.00 82.94 119.10 145.52 181.96 192.10
S&P 500 Index 100.00 101.32 139.40 171.40 228.59 293.91
- -------------------- --------- --------- --------- --------- --------- ---------
*Assumes $100 invested on December 31, 1992 in ReliaStar Financial Corp. common
stock, the S&P Life Insurance Index and the S&P 500 Index. Total return assumes
reinvestment of dividends.
13
<PAGE>
BENEFICIAL OWNERSHIP
This table shows how much ReliaStar common stock is owned by the directors,
nominees and certain executive officers as of February 28, 1999 and owners of
more than 5% of ReliaStar's outstanding shares.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Amount and Nature of Beneficial
Ownership
---------------------------------------------------------------------------
Percent
Number of
of Shares Outstanding
Beneficially Right to Shares as of
Name Owned Acquire Total March 16, 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FMR Corp. (1)
82 Devonshire Street
Boston, MA 02109 6,218,548 6,218,548 7.01%
- -----------------------------------------------------------------------------------------------------------
ReliaStar Success
Sharing Plan and ESOP (2)
c/o Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675 5,681,973 5,681,973 6.40%
- -----------------------------------------------------------------------------------------------------------
Carolyn H. Baldwin 875 (3) 6,999 7,874 *
- -----------------------------------------------------------------------------------------------------------
David C. Cox 13,343 (3) 6,999 20,342 *
- -----------------------------------------------------------------------------------------------------------
Richard U. De Schutter 1,000 0 1,000 *
- -----------------------------------------------------------------------------------------------------------
Luella Gross Goldberg 64,356 (3)(4) 4,999 69,355 *
- -----------------------------------------------------------------------------------------------------------
William A. Hodder 45,269 (3) 6,999 52,268 *
- -----------------------------------------------------------------------------------------------------------
James J. Howard 9,048 (3) 6,999 16,047 *
- -----------------------------------------------------------------------------------------------------------
Randy C. James 6,546 (3) 6,999 13,545 *
- -----------------------------------------------------------------------------------------------------------
Richard L. Knowlton 23,740 (3) 6,999 30,739 *
- -----------------------------------------------------------------------------------------------------------
David A. Koch 14,302 (3)(4) 6,999 21,301 *
- -----------------------------------------------------------------------------------------------------------
Richard M. Kovacevich 10,096 6,999 17,095 *
- -----------------------------------------------------------------------------------------------------------
Glen D. Nelson 51,397 (3)(4) 6,999 58,396 *
- -----------------------------------------------------------------------------------------------------------
James J. Renier 16,750 (3) 6,999 23,749 *
- -----------------------------------------------------------------------------------------------------------
John G. Turner 235,720 (4)(5) 377,320 613,040 *
- -----------------------------------------------------------------------------------------------------------
John H. Flittie 163,928 (4)(5) 230,621 394,549 *
- -----------------------------------------------------------------------------------------------------------
Robert C. Salipante 64,231 (5) 126,834 191,065 *
- -----------------------------------------------------------------------------------------------------------
Michael J. Dubes 89,414 (4)(5) 129,743 219,157 *
- -----------------------------------------------------------------------------------------------------------
Wayne R. Huneke 68,999 (5) 64,432 133,431 *
- -----------------------------------------------------------------------------------------------------------
Directors, Nominees and
Executive Officers as a group 1,043,935 (5) 1,229,093 2,273,028 2.56%
(21 persons)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*Less than 1%
14
<PAGE>
(1) As of December 31, 1998. This information is in accordance with Schedule
13G filed by FMR Corp. FMR Corp. has sole voting power as to 556,320,
shared voting power as to 0, sole dispositive power as to 6,218,548 and
shared dispositive power as to 0 of the reported shares. Various persons
have the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, the reported shares. No such person
on whose behalf FMR Corp. owns common stock has an interest that exceeds 5%
of the shares outstanding. Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp., is the beneficial
owner of 5,519,228 shares as a result of acting as investment adviser to
several investment companies ("Funds") registered under Section 8 of the
Investment Company Act of 1940. Edward C. Johnson 3d, FMR Corp., through
its control of Fidelity, and the Funds each has sole power to dispose of
the 5,519,228 shares owned by the Funds. Neither FMR Corp. nor Edward C.
Johnson 3d has the sole power to vote or direct the voting of the shares
owned directly by the Funds, which power resides with the Funds' Boards of
Trustees. Fidelity Management Trust Company, a wholly-owned subsidiary of
FMR Corp., is the beneficial owner of 699,320 of the reported shares as a
result of serving as an investment manager of one or more institutional
accounts. Edward C. Johnson 3d and FMR Corp., through its control of
Fidelity Management Trust Company, each has sole dispositive power over
699,320 shares and sole power to vote or to direct the voting of 556,320
shares, and no power to vote or to direct the voting of 143,000 shares
owned by the institutional account(s). Edward C. Johnson 3d and Abigail P.
Johnson, who own 12.0% and 24.5% respectively of the outstanding voting
stock of FMR Corp., together with trusts for the benefit of family members,
form a controlling group (representing approximately 49% of the voting
power of FMR Corp.) with respect to FMR Corp.
(2) These shares are held in trust for the benefit of participants in the
Company's Success Sharing Plan and ESOP. As of January 31, 1999, there were
5,681,973 shares in the Company's Success Sharing Plan and ESOP. Of these
shares 1,997,359 shares were allocated to participants and 3,684,614 were
unallocated. See the Question and Answer on page 3 for a discussion of
voting rights regarding the Company's Success Sharing Plan and ESOP.
(3) Includes common stock that each of the following directors has a right to
receive upon termination as a director and which is beneficially owned by
each such director through a rabbi trust established by the Company: Ms.
Baldwin, 511 shares; Mr. Cox, 2,600 shares; Mrs. Goldberg, 33,666 shares;
Mr. Hodder, 17,333 shares; Mr. Howard, 5,647 shares; Mr. James, 4,348
shares; Mr. Knowlton, 2,708 shares; Mr. Koch, 2,944 shares; Dr. Nelson,
4,669 shares; Dr. Renier, 2,928 shares. See the discussion on page 10
regarding the voting rights of these directors in the common stock held by
the rabbi trust.
(4) Includes shares of ReliaStar common stock held by family members as
follows: Mrs. Goldberg, 884 shares; Mr. Koch, 2,500 shares; Dr. Nelson,
8,698 shares; Mr. Turner, 20,456 shares; Mr. Flittie, 24,250 shares; Mr.
Dubes, 17,978 shares. Dr. Nelson and Mr. Turner each disclaim beneficial
ownership of these shares held by family members.
(5) Includes shares of ReliaStar common stock held by the Trustee of the
Company's Success Sharing Plan and ESOP on behalf of the named individuals
as follows: Mr. Turner, 20,193 shares; Mr. Flittie, 5,529 shares; Mr.
Salipante, 1,997 shares; Mr. Dubes, 8,853 shares; Mr. Huneke, 4,676 shares;
directors and executive officers as a group, 59,584 shares.
15
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Personnel and Compensation Policy Committee of the Board develops our
executive compensation policies. The Committee
o advises the Board on overall compensation matters,
o advises the Board on CEO compensation,
o sets the compensation for the executives named in the Summary
Compensation Table, and
o administers our executive compensation and stock incentive plans.
All members of the Committee are nonemployee directors.
COMPENSATION PHILOSOPHY
The Committee's compensation philosophy
o relates executive compensation to the Company's performance compared
to the Strategic Plan and to peer companies,
o rewards long-term performance, and
o links management's interests to shareholders' interests by encouraging
stock ownership.
The 1998 compensation program is similar to prior years. The Committee sets
total salary and incentive pay at market levels based on Company performance.
o If the Company performs at the threshold level, total pay is well
below the market median.
o If the Company performs at the par level, total pay is at the market
median.
o If the Company performs at the superior level, total pay is well above
the market median.
The Committee hires an independent consultant to help it define market
compensation levels. Market levels for each part of total pay are determined for
the Company's peer companies and other companies in our business. Data is found
in proxy statements and pay surveys. There are currently 21 peer companies in
the peer group, including the Company and all five of the companies in the S&P
Life Insurance Index. The Committee changes the list of peer companies in the
event of mergers or if new competitors emerge.
PAY COMPONENTS
The Committee sets pay levels based on the philosophy described above. In 1998,
the Committee set target pay levels for the CEO and other executives for each of
the following components:
o base salary,
o annual bonus,
o long-term incentive compensation, and
o stock-based compensation.
BASE SALARY
The Committee sets the base salary for the CEO in July. The Committee sets the
base salaries for all other executives in February.
16
<PAGE>
The Committee reviewed the CEO's salary based upon (1) the market compensation
target set by the Committee, and (2) the Board's evaluation of Mr. Turner's
performance based on preset goals. These preset goals included Company
performance, leadership, strategy, financial results, talent management, board
relations and external relations. The Committee did not assign specific weights
to these goals. The Committee recommended a $75,000 increase to the CEO's salary
in 1998. Mr. Turner requested that he receive Company stock options instead of a
salary increase. The Committee determined that Mr. Turner's request furthered
the Committee's philosophy of encouraging greater stock ownership by management.
The Committee, with the help of its consultant, converted the foregone salary
adjustment of $75,000 into a one-time grant of an option to purchase 100,000
shares based on a Black-Scholes valuation. These options approximate the present
value of the foregone increase in salary and benefits until retirement that
would result from not receiving the $75,000 salary increase. The special option
grant assumes that the foregone $75,000 salary adjustment will not be made up in
future years. The Committee awarded this one-time grant in addition to an annual
grant discussed under Stock Option Grants.
The Committee determines executive salaries based on (1) the evaluation by the
CEO or the COO of each executive's performance during the past fiscal year and
(2) the executive's salary as compared to the target salary.
The Company has a uniform process for rating executive performance. The CEO or
the COO rates each executive based on the performance of specific goals such as
sales, earnings, investment performance and expense management. The Committee
approved salary increases for 1998 for the other named executive officers in
February 1998.
ANNUAL BONUS
The Company has an Annual Bonus Plan which meets the requirements of Section
162(m) of the Internal Revenue Code. The Plan assures that bonuses paid to
executives are tax deductible to the Company. Under the Plan in effect for 1998,
if the Company earns an after-tax return on equity of at least 10.7%, the
Company may pay bonuses to the eight executives covered by the Plan in 1998.
Total bonuses to these executives may not exceed 2% of pre-tax earnings from
continuing operations before (1) realized investment gains or losses, (2)
extraordinary items and (3) the effect of accounting changes. Using these rules,
the maximum pool for bonuses in 1998 was $7,316,000. The Plan limits payments to
the CEO to 20% of the pool, to the COO to 17% of the pool and to each of the
other six executives covered by the Plan in 1998 to 10.5% of the pool. The
Committee may pay bonuses up to the pool limits and the CEO and COO limits. The
Committee paid less than these limits in each instance. Proposed amendments to
this Plan are discussed in Proposal 3 on pages 5-7 of this proxy statement.
The Committee paid bonuses based on the Enterprise Performance Factor (the
"EPF") and goals set for the executives. The EPF is a factor based upon ROE,
earnings per share adjusted for certain extraordinary items as determined by the
Committee and capital gains. The Committee sets EPF goals. No bonuses based on
EPF may be paid unless the current year's earnings per share exceed the prior
year's level by an amount preset by the Committee. The targets based upon EPF
and other set goals for executives are the following:
CEO 100% EPF
COO 80% EPF; 20% set goals
Other Executives 50% EPF; 50% set goals
The Company's performance for 1998 on the EPF was slightly below par. Awards for
the EPF component were paid at this level.
17
<PAGE>
The set goals for the COO and other executives include business or service unit
results, investment results, and expense management. The Committee set bonus
targets as a percent of salary, based upon meeting the EPF and other set goals.
The targets are based on defined threshold, par and maximum levels for EPF and
other set goals. The bonus as a percentage of salary for each level is set out
below:
Executive Threshold Par Maximum
--------- --------- --- -------
CEO 37.5% 75% 112.5%
COO 30% 60% 90%
Other Executives 25% 50% 75%
LONG-TERM INCENTIVE COMPENSATION
The Company has a long-term incentive compensation plan. This plan pays bonuses
based upon the Company's total shareholder return ("TSR") compared to the same
peer companies used to evaluate the Company's financial performance and other
compensation. This plan provides incentives to create shareholder value and to
foster long-term performance of the Company.
This plan compares the Company's TSR to that of the peer companies over a
three-year period. Each quarter, the Company's TSR is ranked against the peer
companies. Payouts are based upon the Company's percentile ranking within the
peer group. The percentile objectives are the following:
Threshold 40th Percentile
Par 60th Percentile
Maximum 80th Percentile
This plan has overlapping three-year cycles and one cycle ends each year. Award
opportunities as a percentage of base annualized salary are as follows:
Executive Threshold Par Maximum
--------- --------- --- -------
CEO 16.25% 65% 130%
COO 15% 60% 120%
Others Executives 12.5% 50% 100%
The Company's performance compared to the peer group for the cycle which ended
December 31, 1998 produced payouts between par and maximum. This reflects the
Company's rank among the peer companies. The Company's external auditors review
the calculations for this plan following certain agreed-upon procedures.
STOCK-BASED COMPENSATION
The Board and the Committee believe stock ownership by management aligns the
interests of management with Company shareholders to help build shareholder
value. In 1993 the Committee set stock ownership targets for management. These
targets are based upon a multiple of base salary and are expected to be achieved
in seven years. The Committee adopted the ReliaStar 1993 Stock Incentive Plan
("Stock Plan") to help executives meet these targets. The Stock Plan allows the
Committee to make grants of stock options, restricted shares and replacement
stock options. The Stock Plan also authorizes the Deposit Share Plan.
Stock Option Grants
In 1998 the Committee awarded 514,412 options to the named executives, including
an annual award of 255,000 options to the CEO. The Committee awards options
based on an executive's base salary. The
18
<PAGE>
Committee determines the amount of options based on target total compensation
levels for the executives. Extra stock option grants may be awarded to
executives based upon exceptional performance. The Committee does not
specifically consider the number of options already held by the executive in
determining the size of the annual stock option grants. The exercise price for
all options was the fair market value at the date of grant. One-third of the
options vests on each of the first three anniversaries of the grant. Stock
options granted in 1998 were nonqualified.
Replacement Stock Options
The stock option grants in 1998 included a replacement feature to encourage
executives to exercise options early in the option term. When these options are
exercised, replacement options are granted. The number of replacement stock
options granted equals the number of shares required to pay the exercise price
and withholding taxes. The exercise price of the replacement stock options is
the fair market value of the Company's common stock on the date of the
replacement grant. Replacement stock options vest in six months and have a term
equal to the remaining term of the exercised options.
Deposit Share Plan
The Company also has a plan which encourages executives to take some of their
annual plan bonuses in Company stock. Each year the Committee determines what
portion of an executive's bonus may be elected in Company stock (deposit
shares). The Committee also may award additional restricted shares to match a
portion of the deposit shares. For 1998, the Committee allowed an executive to
take up to one-fourth of his or her bonus in Company stock (deposit shares), and
matched one-half of that amount with a restricted stock grant. Fifty percent of
the restricted stock vests three years after the date of the grant and fifty
percent vests five years after the date of grant. The deposit shares are
deposited with the Company during the vesting period. If the executive withdraws
the deposit shares before the matching shares vest, the matching shares are
forfeited. Also, matching shares are forfeited if the executive is not employed
by ReliaStar on the vesting date except in the case of retirement or disability.
The matching restricted shares may not be traded, but executives may vote the
shares and receive dividends.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has acted to preserve the Company's tax deduction under Section
162(m) of the Internal Revenue Code for the compensation it pays to its
executives. Shareholder approval of the Annual Incentive Bonus Plan for
Designated Executive Officers (as described in Proposal 3 on pages 5-7) will
assure that the Company may continue to deduct the annual bonuses it pays to its
executives. The Committee also has acted to preserve the Company's tax deduction
for its executives' long-term plan bonuses and stock option exercise gains. The
Committee intends to act to preserve the Company's ability to deduct executive
compensation to the extent possible without compromising the ability to motivate
and reward the excellent performance of its executives.
The Members of the Committee:
WILLIAM A. HODDER (CHAIR)
DAVID C. COX
LUELLA G. GOLDBERG
JAMES J. HOWARD
RANDY C. JAMES
RICHARD M. KOVACEVICH
JAMES J. RENIER
19
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term Compensation
---------------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------
Restricted Securities
Stock Underlying LTIP All Other
Name and Principal Position Year Salary Bonus Awards Options Payouts Compensation
($)(1) ($)(2) ($)(3) (#)(4) ($)(5) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John G. Turner, Chairman 1998 700,000 465,553 54,404 359,141 606,665 133,809 (6)
and Chief Executive Officer 1997 673,077 441,249 61,219 150,000 910,000 87,069 (7)
1996 623,654 506,923 60,009 65,000 739,375 93,492 (8)
- ----------------------------------------------------------------------------------------------------------------------------------
John H. Flittie, President 1998 556,539 295,127 31,639 75,491 455,999 37,717 (6)
and Chief Operating 1997 503,846 258,361 37,179 67,832 624,000 35,488 (7)
Officer 1996 451,923 309,860 36,544 38,704 483,000 53,732 (8)
- ----------------------------------------------------------------------------------------------------------------------------------
Robert C. Salipante, 1998 318,154 171,888 15,842 23,935 215,333 26,414 (6)
Senior Vice President 1997 299,615 130,186 22,262 25,028 305,000 23,894 (7)
1996 272,538 185,608 20,869 15,065 249,375 32,124 (8)
- ----------------------------------------------------------------------------------------------------------------------------------
Michael J. Dubes, 1998 322,423 122,925 17,084 19,117 217,999 30,019 (6)
Senior Vice President 1997 305,962 140,665 16,811 22,970 310,000 29,086 (7)
1996 288,269 142,431 17,252 15,887 258,125 59,985 (8)
- ----------------------------------------------------------------------------------------------------------------------------------
Wayne R. Huneke, 1998 304,615 128,549 18,859 36,728 206,666 19,795 (6)
Senior Vice President 1997 272,500 153,660 19,049 22,433 290,000 18,130 (7)
1996 226,885 158,837 16,370 11,605 214,375 23,365 (8)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes base salary paid, amounts deferred under salary reduction
agreements and amounts applied to purchase certain fringe benefits under
the Company's cafeteria plan.
(2) Amounts shown for each year include the annual incentive bonuses paid in
cash and in common stock. Bonus amounts shown in cash that are paid in
ReliaStar common stock are converted to shares by dividing the dollar
amount by the fair market value of the common stock on the bonus
determination date. Amounts shown for each year also include cash awards,
paid in the following year, pursuant to the Company's broad-based Success
Sharing Plan and ESOP covering all eligible employees of the Company and
its subsidiaries.
(3) Amounts shown for each year are based on the closing price of the ReliaStar
common stock on the date of grant. The total number of restricted shares
held, and their value based on the closing price on December 31, 1998, by
each of the named executives is as follows: Mr. Turner, 16,011 shares
($738,507); Mr. Flittie, 15,798 shares ($728,683); Mr. Salipante, 8,270
shares ($381,454); Mr. Dubes, 7,177 shares ($331,039); Mr. Huneke, 5,665
shares ($261,298). Dividends are paid on these restricted shares at the
same rate as those paid on the Company's common stock.
(4) The Company has not issued any free-standing stock appreciation rights.
(5) Payout amounts shown for each year are for performance cycles ending in
that year. Such amounts are determined and paid in cash in the first
quarter of the following year.
20
<PAGE>
(6) Includes (a) combined contributions to the Company's tax-qualified Success
Sharing Plan and ESOP and a nonqualified supplemental plan for the 1998
plan year as follows: Mr. Turner, $35,070; Mr. Flittie, $27,882;
Mr.Salipante, $15,939; Mr. Dubes, $16,153; Mr. Huneke, $15,261; (b) 1998
premiums paid for term life insurance coverage and the actuarially
projected current dollar value of the benefit to the executive of the
remainder of premiums and the imputed income on the term portion of split
dollar life insurance coverage paid by the Company on behalf of the named
executives as follows: Mr. Turner, $9,181; Mr. Flittie, $6,412;
Mr.Salipante, $5,781; Mr. Dubes, $6,178; Mr. Huneke, $4,534; (c) interest
accrued during 1998 on long-term incentive program payout amounts deferred
at the executive's election as follows: Mr.Turner, $89,558; Mr. Flittie,
$3,423; Mr. Salipante, $4,694; Mr. Dubes, $7,689.
(7) Includes (a) combined contributions to the Company's tax-qualified Success
Sharing Plan and ESOP and a nonqualified supplemental plan for the 1997
plan year as follows: Mr. Turner, $33,822; Mr. Flittie, $25,318;
Mr.Salipante, $15,056; Mr. Dubes, $15,375; Mr. Huneke, $13,693; (b) 1997
premiums paid for term life insurance coverage and the actuarially
projected current dollar value of the benefit to the executive of the
remainder of premiums and the imputed income on the term portion of split
dollar life insurance coverage paid by the Company on behalf of the named
executives as follows: Mr. Turner, $9,815; Mr. Flittie, $7,063;
Mr.Salipante, $4,350, Mr. Dubes, $6,359; Mr. Huneke, $4,437; (c) interest
accrued during 1997 on long-term incentive program payout amounts deferred
at the executive's election as follows: Mr. Turner, $43,431; Mr. Flittie,
$3,107; Mr. Salipante, $4,489; Mr. Dubes, $7,352.
(8) Includes (a) combined contributions to the Company's tax-qualified Success
Sharing Plan and ESOP and a nonqualified supplemental plan for the 1996
plan year as follows: Mr. Turner, $50,469; Mr. Flittie, $36,573;
Mr.Salipante, $22,055; Mr. Dubes, $23,328; Mr. Huneke, $18,361; (b) 1996
premiums paid for term life insurance coverage and the actuarially
projected current dollar value of the benefit to the executive of the
remainder of premiums for split dollar life insurance coverage paid by the
Company on behalf of the named executives as follows: Mr. Turner, $15,638;
Mr. Flittie, $13,866; Mr. Salipante, $6,117, Mr. Dubes, $9,415; Mr.Huneke,
$5,004; (c) interest accrued during 1996 on long-term incentive program
payout amounts deferred at the executive's election as follows: Mr. Turner,
$27,385; Mr. Flittie, $3,293; Mr. Salipante, $3,952; Mr.Dubes, $6,473; (d)
lump-sum cash payment of $20,769 in accrued vacation pay as of December 31,
1995 made to Mr. Dubes pursuant to a change in a subsidiary's vacation
carry-over policy.
21
<PAGE>
STOCK OPTION GRANTS IN 1998
The following table summarizes stock option grants during 1998 with respect to
the CEO and the named executive officers listed in the Summary Compensation
Table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Number of
Securities Percentage of
Underlying Total Options Grant Date
Options Granted Exercise or Expiration Present
Name Granted in 1998 Base Price Date Value
(#)(1) (%) ($) ($)(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John G. Turner 255,000 (3) 15.50 50.2500 7/09/08 4,923,056
100,000 (3) 6.08 50.2500 7/09/08 1,930,610
1,278 (4) 0.08 45.0313 2/10/03 15,093
2,863 (4) 0.17 41.7500 2/10/03 35,706
- -----------------------------------------------------------------------------------------------------------
John H. Flittie 9,414 (4) 0.57 45.6563 2/08/05 137,831
16,077 (4) 0.98 45.6563 2/07/06 250,642
50,000 (3) 3.04 43.8125 2/11/08 776,680
- -----------------------------------------------------------------------------------------------------------
Robert C. Salipante 16,707 (3) 1.02 43.8125 2/11/08 259,520
5,042 (4) 0.31 47.0938 7/06/02 57,833
2,186 (4) 0.13 47.0938 2/06/06 34,763
- -----------------------------------------------------------------------------------------------------------
Michael J. Dubes 16,981 (3) 1.03 43.8125 2/11/08 263,776
2,136 (4) 0.13 47.2500 2/06/06 32,561
- -----------------------------------------------------------------------------------------------------------
Wayne R. Huneke 15,886 (3) 0.97 43.8125 2/11/08 246,767
50 (4) 0.003 48.1563 2/08/05 843
976 (4) 0.06 48.1563 2/06/06 17,469
10,994 (4) 0.67 47.7813 2/08/05 183,924
4,504 (4) 0.27 47.7813 2/07/06 79,964
4,318 (4) 0.26 47.7813 2/12/07 80,601
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) All stock options granted may be exercised with cash or already owned
shares of ReliaStar common stock valued at the time of exercise. The
options include a right to have the Company withhold shares upon exercise
to satisfy the holder's tax liability due upon exercise.
(2) Present values have been estimated using a variation of the Black-Scholes
valuation method assuming (a) a dividend yield calculated over the most
recent 12-month period as of the end of the month prior to the grant date
(ranges from 1.55% to 1.72%); (b) a volatility factor calculated over the
36-month period as of the end of the month prior to the grant date (ranges
from 20.18% to 32.01%); (c) a risk-free rate of return equal to the most
recent 52-week average of the 10-year T-Bond rate as of the end of the
month prior to the grant date (ranges from 5.36% to 6.25%); and (d)
exercise at the end of the option term.
(3) One-third of the options granted vests on each of the first three
anniversaries of the date of grant. The options have a term of ten years,
but may terminate earlier in certain events related to termination of
employment. The options have a replacement (reload) feature. A reload is
the grant of a new option upon the holder's exercise of an option using
previously owned ReliaStar common stock or cash equivalent. The reload
option's exercise
22
<PAGE>
price is the fair market value of ReliaStar common stock on the replacement
option grant date. Its term is equal to the remaining term of the option
exercised.
(4) These are replacement (reload) options awarded on exercise of options with
payment made with previously owned ReliaStar common stock or cash
equivalent as described above. A reload option may be exercised six months
after the date of grant.
OPTION EXERCISES
AND YEAR-END VALUE
The following table shows the number and value of stock options (exercised and
unexercised) for the named executive officers during 1998. Value is calculated
using the difference between the option exercise price and $46.125 (1998
year-end stock price) multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money Options
Options at End of 1998 at End of 1998
Shares Acquired Value ---------------------------- ----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
(#) ($) (#) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John G. Turner 60,742 2,093,746 381,703 502,474 10,403,043 1,775,546
- ---------------------------------------------------------------------------------------------------------------------
John H. Flittie 98,422 3,128,264 190,493 86,148 4,276,906 812,283
- ---------------------------------------------------------------------------------------------------------------------
Robert C. Salipante 14,294 480,533 100,064 44,365 2,776,780 439,000
- ---------------------------------------------------------------------------------------------------------------------
Michael J. Dubes 43,970 1,414,575 110,955 36,278 3,153,529 416,779
- ---------------------------------------------------------------------------------------------------------------------
Wayne R. Huneke 34,294 955,794 43,927 36,647 713,818 351,096
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
LONG-TERM INCENTIVE PROGRAM AWARDS
The following table identifies estimated future payouts under the Company's
Long-term Incentive Program.
The named executive officers have the opportunity to earn awards based on the
Company's average total shareholder return ("TSR") compared to that of peer
companies. The Company's TSR is compared to the peer group each quarter for a
three-year period called a performance cycle. Threshold, par and maximum goals
are set at the beginning of each performance cycle. The goals are a percentile
ranking compared to the peer group. The peer group is selected by the Personnel
and Compensation Policy Committee. It is a group of publicly traded companies
that compete in the Company's primary lines of business. There are currently 21
companies in the peer group, including the Company. All five of the companies
included in the S&P Life Insurance Index shown in the performance graph on page
13 are in the Company's peer group.
Payouts are based on a percentage of each executive's annualized salary for the
final year of each performance cycle. The estimates project an annual salary
increase of five percent. Actual salary amounts may differ. No individual award
for a performance cycle may exceed $2 million. No award is earned until the end
of a performance cycle. The Personnel and Compensation Policy Committee has the
right to amend or terminate the program as to performance cycles in progress at
any time.
23
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Performance or Other Period Estimated Future Pay-outs under Non-stock-price-based Plans
---------------------------------------------------------------------
Name until Maturation or Pay-out Threshold ($) Target ($) Maximum ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John G. Turner 1997-1999 119,438 477,750 955,500
1998-2000 (1) 62,705 250,819 501,638
- -------------------------------------------------------------------------------------------------------------------------------
John H. Flittie 1997-1999 89,775 359,100 718,200
1998-2000 94,264 377,055 754,110
- -------------------------------------------------------------------------------------------------------------------------------
Robert C. Salipante 1997-1999 42,394 169,575 339,150
1998-2000 44,513 178,054 356,108
- -------------------------------------------------------------------------------------------------------------------------------
Michael J. Dubes 1997-1999 42,919 171,675 343,350
1998-2000 45,065 180,259 360,518
- -------------------------------------------------------------------------------------------------------------------------------
Wayne R. Huneke 1997-1999 40,688 162,750 325,500
1998-2000 42,722 170,888 341,775
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown have been reduced to reflect Mr. Turner's election to receive
the value of 50% of any award to which he may be entitled for the 1998-2000
performance cycle in stock options. The Personnel and Compensation Policy
Committee offered this one-time election to each executive officer. The
Committee granted 17,195 ten-year, nonqualified stock options to Mr. Turner
on February 10, 1999 at the fair market value. The options vest two years
from the date of grant.
RETIREMENT PLANS
QUALIFIED DEFINED BENEFIT RETIREMENT PLAN
The Company's qualified defined benefit retirement plan was amended effective
December 31, 1998 to terminate all future benefit accruals under this plan. This
applies to the named executive officers as well as all other employees
participating in the plan.
This plan will provide the named executive officers a benefit at retirement.
This retirement benefit is based on final average compensation and years of
credited service as of December 31, 1998. Final average compensation is based on
salary (including elective deferrals) but does not include incentive
compensation. The benefit is offset by two percent of the primary Social
Security benefit as of December 31, 1998 for each year of credited service up to
25 years. Federal laws limit the benefits payable under qualified plans and the
amount of annual compensation that the plans may consider. The Company has
adopted supplemental retirement agreements ("SRAs") to replace any qualified
plan benefits which are reduced by these limits.
The estimated benefit under the qualified defined benefit plan, together with
amounts under the SRAs, is as follows: Mr. Turner, $26,048; Mr. Flittie,
$18,884; Mr.Salipante, $2,716; Mr. Dubes, $10,530; and Mr. Huneke, $4,312.
24
<PAGE>
Basis of calculations:
o The final benefit is calculated as a five-year certain and life
monthly benefit assuming retirement at age 65.
o The years of credited service used to calculate these benefits for
each of the named executive officers are as follows: Mr.Turner 31.58
years; Mr. Flittie 25.00 years; Mr. Salipante 6.50 years; Mr. Dubes
31.50 years; and Mr. Huneke 12.58 years.
o Mr. Flittie's final benefit and years of credited service have been
adjusted to reflect his unfunded supplemental retirement agreement
which provides him with a supplemental retirement benefit based on 25
years of credited service at age 65 less the amount of his final
retirement benefit under the Company's defined retirement plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("SERP")
The Company has established a SERP that includes the named executive officers.
The SERP does not require employee contributions and is unfunded.
SERP participants are entitled to a monthly pension benefit if employment with
the Company terminates:
o After the participant is age 55 and has ten or more years of vesting
service, or
o After the participant is age 65 and has five or more years of vesting
service.
At ten years of credited service, the SERP benefit is the amount by which 55% of
the participant's average compensation for the last five years (salary plus
bonus) exceeds the SERP offset amount.
The SERP monthly benefit is reduced by the offset amount. The offset amount is
the sum of the following:
o The monthly benefit under the Company's qualified defined retirement
benefit plan, including SRAs,
o The monthly primary Social Security benefit,
o A monthly benefit amount which is attributable to employer
contributions under the Company's qualified and supplemental defined
contribution plans,
o The amount of any monthly pension benefit earned under a prior
employer's defined benefit plan or defined contribution plan if that
plan was the prior employer's primary retirement plan, and
o The amount payable under any other supplemental retirement plan or
agreement covering the participant.
If a participant has less than ten years of credited service, the SERP benefit
is 10% of the SERP amount determined as described above for each year of the
participant's credited service up to ten years.
The annual benefit shown in the following table is the SERP benefit reduced for
the primary Social Security benefit but not reduced by any of the other offsets
listed above.
Basis of calculations:
o Benefits are calculated as a five-year certain and life monthly
benefit.
o The benefits assume retirement in 1998 at age 65 to persons having at
least ten years of service.
25
<PAGE>
o Years of credited service are as follows: Mr. Turner, 31.58 years; Mr.
Flittie, 13.17 years; Mr. Salipante, 6.50 years; Mr. Dubes, 31.50
years; and Mr. Huneke, 12.58 years.
o Current compensation covered by the SERP for the named executive
officers is as follows: Mr. Turner, $1,153,863; Mr. Flittie, $855,833;
Mr.Salipante, $489,575; Mr. Dubes, $444,541; and Mr. Huneke,
$433,462.
- --------------------------------------------------------------------------------
SALARY PLUS ANNUAL INCENTIVE ($) ESTIMATED ANNUAL BENEFIT ($)
- --------------------------------------------------------------------------------
400,000 203,884
450,000 231,384
500,000 258,884
550,000 286,384
600,000 313,884
650,000 341,384
700,000 368,884
750,000 396,384
800,000 423,884
850,000 451,384
900,000 478,884
950,000 506,384
1,000,000 533,884
1,050,000 561,384
1,100,000 588,884
1,150,000 616,384
1,200,000 643,884
1,250,000 671,384
1,300,000 698,884
1,350,000 726,384
1,400,000 753,884
1,450,000 781,384
1,500,000 808,884
1,550,000 836,384
1,600,000 863,884
- --------------------------------------------------------------------------------
CHANGE IN CONTROL AND TERMINATION ARRANGEMENTS
MANAGEMENT AGREEMENTS
The Company has management agreements with each of its executive officers. These
provide for certain benefits if there is a "change in control" of the Company. A
change in control generally will be considered to have occurred upon (1) a third
party's acquisition of 20% or more of the Company's stock; (2) a change in the
membership of the Company's Board of Directors in which the current members of
the Company's Board of Directors (including their nominees) no longer make up at
least two-thirds of the Board; (3) a merger, consolidation, reorganization or
liquidation of the Company under certain conditions or (4) a sale of all or
substantially all of the assets of the Company.
26
<PAGE>
In general, these agreements entitle the executive to a lump-sum payment if the
executive's employment is involuntarily terminated (other than for cause, death,
disability or retirement) and the executive is less than 65 years old. The
lump-sum payment is equal to three times the sum of (1) base annual salary plus
(2) the average annual bonus payable for the shorter of the last three years of
employment or actual years of employment.
The executive also will be entitled to certain insurance benefits and to receive
a lump-sum cash payment of additional qualified and nonqualified retirement
benefits which the executive would have earned had employment continued to the
earlier of three years following termination of employment or age 65. The
Company also will reimburse an executive for legal expenses incurred to resolve
disputes under the agreements.
GRANTOR TRUSTS
The Company has established grantor trusts. The Company may set aside funds
under these trusts to satisfy obligations of the Company and its subsidiaries
under their incentive compensation plans, deferred compensation programs and
supplemental profit sharing plans. The CEO, with the approval of the Personnel
and Compensation Policy Committee, has caused the Company to partially fund one
of these trusts. The trusts provide that funds will automatically and
irrevocably be contributed to the trusts if there is a change in control.
STOCK OPTIONS AND RESTRICTED SHARES
All outstanding stock options will vest and become exercisable and restricted
shares will vest immediately if there is a change in control.
ADDITIONAL POLICIES
The Board has adopted a policy providing that the Company's health, welfare and
severance plans may not be changed for three years following a change in control
unless required by law.
RETIREMENT PLANS
The Company's qualified retirement plans provide full vesting of accrued
benefits for participants whose employment terminates under certain
circumstances within three years of a change in control of the Company.
COMPLIANCE WITH SECTION 16(a) REPORTING
The rules of the Securities and Exchange Commission require that ReliaStar
disclose late filings of reports of ownership (and changes in stock ownership)
of ReliaStar common stock by its directors and Section 16 officers. Based on
written representations, ReliaStar believes that all of these filing
requirements (pursuant to Section 16(a) of the Securities Exchange Act of 1934)
were satisfied in 1998, except that Mark L. Lipson filed one late report.
27
<PAGE>
APPENDIX
RELIASTAR ANNUAL INCENTIVE BONUS PLAN
FOR
DESIGNATED EXECUTIVE OFFICERS
The ReliaStar Annual Incentive Bonus Plan for Designated Executive Officers is
hereby restated and amended, effective January 1, 1999.
1. DEFINITIONS. When the following terms are used herein with initial capital
letters, they shall have the following meanings:
1.1. RETURN ON EQUITY-OPERATING INCOME BASIS - A ratio, expressed as a
percentage of which the numerator is operating income (income from continuing
operations, excluding realized investment gains and losses and their impact on
the amortization of deferred policy acquisition costs and present value of
future profits, net of tax) available to common shareholders, and the
denominator is beginning-of- year common shareholders' equity, excluding
accumulated other comprehensive income as defined in Statement of Financial
Accounting Standards No. 130, and adjusted for the weighted impact of
significant common shareholder equity transactions that occur during the period.
1.2. BONUS POOL AMOUNT - an amount of a pool from which bonuses as
provided herein may be paid equal to one and one-half (1 1/2%) of the
Corporation's Pre-tax Operating Income for the Plan Year for which the bonuses
are being paid.
1.3. COMPENSATION COMMITTEE - a committee comprised solely of two or
more "outside directors" of the Corporation, which satisfies the requirements of
Section 162(m) Code, provided, however, that until the first meeting of
shareholders of the Corporation at which directors are to be elected that occurs
after July 1, 1994, the Compensation Committee may be composed of two or more
disinterested directors within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934.
1.4. CODE - the Internal Revenue Code of 1986, as it may be amended
from time to time, and any proposed, temporary or final Treasury Regulations
promulgated thereunder.
1.5. CORPORATE PERFORMANCE FACTOR - Achievement of a Return on Equity
Operating Income Basis for the Plan Year equal to or greater than 10.7%.
1.6. CORPORATION - ReliaStar Financial Corp., a Delaware corporation,
and any of its Participating Employers that adopt this Plan.
<PAGE>
1.7. PARTICIPANT - Executive officers of the Corporation who are
designated by the Compensation Committee as Participants in this Plan pursuant
to Section 2.1 hereof.
1.8. PARTICIPATING EMPLOYER - the Corporation and any of its
subsidiaries which has, by action of its Board of Directors, elected to be a
Participating Employer.
1.9. PRE-TAX OPERATING INCOME - Income from continuing operations
before income taxes, realized investment gains and losses and their impact on
the amortization of deferred policy acquisition costs and present value of
future profits, extraordinary items and the cumulative effect of accounting
changes, determined in accordance with generally accepted accounting principles,
adjusted to eliminate (a) restatements of financial results relating to an
acquisition accounted for as a "pooling-of-interests" and (b) any other unusual
nonrecurring gain or loss which is separately identified and quantified in the
Corporation's financial statements.
1.10. PLAN YEAR - the twelve consecutive month period which coincides
with the Corporation's fiscal year.
1.11. SHARES - shares of common stock of ReliaStar Financial Corp.
2. ADMINISTRATION.
2.1. DETERMINATIONS MADE PRIOR TO EACH PLAN YEAR. Prior to each Plan
Year or prior to such later date in the Plan Year as may be permitted in
accordance with Section 162(m) of the Code, the Compensation Committee shall
designate Participants for that Plan Year.
2.2. CERTIFICATION. Following the close of each Plan Year and prior to
payment of any bonus under the Plan, the Compensation Committee must certify in
writing that the Corporate Performance Factor has been attained, and the Bonus
Pool Amount for the Plan Year.
2.3. SHAREHOLDER APPROVAL. The material terms of this Plan shall be
disclosed to and approved by shareholders of the Corporation in accordance with
Section 162(m) of the Code. No bonus shall be paid under this Plan unless such
shareholder approval has been obtained.
3. BONUS PAYMENT.
3.1. FORMULA. The Participants in the Plan shall receive cash bonus
payments each Plan Year in amounts not greater than the following designated
percentages of the Bonus Pool Amount for that Plan Year: The maximum bonuses
which can be paid for any Plan Year to the chief executive officer and to the
chief
2
<PAGE>
operating officer shall be 20% and 17%, respectively, of the Bonus Pool Amount
for that Plan Year, and the maximum bonus that each of the other Participants
may be paid for any Plan Year shall be the amount determined by dividing the
remaining 63% of the Bonus Pool Amount by the number of Participants, excluding
the chief executive officer and the chief operating officer, who are covered
under the Plan for that Plan Year.
3.2. LIMITATIONS.
(a) NO PAYMENT IF PERFORMANCE FACTOR NOT ACHIEVED. In no
event shall any Participant receive a bonus payment
hereunder for a Plan Year if the Corporate
Performance Factor is not achieved during the Plan
Year.
(b) COMPENSATION COMMITTEE MAY REDUCE BONUS PAYMENT. The
Compensation Committee retains sole discretion to
reduce the amount of any bonus otherwise payable
under this Plan. To determine such reductions, the
Compensation Committee may, in its sole discretion,
adopt guidelines based on factors including, but not
limited to the Corporation's return on equity and net
income for each plan year compared to planned goals
for these factors, and attainment of business unit
and individual performance goals established for
Participants.
(c) NO PAYMENT TO PARTICIPANT WHO TERMINATES EMPLOYMENT
PRIOR TO CLOSE OF PLAN YEAR. Except in the event of
death, retirement, disability, transfer to an
affiliate company that does not participate in this
Plan or change in control "Event" as defined in
Section 3.1(b) of the Compensation Trust Agreement
dated as of January 3, 1989 between the Corporation
and Norwest Bank Minnesota, N.A., as from time to
time amended, no bonus payment shall be paid to a
Participant who terminates employment prior to the
last day of the Plan Year.
4. BENEFIT PAYMENTS.
4.1. TIME AND FORM OF PAYMENTS. Subject to any deferred compensation
election pursuant to any such plans of the Corporation applicable hereto,
benefits shall be paid to the Participant as soon as administratively feasible
after the Compensation Committee has certified that the Corporate Performance
Factor has been attained. As determined from time to time by the Compensation
Committee, bonuses payable hereunder may be paid to Participants in cash or
Shares, except
3
<PAGE>
that any bonus payable in respect of a deceased Participant shall be payable
solely in cash to the person or persons designated by the Participant's will or
pursuant to the laws of descent and distribution. Bonuses payable in Shares
shall be subject to Section 4.2 hereof.
4.2. BONUSES PAID IN SHARES. The dollar amount of any bonus payable in
Shares shall be charged against the Bonus Pool Amount and shall be converted to
a whole number of Shares by dividing the amount by the fair market value of one
Share as of the date the Compensation Committee certifies that the Corporate
Performance Factor has been attained as provided in Section 4.1 hereof. Any
remainder shall be paid to the Participant in cash. Any bonus payable hereunder
in the form of Shares shall be awarded under and subject to all of the terms and
conditions of The ReliaStar 1993 Stock Incentive Plan, as amended from time to
time ("Stock Incentive Plan"). Shares awarded hereunder may, at the
Participant's election and if permitted by the Committee, be deposited with the
Corporation under Section 8.6 of the Stock Incentive Plan.
4.3. NONTRANSFERABILITY. Participants and beneficiaries shall not have
the right to assign, encumber or otherwise anticipate the payments to be made
under this Plan, and the benefits provided hereunder shall not be subject to
seizure for payment of any debts or judgments against any Participant or any
beneficiary.
4.4. TAX WITHHOLDING. In order to comply with all applicable federal or
state income tax laws or regulations, the Corporation may take such action as it
deems appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant.
5. AMENDMENT AND TERMINATION. The Compensation Committee may amend this Plan
prospectively at any time and for any reason deemed sufficient by it without
notice to any person affected by this Plan and may likewise terminate or curtail
the benefits of this Plan both with regard to persons expecting to receive
benefits hereunder in the future and persons already receiving benefits at the
time of such action.
6. MISCELLANEOUS.
6.1. EFFECTIVE DATE. January 1, 1994.
6.2. HEADINGS. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
4
<PAGE>
6.3. APPLICABILITY TO SUCCESSORS. This Plan shall be binding upon and
inure to the benefit of the Corporation and each Participant, the successors and
assigns of the Corporation, and the beneficiaries, personal representatives and
heirs of each Participant. If the Corporation becomes a party to any merger,
consolidation or reorganization, this Plan shall remain in full force and effect
as an obligation of the Corporation or its successors in interest.
6.4. EMPLOYMENT RIGHTS AND OTHER BENEFIT PROGRAMS. The provisions of
this Plan shall not give any Participant any right to be retained in the
employment of the Corporation. This Plan shall not replace any contract of
employment, whether oral or written, between the Corporation and any
Participant, but shall be considered a supplement thereto. This Plan is in
addition to, and not in lieu of, any other employee benefit plan or program in
which any Participant may be or become eligible to participate by reason of
employment with the Corporation. Receipt of benefits hereunder shall have such
effect on contributions to and benefits under such other plans or programs as
the provisions of each such other plan or program may specify.
6.5. GOVERNING LAW. The validity, construction and effect of the Plan
or any bonus payable under the Plan shall be determined in accordance with the
laws of the State of Delaware.
6.6. SEVERABILITY. If any provision of the Plan is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction such
provision shall be construed or deemed amended to conform to applicable laws, or
if it cannot be so construed or deemed amended without, in the determination of
the Compensation Committee, materially altering the purpose or intent of the
Plan, such provision shall be stricken as to such jurisdiction, and the
remainder of the Plan shall remain in full force and effect.
6.7. QUALIFIED PERFORMANCE-BASED COMPENSATION. All of the terms and
conditions of the Plan shall be interpreted in such a fashion as to qualify all
compensation paid hereunder as "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code.
5
<PAGE>
RELIASTAR FINANCIAL CORP.
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 13, 1999
10:00 A.M.
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401
[LOGO] RELIASTAR RELIASTAR FINANCIAL CORP.
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 13, 1999.
The shares of stock you hold in your account or in a dividend reinvestment
account will be voted as you specify on this proxy or by telephone.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3.
By signing the proxy, you revoke all prior proxies and appoint John G. Turner,
John H. Flittie and Richard R. Crowl, and each of them, as proxies, with full
power of substitution and revocation to vote all shares of the Company which you
are entitled to vote at the Annual Meeting of the Company to be held May 13,
1999 and any adjournments, upon all business that may properly come before the
meeting.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
--------------------
COMPANY #
CONTROL #
--------------------
THERE ARE TWO WAYS TO VOTE YOUR PROXY.
VOTE BY PHONE: 24 HOURS A DAY, 7 DAYS A WEEK
CALL TOLL FREE ON A TOUCH-TONE TELEPHONE 1-800-240-6326. THERE IS NO CHARGE TO
YOU FOR THIS CALL. YOU WILL BE ASKED TO ENTER THE COMPANY NUMBER AND THE
CONTROL NUMBER LOCATED ABOVE IN THE BOX. SEE INFORMATION BELOW ON EACH
PROPOSAL.
OPTION A: To vote as the Board of Directors recommends on ALL proposals,
press 1.
OPTION B: If you choose to vote on each proposal separately, press 0.
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9; to WITHHOLD FOR AN INDIVIDUAL
nominee follow the directions given.
Proposals 2, 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0. The instructions are the same for proposals 2
and 3.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
VOTE BY MAIL:
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to ReliaStar Financial Corp., c/o Shareowner
Services(SM), P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE, PLEASE DO NOT MAIL YOUR PROXY CARD
PLEASE DETACH HERE
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of directors: 01 Carolyn H. Baldwin 03 James J. Howard
02 Richard U. De Schutter 04 John H. Flittie
[ ] Vote FOR [ ] Vote WITHHELD
all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE, _______________________________________
WRITE THE NUMBER(S) OF THE NOMINEE(S) | |
IN THE BOX PROVIDED TO THE RIGHT.) |_______________________________________|
2. Proposal to ratify appointment of
Deloitte & Touche LLP as ReliaStar's
independent public accountants for
1999. [ ] For [ ] Against [ ] Abstain
3. Proposal to approve the ReliaStar
Annual Incentive Bonus Plan for
Designated Executive Officers. [ ]For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. DISCRETIONARY AUTHORITY IS HEREBY
CONFERRED AS TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MAY 13,
1999 ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
Address Change? Mark Box [ ] Indicate changes below:
Date ______________________
_______________________________________
| |
|_______________________________________|
Signature(s) in Box
Please sign exactly as your name(s)
appears on the proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority.
Corporations should provide full name of
corporation and title of authorized
officer signing the proxy.
<PAGE>
March 31, 1999
TO: Participants in the ReliaStar Success Sharing Plan and ESOP
The Annual Meeting of Shareholders of ReliaStar Financial Corp. ("ReliaStar")
will be held in the auditorium of 20 Washington Avenue South, Minneapolis,
Minnesota, on Thursday, May 13, 1999 at 10:00 a.m., Minneapolis time. ReliaStar
shareholders of record as of March 16, 1999 may vote the shares they held of
record on that date.
Under the ReliaStar Success Sharing Plan and ESOP ("Plan"), you have an interest
in the ReliaStar common stock ("Shares") held by the Plan. You may instruct The
Northern Trust Company, the Trustee for the Plan, how to vote the Shares
allocated to your account(s) as of the record date. Your interest in the Shares
held by the Plan may only be voted through the Trustee.
Enclosed are several documents that are important for both the Annual Meeting
and proxy voting.
1. The Notice of Annual Meeting and Proxy Statement that explains the
proposals to be voted upon at the Annual Meeting.
2. The enclosed Voting Instruction Card is to be used to record your voting
instructions for the Shares allocated to your accounts.
3. An annual report is enclosed for former employees who are participating in
the ReliaStar Success Sharing Plan and ESOP. (Please note that an annual
report has been sent to all active employees of ReliaStar under separate
cover.)
The number of Shares allocated to your account(s) on the record date is shown on
the Voting Instruction Card. The Shares get one vote each.
TO VOTE ALL OF YOUR SHARES, YOU CAN EITHER VOTE BY PHONE AS SHOWN ON THE VOTING
INSTRUCTION CARD -- TOLL FREE 1-800-240-6326 -- OR SIMPLY COMPLETE AND RETURN
THE VOTING INSTRUCTION CARD, USING THE ENCLOSED ENVELOPE, TO NORWEST BANK ON
BEHALF OF THE NORTHERN TRUST COMPANY. YOUR CARD MUST BE RECEIVED BEFORE MAY 4,
1999.
The Trustee will vote those Shares for which no voting instructions are received
as well as the Shares that are held in trust for allocation to participants'
accounts in future years in the same proportion as Shares for which voting
instructions are received.
If you have any questions about any of this material, please call me at (612)
372-5757.
/s/ Nancy Carlson
Nancy Carlson
Manager, Retirement Plans
Human Resources Department
Encl.
<PAGE>
RELIASTAR FINANCIAL CORP.
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 13, 1999
10:00 A.M.
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401
RELIASTAR FINANCIAL CORP.
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401 VOTING INSTRUCTION FORM
- --------------------------------------------------------------------------------
RELIASTAR COMMON STOCK VOTING INSTRUCTION FORM
RELIASTAR SUCCESS SHARING PLAN AND ESOP
I hereby instruct The Northern Trust Company, the Trustee of the ReliaStar
Success Sharing Plan and ESOP ("Plan"), to vote my interest in the shares of
ReliaStar common stock held in the Plan by the Trustee as of the close of
business on March 16, 1999, at the Annual Meeting of ReliaStar Financial Corp.
to be held on May 13, 1999, and any adjournment thereof, in the manner directed
by telephone or on this form with respect to the proposals described in the
accompanying Notice of Annual Meeting and Proxy Statement.
I understand that my instructions by telephone or as marked on this form must be
received by the Trustee by May 4, 1999. I also acknowledge receipt of the proxy
materials for the 1999 Annual Meeting.
If no instruction is indicated by telephone or on this voting instruction form,
the Trustee is instructed to vote my interest in the ReliaStar common stock held
by the Trust on each of the proposals shown on this form proportionately in
accordance with instructions received from other Plan participants with respect
to shares of ReliaStar common stock. I understand that shares of ReliaStar
common stock for which the Trustee does not receive voting instructions,
including unallocated ESOP shares of common stock, will be voted by the Trustee
in the same proportion as all shares of ReliaStar common stock for which the
Trustee receives voting instructions. On any other matters that may properly
come before the meeting, the Trustee shall vote in accordance with its best
judgment.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
--------------------------
COMPANY NUMBER
CONTROL NUMBER
--------------------------
There are two ways to instruct the Plan Trustee how to vote.
BY PHONE: CALL TOLL FREE ON A TOUCH-TONE TELEPHONE 1-800-240-6326. THERE IS
24 HOURS A NO CHARGE TO YOU FOR THIS CALL. YOU WILL BE ASKED TO ENTER THE
DAY, 7 DAYS COMPANY NUMBER AND THE CONTROL NUMBER LOCATED ABOVE IN THE BOX.
A WEEK SEE INFORMATION BELOW ON EACH PROPOSAL.
OPTION A: To vote as the Board of Directors recommends on ALL
proposals, press 1.
OPTION B: To vote on each proposal separately, press 0.
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD
FOR ALL nominees, press 9; to WITHHOLD FOR AN
INDIVIDUAL nominee follow the directions given.
Proposals 2, 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0. The instructions are the same for
proposals 2 and 3.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
Your telephone vote instructs the Plan Trustee to vote your interest in the
shares of ReliaStar common stock held in the Plan in the same manner as if you
marked, signed and returned your voting instruction form.
BY MAIL:
Mark, sign and date your voting instruction form and return it in the
postage-paid envelope we've provided or return it to ReliaStar Financial Corp.,
c/o Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-0873.
If you vote by phone, please do not mail your voting instruction form.
Please detach here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
THE PLAN TRUSTEE SHALL VOTE MY SHARES AS FOLLOWS:
<TABLE>
<S> <C> <C> <C> <C> <C>
1. Election of directors: 01 Carolyn H. Baldwin 03 James J. Howard [ ] Vote FOR [ ] Vote WITHHELD
02 Richard U. De Schutter 04 John H. Flittie all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, ----------------------------------------------------
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) | |
----------------------------------------------------
2. Proposal to ratify appointment of Deloitte & Touche LLP as ReliaStar's [ ] For [ ] Against [ ] Abstain
independent public accountants for 1999.
3. Proposal to approve the ReliaStar Annual Incentive Bonus Plan for Designated [ ] For [ ] Against [ ] Abstain
Executive Officers.
Date
--------------------------------------------
Address Area
----------------------------------------------------
| |
----------------------------------------------------
Signature of Participant in Box
(Please date and sign exactly as shown.)
- ------------------------------------------------------------------------------------------------------------------------------------
Proxy # Account # Issue or Issuer #
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
