SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to rule 14a-11(c) or Rule 14a-12
Lincoln National Corporation
___________________________________________________________________________
(Name of Registrant as specified in its Charter)
___________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:*
____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________________________
X Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid: $125.00___________________________________________
2) Form, Schedule or Registration Statement No. Preliminary Proxy Material
3) Filing Party:___________________________________________________________
4) Date filed:___March 16, 1994____________________________________________
*Set forth the amount on which the filing fee is calculated and state how
it was determined.
Lincoln National Corporation
FORT WAYNE, INDIANA
April 11, 1994
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Lincoln National Corporation scheduled to be held
on Thursday, May 12, 1994, at the Grand Wayne Center, 120 West
Jefferson Boulevard, Fort Wayne, Indiana, at 10:00 a.m., local
time. Please note that this is a change from the meeting site in
previous years. The Grand Wayne Center is one block north of the
Corporation's office at which annual meetings have been held in
previous years. Your Board of Directors and Management look
forward to greeting personally those shareholders able to attend.
The matters to be acted upon at the meeting are described in the
attached Notice of Meeting and Proxy Statement which we urge you to
review carefully.
It is important that your shares are represented at the meeting.
Accordingly, we request your cooperation by signing, dating and
mailing the enclosed proxy card in the envelope provided for your
convenience.
On behalf of the Board of Directors, thank you for your continued
support.
Sincerely,
Ian M. Rolland
Chairman
<PAGE> 1
LINCOLN NATIONAL CORPORATION
FORT WAYNE, INDIANA
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
April 11, 1994
The annual meeting of shareholders of LINCOLN NATIONAL CORPORATION
will be held on Thursday, May 12, 1994, at 10:00 a.m., local time, at
the Grand Wayne Center,120 West Jefferson Boulevard, Fort Wayne,
Indiana 46802. Please note that this is a change from the meeting site
in previous years. The Grand Wayne Center is one block north of the
Corporation's office at which annual meetings have been held in previous
years.
The items of business are:
1. to elect four directors for three year terms;
2. to approve or disapprove an amendment to the Corporation's articles of
incorporation to increase the amount of authorized Common Stock from
400 million to 800 million shares;
3. to approve or disapprove an amendment and restatement of a stock
option plan;
4. to approve or disapprove a stock plan for directors;
5. to approve or disapprove a phantom stock plan for employees;
6. to approve or disapprove an amendment and restatement of an
executive value sharing plan; and
to consider and act upon such other matters as may properly come
before the meeting.
These items are more fully described in the following pages. Only
shareholders of record at the close of business on March 18, 1994 are
entitled to notice of and to vote at the meeting or any meeting resulting
from an adjournment thereof. Shareholders are reminded that shares cannot
be voted unless the signed proxy card is returned or other arrangements
are made to have the shares represented at the meeting.
For the Board of Directors,
C. Suzanne Womack
Secretary
<PAGE> 2
LINCOLN NATIONAL CORPORATION
200 East Berry Street
FORT WAYNE, INDIANA
Proxy Statement
Annual Meeting of Shareholders
May 12, 1994
Any shareholder giving a proxy has the power to revoke it at anytime before
its exercise by submitting a written revocation or a new proxy, or by the
shareholder's attendance and vote at the annual meeting. This Proxy
Statement is first being mailed to shareholders on or about April 11, 1994.
Proxies in the form provided are being solicited by the Board of Directors
of Lincoln National Corporation (the "Corporation" or "LNC") for use at the
annual meeting of shareholders to be held May 12, 1994, and any meeting
resulting from an adjournment thereof.
Solicitation of Proxies
The cost of soliciting proxies will be paid by the Corporation. The
Corporation has made arrangements with brokerage firms, banks, custodians
and other fiduciaries to forward proxy materials to their principals, and
the Corporation will reimburse them for their reasonable mailing and other
expenses.
In addition to solicitation by mail, certain directors, officers and
employees of the Corporation, who will receive no additional compensation
for their services, may solicit proxies by telephone, telecopy and by
personal contacts. The Corporation has retained the firm of Corporate
Investor Communications, Inc., a shareholder relations and proxy
solicitation firm. Representatives of this firm may also solicit proxies
by mail, telephone, telecopy and by personal contacts.
The enclosed proxy/direction card is considered to be voting instructions
furnished to the respective trustees of the Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan and The Lincoln National Life
Insurance Company Agents' Savings and Profit-Sharing Plan with respect to
shares allocated to individual accounts under these plans. To the extent
that account information is the same, participants in one or more of the
plans who are also shareholders of record will receive a single card
representing all shares. If a plan participant does not return a
proxy/direction card to the Corporation, the trustees of the plan in which
shares are allocated to his/her individual account will vote such shares in
proportion to shares for which directions have been received.
Approval by the shareholders at the annual meeting of the minutes of the
previous annual meeting will not constitute approval of any of the matters
referred to in such minutes. The Board has no information that items other
than those contained in the "Notice of Annual Meeting" will be brought
before the meeting. For requirements applicable to shareholder proposals,
please see "Shareholder Proposals" on page 43. If, however, other matters
are presented, holders of proxies given pursuant to this Proxy Statement
will vote the shares in the interest of the Corporation and in accordance
with their best judgment.
<PAGE> 3
SHAREHOLDERS ENTITLED TO VOTE AND
SHARES OUTSTANDING
Only shareholders of record at the close of business on March 18, 1994 will
be entitled to vote at the meeting. As of that date, there were 98,190,014
shares of capital stock of the Corporation issued, outstanding and entitled
to vote as follows: 94,725,811 shares of Common Stock; 46,306 shares of
$3.00 Cumulative Convertible Preferred Stock, Series A; 2,201,443 shares
of 5 1/2% Cumulative Convertible Exchangeable Preferred Stock, Series E; and
2,216,454 shares of 5 1/2% Cumulative Convertible Exchangeable Preferred
Stock, Series F. Each share is entitled to one vote.
VOTES NECESSARY FOR QUORUM
AND ADOPTION OF PROPOSALS
Quorum - The Corporation is domiciled in the state of Indiana. A majority
of all outstanding voting shares constitutes a quorum, and for Item 2, a
majority of the outstanding shares of Common Stock constitutes a quorum
for the Common Stock voting as a group. Once a share is represented for any
purpose at a meeting it is deemed present for quorum purposes for the
remainder of the meeting or any adjournment.
Votes Necessary to Adopt Proposals - A plurality of the votes cast is
required for the election of directors (i.e., Item 1). The proposed
amendment to increase authorized Common Stock (i.e., Item 2) will be
adopted if the votes cast favoring the proposal exceed the votes cast opposing
the proposal by both the holders of Common Stock voting as a group and the
holders of all capital stock entitled to vote. The affirmative vote of the
holders of a majority of the voting securities of the Corporation present,
or represented, and entitled to vote at the meeting is necessary for the
adoption of Items 3 through 6. For Items 1 and 2, abstentions, broker
non-votes and instructions on a proxy to withhold authority to vote for one
or more of the director nominees will have no effect on the outcome of the
election of directors or the proposed amendment to the Articles of
Incorporation. For Items 3 through 6, abstentions and broker non-votes will
have the same effect as a vote against the respective proposals.
ITEM 1 - ELECTION OF DIRECTORS
Proxies will be voted for nominees listed below unless the shareholder
giving the proxy withholds such authority. It is intended that shares
represented by proxies will be voted for Robert A. Anker, Harry L. Kavetas,
M. Leanne Lachman and Jill S. Ruckelshaus for terms expiring in 1997.
All nominees presently are serving as directors of the Corporation. All
nominees have agreed to serve if elected; however, if any nominee is unable
or declines to serve as a director at the time of the annual meeting or any
meeting resulting from an adjournment thereof (an event not now
anticipated), proxies will be voted for the election of a qualified
substitute nominee, or the size of the Board may be reduced.
<PAGE> 4
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR
(Terms Expiring in May 1997)
NAME AND POSITION
WITH THE DIRECTOR PRINCIPAL OCCUPATION OTHER
CORPORATION AGE SINCE AND EMPLOYMENT DIRECTORSHIPS
<S> <C> <C> <C> <C>
Robert A. Anker 52 1992 President and Chief None
President, Chief Operating Officer of
Operating Officer the Corporation and
and Director of The Lincoln National
Life Insurance Company
(previously, Chairman,
President, American
States Insurance
Company, a wholly-owned
property/casualty
insurance subsidiary of
the Corporation)
Harry L. Kavetas 56 1990 Senior Vice President IBM Mutual Fund
Director and Chief Financial
Officer, Eastman Kodak
Company (previously,
Vice President,
International Business
Machines Corporation,
an information\handling
systems, equipment and
services company;
President, IBM Credit
Corporation, a finance
company that finances
IBM products and
services for IBM
customers)
M. Leanne Lachman 51 1985 Managing Director, Chicago Title
Director Schroder Real Estate and Trust
Associates, a national Company,
real estate investment Chicago Title
management firm; Insurance
Managing Director, Company
Schroder Mortgage
Associates, a national
commercial mortgage
investment firm
Jill S. Ruckelshaus 57 1975 Dirctor, Seattle Sea-First
Director First Bank Corporation Corproation
(previously, Consultant,
William D. Ruckelshaus
Associates, environmental
consultants)
</TABLE>
<PAGE> 5
DIRECTORS CONTINUING IN OFFICE
(Terms Expiring in May 1996)
<TABLE>
<CAPTION>
NAME AND POSITION
WITH THE DIRECTOR PRINCIPAL OCCUPATION OTHER
CORPORATION AGE SINCE AND EMPLOYMENT DIRECTORSHIPS
<S> <C> <C> <C> <C>
J.Patrick Barrett 57 1990 Chairman and Chief None
Director Executive Officer of
CARPAT Investments, a
private investment
company
Thomas D. Bell, Jr. 44 1988 Vice-Chairman, Chief None
Director Operating Officer
Worldwide and Director,
Burson-Marsteller, a
public relations/public
affairs firm
(previously, Executive
Vice President and
Director of Ball
Corporation, a
diversified
manufacturer serving
the industrial,
packaging and high
technology markets)
Daniel R. Efroymson 52 1993 President, Treasurer NBD Bank, N.A.
Director and Director, Real Silk
Investments, Inc., a
closed-end investment
company, Vice President
and Director, Moriah
Fund, Inc., a private
foundation
Leo J. McKernan 56 1991 Chairman, President, 1st Source
Director Chief Executive Corporation,
Officer and Director, VME Group,
Clark Equipment N.V.
Company
Ian M. Rolland 60 1975 Chairman of the Board Tokheim
Chairman of the and Chief Executive Corp.,
Board, Chief Officer (previously NIPSCO
Executive Officer President) of the Industries,
and Director Corporation and of Inc.,Norwest
The Lincoln National Corporation
Life Insurance Company,
a wholly-owned life
insurance subsidiary of
the Corporation
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
(Terms expiring in May 1995)
NAME AND POSITION
WITH THE DIRECTOR PRINCIPAL OCCUPATION OTHER
CORPORATION AGE SINCE AND EMPLOYMENT DIRECTORSHIPS
<S> <C> <C> <C> <C>
Earl L. Neal 66 1985 Attorney at Law, Chicago Title
Director Earl L. Neal & and Trust
Associates Company, Chicago
Title Insurance
Company,
Peoples Energy
Corporation,
First Chicago
Corporation, The
First National
Bank of Chicago
John M. Pietruski 61 1989 Chairman, Texas Hershey Foods
Director Biotechnology Corporation,
Corporation, a research General Public
and development Utilities
company, retired Corporation,
Chairman and Chief Cytogen
Executive Officer of Corporation,
Sterling Drug Inc. McKesson Corp.
Gordon A. Walker 66 1982 Chairman and Chief Turner
Director Executive Officer, Corporation
Hollinee Inc., a
privately-held holding
company
Gilbert R. 62 1986 Provost and Executive Handleman
Whitaker,Jr. Vice President of Company,
Director Academic Affairs, Johnson Controls,
University of Michigan Inc., Structural
(previously, Dean and Dynamics
Professor of Business Research Corp.
Economics of the School
of Business Administration,
University of Michigan)
</TABLE>
<PAGE> 7
SECURITY OWNERSHIP OF DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS
The Corporation encourages all employees to own shares of its Common
Stock and has established stock ownership guidelines for its officers. These
guidelines were established in 1993, and officers are expected to meet them
within 5 years. Officers are expected to achieve stock ownership equivalent
to the following multiples of their base salary: chief executive officer 8
times, chief operating officer 7 times, executive vice presidents 6 times,
senior vice presidents 4 times and vice presidents 2 times base salary.
Similarly, directors are expected to achieve stock ownership of 5 times
their annual retainer within a period of 5 years. The Corporation has two
classes of equity securities, Common Stock and Preferred Stock. None of
the persons listed below own Preferred Stock. The following table shows the
number of shares of the Corporation's Common Stock beneficially owned by
directors, nominees for director, and executive officers as of March 3,
1994:
<TABLE>
<CAPTION>
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL BENEFICIAL
NAME OWNERSHIP <f1,2> NAME OWNERSHIP<f1,2>
<S> <C> <C> <C>
Robert A. Anker 104,388 Leo J. McKernan 1,000
J. Patrick Barrett 2,000 Earl L. Neal 1,000
Thomas D. Bell, Jr. 200 John M. Pietruski 2,000
Jon A. Boscia 44,031 Ian M. Rolland 257,953
P. Kenneth Dunsire 98,356 Jill S. Ruckelshaus 2,000
Daniel R. Efroymson 1,000,396 Gordon A. Walker 566
Harry L. Kavetas 600 Thomas M. West 84,892
M. Leanne Lachman 1,000 Gilbert R. Whitaker,Jr. 1,000
F. Cedric McCurley 36,332 Directors and Executive 1,843,161
Officers as a Group -
24 Persons
<FN>
___________________________
<F1> Except for Mr. Efroymson,who beneficially owns 1.06% of the Corporation's
Common Stock, each of these amounts represents less than 1% of the outstanding
shares of the Corporation's Common Stock as of March 3, 1994. As to shares
beneficially owned, each person, other than Mr. Efroymson, has sole voting
and investment power except that the following persons each share voting and
investment power with another person as to the number of shares indicated:
Mr. Anker, 4,000 shares; Mr. Boscia, 2,000 shares; Mr. McCurley, 1,000
shares; Mr. Rolland, 150 shares; and Ms. Ruckelshaus, 200 shares. Of the
shares reported for Mr. Efroymson, he has sole voting and investment power with
respect to 4,430 shares and shared voting and investment power with respect to
the remaining 995,966 shares. Of the shares reported for Mr. Efroymson,
422,660 shares are held in various trusts and 577,736 are held by Moriah Fund,
Inc., a private foundation of which Mr. Efroymson is Vice President and a
director. Mr. Efroymson disclaims beneficial ownership of all but 4,430
shares.
<F2> This table includes the following shares which are subject to acquisition
within 60 days by the exercise of outstanding stock options: Mr. Anker,
67,500 shares; Mr.Boscia, 29,500 shares; Mr. Dunsire, 60,000 shares; Mr.
McCurley, 27,400 shares; Mr.Rolland, 154,000 shares; and Mr. West, 70,500
shares.
</FN>
</TABLE>
<PAGE> 8
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
The table below sets forth, as of March 3, 1994, the names of persons
known to the Corporation to be the beneficial owners of more than 5% of its
Common or Preferred Stock.
<TABLE>
<CAPTION>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
Title of Class Name and Address of Beneficial Amount and Nature of Percent
Owner Beneficial Ownership of Class
<S> <C> <C> <C>
Common The Dai-ichi Mutual Life 8,835,794 shares - sole 8.58%
Insurance Company voting and sole
13-1, Yurakucho 1-Chome dispositive power of all
Chiyoda-ku shares [Note: The Dai-
Tokyo 100, Japan ichi Mutual Life Insurance
Company has the right to
acquire beneficial ownership
(as defined in Rule
13d-3(d)(1) under the
Securities Exchange Act
of 1934) of all of these
shares.]
Common The Capital Group, Inc. 6,411,990 shares - sole 6.81%
333 South Hope Street voting power - 3,690
Los Angeles, California 90071 shares; sole dispositive
power - 6,411,990 shares
Preferred The Dai-ichi Mutual Life 8,835,794 shares - sole 99.46%
Insurance Company voting and sole
13-1, Yurakucho 1-Chome dispositive power
Chiyoda-ku
Tokyo 100, Japan
</TABLE>
DIRECTOR FEES AND BENEFITS, ATTENDANCE,
COMMITTEES, COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
INTERLOCKS
FEES
Directors of the Corporation who are not employees ("non-employee
directors") of the Corporation or its subsidiaries were paid an annual
retainer at a rate of $23,000 plus a fee of $1,000 for each Board and Board
committee meeting attended in 1993 prior to July 1, 1993 and an annual
retainer at a rate of $24,000 plus a fee of $1,100 for each Board and Board
committee meeting attended on or after July 1, 1993. In addition, the
Corporation reimburses directors, and on some occasions their spouses, for
reasonable travel expenses incurred in attending Board and Board committee
meetings.
<PAGE> 9
If shareholders approve the Lincoln National Corporation 1993 Stock Plan for
Non-Employee Directors (Item 4), each non-employee director shall on July
1, 1994 receive an award of restricted shares of the Corporation's Common
Stock equal to $10,000 (rounded upward to the nearest whole share). After
July 1, 1994, and thereafter until July 1, 2004, on the July 1 following
when a non-employee director commences a new three-year term, such
director shall receive an additional award of restricted shares equal to
$10,000 (rounded up to the nearest whole share). In addition, beginning on
July 1, 1994, and continuing as of each successive July 1 thereafter,
one-fourth of the annual retainer for all non-employee directors shall be
paid in restricted Common Stock. The restrictions on all Common Stock issued
to directors under the proposed plan will lapse on the earliest of the non-
employee director's death, disability or termination as a director at age
70.
BENEFITS
Deferred Compensation Plan
Directors of the Corporation who are not employees of the Corporation or
any of its subsidiaries may defer their annual retainer and fees under a plan
by which the amounts deferred, together with interest, are paid to the
director in either monthly installments over a ten-year period or a lump sum
after the director has ceased to be a director. The rate of interest which
is credited on fees deferred during any calendar year will be that rate
equal to the annual yield which would be realized if the longest term United
States Treasury Bond were purchased at the published closing price on the
last day of the preceding year, but in no event less than 5% per annum. If
shareholders approve the establishment of the stock plan for non-employee
directors, directors will also have the option to defer fees in phantom
stock units which mirror the performance of the Corporation's Common
Stock.
Retirement Plan
Directors, who are not employees of the Corporation or any of its
subsidiaries, are eligible for retirement benefits. The annual benefit
payable to a director is equal to .833% of the director's retainer paid
during the last year he/she was a director multiplied by the number of
months of service (with a maximum of 120 months). Individuals who were
directors on January 1, 1987, were given credit for all years of past
service. The benefit is payable either in a single lump sum or monthly
beginning at the later of age 65 or when the director retires from the
Corporation's Board. In the event of a director's death prior to the
commencement of retirement benefits, a death benefit is paid to a
beneficiary.
ATTENDANCE
The Board held five regularly scheduled meetings and one special meeting
during 1993. All directors except J. Patrick Barrett and Daniel R.
Efroymson attended 75% or more of the aggregate meetings of the Board
and Board committees which he or she was eligible to attend. The Corporation
believes attendance at meetings is only one criterion for judging the
contribution of individual directors, and all directors have made
substantial and valuable contributions to the management of the
Corporation.
<PAGE> 10
COMMITTEES
The Board currently has four standing committees (i.e., committees
composed entirely of Board members): the Audit Committee, the Compensation
Committee, the Development Committee and the Directors and Nominations
Committee.
Audit Committee
The members of the Audit Committee are: Earl L. Neal (Chairperson), J.
Patrick Barrett, Thomas D. Bell, Jr., Daniel R. Efroymson, Harry L. Kavetas,
Jill S. Ruckelshaus and Gilbert R. Whitaker, Jr. During 1993 the Audit
Committee met six times. The principal functions of the Audit Committee
are: (1) to review audits of the consolidated financial statements of the
Corporation performed by independent auditors, (2) to confer with the
independent auditors and officers of the Corporation regarding accounting
and financial statement matters, (3) to recommend to the Board the
selection, retention, or termination of the independent auditors, (4) to
review the Corporation's accounting and auditing procedures and (5) to
perform such other functions as are necessary and desirable.
Compensation Committee
The members of the Compensation Committee are John M. Pietruski
(Chairperson), Thomas D. Bell, Jr., Earl L. Neal, Jill S. Ruckelshaus and
Gordon A. Walker. The Compensation Committee held five meetings during
1993. No member of the Compensation Committee is an officer [or
employee] of the Corporation. The functions of the Compensation Committee
relate to compensation of officers and key personnel and include: (1) the
selection and development of officers and key personnel, (2) establishing
salaries for officers and key personnel, (3) establishing and approving
employee and officer retirement, group insurance and other benefit plans,
(4) approving modifications to employee benefit plans if all such
modifications according to actuarial estimates will not in the aggregate
increase the Corporation's benefit expense by more than $5,000,000 in the
next full calendar year after the effective date of such modifications,
(5) administering those benefit plans of the Corporation designed to comply
with the disinterested administration provisions of Rule 16b-3(c) under the
Securities Exchange Act of 1934 and (6) such other functions as are necessary
or desirable.
Development Committee
The members of the Development Committee are: M. Leanne Lachman
(Chairperson), Robert A. Anker, J. Patrick Barrett, Daniel R. Efroymson,
Leo J. McKernan, John M. Pietruski and Ian M. Rolland. During 1993 the
Development Committee met seven times. The Development Committee
generally has authority to authorize the following transactions and
expenditures between $5 million and $10 million: (1) acquisitions or
divestitures of companies, assets or books of business, mergers, strategic
investments and joint ventures, (2) movements or transfers of capital among
affiliates, capital contributions to affiliates or transfer of ownership of
affiliates among affiliates, (3) capital commitments or expenditures for leases
and asset purchases, (4) purchases by the Corporation or its affiliates of
securities issued by the Corporation or any of its affiliates and issuance of
securities by the Corporation or any of its affiliates and (5) such other
transactions as the chief executive officer may elect to refer to the Committee.
<PAGE> 11
Directors and Nominations Committee
The members of the Directors and Nominations Committee are: Gilbert R.
Whitaker, Jr. (Chairperson), Harry L. Kavetas, M. Leanne Lachman, Leo J.
McKernan, Ian M. Rolland, and Gordon A. Walker. During 1993 the
Directors and Nominations Committee met three times. The functions of the
Directors and Nominations Committee include: (1) the nomination of directors
for election by shareholders, (2) the nomination of directors to fill vacancies,
(3) the compensation and reimbursement of directors, (4) the retirement
policy and benefit plans for directors and (5) the determination of the size
of the Board.
Although the Directors and Nominations Committee does not solicit
shareholder suggestions regarding nominees for director to be proposed by
the Board, it will consider such recommendations if they are made.
Recommendations regarding nominees for director to be proposed by the
Board, along with relevant qualifications and biographical material, should
be sent to the Secretary of the Corporation.
Nominations for directors to be proposed by a shareholder at a shareholders'
meeting must comply with the provisions of the Corporation's Bylaws (See
Shareholder Proposals on page 43).
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Corporation's directors,
its executive officers (which include all the Named Executive Officers shown
on the Summary Compensation Table on page 18), and any persons holding
more than ten percent of a class of its equity securities ("Reporting Persons")
are required to report their initial ownership of such securities and any
subsequent changes in that ownership to the Securities and Exchange
Commission (SEC) and the New York Stock Exchange on Forms 3, 4 and 5.
All Reporting Persons are required by SEC regulations to furnish the Corporation
with copies of all Forms 3, 4 and 5 they file. Specific due dates for these
reports have been established, and the Corporation is required to disclose
in this proxy statement any failure during 1993 to file by these dates. All
of these filing requirements were satisfied. In making these disclosures,
the Corporation has relied solely on written representations of the
Reporting Persons and copies of the reports that were filed with the SEC.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Corporation's
Compensation Committee during the 1993 fiscal year: Thomas D. Bell, Jr.,
Edwin K. Hoffman, Earl L. Neal, John M. Pietruski, Jill S. Ruckelshaus and
Gordon A. Walker. All of the above persons except Edwin K. Hoffman are
currently serving on the Compensation Committee. Edwin K. Hoffman retired
from the Board on May 13,1993. None of these people had interlocks reportable
under Section 402(j)(3) and (4) of Regulation S-K, and none were
employees, officers or former officers of the Corporation or its subsidiaries.
<PAGE> 12
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
Following is the report of the Compensation Committee of the Board of
Directors regarding compensation of executive officers:
The Corporation's executive compensation programs are administered by the
Compensation Committee (the "Committee"), a committee of the Board of
Directors comprised exclusively of non-employee directors. The Committee
approves payment amounts and award levels for the Corporation's officers
and key personnel including payments under plans approved by the Board of
Directors. The Committee's decisions assist the Corporation in attracting
and retaining the highest caliber executives while providing appropriate
compensation programs that reinforce the attainment of superior financial
results for the benefit of the shareholders, customers, employees and
communities in which the Corporation operates. None of these
non-employee directors have any interlocking or other relationships that
would call into question their independence as Committee members.
The Corporation has been tracking its corporate performance versus that of
a selected group of specialty and multi-line insurance companies since 1989.
This group of peer companies, which has operating and market characteristics
similar to the Corporation's, currently includes 14 insurance companies.
Lincoln's size in total assets and annual revenue is above the median of
this group of companies. These are the same companies listed on the
Performance Graph on page 26, and are hereafter referred to in this report
as the "Peer Group." The Compensation Committee annually reviews and
approves the companies that comprise the Peer Group.
The Corporation's primary objective is to maximize shareholder value over
time. To accomplish this objective, the Corporation has adopted a
comprehensive business strategy. The overall goal of the Committee is to
develop executive compensation policies which are consistent with and
linked to the Corporation's strategic business objectives.
The Corporation's executive compensation program has been designed to
provide a strong and direct link between executive pay and the Corporation's
financial performance (as more specifically described below) and total
long-term shareholder return, both relative to the Peer Group. Consistent
with this objective, the Committee establishes performance criteria,
evaluates performance against this criteria and determines actual incentive
awards.
TOTAL COMPENSATION PRINCIPLES
There are key principles to which the Committee adheres in structuring
the compensation program for its key executives. They are as follows:
Long-Term and At-Risk Focus: The majority of compensation for senior
executive officers is long-term and at-risk, to focus management on the
long-term interests of share owners. Less emphasis is placed on base
pay and annual incentives.
<PAGE> 13
Equity Orientation: Equity-based plans comprise a major part of the
at-risk portion of total compensation to instill ownership thinking
and to link compensation to long-term shareholder return. Consistent
with this philosophy, the Corporation requires officers to meet
certain share ownership guidelines.
Management Development: Compensation opportunities are structured to
attract and retain those individuals who can maximize the creation of
share-owner value. The compensation structure facilitates the
Corporation's philosophy of developing leaders.
Competitiveness: Base pay will be competitive with selected
companies within the Corporation's market. Total compensation,
however, will be below average for average or below average
financial performance but will be in the top quartile for top
quartile financial performance. The market to which we compare
includes the Peer Group as well as other companies in our industry.
The development of at-risk pay policies is driven more by corporate
strategy than by competitive practice.
Guided by these principles, the Committee began to restructure the total
compensation approach for key executives in 1989 and has utilized these
key principles in the design and administration of the executive compensation
program. Recognizing that many factors bear on corporate performance, the
Committee believes that the structure of the executive compensation
approach implemented in 1989 encourages the creation of share-owner value
over the long-term.
EXECUTIVE COMPENSATION STRATEGY
The primary components of executive compensation used by the Committee
are:
Base pay
Long-term incentives
Benefits
These components are structured to meet varying business objectives and to
cumulatively provide a level of total compensation opportunity that compares
favorably to levels of total compensation offered by other successful
companies in our industry. Annual incentives were eliminated beginning in
1992 and thereafter making the long-term incentive opportunity the only
variable component of total compensation. Top tier performance by the
Corporation will result in total compensation that exceeds the average of
our industry. For example, if our performance is in the top quartile,
total compensation will also be in the top quartile. On the contrary,
performance levels at or below the average will result in below average
total compensation.
COMPONENTS OF EXECUTIVE COMPENSATION AND DISCUSSION OF
CEO'S 1993
COMPENSATION
Following is a discussion of the components of the executive compensation
program along with a specific discussion of decisions regarding Mr.
Rolland's 1993 compensation.
Base Pay
The Corporation's executive base pay bands, including the pay band
for the Chief Executive Officer, are established to be fully
competitive with a group of specialty and multi-line insurance
companies (including but not limited to the Peer Group) adjusted
for differences in assets and revenues. These pay bands were
<PAGE> 14
established by using methodology and data provided and
developed by independent compensation consulting firms.
The Committee emphasizes longer term compensation in the total
compensation strategy for senior executives rather than increases in base
pay. Accordingly it is expected that once base pay reaches fully competitive
levels, future increases in base pay will occur at frequencies ranging from
12 to 30 months. The frequency depends upon individual performance, pay
competitiveness, and length of service.
Base pay increases for the Named Officers were based on sustained
individual performance and achieving a market competitive position. The
increase in Mr. Rolland's base pay for 1993 was 7.9%. This increase was based
on his guidance of the Corporation in 1992 in achieving "business success."
Factors used to determine "business success" for 1992 included the total
return to shareholders, an increase in income from operations,
implementation of expense controls, and successful sale of the Corporation's
large case Managed Health Care
operation.
Long-term Incentives
Long-term incentives comprise the largest portion of total compensation for
executive officers. These incentives are provided through annual grants
of Stock Options and two long-term cash incentive plans: the Executive
Value Sharing Plan ("EVSP") and the Management Incentive Plan II ("MIP
II"). The Committee has the authority to convert cash payments from either the
EVSP or the MIP II into restricted stock, thus creating three forms of long-
term incentives utilized for key executives: stock options, restricted stock
and cash awards. In any given year, an executive may receive a
combination of all or some of these incentives, depending on circumstances such
as individual and corporate performance. The objective of both the stock
option grants and the conversion of long-term cash incentives to restricted
stock awards is to motivate executives to make long-term changes in the
performance of the Corporation that will enhance long term total return to
shareholders.
During the three-year performance cycle of 1991 through 1993, the
Corporation performed at the 79th percentile of the Peer Group for the key
financial measure of increase in book value per share and at the 86th
percentile of the Peer Group for total shareholder return.
For 1993, approximately three-fourths of the value of Mr. Rolland's total
compensation was variable. This total variable portion was comprised of
long-term incentives which are based on long-term corporate financial and
LNC Common Stock performance relative to the Peer Group as discussed
above. The long-term incentive plans are discussed below:
Stock Options: Stock option grants provide the opportunity to
purchase shares of LNC Common Stock at fair market value (the
average of the high and low trading prices on the day preceding
the date of grant). The objective of these grants is to increase
executive officers' equity interest in the Corporation and to
allow them to share in the appreciation of the Corporation's Common
Stock. Stock options only have value for the executive officers
if the stock price appreciates in value from the date the options
are granted. Each stock option becomes exercisable in four
annual installments beginning on the first anniversary of grant
and has a ten year term. The Committee has typically granted
stock options each year to executive officers at its May meeting.
The option grants cover shares of Common Stock authorized under
<PAGE> 15
shareholder-approved plans. Over 500 employees are
eligible to receive option grants.
Executives are encouraged to hold shares received upon the exercise
of the options, linking their interests to those of share owners.
In fact, executives who sell shares prior to reaching the share
ownership guidelines (discussed on page 16) may have future stock
option awards reduced or eliminated. Mr. Anker has not sold any
shares of Common Stock since becoming an Executive Officer, and
Mr. Rolland has only sold shares once in the past 25 years.
In granting stock options, the Committee takes into account the
executive's level of responsibility and individual contribution.
In addition, the Committee considers the practices of other companies
as verified by external surveys, shares of Common Stock owned by the
individual, and total compensation objectives. Mr. Rolland was awarded
a grant of 46,000 stock options at the then fair market price of
$39.75 per share on May 12, 1993. The Committee based Mr. Rolland's
award on progress made toward controlling corporate costs, the
sale of the large case Managed Health Care operation, the development
of a high performing executive management team, and the long-term stock
performance of the Corporation in relation to the stock performance of
the Peer Group.
Executive Value Sharing Plan ("EVSP"): Under the EVSP as in effect for
all three-year performance cycles beginning before 1994, the
Corporation shares with executive officers and a select group of key
personnel a portion of either the Corporation's or a designated
business segment's increase in book value over a three-year cycle that
is in excess of the average increase in book value of designated groups
of comparable companies e.g., for corporate management, the comparable
companies are the Peer Group. The amount of an award is dependent on
the level of participation by an executive as set by the Committee.
The EVSP eliminates awards for average and below average results while
making significant awards when superior performance is achieved. All
awards for the Named Executive Officers made by the Committee in 1994
for the 1991-1993 cycle were made as grants of restricted shares of the
Corporation's Common Stock, which vest on January 1, 1997.
Under the EVSP, Mr. Rolland has the opportunity to be paid an amount
equal to 1.2% of the Corporation's book value increase that is in
excess of the average increase of the Peer Group for the 1991-1993,
1992-1994 and 1993-1995 performance cycles. In early 1994, the
Committee reviewed and approved the 1993 award to Mr. Rolland and the
other Reporting Persons. In approving the calculation of the award,
the Committee also approved adjustments to the book values of both the
Corporation and of the companies to which the Corporation or the
designated Business Unit is compared. These adjustments were made due
to certain new accounting rules in order to treat all companies on an
equal basis. Mr. Rolland's 1991-1993 award was $1,383,584. His award
was based on the Corporation performing at the 79th percentile of Peer
Group performance for the financial measure of increase in book value
per share. The award was converted to 32,845 shares of restricted
stock using a $42.125 per share conversion price. The restrictions
on these shares lapse at the earliest of death, disability or January 1,
1997.
The Committee revised the EVSP formula for the 1994-1996
Performance Cycle so that awards under the EVSP would qualify
for a "performance-based compensation" exception to the dis-
allowance to the Corporation of federal income tax deductions
for compensation paid to Named Executive Officers. The
<PAGE> 16
Committee set the target EVSP award levels for Mr. Rolland for the
1994-1996 Performance Cycle at 0% for below average performance as
compared to a peer group established for that Performance Cycle,
$1,800,000 for 75th percentile ("Top-Tier") performance, and
$3,200,000 if the Corporation is the number one company in the peer
group. The final determination of the amount of the award and the
form of payment (i.e., cash or restricted stock) is in the Committee's
sole discretion. Historically, the Committee has made this payment to
Mr. Rolland and all of the Named Executive Officers in restricted
stock, the restrictions on which lapse at the end of three years.
This revision to the EVSP is subject to shareholder approval and a
more detailed description of the operation of the EVSP for all
performance cycles beginning with 1994 is contained in Item 6
beginning on page 36. In setting these target awards, the Committee's
objective is to achieve competitive total compensation levels. The
Committee annually reviews the results of external surveys to
determine the maximum award levels.
Management Incentive Plan II (MIP II): Under MIP II, all the executive
officers received an award. Potential payments can range from 0% to
40% of average annual salary for the performance cycle. Future awards
under three year performance cycles beginning in 1992 under MIP II were
terminated with respect to all executive officers (including the Named
Officers) and certain key personnel who participate in the EVSP. In
1994, Messrs. Rolland, Anker, Dunsire, and West received cash and
restricted stock as their awards for the 1991-1993 performance cycle.
This award was based on the total shareholder return for the Corporation
as compared to the Peer Group over a 3-year performance cycle.
Mr. Rolland's 1991-1993 award was 34.3% of his average annual salary for
that cycle. His award was based on the Corporation achieving total
shareholder return at the 86th percentile as compared to the Peer Group.
The Committee converted and paid one-half of the award in 3,313 shares of
restricted stock using a $41.937 per share conversion price. These
restrictions lapse at the end of 1995. This was the last payment
under MIP II because of the implementation of the EVSP in 1992.
Restricted Stock: Restricted stock awards were made to all of the
Named Executive Officers in lieu of a cash payment under the Executive
Value Sharing Plan, and in lieu of fifty percent of their awards under
Management Incentive Plan II. The shares awarded are typically
restricted from sale or trade for three years after grant except in a
situation relating to death or disability. During the period that the
shares are issued but restricted, the executives may vote the shares.
In addition, at the time the restrictions lapse, compensation equal to
the amount of dividends that would have been paid during the period the
shares were restricted is paid to the executive. The Committee may also
grant individuals restricted stock to recognize exceptional performance
or in order to ensure retention of key executives.
Share Ownership Guidelines: The Committee endorses stock ownership by
directors, executive officers and key personnel in the belief that stock
ownership enhances the alignment of management and shareholder interests.
Further, the Committee endorses stock based performance compensation
arrangements as being essential in achieving this alignment. In support
of achieving stock ownership, the Corporation has adopted the following
guidelines. fficers are expected to achieve stock ownership equivalent
to the following multiples of their base salary:chief executive officer
- 8 times, chief operating officer - 7 times,executive vice presidents -
6 times, senior vice presidents - 4 times,vice presidents - 2 times, and
officers below vice president - 1 times base salary. These guidelines
were established in 1993, and officers are expected to meet them within 5
years.
<PAGE> 17
Benefits
Benefits offered to key executives serve a different purpose than do the
other elements of total compensation. In general, they provide a safety net
for protection against the financial catastrophes that can result from
illness, disability or death. Benefits offered to key executives are
largely those that are offered to the general employee population, with some
variation, largely to promote tax efficiency and replacement of benefit
opportunities lost due to regulatory limits.
IMPACT OF OBRA 1993 ON EXECUTIVE COMPENSATION STRATEGY
The Committee has taken steps to minimize the amount of compensation to be
paid to any of the Named Executive Officers listed on the Summary
Compensation Table in excess of the amount that would be deductible for the
Corporation in 1994. In addition, both the Corporation's 1986 Stock Option
Incentive Plan and the Executive Value Sharing Plan are being submitted to
a shareholder vote so that future awards under those plans will not be
subject to the one million dollar limit on deductibility. Although the
plans will meet the necessary requirements to be deductible, the Committee
may, in accordance with its powers, award other discretionary bonuses to
executives that are not deductible to recognize exceptional service or to
correct below market compensation. Should compliance with the million
dollar limit conflict with the Committee's compensation philosophy, the
Committee will act in accordance with that philosophy and in the best
interests of shareholders.
The Compensation Committee believes the executive compensation policies and
programs serve the interest of the share owners and the Corporation. Pay
delivered to the executives is intended to be linked to and commensurate
with corporate performance. The Committee believes the performance of the
Corporation validates this compensation philosophy.
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Corporation
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
John M. Pietruski, Chairperson
Thomas D. Bell, Jr.
Earl L. Neal
Jill S. Ruckelshaus
Gordon A. Walker
<PAGE> 18
SUMMARY ANNUAL AND LONG-TERM COMPENSATION
The Corporation's compensation program for executive officers for the fiscal
year ended December 31, 1993 consisted primarily of salaries, cash bonuses,
and other compensation. Shown below is information concerning the annual
and long-term compensation for services in all capacities to the Corporation
for the fiscal years ended December 31, 1993, 1992 and 1991, of those
persons who were, at December 31, 1993 (i) the chief executive officer and
(ii) the other five most highly compensated executive officers of the
Corporation (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUT
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION<f1,2> AWARDS<f3,7> SARs PAYOUT(S) SATION<f1,5>
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IAN M. ROLLAND 1993 $ 896,494 $ -0- $ 69,450 $1,522,520 46,000 $ 138,891 $123,338
Chairman and CEO of 1992 820,769 -0- 20,046 1,178,874 40,000 107,453 109,000
LNC 1991 715,175 190,691 --- -0- 30,000 119,130 ---
ROBERT A. ANKER 1993 467,648 -0- 24,107 778,146 24,000 69,146 61,315
President and COO 1992 423,654 -0- 84,093<F6> 599,052 22,000 50,048 53,799
of LNC 1991 327,583 -0- --- -0- 15,000 49,590 ---
P. KENNETH DUNSIRE 1993 408,033 -0- 28,870 719,537 15,000 62,860 54,374
Executive Vice 1992 373,077 -0- 10,497 448,654 16,000 47,868 48,247
President of LNC 1991 324,231 184,276 --- -0- 15,000 51,585 ---
THOMAS M. WEST 1993 396,302 -0- 3,118 712,970 15,000 61,325 48,286
Executive Vice 1992 367,885 -0- 690 440,577 14,000 46,721 42,812
President of 1991 314,366 43,659 --- -0- 15,000 50,160 ---
Lincoln Life Ins.Co.
JON A. BOSCIA 1993 353,032 -0- 2,845 536,913 15,000 82,950 40,402
Executive Vice 1992 318,461 -0- 2,020 415,748 14,000 71,838 34,859
President and Chief 1991 253,900 95,608 --- -0- 9,000 62,000 ---
Investment Officer
of LNC
F. CEDRIC McCURLEY<F4> 1993 345,340 -0- 6,389 373,082 15,000 -0- 55,574
CEO of American 1992 320,000 -0- 739 225,273 12,000 -0- 50,717
States 1991 --- --- --- --- --- --- ---
Insurance Company
- ---
<FN>
<F1> In accordance with the transitional provisions applicable to the revised rules on
executive officer and director compensation disclosure adopted by the Securities and
Exchange Commission, as informally interpreted by the Commission's Staff, amounts of
Other Annual Compensation and All Other Compensation are excluded for the Corporation's
1991 fiscal year.
<F2> The amounts included represent (a) amounts reimbursed during the fiscal year for
payment of taxes and (b) perquisites and other personal benefits if they exceed the
lesser of $50,000 or 10% of the total of base salary and annual bonus for the Named
Executive Officers.
<PAGE> 19
<F3> Represents the fair market value on the day prior to the award of restricted shares of Common Stock
awarded under the Management Incentive Plan II for services rendered in 1990, 1991, 1992 and 1993, and
awarded under the Executive Value Sharing Plan for services rendered in 1992 and 1993. As of December 31,
1993, the number and value of the aggregate restricted stockholdings of all employees of the corporation were 148,154
shares at $6,444,699. The awards made for the performance cycles ending on December 31, 1993, and reflected in
this column are not included in this aggregate number as these awards were made in the first quarter of 1994. No
dividends are payable on the restricted shares, however, when the restrictions lapse, a "dividend equivalency" bonus
is paid. The restrictions on the shares awarded under the Management Incentive Plan II for the 1990-92 performance
cycle lapse on December 31, 1994, and for the 1991-93 performance cycle lapse on December 31, 1995. The restrictions
on the shares awarded under the Executive Value Sharing Plan lapse on the third anniversary of January 1 of the year
next succeeding the applicable performance cycle.
<F4> Information is furnished for any full fiscal year only if a Named
Executive Officer served as an executive officer of the Corporation during
any part of a fiscal year with respect to which information is required.
Mr. McCurley was not an executive officer at any time during 1991.
<F5> Amounts included in the All Other Compensation column are amounts
contributed or accrued for the Named Executive Officers under the
Corporation's Employees' Savings and Profit-Sharing Plan and the related supplemental
savings plans. The amounts for fiscal 1993 are as follows: Mr. Rolland $79,183,
Mr. Anker $40,921, Mr. Dunsire $35,602, Mr. West $34,556, Mr. Boscia $30,695 and
Mr. McCurley $30,009. In addition, the dollar value of insurance premiums paid by the
Corporation for the benefit of the Named Executive Officers is included. The amounts for
fiscal 1993 are as follows: Mr. Rolland $44,155, Mr. Anker $20,394, Mr. Dunsire
$18,772, Mr. West $13,730, Mr. Boscia $9,707 and Mr. McCurley $25,565.
<F6> Of this amount, $63,834 is associated with the sale of Mr. Anker's
previous residence and move to Fort Wayne.
<F7> The restricted stockholdings of the Named Executive Officers as of
December 31, 1993 are as follows: Mr. Rolland, 32,234 shares; Mr. Anker, 16,380 shares;
Mr. Dunsire, 12,270 shares; Mr. West, 12,048 shares; Mr. Boscia, 11,362 shares and
Mr. McCurley, 6,156 shares.
</FN>
</TABLE>
[This space intentionally left blank]
<PAGE> 20
LONG-TERM INCENTIVE PLANS
Beginning with 1994, Section 162(m) of the Internal Revenue code of 1986,
as amended (the "Code"), generally disallows deductions for compensation in
excess of $1,000,000 paid to the executive officers who are listed in the
Summary Compensation Table for the tax year in which the Corporation would be
entitled to the deduction, (the "Code 162(m) Covered Employees"). The
Corporation has adopted, subject to shareholder approval, a restatement of the
Corporation's Executive Value Sharing Plan, (the "EVSP"). The Corporation
believes that the EVSP, as more fully described in Item 6 beginning on page
36, would qualify for a "performance-based compensation" exception to this
disallowance rule if the Corporation's shareholders approve Item 6. Shown
below are the estimated future payouts for the 1994 to 1996 Performance
Cycle under the Corporation's Executive Value Sharing Plan.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
PERFORMANCE
NUMBER OF OR OTHER
SHARES, PERIOD WITH
UNITS OR OTHER MATURATION OR THRESH-HOLD<F2>
NAME RIGHTS <F1> # PAYOUT $ or # TARGET<F3> MAXIMUM<F4>
<S> <C> <C> <C> <C> <C>
Rolland N/A 1994-1996 -0- $ 1,800,000 $3,200,000
Anker N/A 1994-1996 -0- 1,200,000 2,200,000
Dunsire N/A 1994-1996 -0- 1,000,000 1,800,000
West N/A 1994-1996 -0- 930,000 1,400,000
Boscia N/A 1994-1996 -0- 1,000,000 1,800,000
McCurley N/A 1994-1996 -0- 930,000 1,400,000
<FN>
________________________
<F1> The Corporation's Executive Value Sharing Plan permits the Compensation Committee to establish performance goals. The 1994-199
Named Executive Officers relate the Corporation's performance to a selected group of peer
companies. If the increase in the dividend-adjusted value sharing return on equity of the
Corporation for the three year performance cycle exceeds the average performance of
selected companies, then an award will be made according to a pre-established formula with
Compensation Committee discretion to adjust downward.
<F2> The basic philosophy is to make no payment if performance is equal to or below the average performance of the selected companie
produced by the formula and payable at threshold are established at higher levels than zero in order to
permit the Compensation Committee the discretion to adjust downward to comply with
Section 162(m) of the Code. The average performance is determined for each of the three years in
a performance cycle by deleting the top three and bottom three companies to determine an
annual average, and then averaging the three years to determine the Corporation's ranking.
<F3> The target is the estimated maximum to be paid for the 1994-1996 three-year cycle if the Corporation's performance is at the 7
pared to the
competitors. Upon completion of the cycle, any award may be paid in restricted shares of
the Corporation's Common Stock, cash, or both.
<F4> The maximum is the most that would be awarded if the Corporation was the top company
among the selected group of competitors for the 1994-1996 Performance Cycle. If there is no
increase in adjusted book value for a performance cycle, no payment is made.
</FN>
</TABLE>
<PAGE> 21
STOCK OPTION PLANS
Shown below is further information on grants of stock options pursuant to the
Corporation's 1986 Stock Option Incentive Plan during the fiscal year 1993 to
the Named Executive Officers which are reflected in the Summary Compensation
Table. No stock appreciation rights were granted under that Plan during fiscal
1993.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR
GRANTED<F1> EMPLOYEES IN BASE PRICE<F3> EXPIRATION
NAME (#) FISCAL YEAR<F2> ($/SHARES) DATE<F4> 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Rolland 46,000 8.06% $ 39.75 5/12/2003 $1,149,933 $ 2,914,158
Anker 24,000 4.21% 39.75 5/12/2003 599,965 1,520,430
Dunsire 15,000 2.63% 39.75 5/12/2003 374,978 950,268
West 15,000 2.63% 39.75 5/12/2003 374,978 950,268
Boscia 15,000 2.63% 39.75 5/12/2003 374,978 950,268
McCurley 15,000 2.63% 39.75 5/12/2003 374,978 950,268
<FN>
_________________________
<F1> Options granted on May 12, 1993 are exercisable starting 12 months after the grant date with
respect to 25% of the shares covered and with an additional 25% of the option shares becoming
exercisable on each successive anniversary date, with full vesting occurring on the 4th anniversary
date.
<F2> The Corporation granted options representing 570,600 shares to employees in fiscal year 1993.
<F3> The exercise price and tax withholding obligations related to exercise may be paid by delivery
of already owned shares or by offset of the underlying shares, subject to certain conditions.
<F4> The options were granted for a term of 10 years, subject to earlier forfeiture in certain events related
to termination of employment.
</fn?
</TABLE>
<PAGE> 22
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to option exercises in fiscal year 1993
and unexercised options to purchase the Corporation's Common Stock and Common
Stock granted in fiscal year 1993 and prior years under the Corporation's
1982 and 1986 Stock Option Incentive Plans to the Named Executive Officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Unexercised Options held at Value of Unexercised in-the-money
December 31, 1993 Options Held at December 31, 1993(f1>
Shares Acquired
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Rolland -0- -0- 154,000 76,000 $2,795,250 $ 645,900
Anker -0- -0- 67,500 40,500 1,283,315 350,370
Dunsire -0- -0- 60,000 27,000 1,062,500 245,610
West -0- -0- 70,500 25,500 1,277,795 221,940
Boscia -0- -0- 29,500 25,500 566,745 221,940
McCurley -0- -0- 27,400 24,000 527,708 198,270
<FN>
<F1> Based on the closing price on the New York Stock Exchange Composite Transactions of the Corporation's
Common Stock on December 31, 1993 ($43.50).
</FN>
</TABLE>
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<PAGE> 23
RETIREMENT PLANS
The following table shows the estimated annual retirement benefits payable on a
straight life annuity basis to participating employees, including the Named
Executive Officers, under the Corporation's retirement plans which cover most
officers and other employees on a non-contributory basis. Such benefits
reflect a reduction to recognize in part the Corporation's cost of Social
Security Benefits related to service for the Corporation.
<TABLE>
<CAPTION>
PENSION TABLE
Estimated annual retirement benefits for credited years of service<f1,3>
Final
Average
Salary<F2> 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
<S> <C> <C> <C> <C> <C> <C> <C>
$ 300,000 $ 50,028 $ 75,041 $ 100,055 $125,069 $150,083 $175,096 $ 182,596
350,000 58,528 87,791 117,055 146,319 175,583 204,846 213,596
400,000 67,028 100,541 134,055 167,569 201,083 234,596 244,596
450,000 75,528 113,291 151,055 188,819 226,583 264,346 275,596
500,000 84,028 126,041 168,055 210,069 252,083 294,096 306,596
550,000 92,528 138,791 185,055 231,319 277,583 323,846 337,596
600,000 101,028 151,541 202,055 252,569 303,083 353,596 368,596
650,000 109,528 164,291 219,055 273,819 328,583 383,346 399,596
700,000 118,028 177,041 236,055 295,069 354,083 413,096 430,596
750,000 126,528 189,791 253,055 316,319 379,583 442,846 461,596
800,000 135,028 202,541 270,055 337,569 405,083 472,596 492,596
850,000 143,528 215,291 287,055 358,819 430,583 502,346 523,596
900,000 152,028 228,041 304,055 380,069 456,083 532,096 554,596
950,000 160,028 240,791 321,055 401,319 481,583 561,846 585,596
1,000,000 169,028 253,541 338,055 422,569 507,083 591,596 616,596
<FN>
<F1> This table assumes retirement at age 65 (current normal retirement date), and at
age 65, the following individuals will have the number of years credited service
indicated: Mr. Rolland, 41; Mr. Anker, 31; Mr. Dunsire, 11; Mr. West, 40; Mr. McCurley,
14; and Mr. Boscia, 33.
<F2> Final average salary is the average of an employees' base salary paid in any
consecutive 60 month period during an employee's last ten years of active employment
which produces the highest average salary.
<F3> As a result of limitations under the Internal Revenue Code, a portion of these
amounts will be paid under a supplemental benefit plan established by the Corporation
to provide benefits (included in this table) which would exceed these limits.
</FN>
</TABLE>
<PAGE> 24
SUPPLEMENTAL RETIREMENT ARRANGEMENTS
LNC Executives' Salary Continuation Plan
Certain officers of the Corporation and its subsidiaries, including all Named
Executive Officers, have entered into salary continuation agreements with their
employers under the terms of the Salary Continuation Plan for Executives of
Lincoln National Corporation and Affiliates ("Salary Continuation Plan").
Under the Salary Continuation Plan, the amount each officer is entitled to
receive upon retirement is 2% of final monthly compensation times the number of
years the agreement has been in effect up to a maximum of 10% of final monthly
salary; so long as the officer agrees to an exclusive consulting arrangement
with the Corporation until the earlier of the waiver of such arrangement or
attainment of age 65. This amount will be paid in the form of a 120-month
certain and life annuity. In the event of death prior to retirement, a
designated beneficiary of executives who were participating in the Salary
Continuation Plan on December 31, 1991, will instead receive annual payments
each equal to 25% of the employee's final annual salary until the later of
the date on which the employee would have attained age 65 or the date on
which a minimum of ten payments have been made.These agreements automatically
terminate upon the officer's termination of service for reasons other than
death, disability or retirement; except that in the event of a change-in-
control of the Corporation, as defined in the Executives' Severance Plan,
and a subsequent voluntary or involuntary termination of the employee's
employment within 2 years of the change-in-control, such employee shall be
treated as continuing employment with the Corporation and its affiliates until
age 65 at which time benefits shall begin. The Salary Continuation
plan was amended in 1991 to cap compensation used to determine benefits at the
greater of $200,000 or the annual base compensation in effect on December 31,
1991 for all current and future participants and to eliminate the death
benefit for future participants. Effective December 31, 1993, the exclusive
consulting arrangement was waived for all participants who had attained age
55 which included Messrs. Rolland and Dunsire.
LNC Executive Employees Supplemental Pension Arrangement
The LNC Executive Employees' Supplemental Pension Arrangement was
established to provide an incentive for attracting experienced senior executive
personnel by protecting them from the loss of retirement benefits attributable
to prior employment. Executives are selected for participation in the
arrangement by the chief executive officer of the Corporation with the
consent of the Compensation Committee of the Board. Participants must be
eligible for retirement under the LNC Retirement Plan to be eligible for
payments. In addition, participants who are eligible for early retirement
may be eligible for benefits under this arrangement at the chief executive
officer's discretion. Under this arrangement, payments decrease to zero as
years of service increase and benefits under the LNC Retirement Plan become
equal to the Cumulative Benefit (described below). Accordingly, payments
equal the Cumulative Benefit minus the amount paid from the LNC retirement
plans and the amount of the Social Security payment that is attributable to
the employer's contribution. The Cumulative Benefit is determined by
multiplying an employee's final average salary by a percentage which is the
total of 3.0% for the first 15 years of service (45% after 15 years), 1.5%
for the next 5 years (52.5% after 20 years), 1.0% for the next 5 years (57.5%
after 25 years), and .25% for service over 25 years (60% maximum after 35
years). Mr. Dunsire is currently a participant. His annual estimated benefit
at age 65 and payable under this plan is $62,490 and as of December 31, 1993,
he became vested in his benefit payable upon attainment of his 62nd birthday.
<PAGE> 25
CHANGE-IN-CONTROL ARRANGEMENTS
Recognizing that an unforeseen change of control is unsettling to the Corpora-
tion's key executives, the Board adopted the Lincoln National Corporation Execu-
tives' Severance Benefit Plan ("Executives' Severance Plan") for the following
reasons: (1) to encourage the continued employment of certain executives in the
face of a threat of a change of control; (2) to enable such executives, if the
Corporation is under a proposal for a change of control,to help the Board
assess the proposal and advise what would be in the best interests of the
Corporation, its shareholders, and the policyholders and customers of its
affiliates without being unduly influenced by the uncertainties of continued
employment; and (3) to demonstrate to executives the desire of the Corporation
to treat them fairly.
Pursuant to the Executives' Severance Plan, the Corporation may enter into
agreements (which are not employment agreements) with key employees to provide
severance benefits in the event of their termination of employment for any
reason other than death, disability or willful misconduct, within two years
after a change of control of the Corporation has occurred. Executives eligible
for participation in the Executives' Severance Plan ("Eligible Executives")are
the chief executive officer, the chief operating officer, the chief financial
officer, the chief investment officer and the general counsel. In addition to
these five officers, the Compensation Committee of the Board may select up to
an additional twenty officers as Eligible Executives. The maximum number of
Eligible Executives at any time may not exceed 25. All Named Executive
Officers were Eligible Executives during 1993.
The minimum benefit to which an Eligible Executive would be entitled under the
terms of the Executives' Severance Plan is 299.9% of the Eligible Executive's
average annual compensation for the period consisting of the five most recent
taxable years ending before the change in control. The maximum amount of
benefits to which an Eligible Executive would be entitled under this
Executives' Severance Plan is two times his/her annual compensation (paid on
account of services rendered during the calendar year preceding termination
and including all forms of compensation reportable on a Form W-2) and the
continuation of certain benefits under the welfare benefit plans in which he
or she participates, the value of certain unexercised stock options and a
lump sum payment equal to 43.8% of any amount paid which is deemed an "excess
parachute payment" under the Code. In addition,the Corporation must reimburse
an Eligible Executive any and all legal fees and expenses incurred by the
Eligible Executive relating to enforcing the Corporation's obligations under
the Executives' Severance Plan. The Executives' Severance Plan supplements and
does not supersede other plans, contracts of employment, or other arrangements
which Eligible Executives may have with the Corporation or its affiliates.
TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Corporation has also entered into individual severance agreements with two
of its executives. Mr. Dunsire, a Named Executive Officer, would receive one
year of base salary if for any reason the Corporation terminates his employment.
In addition, the Corporation has an agreement with Mr. Richard Vaughan, its
chief financial officer, to pay two years base salary if the Corporation
terminates his employment before June 18, 1996, and one year of base salary if
the Corporation terminates his employment between June 18, 1996 and age 55.
<PAGE> 26
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The following graph shows a five year comparison of the yearly performance
change in the Corporation's cumulative total shareholder return (change in
the year-end stock price plus reinvested dividends)with the S&P 500 Composite
Index and an index of peer companies selected by the Corporation. Companies
in the Peer Group are as follows: Aetna Life & Casualty Company, American
General Corporation, Capital Holding Corporation, CIGNA Corporation, The
Continental Corporation, Kemper Corporation,The NWNL Companies, Inc., Provident
Life and Accident Insurance Company of America, SAFECO Corporation, Torchmark
Corporation, Transamerica Corporation, Travelers Inc., USF&G Corporation, and
US LIFE Corporation. Companies in the Peer Group are publicly traded insurance
holding companies with business units which are considered to be significant
competitors of major business units of the Corporation, and their returns
have been weighted for stock market capitalization.
PERFORMANCE GRAPH
AMONG CORPORATION, S&P AND PEER GROUP
1988 1989 1990 1991 1992 1993
LNC 100.00 147.06 109.17 147.44 209.44 255.78
S&P 100.00 131.68 127.58 166.47 179.20 197.26
Peer Group 100.00 132.81 97.40 137.68 167.04 185.66
Source: S&P Compustat Services, Inc.
The Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange
Act of 1934, except to the extent that the Corporation specifically
incorporates this graph by reference, and shall not otherwise be deemed
filed under such Acts.
There can be no assurance that the Corporation's stock performance will
continue into the future with the same or similar trends depicted in the
preceding graph. The Corporation will not make or endorse any predictions
as to future stock performance.
<PAGE> 27
ITEM 2 - PROPOSED INCREASE
IN AUTHORIZED COMMON STOCK
On November 11, 1993, the Board approved and recommended to shareholders an
amendment to the Corporation's Articles of Incorporation to increase
authorized Common Stock from 400,000,000 shares to 800,000,000 shares.
More specifically, the Board believes it is in the best interests of the
Corporation and its shareholders to amend Article V, Section 1 of the
Articles of Incorporation to read as follows:
"Section 1. Number and Classes of Shares. The total number
of shares which the Corporation shall have authority to issue
is eight hundred ten million (810,000,000) shares, consisting
of eight hundred million (800,000,000) shares of a single
class of shares to be known as Common Stock, and ten million
(10,000,000) shares of a single class of shares to be known
as Preferred Stock."
The current Articles of Incorporation provide for authorized capital stock of
410,000,000 shares consisting of 400,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock. If the proposed amendment is approved by
shareholders, the Corporation's authorized capital stock would be 810,000,000
shares consisting of 800,000,000 shares of Common Stock and 10,000,000 shares
of Preferred Stock. As of March 3,1994, 94,189,885 shares of Common Stock were
issued and outstanding. An additional 223,248,410 shares of Common Stock were
reserved for issuance to meet the Corporation's obligations under its benefit
plans, dividend reinvestment plan and rights plans and for conversion of its
outstanding Preferred Stock. On June 25, 1993, the Corporation effected a
two-for-one split of its Common Stock. Given the amount of Common Stock
outstanding and reserved for issuance, the Corporation presently does not have
sufficient Common Stock to accommodate a similar stock split in the future.
The Board believes that it is desirable to have the additional shares of Common
Stock authorized to accommodate a possible future stock split and/or possible
future stock offerings, acquisitions, stock dividends and for other general
corporate purposes. The Board has no current commitments, agreements or plans
to engage in any of the above transactions. The Board believes, however,that
the proposed increase in the number of authorized shares of Common Stock is
desirable to provide greater flexibility and efficient corporate management.
Like the presently authorized but unissued shares, the additional authorized
shares would be available for any proper corporate purpose without the delay
and expense of further action by the shareholders, unless such action is
required by applicable law or by the rules of the exchanges on which the
Corporation's Common Stock is listed. The Corporation's Common Stock currently
is listed on the New York, Chicago, Pacific, London and Tokyo stock exchanges.
The additional shares of Common Stock for which authorization is sought
would be identical to the shares of Common Stock now authorized. Holders of
Common Stock do not have preemptive rights to subscribe for additional
securities which the Corporation may issue.
Although a proposal to increase the authorized common stock of a company
may be construed as having an anti-takeover effect in certain instances,
neither the management of the Corporation nor its Board views this proposal
in that perspective. The proposal has not been prompted by an effort by
anyone to gain control of the Corporation, and the Corporation is not
aware of any such effort. Under certain circumstances, however,
<PAGE> 28
the Corporation could use the additional shares to oppose persons seeking
to effect a takeover or otherwise gain control of the Corporation without
negotiating with the Board by, for example, privately placing such shares
with purchasers who might side with the Board in opposing a hostile takeover
bid. The additional shares could also be used to dilute the stock ownership
of a person or entity seeking to gain control of the Corporation, should the
Board consider the action of such person not to be in the best interests of
the Corporation and its shareholders. Such uses of Common Stock could
discourage or render more difficult a tender offer or other attempt to
acquire control, if such transaction were to be opposed by the Board.
While the proposal is not part of an integrated plan by management to adopt
anti-takeover measures, the Corporation's Articles of Incorporation and
Bylaws do contain certain other provisions which could also make a change of
control of the Corporation more difficult, especially if the change were to be
opposed by the Board. For example, shareholders previously approved provisions
in the Corporation's Articles of Incorporation establishing a "staggered" board
of directors, a supermajority vote of shareholders in order to remove
directors, and a supermajority vote of shareholders in order to amend either
of the foregoing provisions. The Articles of Incorporation also contain a
so-called "fair price" provision, which would require a supermajority vote of
shareholders in order to approve certain business combinations with holders of
more than 10% of the Corporation's stock unless any such business combination
is approved by the Board and a fair price is paid to all shareholders.
Management has no present intention to propose anti-takeover measures in
future proxy solicitations. Finally, shareholders of the Corporation do not
have cumulative voting rights.
The proposed amendment will be adopted if the votes for it exceed the votes
against it at a shareholders' meeting at which a quorum is present and will
become effective upon filing with the Indiana Secretary of State.
The Board recommends a vote FOR the proposed amendment to increase the
Corporation's authorized Common Stock from 400,000,000 to 800,000,000 shares.
ITEM 3 - PROPOSED AMENDMENT AND RESTATEMENT OF
LNC 1986 STOCK OPTION INCENTIVE PLAN
The Lincoln National Corporation 1986 Stock Option Incentive Plan (the "1986
Plan") was adopted by the Corporation's Board on January 8, 1986 and approved
by shareholders on May 8, 1986. The Board has determined that it is in the
best interests of the Corporation to amend and restate the 1986 Plan by
increasing the number of authorized shares thereunder by an additional five
million shares, to extend the term for ten years from the date the Amendment
may be approved by shareholders, and to add additional rights and features as
more fully described in this description. The 1986 Plan has facilitated
stock ownership and increased the interest of employees in the growth and
performance of the Corporation. Approval of the Amended and Restated 1986
Plan requires the affirmative vote of the holders of a majority of the voting
securities of the Corporation present, or represented, and entitled to vote
at the meeting.
The following paragraphs summarize the principal features of the 1986 Plan
which appears as Exhibit 1 in this proxy statement.
<PAGE> 29
Summary of the 1986 Plan
The 1986 Plan is administered by the Compensation Committee of the Board (the
"Committee"). The Committee, by action of a majority of its members, has the
authority to establish rules for administering and interpreting the 1986 Plan.
All full- or part-time employees of the Corporation, its subsidiaries, and its
affiliates, in addition to agents and brokers under contract with subsidiaries
of the Corporation, are eligible to be participants in the 1986 Plan. The
Committee has the authority to select individuals to whom awards are granted
and the timing of such awards. The Board is authorized to terminate, amend or
modify the 1986 Plan, except that shareholder approval is required for any
amendment which would increase the number of shares available, decrease the
minimum option price, extend the maximum option term or materially modify the
eligibility requirements for participation in the 1986 Plan.
Subject to adjustment as described below, a maximum of ten million shares of
Common Stock would be available for distribution under the 1986 Plan, if
shareholders approve the proposed Amendment to the 1986 Plan. If awards lapse,
expire, terminate,or are cancelled prior to the issuance of shares,such shares
will be available for new awards. For fiscal year 1994, it is anticipated that
approximately 325 individuals will receive awards or grants under the 1986
Plan. The total number of shares which may be awarded are subject to
adjustment to reflect capital changes. As of December 31, 1993, 2,996,846
shares had been reserved for issuance pursuant to the 1986 Plan, and
1,291,722 were available for the grant of awards under the 1986 Plan. The
1986 Plan permits the granting of all or any of the following types of awards:
(1) stock options, including both incentive stock options ("ISO") and
nonqualified stock options,
(2) restricted stock,
(3) restricted or unrestricted stock awarded as payment of incentives, and
(4) stock appreciation rights.
The Amendment, if approved by shareholders, would also add dividend equivalent
rights and phantom shares as additional rights that could be awarded under the
1986 Plan.
The vesting of any award granted under the 1986 Plan may be conditioned upon
the meeting of performance criteria selected by the Committee. No award
granted under the 1986 Plan may be assigned, transferred, pledged or otherwise
encumbered by a participant other than by will or the laws of descent and
distribution unless such transfer would not affect the availability of the
exemptions provided by Rule 16b-3 promulgated by the Securities and Exchange
Commission.
The purchase price of a share of the Corporation's Common Stock purchasable
under any stock option granted pursuant to the 1986 Plan will be determined by
the Committee but shall not be less than 100% of the fair market value of the
stock on the date of grant of such option. The term of each option shall be
fixed by the Committee and the options may be exercised at such time or times
as determined by the Committee,but no options can be exercised after the
expiration of ten years of the date the option is granted. The fair market
value of incentive stock options first exercisable in any one year as to any
participant may not exceed $100,000, and no participant may be awarded more
than 100,000 options and 100,000 stock appreciation rights in any calendar
year.
Options may be exercised by paying the purchase price and withholding taxes,
if any, either in cash or, at the discretion of the Committee, in the stock
of the Corporation or a combination of cash and stock of the
<PAGE> 30
Corporation. The Committee may, in its discretion, allow the optionee to
deliver a notice of exercise and sale of shares by a brokerage firm. The
Committee may include a provision in an option permitting the grant of a new
option when payment of the exercise price upon exercise of an option is made
in shares of Common Stock (a so-called "reload"). If the participant's
employment with the Corporation and its affiliates ceases during the term of
the option, the option will terminate within three months of the termination
of employment. If termination of employment is due to death, disability or
retirement, then the option by its terms, may be exercised for up to five
years from the date of termination.
The grant of an option under the 1986 Plan will not result in taxable income at
the time of grant for the holder or the Corporation. The holder will not have
taxable income upon exercising an incentive stock option ("ISO") (except that
the alternative minimum tax may apply) and the Corporation will realize no
deduction when an incentive stock option is exercised. Upon exercising a
nonqualified stock option, the holder will recognize ordinary income in the
amount by which the fair market value on the date of exercise exceeds the
option price, and the Corporation will be entitled to deduction for the same
amount. The tax treatment to a holder upon a disposition of shares prior to
an exercise of an option is dependent upon the length of time the shares are
held and whether the option is an ISO or not. Generally, there will be no tax
consequences to the Corporation in connection with the disposition of a share
acquired under an option.
At the time of an award of restricted stock under the 1986 Plan, a restricted
period will be established for each participant. During the restricted period,
the restricted stock may not be transferred,encumbered, or sold,except pursuant
to rules developed by the Committee. The participant, once the shares are
issued, will have the right to vote the shares. The Committee may provide for
the accumulation of dividend equivalencies on the award which are payable
during or after the restricted period.
Recipients of restricted stock are not required to provide consideration other
than the rendering of services as payment for such awards as determined by the
Committee. Except as otherwise may be determined by the Committee, all shares
are forfeited unless the participant remains in the continuous service of the
Corporation or one of its subsidiaries for the entire restricted period with
respect to which the shares were granted.
Stockholder approval of the 1986 Plan as restated and amended is being sought
in order to qualify the 1986 Plan pursuant to Rule 16b-3 under the Securities
and Exchange Act of 1934 and under Section 162(m) of the Internal Revenue Code
of 1986, as amended, as a shareholder approved plan. Once approved, grants of
options will not be treated as purchases for purposes of the Section 16(b)
short swing profit provisions of that Act. The Corporation believes that the
approval of the 1993 Restatement and Plan Amendment does not conflict with or
impede the policy behind the short swing profit provisions of the securities
laws.
The Board recommends that you vote FOR the approval of the Amendment and
Restatement of the 1986 Plan.
<PAGE> 31
The following table illustrates the benefits that would have been provided
under the 1986 Plan if the plan, as proposed to be amended and restated,
had been in effect during 1993.
<TABLE>
<CAPTION>
AMENDED AND RESTATED STOCK OPTION PLAN BENEFITS
Name and Position Dollar Value ($)<F1> Number of Units<F2>
<S> <C> <C>
Ian Rolland, Chairman $ 132,520 49,317
and Chief Executive
Officer of LNC
Robert A. Anker, 66,000 26,650
President and
Chief Operating
Officer of LNC
P. Kenneth Dunsire, 60,000 16,500
Executive Vice
President of LNC
Thomas M. West, 58,520 16,463
Executive Vice
President of The
Lincoln National
Life Insurance Company
Jon A. Boscia, Executive 0 15,000
Vice President and Chief
Investment Officer of LNC
F. Cedric McCurley, Chief 0 15,000
Executive Officer of American
States Insurance Company
Executive Group 517,480 185,528
Non-Executive Director
Group 0 0
Non-Executive Officer
Employee Group 202,040 375,051
<FN>
___________________________
<F1> Assumed a $40 per share price for valuing the 1993 restricted shares
granted from the Management Incentive Plan II. The 1993 stock option units
were valued at $0 because they were granted at the current market as the exercise price.
<F2> Included in this number are the options granted in 1993 to this group including
a restricted share grant to four participants in the Investment Executives' Long-Term
Incentive Plan.
</FN>
</TABLE>
ITEM 4 - PROPOSED DIRECTORS' STOCK PLAN
The Corporation proposes that the shareholders approve the Lincoln National
Corporation 1993 Stock Plan for Non-employee Directors (the "Directors' Stock
Plan"). This is a new plan pursuant to which eligible directors will receive
one-fourth of their retainer fees in the form of restricted Common Stock rather
than in cash. In addition, upon election or re-election to the Board of
Directors, each non-employee director will receive restricted Common Stock the
fair market value of which equals $10,000, and directors may elect to defer the
cash portion of their retainer and fees into phantom shares of the Corpora-
tion's Common Stock. The Directors' Stock Plan was adopted by the Board on
November 11, 1993, subject to approval by the Corporation's shareholders.
Approval of the Directors' Stock Plan requires the affirmative vote of the
holders of a majority of the voting securities of the Corporation present, or
represented, and entitled to vote at the meeting.
<PAGE> 32
The following paragraphs summarize the principal features of the Directors'
Stock Plan. This summary is subject, in all respects, to the terms of the
Directors' Stock Plan which appears as Exhibit 2 in this proxy statement.
Summary of Directors' Stock Plan
The Board believes that the Directors' Stock Plan will assist in the recruit-
ment and retention of directors and benefit the Corporation by promoting an
identity of interests between the eligible directors and shareholders by
enabling directors to participate in the Corporation's success through
ownership of Common Stock. A maximum of 150,000 shares of Common Stock may be
issued under the Directors' Stock Plan.
The Directors' Stock Plan provides for each eligible director to receive
payment for a part of his or her retainer fee in the form of restricted stock
rather than in cash.
No director who is an employee of the Corporation or one of its subsidiaries is
eligible to participate in the Directors' Stock Plan. Also, a director who is
required to assign or pay the retainer fee to his or her firm or employer will
not be eligible to participate in the Directors' Stock Plan. The Board
currently consists of thirteen directors, eleven of whom will be eligible to
participate in the Directors' Stock Plan.
The Directors' Stock Plan provides that on each July 1 during the term of the
plan, the Corporation shall issue to each eligible director that number of
whole shares of Common Stock which would, when multiplied by the Fair Market
Value of the Corporation's Common Stock equal, as near as possible, to 25%
of the then current director retainer. The value of any fractional share
would be rounded up so that only whole shares will be awarded. For purposes
of the Directors' Stock Plan, "Fair Market Value" on any day is the average
of the high and low sale price quoted on the New York Stock Exchange
Composite Listing on the next preceding business day. The restrictions on
such shares will provide that a director who is no longer a director prior to
the attainment of age 70, death or disability will forfeit the restricted
shares. In addition, a majority of the Board can vest the shares in a
special vote in which the affected director would not participate.
In addition to a portion of the retainer being paid in restricted shares, each
director,upon reelection to a new three-year term (for terms beginning after
the end of 1994), will receive an award of restricted shares with the Fair
Market Value equal to $10,000 (rounded up to the next whole share). On July 1,
1994, a one time award shall be made to all non-employee directors of $10,000
of restricted shares (rounded up to the next whole share). These shares also
shall be forfeited by the director in the event of termination as a director
prior to death,disability or retirement at age 70 unless there is special
approval by the remaining members of the Board. In addition, the director may
elect to defer the remaining 75% of the retainer and all fees into phantom
stock units. The value of these phantom stock units can be paid in cash or
shares of Common Stock either in a single lump sum or annual installments as
elected by the director pursuant to an irrevocable election filed at least
six months prior to the date of the distribution, and shall be 100% vested at
all times. One phantom stock unit will have the same value as one share of
the Corporation's Common Stock on a given day. In the event of a change of
control of the Corporation, all phantom stock units shall immediately be
distributed in the equivalent number of shares of the Corporation's Common
Stock. Phantom stock units can not be transferred other than on account of
death.
The first issue of restricted Common Stock pursuant to the Directors' Stock
Plan will occur on July 1, 1994, and the last would occur on July 1, 2004 if
the Directors' Stock Plan is approved by shareholders. Issuances of Common
Stock awarded under the Directors' Stock Plan would come from the Corporation's
authorized but unissued Common Stock. The directors may not sell or transfer
the shares prior to vesting. Up to 150,000
<PAGE> 33
shares of Common Stock may be issued under the Directors' Stock Plan; however,
only 50,000 of those shares may be issued as restricted shares. This aggregate
share limitation will be adjusted to reflect stock dividends, stock splits,
consolidations or other changes in the Corporation's capitalization. The
Directors' Stock Plan provides that the Board may amend or terminate the plan,
but the plan may not be amended more than once within a six month period other
than to conform to changes in the Internal Revenue Code or the Employer
Retirement Income Security Act. An amendment will not become effective
without shareholder approval if the amendment changes the eligibility
requirements or increases the benefits that may be provided under the
Directors' Stock Plan.
The Board recommends a vote FOR approval of the Directors' Stock Plan and
authorization to issue up to 150,000 shares of Common Stock under the Plan.
The following table illustrates the benefits that would have been provided
under the Directors' Stock Plan if the plan had been in effect during 1993.
<TABLE>
<CAPTION>
DIRECTORS' STOCK PLAN BENEFITS
Name and Position Dollar Value ($) Number of Units
<S> <C> <C>
Ian Rolland, Chairman and Chief
Executive Officer of LNC $ 0 0
Robert A. Anker, President and
Chief Operating Officer of LNC 0 0
P. Kenneth Dunsire, Executive Vice
President of LNC 0 0
Thomas M. West, Executive Vice
President of The Lincoln
National Life Insurance Company 0 0
Jon A. Boscia, Executive Vice
President and Chief Investment
Officer of LNC 0 0
F. Cedric McCurley, Chief
Executive Officer of American
States Insurance Company 0 0
Executive Group 0 0
Non-Executive Director Group 245,000 6,125<F1>
Non-Executive Officer Employee Group 0 0
<FN>
________________________
<F1> Assumed a $40 per share price for converting the equivalent of $10,000 to
restricted Common Stock of the Corporation, in addition to twenty-five percent of
the retainer, both in 1994. Also, assumed that directors who currently defer their
retainer and meeting fees would continue this practice, but in the phantom stock
of the Corporation.
</FN>
</TABLE>
<PAGE> 34
ITEM 5 - PROPOSED PHANTOM
STOCK PLANOR EMPLOYEES
The Corporation proposes shareholders approve the Lincoln National Corporation
Phantom Stock Plan for Employees (the "Phantom Stock Plan"). This is a new plan
that will provide participants in the LNC Executive Deferred Compensation Plan
for employees (the "Deferred Compensation Plan") with an investment option that
mirrors the performance of the Corporation's Common Stock. In addition, the
Compensation Committee of the Board may award phantom units under the Phantom
Stock Plan as additional compensation or to supplement qualified retirement or
profit-sharing plans that are cut back because of Internal Revenue Code limits.
The Phantom Stock Plan was adopted by the Board on November 11,1993, subject to
approval by the Corporation's shareholders. Approval of the Phantom Stock Plan
requires the affirmative vote of the holders of a majority of the voting
securities of the Corporation present, or represented, and entitled to vote at
the meeting.
The Board believes the Phantom Stock Plan will assist in the recruitment and
retention of employees and further promote the identity of interests between
the eligible employees and shareholders by enabling eligible employees
to invest deferred compensation in phantom units of the Corporation's Common
Stock. The maximum number of phantom units awarded pursuant to this plan and
the Corporation's Phantom Stock Plan for Agents may not exceed 1% of the
Corporation's total outstanding voting securities as of December 31 of the
year prior to the year of calculation.
The following paragraphs summarize the principal features of the Phantom Stock
Plan. This summary is subject, in all respects, to the terms of the Phantom
Stock Plan, which is attached as Exhibit 3 to this proxy statement.
Summary of Phantom Stock Plan
The Deferred Compensation Plan allows a select group of managers and highly
compensated employees to defer a portion of their compensation until they
terminate employment with the Corporation or one of its subsidiaries. During
the deferral period, participants may choose among a series of investments
that correspond to the subaccounts underlying Lincoln National Variable
Annuity Account C or to phantom stock units. Upon termination, participants
may receive cash in either a lump sum or periodic payments. It is anticipated
that approximately 400 participants are eligible to participate in the Phantom
Stock Plan.
The Corporation match which is provided to participants in the Corporation's
Savings and Profit-Sharing Plan, but which is limited pursuant to provisions
of the Internal Revenue Code, is contributed to the Deferred Compensation Plan
and would automatically be placed in phantom stock units.
Investments in phantom stock will be denominated in phantom units. One phantom
unit will have the same value as one share of the Corporation's Common Stock on
a given day. Purchase of fractional phantom units will be permitted. If the
Corporation grants dividends on its Common Stock, holders of phantom units will
also be credited with equivalent dividends. If the Corporation's Common Stock
splits or is combined, the phantom units will be similarly adjusted. Phantom
units have no voting rights.
<PAGE> 35
The initial purchase of phantom units and transfers to and from phantom units
from among the various investment options will be subject to federal securities
law restrictions on insider trading of the Corporation's Common Stock.
The Compensation Committee of the Corporation's Board of Directors may
authorize the issuance of phantom restricted stock rather than issuing
regular restricted stock, to achieve a long-term deferral of an incentive
award which can be tied to the value of the Corporation's Common Stock. The
terms and conditions of such phantom restricted stock would be determined by
the Compensation Committee at the time of the award. Upon vesting, phantom
restricted units become unrestricted phantom units, held pursuant to the
rules contained in the Deferred Compensation Plan.
The Board of Directors recommends a vote FOR approval of the Phantom Stock
Plan and authorization to issue up to 1% of the total number of the
Corporation's Common Stock outstanding as of December 31 of the year prior to
the year of calculation as shares of phantom stock under the plan.
The following table illustrates the benefits that would have been provided
under the Phantom Stock Plan if the plan had been in effect during 1993.
<TABLE>
<CAPTION>
EMPLOYEES' PHANTOM STOCK PLAN BENEFITS
Name and Position Dollar Value($)<F1> Number of Units
<S> <C> <C>
Ian Rolland, Chairman and Chief
Executive Officer of LNC $ 65,809 1,645
Robert A. Anker, President and
Chief Operating Officer of LNC 27,547 689
P. Kenneth Dunsire, Executive Vice
President of LNC 22,228 556
Thomas M. West, Executive Vice
President of The Lincoln
National Life Insurance Company 21,182 530
Jon A. Boscia, Executive Vice
President and Chief Investment
Officer of LNC 17,321 443
F. Cedric McCurley, Chief
Executive Officer of American
States Insurance Company 16,635 416
Executive Group 203,805 5,095
Non-Executive Director Group 0 0
Non-Executive Officer Employee
Group 531,773 13,294
<FN>
_________________________
<F1> Assumed a $40 per share price for converting the dollar value of the
Corporation's matching contribution which would have been made to the Corporation's
Savings and Profit-Sharing Plan, but because of Code limits is contributed to the
Phantom Stock Plan within the Corporation's Deferred Compensation Plan.
</FN>
</TABLE>
<PAGE> 36
ITEM 6 - PROPOSAL REGARDING SHAREHOLDER
APPROVAL OF THE AMENDED AND RESTATED
EXECUTIVE VALUE SHARING PLAN
The Corporation proposes that shareholders approve the Lincoln National
Corporation Executive Value Sharing Plan (the "EVS Plan"). The EVS Plan
rewards participants for superior performance which reflects corporate,
business unit and individual contributions to the Corporation.
The EVS Plan was adopted by the Corporation's Board effective January 1, 1992.
The Compensation Committee of the Board (the "Committee") has determined
that it is in the best interest of the Corporation to amend and restate the
EVS Plan in order to: (i) comply with the performance-based compensation
rules of Section 162(m) of the Code; (ii) authorize 2,500,000 shares of the
Corporation's restricted stock to be awarded thereunder (to be adjusted as
necessary to reflect the impact of any stock split, recapitalization, etc.);
and (iii) assure that awards of such shares to Reporting Persons are exempt
from the short-swing profit provisions of Section 16(b) of the 1934 Act
through compliance with Rule 16b-3 under the 1934 Act. Subject to shareholder
approval, the amended and restated EVS Plan will be effective January 1, 1994
and will continue indefinitely, unless amended or terminated by the Board.
The Corporation intends, however, to also seek shareholder approval in the
future to the extent such approval is necessary to prevent a loss of income
tax deductions for amounts payable under the EVS Plan. Approval of the
amended and restated EVS Plan requires the affirmative vote of the holders of
a majority of the voting securities of the Corporation present, or
represented, and entitled to vote at the meeting.
The Board adopted the EVS Plan in recognition of the importance to the
Corporation of attracting and retaining employees with the requisite degree of
training, experience and ability. The EVS Plan furthers these objectives by
granting incentive bonus awards to participants if specified performance
objectives are attained. The amount of these awards depends on the
Corporation's or a designated business segment's performance over three-year
"Performance Cycles" relative to the performance of other companies contained
in a designated peer group. These three-year cumulative comparisons focus on
sustained performance rather than short-term results.
The following paragraphs summarize the principal features of the EVS Plan.This
summary is subject, in all respects, to the terms of the EVS Plan, which is
attached as Exhibit 4 to this proxy statement.
SUMMARY OF THE EVS PLAN
Under the EVS Plan, the Corporation makes awards ("EVSP Awards") to partici-
pants based upon the Corporation's or a designated business segment's
performance over a Performance Cycle relative to the performance of other
companies contained in designated peer groups. A new three-year Performance
Cycle begins each year. Thus, each calendar year is a component of three
concurrently running Performance Cycles.
The EVS Plan is administered by the Committee. Prior to each Performance Cycle,
the Committee designates which of the Corporation's (or a subsidiary's) current
employees will participate in the EVS Plan for that Performance Cycle. The
Chief Executive Officer of the Corporation will always be a participant in the
EVS Plan. In addition, key employees of the Corporation or its subsidiaries,
including but not limited to heads of
<PAGE> 37
business units, are eligible to participate in the EVS Plan. The Committee
may delegate certain responsibilities with respect to employees who are not
Reporting Persons to the Chief Executive Officer or Chief Operating Officer of
the Corporation including the right to designate such employees as EVS Plan
participants. The Committee may also grant EVSP Awards based on service for
part of a Performance Cycle to new employees or employees receiving a promo-
tion during a Performance Cycle, to the extent that it determines that doing
so is consistent with the performance-based compensation exception of section
162(m) of the Code. In no event will the number of participants assigned to
a Performance Cycle exceed 50. During fiscal year 1994, it is expected that
approximately 31 participants will participate in the EVS Plan.
The Committee is also responsible for, among other things: (1) establishing
performance goals or formulae for measuring the Corporation's or a designated
business unit's performance relative to peer group companies; (2) determining
the composition of the peer groups;(3) establishing the maximum amounts of EVSP
Awards that can become payable on attainment of the performance goals; (4)
certifying the extent to which the performance goals set forth for each
Performance Cycle have been attained;and (5) determining the actual EVSP Awards.
For each Performance Cycle,the maximum EVSP Award that each participant who is a
Reporting Person can receive will be determined by objective formulae (sometimes
referred to as performance goals) established by the Committee. The Committee
does not have discretion to increase the amount of such a participant's actual
EVSP Award above that maximum. The Committee has discretion to reduce or
eliminate any participant's EVSP Award. Participants will be informed not to
expect to receive the maximum awards produced by the formulae as these maximums
are established at high enough levels to permit the Compensation Committee
downward discretion to adjust the award as permitted by Section 162(m) of the
Code.
The formulae established by the Committee will require that the Corporation's
or a designated business unit's average growth in adjusted book value (i.e.,
its "Value Sharing Return on Equity" discussed in more detail below) equals or
exceeds the average growth for a peer group of companies for the years included
in the Performance Cycle before any EVSP Awards become payable. These formulae
may be expressed in words, algebraically, in tabular form or through a
combination of these methods, so long as a third party having knowledge of the
performance results of the Corporation and the peer group could calculate the
maximum EVSP Award for the participant. Thus, for the 1994-1996 Performance
Cycle, the objective formulae applicable to Reporting Persons are expressed as
a series of calculations that compare the Corporation's "Value Sharing Return
on Equity" ("VROE") to the average VROEs for the "Top Company" in the peer
group, the "Top-Tier" of the peer group, and to the "Average" of the peer
group for the years included in the Performance Cycle (all as discussed in
more detail below). The Committee establishes a Maximum Performance Award
for each participant for each Performance Cycle similar to the EVSP Table on
page 40. These maximum Performance Awards are established using methodology
and data provided by independent compensation consulting firms. The maximum
EVSP Awards available are then determined under the table that correlates
the Awards with how well the Corporation or designated business unit performed
relative to the peer group during the Performance Cycle.
Except as provided in the next sentence,the effect of any disclosed accounting
changes implemented by any company during a year will be eliminated from the
calculations for that company for that year. For the calculation of VROE, the
effect of disclosed accounting changes shall not be eliminated from the
calculation if the accounting changes relate to any Financial Accounting
Standards Board Statement promulgated by the Financial Accounting Standards
Board prior to SFAS 118.
<PAGE> 38
LNC CORPORATE EVSP CALCULATION
The discussion in this section describes the EVSP Plan Award calculation
applicable to Reporting Persons for the 1994-1996 Performance Cycle and
illustrates the manner in which the EVS Plan operates. The Committee has the
authority to change some aspects of the manner in which EVSP Awards are
calculated for Performance Cycles beginning after 1994, if it believes it
appropriate to do so. Thus, for example, the Committee could change the
composition of the peer group to reflect changes in the industry or in the
Corporation's business, could make changes in the way Value Sharing Return on
Equity or Adjusted Book Value is calculated, or could make changes in the EVSP
Table below for subsequent Performance Cycles. The Committee does not,
however, have the authority to make EVSP Awards if the Corporation's average
VROE for the years included in a Performance Cycle is less than the Peer Group
Average for the years included in the Performance Cycle; nor does the Committee
have authority to make EVSP Awards in excess of the "LIMITS ON EVSP AWARDS" set
forth in the following section.
Incorporated in the design of the performance calculation is a partial
recognition of market value appreciation or depreciation on securities. The
calculation treats both realized and unrealized gains (losses) on securities
the same. During a year, 20% of both the realized gains (losses) and change
in unrealized gains (losses) are recognized with the remaining gains (losses)
spread over future years. This treatment avoids an incentive to realize gains
(losses) except to capture value under the Corporation's total return approach
to investing.
The link between total pay and business strategy is emphasized in the EVS Plan,
which is designed to provide larger than competitive awards for superior long-
term performance. This plan reinforces the reality that the Corporation must
continually perform better than the "peer group", if it is to be a top-tier
company in the industry.
When the VROE, as defined below, equals or exceeds the average of the peer
group, incentive awards begin to be paid to the participant. However, if VROE
performance is below average, no award will be earned. This would then produce
total compensation that is below competitive levels. As performance reaches
Top-Tier, as defined below, the participant's award increases to a level where
total direct compensation is competitive with top performing companies. If the
Corporation's performance exceeds Top-Tier, the award accelerates providing an
award that will bring total compensation to a level that rivals or exceeds the
top compensation levels in the marketplace.
Performance Goals for LNC Corporate: Corporation performance will be measured by
comparing its VROE with the VROE of 14 specified other companies, comprising
the "peer group". For each calendar year in a Performance Cycle, the VROE of
the 14 companies will be ranked in order. The average of the VROE of the eight
companies ranked fourth highest through eleventh will be the "Average VROE".
The average of the VROE of the three companies ranked third highest through the
fifth will be the "Top-Tier VROE". The VROE of the top ranked company in the
entire peer group will be the "Top Company VROE".
Peer Group:The peer group will consist of the following 14 companies: Aetna
Life & Casualty; American General Corp.; Capital Holding Corp.; CIGNA Corp.;
The Continental Corp.; The Equitable Companies, Inc.; The NWNL Companies;
Provident Life & Accident Insurance Co.; SAFECO Corp.; Torchmark Corp.;
Transamerica Corp.; Travelers Inc.; USF&G Corp. and USLIFE Corp.
<PAGE> 39
If as a result of merger or otherwise, including a merger through pooling of
interests, any of these companies ceases to exist as a publicly-held company
or if its primary business changes, that company will be excluded from the
peer group calculation for the calendar year in which the event occurs. The
calculation of the Average, Top-Tier and Top Company VROEs will be based on the
remaining companies.
A list of potential peer group companies not on the above list has been
established. If companies are removed from the list of peer group companies as
provided in the previous paragraph, they will be replaced by companies from
the potential peer group list, in order, in the year following such removal.
Value Sharing Return on Equity: The VROE for each company shall be computed as
the Adjusted Book Value per Share ("ABV") defined below at the end of the year,
less the ABV at the start of the year, plus the total cash dividends to common
shareholders per share declared in the year;all divided by the ABV at the start
of the year. The dividend to common shareholders shall be computed so as to be
consistent with the manner in which such dividends reduce shareholder equity in
the company's financial statements. Per share calculations are to be
appropriately adjusted for the effects of any stock splits or stock dividends.
Adjusted Book Value per Share: The adjusted book value for a company shall be
computed as the book value (shareholders' equity) reported in the company's
financial statements,
minus (plus) 80% of the amount of unrealized gain (loss) on securities
included therein, net of associated deferred acquisition cost and other
items and deferred taxes, if appropriate,
plus (minus) 20% of the amount of unrealized gain (loss) on securities
that are carried at cost or amortized cost, net of applicable tax,
minus (plus) 80% of the amount of deferred realized gains (losses),
as defined below.
ABV shall be computed by deducting from the adjusted book value the amount in
shareholders' equity applicable to any preferred stock not considered as common
stock equivalents and dividing the remainder by the sum of the number of shares
of common stock and common stock equivalents applicable to such preferred stock
outstanding at the end of the year.
Deferred Realized Gains (Losses): For a given year, realized gains or losses
shall be the amount disclosed in the income statement for realized gains or
losses on investment reduced for taxes as appropriate. Beginning with 1989, the
Deferred Realized Gains (Losses)("DRG") at the end of the year will be computed
as 80% of the DRG at the start of the year, plus (minus) 90% of the realized
gains (losses) net of tax for the year. The DRG at the start of 1989 shall
be zero.
Amount of EVSP Awards: EVSP Awards will be based on the relationship between
the arithmetic average of the Corporation's VROE and the arithmetic averages of
the Average VROE, the Top-Tier VROE, and the Top Company VROE in each calendar
year in the Performance Cycle. If the average of the Corporation's VROEs for
the three calendar years (the "Corporation Average") equals or exceeds the
average of the Top Company VROEs for those calendar years, each Reporting
Person's maximum EVSP Award for the Performance Cycle will be the Top Company
Maximum Performance Award shown in the EVSP Table below. If the Corporation's
Average equals the average of the Top Tier VROEs for those calendar years, the
maximum EVSP Award will be the relevant Top Tier Maximum Performance Award
shown in the EVSP Table. If the Corporation's Average
<PAGE> 40
equals the average of Average VROEs, the maximum EVSP Award will be the
Average Maximum Performance Award shown in the EVSP Table for that position.
Maximum EVSP Awards for Corporation Averages between the average of Average
VROEs and the average of Top-Tier VROEs will be determined on the basis of
straight-line interpolation using the above referenced VROEs between the
Average Maximum Performance Awards and the Top-Tier Maximum Performance Awards
columns of the EVSP Table. Similarly, maximum EVSP Awards for Corporation
Averages between the average of Top-Tier VROEs and the average of Top Company
VROEs will be determined by straight-line interpolation between the Top Tier
Maximum Performance Award and Top Company Maximum Performance Award columns of
the Table.
<TABLE>
<CAPTION>
EVSP TABLE
1994-1996 Cycle - Maximum Performance Awards
Title and Number of Below
Persons Average Average Top Tier Top Company
<S> <C> <C> <C> <C>
Chief Executive Officer $ 0 $ 700,000 $1,800,000 $3,200,000
President & Chief
Operating Officer 0 500,000 1,200,000 2,200,000
Executive Vice Presidents (7) 0 400,000 1,000,000 1,800,000
Others (6) 0 180,000 450,000 800,000
</TABLE>
The amounts determined for the 1994-1996 Performance Cycle as described above
are the maximum amounts that the Committee can award. The Committee has
discretionary authority to reduce any participant's EVSP Award to a lower
amount or to make no EVSP Award to the participant. For Corporation
performance at or near the average performance of the peer group, the
Committee expects that actual EVSP Awards will be substantially less than
the maximums shown and will also vary with individual circumstances.
LIMITS ON EVSP AWARDS
Other limitations are also imposed on EVSP Awards. Under an "overall"
limitation, the total amount awarded to all EVSP participants for any
Performance Cycle cannot exceed 15% of the increase in dividend-adjusted ABV
of the Corporation's Common Stock over the Performance Cycle. In addition,
under "Individual" limitations, even if the Corporation (or a participant's
subsidiary) is performing at the highest level of its peer group, the
maximum amount that can be payable for any Performance Cycle (either in cash
or in shares of the Corporation's restricted stock or phantom stock) is
$5,000,000 for the Corporation's Chief Executive Officer, $3,500,000 for the
Chief Operating Officer, $2,500,000 for the Executive Vice-Presidents, and
$1,000,000 in the case of any other participant. The Committee intends to
exercise its discretion, as described above, to ensure that EVSP Awards, when
combined with participants' other direct compensation, will not exceed
compensation levels offered by comparable companies unless the Corporation or
a designated business segment performs in the top quartile of the peer group.
The Board may amend or terminate the EVS Plan at any time. Amendment or
termination will not, however, affect the validity or terms of any EVSP Awards
previously made to a participant in a manner adverse to the participant without
the participant's consent.
<PAGE> 41
PAYMENT OF EVSP AWARDS
Subject to adjustment as described below, 2,500,000 shares of Common Stock will
be available for distribution under the EVS Plan as restricted stock, if
shareholders approve this proposed amendment and restatement of the EVS Plan.
If restricted shares lapse, expire, terminate, or are cancelled prior to
vesting, such restricted shares will be available for new awards. The number
of shares which may be awarded are subject to adjustment to reflect capital
changes. The vesting of restricted stock granted under the EVS Plan may be
conditioned upon continued employment or meeting performance criteria
selected by the Committee. The Committee retains the discretion to convert
the cash value of a participant's EVSP Award to an equivalent number of
shares of the Corporation's restricted stock authorized under the EVS Plan
or under the 1986 Stock Option Plan or their successors or to an equivalent
number of shares of phantom stock of the Corporation. The Committee
has the authority to prescribe rules under which such phantom stock
may be converted, after such period as the Committee may specify,
into alternative phantom investment options under the Corporation's deferred
compensation plan for executives.
Under the Code, participants will not recognize taxable income on account of
the Committee's grant of an EVSP Award prior to the completion of a Performance
Cycle. If a participant receives cash after the end of a Performance Cycle, the
participant will recognize taxable income equal to the amount so received. If
the participant receives shares of the Corporation's restricted stock upon the
completion of a Performance Cycle, the participant will not recognize taxable
income until the earliest of:(1) the date on which the participant's rights in
such stock are no longer subject to a substantial risk of forfeiture or (2) the
participant makes an election pursuant to section 83(b) of the Code. If the
participant receives phantom stock, the participant will not recognize taxable
income until actual or constructive receipt of payments for the rights
represented by the phantom stock.
The Corporation may deduct cash EVSP Awards as they are paid to the
participants, and can deduct EVSP Awards paid in restricted stock or phantom
stock as participants recognize taxable income on such stock or phantom
stock, subject to one potential limitation. Effective beginning with 1994,
Section 162(m) of the Code generally disallows deductions for compensation in
excess of $1,000,000 paid to certain key executives. The Corporation believes,
however, that the EVS Plan would qualify for a "performance-based compensation"
exception to this disallowance rule if the Corporation's shareholders approve
this Item 6 by the affirmative votes of a majority of the voting shares.
A copy of the EVS Plan is attached hereto as Exhibit 4, and the foregoing
discussion is qualified in its entirety by such reference.
The Board of Directors recommends a vote FOR approval of the amendment and
restatement of the Executive Value Sharing Plan.
The following table illustrates the benefits that would have been available
under the EVS Plan if the plan, as proposed to be amended and restated, had
been in effect during 1990-1992 cycle and this was then applied to the maximums
established for the 1994-1996 Performance Cycle brought down to 1993 dollars.
This table is based upon the 1990-1992 cycle because information from the Form
10-Ks of peer group companies was not available at the time this proxy
statement was prepared, and assumes that the Compensation Committee would
not have exercised any downward discretion.
<PAGE> 42
<TABLE>
<CAPTION>
AMENDED AND RESTATED EVS PLAN BENEFITS
Name and Position Dollar Value($) Number of Units<F1>
<S> <C> <C>
Ian Rolland, Chairman and Chief
Executive Officer of LNC $1,230,000 30,750
Robert A. Anker, President and
Chief Operating Officer of LNC 837,000 20,925
P. Kenneth Dunsire, Executive Vice
President of LNC 689,000 17,225
Thomas M. West, Executive Vice
President of The Lincoln
National Life Insurance Company 639,000 15,994
Jon A. Boscia, Executive Vice
President and Chief Investment
Officer of LNC 689,000 17,225
F. Cedric McCurley, Chief
Executive Officer of American
States Insurance Company 639,000 15,994
Executive Group 6,410,000 1,600,305
Non-Executive Director Group 0 0
Non-Executive Officer Employee
Group 4,785,000 59,812
<FN>
__________________________
<F1> Assumes all EVSP awards to Executive Vice Presidents of the Corporation were
converted to restricted shares of the Corporation's Common Stock, and all other
officer awards were paid 50% in cash and 50% in restricted shares.
</FN>
</TABLE>
GENERAL
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young has been selected by the Board to be the independent auditors to
audit the consolidated financial statements of the Corporation for the year
1994.This firm has been employed by the Corporation in that capacity
continuously since January 17, 1968. Representatives of Ernst & Young will
be present at the annual meeting of shareholders, will be given an
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions relating to the audit of the Corporation's
1993 consolidated financial statements.
SHAREHOLDER PROPOSALS
To Be Included in the Corporation's Proxy Materials - Any shareholder proposals
intended to be considered for inclusion in the proxy materials for the
Corporation's 1995 annual meeting of shareholders must be received by the
Corporation no later than December 14, 1994. All such proposals should be sent
to the Secretary of the Corporation.
<PAGE> 43
To Be Presented In-Person at Shareholder Meetings - Shareholders wishing to
propose matters for consideration at a meeting of shareholders or to propose
nominees for election as directors must follow specified procedures contained
in the Corporation's Bylaws. Such procedures include giving notice to the
Secretary of the Corporation at least fifty and not more than ninety days
prior to the meeting; provided, however, that in the event that less than
sixty days' notice of the date of the meeting is given to shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of
the date of the meeting was given. Such notice must include: the name and
address of the proposing shareholder (as they appear on the Corporation's stock
records), a brief description of the business desired to be brought before
the meeting, the class and number of shares of the Corporation which are
beneficially owned by the proposing shareholder and a description of any
interest of such proposing shareholder in the business proposed. In the case
of a shareholder-proposed nominee for director, the required notice must also
contain as to each person whom the shareholder propose to nominate for
election or re-election as a director: (i) the name, age, bus address and
residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person, (iv) any other
information relating to such person that is required to be disclosed in
solicitation of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected), and (v) the qualifications of the nominee to serve as a director
of the Corporation. The person presiding at a meeting of shareholders is
authorized by the Bylaws, if the facts warrant, to determine that the proposed
business was not properly brought before, or was not lawful or appropriate for
consideration at, the meeting, or that a nomination for director was not
properly made. Upon a declaration of such determination, the proposed
business shall not be transacted or the defective nomination shall be
disregarded, as the case may be.
ANNUAL REPORT
Form 10-K, the annual report of the Corporation filed with the Securities and
Exchange Commission, for the Corporation's 1993 fiscal year will be provided
without charge to each shareholder who requests a copy. Write to Donald Van
Wyngarden, Second Vice President and Controller, Lincoln National Corporation,
200 East Berry Street, Fort Wayne, Indiana, 46802.
For the Board of Directors,
C. Suzanne Womack
Secretary
April 11, 1994
<PAGE> 44
Exhibit 1
LINCOLN NATIONAL CORPORATION
1986 STOCK OPTION INCENTIVE PLAN
(As Amended and Restated Effective as of May 12, 1994)
SECTION 1
GENERAL
1.1. Purpose. The purpose of the LINCOLN NATIONAL CORPORATION 1986 STOCK
OPTION INCENTIVE PLAN (the "Plan") is to promote the long-term financial
performance of Lincoln National Corporation ("LNC") by (a) attracting and
retaining key employees, agents and brokers by providing incentive compensation
opportunities which are competitive with those of other major corporations; (b)
motivating such persons to further the long-range goals of LNC; and (c)
furthering the identity of interests of participating employees, agents and
brokers and LNC shareholders through opportunities for increased ownership of
LNC Common Stock, thereby strengthening their concern for the welfare of LNC by
enhancing its profitable growth.
1.2. Definitions. The following definitions shall be applicable throughout
the Plan:
(a) "Award" means, individually or collectively, any Option, Restricted Stock
Award, Performance Award, Stock Appreciation Right, Incentive Award or
Dividend Equivalent Right.
(b) "Board" means the Board of Directors of Lincoln National Corporation.
(c) "Change of Control" has the same meaning as in the LNC Executives'
Severance Benefit Plan on the date immediately preceding the Change of
Control.
(d) "Code" means the Internal Revenue Code of 1986. Reference in the Plan
to any section of the Code shall be deemed to include any amendments or
successor provisions to such section and any regulations under such
section.
(e) "Committee" means not less than three members of the Board who are
selected by the Board as provided in subsection 1.4.
(f) "Common Stock" means the common stock of Lincoln National Corporation.
(g) "Company" means, collectively, Lincoln National Corporation and its
subsidiaries.
(h) "Dividend Equivalent Right" or "DER" means the right of the holder
thereof to receive, pursuant to the terms of the DER, credits based on
cash dividends that would be paid in shares specified by the DER if
such shares were held by the Holder, as more particularly described
in Section 8.
(i) "Fair Market Value" means, as of any specified date, the average of the
highest and lowest quoted selling prices of the Common Stock as reported
on the Composite Tape for issues listed on the New York Stock Exchange on
the first business day that the Common Stock was traded on that Exchange
which next precedes the date as of the Award, or, if no sales were
reported on the Composite Tape
<PAGE> 45
on such specified date, the average of the highest and lowest quoted
selling prices of the Common Stock on the nearest dates before and
after such specified date on which sales of the Common Stock were so
reported.
(j) "Holder" means an employee, agent or broker of the Company who has been
granted an Option, a Restricted Stock Award, a Performance Award, Dividend
Equivalent Right, Stock Appreciation Right or an Incentive Award.
(k) "Incentive Award" means an Award granted under Section 6 of the Plan.
(l) "Incentive Stock Option" means an Option within the meaning of section
422(b) of the Code.
(m) "Option" means an Award under Section 3 of the Plan and includes both
Nonqualified Stock Options and Incentive Stock Options to purchase Common
Stock.
(n) "Performance Award" means an Award granted under Section 7 of the Plan.
(o) "Personal Representative" means the person who upon the death, disability
or incompetency of a Holder shall have acquired, by will or by the laws of
descent and distribution or by other legal proceedings, the right to
exercise an Option or the right to any Restricted Stock Award, Performance
Award, Dividend Equivalent Right or Incentive Award therefore granted or
made to such Holder.
(p) "Plan" means the Lincoln National Corporation 1986 Stock Option Incentive
Plan (As Amended and Restated Effective as of May 12, 1994).
(q) "Restricted Stock Award" means an Award granted under Section 5 of the Plan.
(r) "Stock Appreciation Right" or "SAR" means an Award granted under Section
4 of the Plan.
(s) "Subsidiary" means any corporation at any date that LNC owns directly, or
indirectly through an unbroken chain of subsidiary corporations, stock
possessing a majority of the total combined voting power of all classes of
stock of that corporation.
1.3. Effective Date and Duration of Plan. The amended and restated Plan shall
become effective following adoption by the Board and approval of shareholders
of Lincoln National Corporation at its 1994 Annual Meeting of Shareholders.
No further Awards may be granted under the Plan after ten years from the date
the amended and restated Plan becomes effective. The Plan shall remain in
effect until all Options granted under the Plan have been exercised or
expired by reason of lapse of time, all restrictions on Restricted Stock
Awards have been eliminated, and all DER's and SAR's satisfied.
1.4. Plan Administration. The Plan shall be administered by the Committee.
In addition to those rights, duties, and powers vested in the Committee by
other provisions of the Plan, the Committee shall have sole authority, in
its discretion, to:
(a) determine which employees, agents and brokers of the Company, shall receive
an Award;
(b) construe the Plan and respective agreements executed thereunder;
(c) adopt, amend and rescind rules and regulations for the administration of
the Plan;
<PAGE> 46
(d) ensure that awards continue to qualify under Rule 16b-3 of the Securities
Exchange Act of 1934, as the same may be hereafter amended; and
(e) make all other determinations deemed by it to be necessary or advisable
for the administration of the Plan;
provided that the Committee shall exercise its authority in accordance with the
provisions of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any agreement
relating to an Award in the manner and to the extent it shall deem expedient
to carry it into effect. The determinations of the Committee on the matters
referred to in this subsection 1.4 shall be conclusive.
The Committee may not exercise its authority at any time that it has fewer than
three members. The Committee shall exercise its authority only by a majority
vote of its members at a meeting or by a writing without meeting. At any date,
the members of the Committee shall be those members of the Compensation
Committee of the Board who are not eligible and who have not been eligible
within one year preceding that date to participate in the Plan or any other
plan of LNC or a Subsidiary under which stock, stock options or stock
appreciation rights of LNC or a Subsidiary may be granted. In the event that
fewer than three members of the Compensation Committee of the Board are
eligible to serve on the Committee, the Board may appoint one of its other
members who is otherwise eligible to serve on the Committee until such time
as three members of the Compensation Committee are eligible to serve.
1.5. Shares Available. The aggregate number of shares of LNC Common Stock
that may be issued under the Plan shall not exceed the sum of (a) 5,000,000
shares originally authorized by shareholders in 1986 (formerly 2,500,000 prior
to the two for one stock split effected through a stock dividend declared by
the Board on May 13, 1993), less the aggregate number of shares issued under
the Plan prior to the effective date of its amendment and restatement and (b)
an additional 5,000,000 shares. In addition to the foregoing limit on the
aggregate number of shares that may be issued under all Awards, the aggregate
number of Restricted Stock Awards that may be granted during any calendar year
(or portion thereof) after the effective date of the amendment and restatement
of this Plan, shall not exceed three-tenths of one percent (0.3%) of the number
of shares of Common Stock outstanding as of December 31 of the prior year. If
the number of shares of Common Stock awarded as Restricted Stock Awards in any
year is less than the number of shares that could have been so granted pursuant
to this subsection, the balance of such unused shares may be added to the
maximum number of shares of Restricted Stock that may be effectively awarded
in following years. To the extent that an Award lapses or the rights of its
Holder terminate or the Award is paid in cash, any shares of Common Stock
subject to such Award shall again be available for the grant of an Award and
not be included in calculating shares available under this subsection.
1.6. Individual Dollar Limitations. The aggregate Fair Market Value of shares
of Common Stock with respect to which Awards (excluding the underlying shares
for Dividend Equivalent Rights) may be made to any individual in any one
calendar year cannot exceed $5,000,000.
1.7. Stock Offered. The shares of Common Stock to be offered, pursuant to the
grant of an Award shall be authorized but unissued shares.
1.8 Change in Corporate Structure. In the event of a merger, consolidation,
reorganization, combination, exchange, recapitalization, stock dividend, stock
split or other similar change in the corporate structure or capitalization of
LNC which affects the Common Stock, outstanding Awards shall be subject to
adjustment by the Committee at its discretion as to the number and price of
shares of Common Stock or other consideration subject to such Awards. In the
event of such changes in the corporate structure or capitalization of LNC, the
<PAGE> 47
aggregate number of shares available under the Plan may be appropriately
adjusted by the Committee, whose determination shall be conclusive.
1.9. Amendment and Termination of Plan. The Board may amend or terminate the
Plan at any time except that, without the approval of the holders of a majority
of LNC stock entitled to vote at a duly held meeting of such shareholders, the
Board may not:
(a) increase the number of shares of Common Stock which may be issued under
the Plan, except as provided in subsection 1.8;
(b) reduce the minimum option price under any Option, except as provided in
subsection 1.8;
(c) increase the maximum period during which Options and related Stock
Appreciation Rights or related Dividend Equivalent Rights may be exercised;
(d) extend the maximum period during which Awards may be granted under the
Plan;
(e) amend the standards for eligibility described in Section 2; and
(f) materially increase the benefits accruing to employees under the Plan.
Amendment or termination of the Plan shall not affect the validity or terms of
any Award previously made to a Holder in any way which is adverse to the Holder
without the consent of the Holder.
1.10. Amendment to Awards. Any Award which was granted under the 1982 Stock
Option Incentive Plan, or which was granted under this Plan prior to the
effective date of the amendment and restatement, may, subject to any
requirements of applicable law or regulation, be amended by action of the
Committee so as to incorporate in that award any terms that might have been
incorporated in an award under this Plan as amended and restated.
SECTION 2
ELIGIBILITY; EFFECT OF THE PLAN
2.1. Participation Designations. The Committee may, at any time, make Awards
to any key executive, managerial, supervisory or professional employee of the
Company or any person holding either an agent's or broker's contract with a
Subsidiary. Awards may not be granted to (i) any director who is not an
employee of the Company or (ii) any person who immediately after such grant
is the owner, directly or indirectly of more than 10% of the total combined
voting power of all classes of stock of LNC.
The right to select eligible employees, agents, and brokers who are subject to
Rule 16(a) of the Securities Exchange Act of 1934 ("Reporting Persons") and all
decisions regarding Awards to such Reporting Persons are reserved exclusively to
the Committee. The right to select individuals who are not Reporting Persons
for participation in the Plan is reserved to the Committee, but such reserved
right may be delegated in whole or in part by the Committee to the chief
executive officer or chief operating officer of LNC.
<PAGE> 48
2.2. Participation Not Contract of Employment. The Plan does not constitute
a contract of employment. Participation in the Plan does not give any employee
the right to be retained in the employ of LNC or a Subsidiary nor does it limit
in any way the right of LNC or a Subsidiary to change the duties or
responsibilities of any employee, agent or broker.
2.3. Multiple Awards. An Award may be made on more than one occasion to the
same person, and such Award may include an Incentive Stock Option,
Nonqualified Stock Option, Restricted Stock Award, Stock Appreciation Right,
Dividend Equivalent Right, Performance Award, Incentive Award, or any
combination thereof.
2.4. Withholding Taxes on Plan Benefits. The Company shall have the right to
deduct from any cash payment made pursuant to the Plan the amount of any tax
required by law to be withheld from that payment. The Company shall have the
right to require payment from any person entitled to receive Common Stock
pursuant to the Plan of the amount of any tax required by law to be withheld
with respect to that stock prior to its delivery. A Holder may elect with
respect to any Option, any Stock Appreciation or Dividend Equivalent Right
which is paid in whole or in part in Common Stock and any Restricted Stock,
Incentive or Performance Award to surrender shares of Common Stock the Fair
Market Value of which on the date of surrender satisfies all or part of the
withholding requirements. Such election must be made by filing a Stock
Surrender Withholding Election with the Secretary of LNC which meets the
following requirements and conditions:
(a) Any Stock Surrender Withholding Election shall be in writing and be
irrevocable;
(b) The Committee shall have the right with respect to any or all outstanding
awards to terminate or suspend for any period the right of a Holder to
make a Stock Surrender Withholding Election at any time prior to the
making of such election;
(c) Any Stock Surrender Withholding Election must be made prior to the date
that the amount of tax to be withheld is determined (the "Tax Date"); and
(d) If a Holder is a Reporting Person, the Stock Surrender Withholding
Election must be made:
(i) more than six months after the date of grant of the Award with respect
to which such election is made (except whenever such election is made
by a disabled Holder or the estate or personal representative of a
deceased Holder); and
(ii) either at least six months prior to the Tax Date or during the ten
day "window period" beginning on the third day following the release
for publication of LNC's summary statement of earnings for a quarter
or fiscal year.
2.5. Awards to Employees Who Are Foreign Nationals. Without amending the Plan,
the Committee may, subject to the limitations in subsections 1.5 and 1.9, grant,
amend, administer, annul or terminate awards to employees who are foreign
nationals on such terms and conditions different from those specified in the
Plan as may in the judgment of the Committee be necessary or desirable to
foster and promote achievement of the purposes of the Plan.
<PAGE> 49
SECTION 3
STOCK OPTIONS
3.1. Grantees. The Committee may, at any time, award an Incentive Stock
Option or Nonqualified Stock Option to an eligible employee, agent, or broker
whether or not such individual has previously received a grant under the Plan.
3.2. Stock Option Agreement. Each Option granted under the Plan shall be
evidenced by an agreement between the Holder and LNC. The Provisions of each
agreement shall be determined by the Committee in accordance with the
provisions of the Plan. LNC shall notify a Holder of any grant of an Option,
and a written option agreement or agreements shall be duly executed and
delivered by LNC to the Holder.
3.3. Shareholder Rights and Privileges. A Holder shall be entitled to all
rights and privileges of a shareholder only with respect to such shares of
Common Stock as have been purchased on exercise of the Option and for which
certificates of stock have been registered in the Holder's name.
3.4. Individual Limitations. In the case of Incentive Stock Options, the
aggregate Fair Market Value (determined as of the time the Option is granted
according to Section 422(d)(1) of the Code) of shares of Common Stock with
respect to which are exercisable for the first time in any one calendar year by
any one individual cannot exceed $100,000 (or such other individual limits
as may be in effect under the Code on the date of grant). In the case of
Options, the maximum number of Options awarded to one individual cannot
exceed 100,000 Options.
3.5. Exercise of Options and Payment. The price at which a share of Common
Stock may be purchased upon exercise of an Option shall not be less than 100%
of the Fair Market Value of a share of Common Stock when the Option is granted.
During any period that an Option is exercisable, it may be exercised by
delivering an irrevocable notice of exercise which specifies the number of
shares purchased and full payment of the purchase price to the Secretary of
LNC. Payment may be made in cash, in shares of Common Stock with an aggregate
Fair Market Value equal to the purchase price, or in any combination of cash
and such shares, provided, however, payment of the exercise price may only be
made in shares of Common Stock which have been owned by the Holder for at
least six months.
3.6. Limitations on Exercise of Option.An Option shall be exercisable in whole
or in such installments and at such times, commencing not earlier than six
months from the date of grant, as determined by the Committee. Generally,
Options granted to a Holder shall not be exercisable prior to the first
anniversary of the grant date except, in the discretion of the Committee and
subject to the limitations of subsection 3.4, if the Holder`s employment
with LNC and all Subsidiaries terminates by reason of death, Disability, or
retirement (as described in subsection 3.7(d)).
3.7. Option Period. Each Option shall terminate and not be exercisable as
specified by the Committee which date shall not be later than the earliest of
(a) the tenth anniversary of the grant date; (b) the last day of the three
month period beginning on the date the Holder's service with LNC and all
Subsidiaries terminates for reasons other than described in (c), (d) or (e)
following; (c) the first anniversary of the date of Holder's termination of
service with LNC and all Subsidiaries on account of death or Disability;
(d) the fifth anniversary of the Holder's retirement at or after age 65 or,
with the approval of the Holder's employer, early retirement at either age 55
with 5 years of service or under the terms of a retirement plan of LNC or a
Subsidiary, or (e) the sixth anniversary of the Holder's termination of service
after a Change of Control of LNC.
<PAGE> 50
3.8. Transferability. An Option shall not be transferable except by will or
the laws of descent and distribution, and may be exercisable during the
Holder's lifetime only by the Holder; provided, however, to the extent
permitted under Rule 16b-3 under the Securities Exchange Act of 1934, the
Committee may develop rules to permit the transfer of Nonqualified Options to
an immediate family member of the Holder or to a family trust.
3.9. Surrender of Options. The Committee (concurrently with the grant of an
Option or subsequent to such grant) may in its sole discretion, grant to any
Option Holder the right upon written request; to surrender any exercisable
Option or portion thereof in exchange for cash, whole shares of Common Stock or
a combination thereof, as determined by the Committee, with a value equal to
the Fair Market Value, as of the date of such request, of one share of Common
Stock over the Option price for such share multiplied by the number of Shares
covered by the Option or portion thereof to be surrendered. In the case of any
such surrender right which is granted with an Incentive stock Option, such
right shall be exercisable only when the Fair Market Value of the Common
Stock exceeds the price specified therefor in the Option or portion thereof to
be surrendered. In the event of the exercise of any surrender right granted
hereunder; the number of shares reserved under the Plan shall be reduced only
to the extent that shares of Common Stock are actually issued in connection
with the exercise of such surrender right. Additional terms and conditions
governing any such surrender rights may from time to time be prescribed by the
Committee in its sole discretion.
SECTION 4
STOCK APPRECIATION RIGHTS
4.1. Holders. The Committee may, at the time an Award is made, designate
that a Holder be granted, in conjunction with that Award, a Stock Appreciation
Right ("SAR"). No SAR may be granted in conjunction with a previously granted
Incentive Stock Option without the written consent of the affected Holder. No
more than 100,000 SARs may be awarded to one participant in one calendar year.
For purposes of the Plan, the term "Stock Appreciation Right" means a right to
surrender all or a portion of an Option and receive, in exchange, payment of a
cash amount no greater than the excess of the Fair Market Value of one or more
shares of LNC common stock over the Fair Market Value of such option share on
the date the related Option was granted. Each Stock Appreciation Right granted
under the Plan shall be evidenced by an agreement between the Holder and LNC.
The provisions of each agreement shall be determined by the Committee in
accordance with the provisions of the Plan.
4.2. Terms of SARs. The Committee shall determine the number of shares of
Common Stock and the percentage (not more than 100 percent) or maximum amount
of the increase in the Fair Market Value of those shares over the relevant
period upon which payment of each SAR at exercise shall be based. Each SAR may
be exercisable at any date with respect to no more than the number of shares
for which the related Option is exercisable on that date. Each SAR issued in
conjunction with an Incentive Stock Option may be exercisable only when there
has been an increase in Fair Market Value of the shares over the relevant
period. If a Holder to whom an SAR has been granted is subject to Section 16
of the Securities Exchange Act of 1934, as amended, the Committee may, at any
time, impose such conditions and limitations to such SAR as the Committee deems
necessary or desirable for the Holder to comply with or obtain an exemption
from such Section 16 and applicable rules and regulations. The terms of an SAR
may include such other conditions and limitations on exercise as the Committee
deems desirable.
4.3. Exercise of SARs and Payment. During any period that a SAR is
exercisable, it may be exercised by delivering an irrevocable written
notice to the Secretary of LNC which specifies the extent
<PAGE> 51
to which the SAR is being exercised. Payment to the Holder shall be made as
soon as practicable after exercise of the SAR and may be made in cash, in
shares of Common Stock with an aggregate Fair Market Value on the date of
exercise equal to the amount to be paid, or in any combination of cash and such
shares as determined by the Committee. Upon exercise of an SAR, the right to
exercise the related Option shall automatically be terminated to the same
extent that the SAR was exercised. Upon exercise of a SAR attached to a
Restricted Stock Award, the restrictions on the Restricted Stock Award shall
lapse.
4.4. Termination of SARs. Each SAR shall terminate and not be exercisable
after the same date that the related Award terminates.
4.5. Transferability. Each SAR granted to a Holder shall not be transferable
except by will or the laws of descent and distribution; provided, however, to
the extent permitted under Rule 16b-3 under the Securities Exchange Act of
1934, the Committee may develop rules to permit the transfer of the SAR
together with the related Option and only to the extent that the related
Option may be transferred.
SECTION 5
RESTRICTED STOCK AWARDS
5.1. Holders. The Committee may, at any time, designate a Holder to receive
a Restricted Stock Award whether or not the Holder has previously received a
grant under the Plan. For purposes of the Plan, the term "Restricted Stock
Award" means the right to receive, at specified times and subject to
specified conditions, shares of Common Stock which may bear such restrictive
endorsements as the Committee determines. Each Restricted Stock Award ("RSA")
shall be evidenced by an agreement between the Holder and LNC. The
provisions of each agreement shall be determined by the Committee in
accordance with the provisions of the Plan.
5.2. Grants of Restricted Stock Awards. The Committee shall, subject to sub-
section 1.5 and this Section 5, determine the number of shares of Common Stock
which may be awarded, the time or times the shares may be awarded, and the
conditions which must be met for award and delivery of the shares to the Holder
under each RSA granted under the Plan. An RSA may provide, in the discretion of
the Committee,for the crediting to the Holder,on each dividend payment date, of
an amount equal to the product of the dividend paid on a share of Common Stock
multiplied by the number of shares which may be awarded under that RSA, and for
the payment in cash to the Holder of the amounts so credited at such time as the
Committee may determine.An RSA may provide, in the discretion of the Committee,
for the issuance of the shares which may be awarded under the RSA in the name of
the Holder subject to the following restrictions:
(a) the shares may not be issued earlier than six months after the grant of
the RSA;
(b) the shares may not be sold, transferred, pledged or otherwise assigned
or encumbered;
(c) each stock certificate shall be registered in the name of the Holder and
deposited with the Secretary of LNC;
(d) if dividends are paid on the shares, they shall be paid to the Holder
at such times as the Committee shall determine; and
<PAGE> 52
(e) the shares and any dividends accumulated shall be subject to forfeiture
in accordance with subsection 5.4.
Subject to the foregoing restrictions, the Holder shall have all of the rights
of a holder of Common Stock with respect to the shares issued to him or her
under this subsection 5.2.
5.3. Distribution of Shares. Subject to the provisions of subsection 5.4, each
RSA shall provide for the distribution of the awarded shares of Common Stock
free of all restrictions to the Holder or, in the event of the Holder`s death,
the person or persons to whom the RSA was transferred by will or the laws of
descent and distribution. Distribution shall be provided for at such time or
times during the period beginning on the first anniversary of the date of grant
of the RSA and ending on a date as the Committee shall determine; except that,
in the discretion of the Committee, distribution may be provided for prior to
such first anniversary if the Holder's service with LNC and all Subsidiaries
terminates on account of death, Disability, or retirement (as described in
subsection 3.7(d)).
5.4. Forfeiture. Each RSA shall provide that a Holder shall forfeit all
rights under the RSA, all shares of Common Stock issued pursuant to the RSA
which had not been distributed to the Holder free of all restrictions, and all
undistributed amounts credited to the Holder with respect to dividends paid on
Common Stock pursuant to the RSA if:
(a) the Holder`s service with LNC and all Subsidiaries terminates for any
reason other than death, Disability, retirement (as described in
subsection 3.7(d)), or other reasons determined by the Committee which
should not cause forfeiture; or
(b) the conditions, if any, specified in the RSA are not fully satisfied
within the prescribed time.
5.5. Transferability. Each RSA granted to a Holder may not be transferred
by the Holder except by will or the laws of descent and distribution.
SECTION 6
INCENTIVE AWARDS
6.1 General. An Incentive Award may be granted hereunder in the form of
shares. Incentive shares may be granted to an eligible employee for no cash
consideration, for such minimum as may be required by applicable law, or for
such other consideration as may be specified by the grant. The terms and
conditions of incentive shares shall be specified by the grant.
6.2 Terms of Incentive Awards. Incentive shares may be paid to the grantee
in a single installment or in installments and may be paid at the time of grant
or deferred to a later date or dates. Each grant shall specify the time and
method of payment as determined by the Committee, provided that no such
determination shall authorize delivery of shares to be made later than the
tenth anniversary of the Holder's date of termination. The Committee, by
amendment of the grant prior to delivery, can modify the method of payment
for any incentive shares, provided that the delivery of any incentive shares
shall be completed not later than the tenth anniversary of the Holder's date
of termination.
6.3 Distribution of Incentive Awards. If any incentive shares are payable
after the Holder dies, such shares shall be payable (a) to the Holder's
designated beneficiary or, if there is no designated beneficiary,
<PAGE> 53
to the Holder's personal representative, and (b) either in the form specified
by the Award or otherwise, as may be determined in the individual case by the
Committee under this Plan.
6.4 Forfeiture. Any grant of incentive shares is provisional, as any share,
until delivery of the certificate representing such share. If, while the grant
is provisional,
(a) the grantee terminates, but does not terminate normally, or
(b) the grantee is determined to have engaged in detrimental activity,
the grant shall be annulled as of the date of termination or, the date of
such determination, as the case may be.
6.5. Management Incentive Plan II. The Committee may, in its discretion,
designate that a Holder who is eligible for a cash award under the terms of the
LNC Management Incentive Plan II (the "MIP II Plan") receive such award as a
grant of restricted stock in lieu of all or a portion of the MIP II Plan cash
award, such RSA shall be made subject to subsection 1.5 and Section 5. The
amount, if any, of the MIP II award which is not paid as an RSA shall be paid
in cash. This cash payment shall be determined by subtracting from the MIP II
Plan award the total Fair Market Value, on the date of the RSA, of the shares
of Common Stock represented by the RSA without discount for any restrictions.
6.6. Executive Value Sharing Plan. The Committee may, in its discretion,
designate that a Holder who is eligible for a cash award under the terms of the
LNC Executive Value Sharing Plan (the "EVS Plan") receive such award as a grant
of restricted stock in lieu of all or a portion of the EVS Plan cash award. If
the Committee decides to make an RSA in lieu of all or a portion of the EVS Plan
cash award, such RSA shall be made subject to subsection 1.5 and Section 5. The
amount, if any, of the EVS Plan award which is not paid as an RSA shall be paid
in cash.
6.7. Career Stock. The Committee may, in its discretion, designate
Restricted Stock Awards, subject to subsection 1.5 and section 5, to employees
of LNC and its subsidiaries who make an irrevocable election to waive
participation in and any benefits under designated retirement programs
maintained by the Company. The Committee may also, in its sole discretion,
award shares of Restricted Stock to individuals who become officers after the
effective date of the Plan in lieu of participation in certain retirement
programs maintained by the Company.
SECTION 7
PERFORMANCE AWARDS
7.1 General. Performance awards may be granted hereunder to an eligible
employee, for no cash consideration, for such minimum as may be required by
applicable law, or for such other consideration as may be specified by the
grant. The terms and conditions of performance awards, which may include
provisions establishing performance periods, performance criteria to be
achieved during a performance period, and vesting dates shall be specified
by the award.
7.2 Terms of Performance Awards. Performance awards shall be credited as of
the date of the award to a bookkeeping reserve account maintained by LNC
("Account") in units which are equivalent in value to Shares of Common Stock
("Stock Units"). Performance awards may be paid in cash, shares, or other
<PAGE> 54
consideration, or any combination thereof. The extent to which any applicable
performance criteria have been achieved shall be conclusively determined by the
Committee. Performance awards may be payable in a single payment or in
installments and may be payable at a specified date or dates or upon attaining
performance criteria.
7.3 Forfeiture. Except as otherwise specified by the award, if the Holder
terminates, but does not terminate on account of death, Disability, or
retirement, as defined in subsection 1.7(d), any performance award or
installment thereof not vested prior to the Holder's termination shall be
annulled as of the date of termination.
7.4 Executive Value Sharing Plan. The Committee may, in its discretion,
designate that a person who is eligible to receive a cash award under the EVS
Plan receive such award in Stock Units as a Performance Award. The Committee
may also in its sole discretion convert outstanding RSAs to Stock Units as
Performance Awards.
7.5 Transferability. Each Performance Award shall not be transferable
except by will or the laws of descent and distribution.
SECTION 8
DIVIDEND EQUIVALENT RIGHTS; INTEREST EQUIVALENTS
8.1 Dividend Equivalent Right. A Dividend Equivalent Right or DER may be
granted hereunder to an eligible employee, as a component of another award or
as a separate award. The terms and conditions of DERs shall be specified
by the grant. Dividend equivalents credited to the holder of a DER may be
paid currently or may be deemed to be reinvested in additional shares (which
may thereafter accrue additional dividend equivalents). Any such reinvestment
shall be at Fair Market Value at the time thereof. DERs may be settled in
cash or shares or combination thereof, in a single installment or
installments. A DER granted as a component of another award may provide that
such DER shall be settled upon exercise, settlement, or payment of, or lapse
of restrictions on, such other award, and that such DER shall expire or be
forfeited or annulled under the same conditions as such other awards. A DER
granted as a component of another award may also contain terms and conditions
different from such other award.
8.2 Interest Crediting. Any award under this Plan that is settled in whole
or in part in cash on a deferred basis may provide, as determined in the sole
discretion of the Committee, for interest equivalents to be credited with
respect to such cash payment. Interest equivalents may be compounded and
shall be paid upon such terms and conditions as may be specified by the grant.
SECTION 9
POSTPONEMENT OF EXERCISE
The Committee may postpone any exercise of an Option or SAR or distribution
pursuant to an RSA for such time as the Committee in its discretion may deem
necessary in order to permit LNC (a) to effect or maintain registration of
the Plan or Common Stock issuable pursuant to the Plan under the Securities
Act of 1933, as amended, or the securities laws of any applicable jurisdiction;
(b) to take any action necessary to comply with restrictions or regulations
incident to the maintenance of a public market for
<PAGE> 55
Common Stock; or (c) to determine that no action referred to in (a) or
(b) above needs to be taken. LNC shall not be obligated to issue shares upon
exercise of any Option or SAR or to issue shares pursuant to an RSA in
violation of any law. Any such postponement shall not extend the term of an
Award. Neither LNC nor its directors or officers shall have any obligation or
liability to any Holder (or successor in interest) because of the loss or
rights under any Award under the Plan due to postponements pursuant to this
Section 10.
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<PAGE> 56
Exhibit 2
LINCOLN NATIONAL CORPORATION
1993 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I - PURPOSE OF PLAN
1.1 Purpose of Plan. Lincoln National Corporation (the "Corporation") has
adopted the 1993 Stock Plan for Non-Employee Directors (the "Plan") to provide
for payment in shares of the Corporation's Common Stock ("Stock") of a portion
of the retainer fee payable to members of the Board of Directors of the
Corporation who are not employees of the Corporation or any of its affiliates
or subsidiaries ("Non-Employee Directors") and to allow Non-Employee Directors
to elect to defer receipt of all or a portion of their retainer and/or meeting
fees.The Plan also provides a restricted stock bonus in the form of Restricted
Stock for Non-Employee Directors. The Plan is intended to provide Non-Employee
Directors with a larger equity interest in the Corporation in order to attract
and retain well-qualified individuals to serve as Non-Employee Directors and to
enhance the identity of interests between Non-Employee Directors and the
shareholders of the Corporation.
ARTICLE II - ELIGIBILITY AND PARTICIPATION
2.1 Eligibility and Participation. Only Non-Employee Directors of the
Corporation and its subsidiaries shall be eligible to participate in the Plan,
and participation in the Plan is mandatory for all Non-Employee Directors.
Except as specifically provided herein, a Non-Employee Director may not elect
to increase or decrease the portion of the retainer fee payable in Stock.
ARTICLE III - RETAINER STOCK AWARDS AND DEFERRAL ELECTIONS
3.1 Retainer Stock Awards.
(a)Amount of Award. On each July 1 after the Effective Date through and
including July 1, 2004 (each such date hereinafter a "Grant Date"), in
lieu of the portion of the retainer fee payable to a Non-Employee Director
with respect to the calendar quarter beginning on the Grant Date
determined without regard to this Plan ("Retainer"), and in consideration
for services rendered as a Non-Employee Director of the Corporation, the
Corporation shall issue to each Non-Employee Director a whole number of
shares of Stock (a "Stock Award") equal to the number of shares determined
by dividing (a) twenty-five percent (25%) of the Retainer, by (b) the Fair
Market Value of the Stock on such Grant Date. For purposes of this Plan,
the "Fair Market Value" of Stock on any business day shall be the average
of the high and low sales prices of the Stock quoted on the New York Stock
Exchange Composite Listing on the next preceding business day on which
there were such quotations for the day in question. To the extent that
the formula described in this Section 3.1(a) does not result in a whole
number of shares of Stock, the result shall be rounded upwards to the next
whole number such that no fractional shares of Stock shall be issued under
the Plan. Such shares shall be restricted from sale or transfer as
provided in Section 3.1(b).
(b)Restrictions on Stock Awards. A stock certificate representing the
Stock Award shall be registered in each Non-Employee Director's name.
The Non- Employee Director shall have all rights and privileges of
a shareholder as to such Stock Award, including the right to vote
such Restricted Shares, except
<PAGE> 57
that the following restrictions shall apply: (i) no dividends
shall be payable on the shares, however, a Dividend Equivalent Payment,
as defined in Article V, below, shall be credited to an account
established under the Plan, invested in Stock Units, as described under
Section 3.2(b) and shall have the same restrictions as the relevant
restricted shares, (ii) none of the Restricted Shares may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of
during the Restricted Period, and (iii) except as provided in Section
3.1(c), all of the Restricted Shares and Dividend Equivalent Payments
shall be forfeited and all rights of the Non-Employee Director to such
Restricted Shares shall terminate without further obligation on the part
of the Corporation and its subsidiaries upon the Non-Employee Director's
ceasing to be a director of the Corporation and its subsidiaries.
(c)Termination of Directorship.
(i)Vesting of Shares. If a Non-Employee Director ceases to be a director
of the Corporation and its subsidiaries by reason of Disability, Death,
Retirement or Change of Control, the Restricted Shares granted to and
Dividend Equivalent Payments on such shares accumulated for such Non-
Employee Director shall immediately vest. If a Non-Employee Director
ceases to be a director of the Corporation and its subsidiaries for any
other reason, the Non-Employee Director shall immediately forfeit all
Restricted Shares, except to the extent that a majority of the Board
other than the Non-Employee Director approves the vesting of such
Restricted Shares. Upon vesting, except as provided in Article X, all
restrictions applicable to such Restricted Shares shall lapse.
(ii)Disability. For purposes of this Section 3.1(c), "Disability" shall
mean a permanent and total disability as defined in Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended.
(iii)Retirement. For purposes of this Section 3.1(c), "Retirement"
shall mean ceasing to be a director of the Company (A) on or after
age 70, or (B) on or after age 65 with the consent of a majority
of the members of the Board other than the Non-Employee Director.
(iv)Change of Control. For purposes of this Section 3.1(c), "Change
of Control" shall have the same meaning as in the LNC Executives'
Severance Benefit Plan on the date that is six months immediately
preceding the "Change of Control."
3.2 Deferral of Retainer and/or Fees.
(a)Deferral Elections. Commencing on the effective date of the Plan, payment
of all or part of the Retainer (excluding Stock Awards pursuant to Section
3.1(a)) and/or fees payable to a Non-Employee Director for meetings of the
Board or Board Committees or for extraordinary services may be deferred by
election of the Non-Employee Director. Each such election must be made
prior to the start of the calendar year for which the Retainer and/or fees
will be paid and must be irrevocable for the affected calendar year,
provided, however, that for 1994, each Non-Employee Director shall be
permitted to elect deferred payment of all or a portion of the Retainer
and/or the fees earned after the effective date of the Plan and before
December 31, 1994, provided such Non-Employee Director has made an
irrevocable election to this effect prior to stockholder approval of the
Plan. In addition, each election to defer payment of any amount of the
Retainer and/or fees payable in cash shall be made at least six (6) months
in advance of the date such election is to be effective and shall be
continuous and irrevocable except upon a subsequent irrevocable election
that takes effect at least six (6) months after the date of such subsequent
election, to the extent necessary to satisfy the requirements of Rule 16b-
<PAGE> 58
3(d) promulgated under the Securities Exchange Act of 1934 ("1934 Act"), as
the same may be hereafter amended.
(b)Crediting Stock Units to Accounts. Amounts deferred pursuant to Section
3.2(a) shall be credited as of the date of the deferral to a bookkeeping
reserve account maintained by the Corporation ("Account") in units which are
equivalent in value to shares of Stock ("Stock Units"). The number of Stock
Units credited to an Account with respect to any Non-Employee Director shall
equal a number of Stock Units equal to any deferred cash amount divided by
the Fair Market Value of the Stock on the date on which such cash amount
would have been paid but for the deferral election pursuant to Section
3.2(a).
(c)Fully Vested Stock Units. All Stock Units credited to a Non-Employee
Director's Account pursuant to this Section 3.2 shall be at all times fully
vested and nonforfeitable.
(d)Payment of Stock Units. Stock Units credited to a Non-Employee Director's
Account pursuant to this Article III shall be payable in an equal number of
shares of Stock or cash in a single lump sum distribution or annual
installment payments made at such time specified by the Non-Employee
Director in the applicable deferral election, provided that the designated
payment date with respect to any election must be the first day of a
subsequent calendar year which is no earlier than twelve (12) months
following the establishment of the affected Stock Unit.
(e)Payment of Stock Units Upon a Change of Control. Stock Units credited to
a Non-Employee Director's Account shall be automatically distributed in a
single lump sum amount of shares of Stock, with fractional Stock Units being
distributed in cash, upon a Change of Control.
ARTICLE IV - RESTRICTED STOCK BONUS
4.1 Restricted Stock Bonus for Non-Employee Directors on July 1, 1994. Each
Non-Employee Director serving as such on the date of shareholder approval of
the Plan shall be awarded a whole number of restricted Shares of Stock (a
"Stock Bonus") equal to $10,000 divided by Fair Market Value of Common Stock)
in consideration for services rendered as a Non-Employee Director of the
Corporation and its subsidiaries. To the extent that the formula described in
this Section 4.1 does not result in a whole number of Shares of Stock, the
result shall be rounded upwards to the next whole number such that no
fractional shares shall be issued under the Plan. The restrictions on the
Stock Bonus shall be the same as those restrictions described in Section
3.1(b).
4.2 Restricted Stock Bonus for Non-Employee Directors After July 1, 1994.
Each Non-Employee Director who commences serving a new three year term after
July 1, 1994 shall be issued an additional Stock Bonus equal to $10,000
divided by Fair Market Value of Common Stock as of the July 1 on which he or
she begins serving a new term as a Non-Employee Director, and thereafter until
the Plan is terminated. A new Non-Employee Director who is appointed or
elected to an unexpired term, shall receive a partial Stock Bonus on the next
succeeding July 1 after his or her appointment or election to such partial term
in an amount equal to the Fair Market Value of Stock on such July 1 of $10,000
multiplied by a fraction the numerator being the number of months remaining in
the unexpired term since being so appointed or elected and the denominator
being 36. To the extent that the formula described in this Section 4.2 does
not result in a whole number of Shares of Stock, the result shall be rounded
upwards to the next whole number such that no fractional shares shall be
issued under the Plan. This Stock Bonus shall contain the same restrictions
as specified in Section 3.1(b).
<PAGE> 59
ARTICLE V - DIVIDEND EQUIVALENT PAYMENTS
5.1 Dividend Equivalent Payments. As of each dividend payment date with
respect to Stock, each Non-Employee Director shall receive additional Stock
Units ("Dividend Equivalent Payment")equal to the product of (i) the per-share
cash dividend payable with respect to each share of Stock on such date, and
(ii) the total number of Restricted Shares issued in his or her name and Stock
Units credited to his Account as of the record date corresponding to such
dividend payment date, divided by the Fair Market Value. Fractional Stock
Units may be awarded. The dividend Equivalent Payments with respect to
Restricted Shares shall contain the same restrictions as specified in
Section 3.1(b).
ARTICLE VI - DELIVERY OF STOCK CERTIFICATES
6.1 Stock Awards. As soon as practicable following the expiration of the
restrictions, but in no event sooner than six (6) months from such Grant Date,
the Corporation shall deliver to the Non-Employee Director an unrestricted
Stock certificate with respect to the shares of Stock issued pursuant to such
Stock Award and Stock Bonus. During any six (6) month period after the Grant
Date and before delivery of the Stock certificate after the restrictions have
lapsed, the Non-Employee Director shall have all the rights of a shareholder
with respect to such Stock, except for the right to receive dividend payments
and except that such Stock shall not be transferable by the Non-Employee
Director other than by will or the laws of descent and distribution.
6.2 Stock Unit Payments. The Corporation shall issue and deliver to the Non-
Employee Director cash or a Stock certificate, as elected by the Non-Employee
Director for payment of Stock Units as soon as practicable following the date
on which Stock Units are payable in accordance with Section 3.2(d). No
fractional shares will be distributed.
ARTICLE VII - STOCK
7.1 Stock. The Aggregate number of shares of Stock that may be issued under
the Plan shall not exceed one hundred fifty thousand (150,000) shares, unless
such number of shares is adjusted as provided in Article VIII of this Plan.
In addition to the foregoing limit, the aggregate number of restricted shares
that may be granted during the term of the Plan shall not exceed fifty thousand
(50,000) shares,unless such number of shares is adjusted as provided in Article
VIII of this Plan. To the extent that an award lapses or the rights of the
Non-Employee Director terminate or the award is settled in cash (e.g. cash
settlement of Stock Units) any shares of Common Stock subject to such award
shall again be available for the grant of an award.
ARTICLE VIII - ADJUSTMENT UPON CHANGES IN CAPITALIZATION
8.1 Adjustment Upon Changes in Capitalization. In the event of a stock
dividend, stock split or combination, reclassification, recapitalization or
other capital adjustment of shares of Stock,the number of shares of Stock that
may be issued pursuant to Stock Awards, Stock Bonuses, and Stock Units and the
number of Stock Units credited to Accounts shall be appropriately adjusted by
the Board of Directors of the Corporation, whose determination shall be final,
binding and conclusive. No fractional shares of Stock shall be issued under
the Plan on account of any adjustment specified herein. The grant of Stock
Awards, Stock Bonuses, or Stock Units pursuant to this Plan shall not affect
in any way the right or power of the Corporation to issue additional Stock or
other securities, make adjustments, reclassification, reorganizations or other
changes in its corporate, capital or business structure, to participate in a
merger, consolidation or share exchange or to transfer its assets or dissolve
or liquidate.
<PAGE> 60
ARTICLE IX - TERMINATION OR AMENDMENT OF PLAN
9.1 In General. The Board of Directors of the Corporation may at any time
terminate, suspend or amend this Plan. However, except as otherwise determined
by the Board, no such amendment shall become effective without the approval of
the stockholders of the Corporation to the extent stockholder approval is
required in order to comply with Rule 16b-3 under the 1934 Act.
9.2 Amendment No More than Once in 6 Months. Those provisions of this Plan
that set forth the amounts and the formula for determining the amounts, prices
and timing of Stock Awards, Stock Bonuses, and Stock Units, respectively, may
not be amended more than once every six (6) months.
9.3 Written Consents. No amendment may adversely affect the right of any Non-
Employee Director to receive any Stock previously issued as a Stock Award,Stock
Bonus, or to receive any Stock of Dividend Equivalent Payments pursuant to an
outstanding Stock Unit without the written consent of such Non-Employee
Director.
9.4 Termination of Plan. Unless the Plan is sooner terminated, no Stock Award
or Stock Bonus shall be granted after July 1, 2004. The termination of the
Plan shall have no effect on outstanding Stock Awards, Stock Bonuses or
Stock Units.
ARTICLE X - GOVERNMENT REGULATIONS
10.1 Government Regulations.
(a) The obligations of the Corporation to issue any Stock granted under this
Plan shall be subject to all applicable laws, rules and regulations and the
obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Board of Directors of the Corporation.
(b) Except as otherwise provided in Article IX of this Plan, the Board of
Directors of the Corporation may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any governmental
authority.
ARTICLE XI - MISCELLANEOUS
11.1 Unfunded Plan. The Plan shall be unfunded with respect to the
Corporation's obligation to pay any amounts due pursuant to Stock Units and
Dividend Equivalent Payments, and a Non-Employee Director's rights to receive
any payment of any Stock Unit or Dividend Equivalent Payment shall be not
greater than the rights of an unsecured general creditor of the Corporation.
11.2 Assignment; Encumbrances. The right to receive a Stock Award, Stock Bonus
or Stock Unit and the right to receive payment with respect to a Stock Unit
under this Plan are not assignable or transferable and shall not be subject to
any encumbrances, liens, pledges or charges of the Non-Employee Director or his
or her creditors. Any attempt to assign, transfer or hypothecate any Restricted
Stock Award, Stock Bonus, or Stock Unit or any right to receive a Stock Award,
Stock Bonus or Stock Unit shall be void and of no force and effect whatsoever.
11.3 Designation of Beneficiaries. A Non-Employee Director may designate a
beneficiary or beneficiaries to receive any distributions under the Plan upon
his or her death.
<PAGE> 61
11.4 Applicable Law. The validity, interpretation and administration of this
Plan and any rules, regulations, determinations or decisions made hereunder,
and the rights of any and all persons having or claiming to have any interest
herein or hereunder, shall be determined exclusively in accordance with the
laws of the State of Indiana, without regard to the choice of laws provisions
hereof.
11.5 Headings. The headings in this Plan are for reference purposes only and
shall not affect the meaning or interpretation of this Plan.
11.6 Notices. All notices or other communications made or given pursuant to
this Plan shall be in writing and shall be sufficiently made or given if
hand-delivered or mailed by certified mail, addressed to any Non-Employee
Director at the address contained in the records of the Corporation or to the
Corporation in case of the Corporation's Secretary, 200 East Berry Street,
Fort Wayne, IN 46802-2706.
ARTICLE XII - EFFECTIVE DATE OF PLAN
12.1 Effective Date of Plan. This Plan shall become effective on the date
on which it is approved by the affirmative vote of the holders of a majority
of the votes cast by shareholders of the Corporation present, or represented
and entitled to vote, at the next annual meeting of the shareholders of the
Corporation duly held in accordance with the laws of the State of Indiana.
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<PAGE> 62
Exhibit 3
Amendment and Restatement of
Lincoln National Corporation
Phantom Stock Plan for Employees
SECTION 1: PURPOSE
The Lincoln National Corporation Phantom Stock Plan for Employees (the "Plan")
is established for the benefit of a select group of management and highly
compensated employees ("Participants") of Lincoln National Corporation (the
"Corporation") and participating affiliates and subsidiaries. The purposes for
which the Plan is being implemented are as follows: to enable each Participant
to defer a portion of his or her compensation pursuant to the Lincoln National
Corporation Executive Deferred Compensation Plan for Employees in the form of
Phantom Stock units; to provide an incentive for Participants to achieve
benchmark performance; and to encourage Participants to remain with the
Corporation for many years. These purposes are to be furthered by the award to
such persons of phantom units of the Corporation's common stock ("Units") and
providing for the additional purchase of such Shares through a reduction in the
cash compensation and bonuses such Participants otherwise would receive from
the Corporation.
SECTION 2: DEFINITIONS
The following definitions are provided for key terms contained within this
document:
2.01 "Change in Control" shall be deemed to have occurred if during, or
following the consummation of, a stock purchase program, tender offer,exchange
offer, merger, consolidation, sale of assets, contested election, or any
combination of the foregoing transactions, any person, entity or group of
persons acting in concert, directly or indirectly, (1) acquires ownership of
the power to vote in excess of 20% of the voting securities of Corporation and
one or more of its representatives are elected to the Board of Directors of
Corporation, (2) acquires ownership of the power to vote in excess of 50% of
the voting securities of Corporation, or (3) otherwise acquires effective
control of the business and affairs of Corporation. This definition shall
always be identical to the definition of "Change in Control" contained in the
LNC Executives' Severance Benefit Plan (or any successor plan). Any amendment
of the definition contained in the LNC Executives' Severance Benefit Plan (or
any successor plan)shall be deemed an amendment of the definition of Change in
Control contained in this Plan, notwithstanding the provisions of Section 4.03
of the 6 month limitation contained in Section 4.03 of this Plan, however, then
such amendment shall become effective on the first day which would not cause
such a violation. Furthermore, in the event of a "Change in Control" the term
"Change in Control" shall have the definition which was operative on the day
immediately preceding that event.
2.02 "Employer" means the Corporation or any individual Subsidiary and when
used in the plural ("Employers") refers to the Corporation and all Subsidiaries
collectively.
2.03 "Insider" means those individuals subject to the short-swing profit
recovery provisions of Section 16 of the Securities Exchange Act of 1934.
<PAGE> 63
2.04 "Hardship" means an unforeseeable emergency to the Participant resulting
from a sudden and unexpected illness or accident of the Participant or of a
dependent (as defined in Section 152(a) of the Internal Revenue Code of 1986,
as amended) of the Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant.
2.04 "LNCC" means the Lincoln National Corporation Compensation Committee
constituted as described in the Corporation Bylaws.
2.05 "Match Units" means Units contributed pursuant to the Match, as defined in
Section 1.10 of the Lincoln National Corporation Executive Deferred
Compensation Plan for Employees.
2.06 "Paid Units" means Units with respect to which the Participant has paid
the purchase price pursuant to Section 3.01.
2.07 "Subsidiary" means any corporation of which 50% or more of the voting
stock is owned directly or indirectly by the Corporation.
2.08 "Unpaid Units" means Units awarded to the Participant and which are not
vested.
2.09 "Vested Units" are Units awarded to the Participant that are no longer
subject to forfeiture.
Section 3: ELIGIBILITY, PARTICIPATION and ADMINISTRATION
3.01 Participation. Employers shall have complete discretion to determine
eligibility to participate in this Plan; however only employees who are members
of a select group of management or highly compensated employees of Employers
will be eligible to participate in the Plan. In order to be eligible to
participate in the Plan, an individual must be a 2nd Vice President or higher
level in the Corporation or an equivalent level to that of 2nd Vice President
of Corporation or above for any Employer.
3.02 Administration of Match Units, Paid Units and Vested Units.
(a) General. The administration of the Match Units, Paid Units and Vested
Units shall be done in accordance with rules and definitions that the Benefits
Committee of LNC shall in its absolute discretion develop from time to time.
The Benefits Committee may delegate its responsibilities to other persons, or
retain the services of lawyers, accountants, or other outside third parties to
assist with the administration of the Plan. Notwithstanding the preceding, the
following terms and conditions describe the benefits available to Participants:
(1) Subject to the terms of this Plan, the Participant and the Employer
may make the following types of annual compensation deferrals for
a calendar year: (a) the Participant may elect to defer a portion
of compensation not to exceed 70% of such Participant's annual
compensation into Paid Units; (b) provided that the Participant has
made Pre-Tax Contributions to his or her 401(k) Plan in the maximum
amount permitted under the terms of such plan for a calendar year,
the Employer may grant Match Units to the Participant; (c) the
Participant may elect to defer a specified amount of any bonus
which would otherwise have been paid to the Participant within
three months after the close of the calendar year which is two years
after the year in which the election is made into Paid Units; and
(d) to the extent that a Participant in the 401(k) Plan reaches the
contribution limit for that plan, he or she may elect to defer the
<PAGE> 64
additional amounts that otherwise would have been placed in the
401(k) Plan into Paid Units in this Plan.
(2) The Participant shall file an election with the Employer which shall
specify the timing and amount of deferrals into Paid Units, if any,
to be made under the Plan by the Participant for the prospective pay
periods. The Participant shall file an election prior to the date
that such compensation is earned. The amount deferred may be changed
no more frequently than annually and such change is only effective for
compensation paid after the first day of the next succeeding calendar
year. An election shall be irrevocable for any calendar year, provided,
however, that in the case of a hardship withdrawal from one of the 401(k)
Plans, the Participant's election shall be automatically revoked
beginning with the first day of the next regularly scheduled payroll
period for the remainder of the calendar year.
(3) If a deferral into Paid Units is made, Match Units are granted,
or Vested Units are awarded for any calendar year, the Employer shall
establish an account in the name of the Participant. The Employer shall
credit such account with Paid Units, Match Units, Vested Units, and with
dividends which would otherwise accrue if the account were actually
invested in common stock of the Corporation, provided, however, that any
expenses incurred by an Employer (including expenses for Federal and State
income taxes) in connection with such Participant's account may be charged
against the Participant's account.
(4) A Participant may request that the Employer make an accelerated
distribution from his or her account in the event such Participant has
incurred a severe financial Hardship. In the case of an Insider such a
distribution may only be made six months after the initial request for a
distribution. Payments under this plan for a severe financial Hardship
will not be made to the extent that such Hardship is relieved through
insurance proceeds, liquidation of Participant's assets (only to the
extent that such liquidation would not itself cause a severe financial
Hardship) or by cessation of deferrals under this Plan. Payments for
severe financial Hardship under this Plan are limited to the extent
necessary to comply with Treas. Reg. Section 1.457-2. The Employer shall
determine whether the Participant has incurred a severe financial Hardship
and, in its sole discretion, may grant the accelerated distribution of
all, or a portion of, the amounts then credited to the Participant's
Account, provided, however, that such distribution shall not exceed the
amount determined by the Employer to be necessary for such Participant to
alleviate the severe financial Hardship.
(5) The Participant may designate a beneficiary to receive amounts
payable to him or her under this Plan in the event of death. The
Participant may revoke or change a beneficiary designation and name a new
beneficiary by filing a written notice of revocation or other notice of
change of beneficiary with the Employer (on a form prescribed by the
Employer), at any time. In the absence of a surviving beneficiary or a
valid beneficiary designation, the balance in a Participant's account, if
any, shall be paid in one single lump sum to the Participant's estate.
(6) The Value of Participant's Match Units, Paid Units and Vested
Units shall be paid to the Participant in a manner to be determined by
the Benefits Committee in its sole discretion following the Participant's
(a)death, (b) total disability, (c) termination of any and all
<PAGE> 65
service with the Employer, or (d) severe financial hardship. The timing
of payments shall ordinarily be calculated by reference to the LNC
Executive Deferred Compensation Plan, and all payments shall be settled
in cash.
(b) Restrictions on Insider Transfers. In the case of any Insider, an initial
election by either the Employer or the Participant to place amounts into the
Lincoln National Corporation Executive Deferred Compensation Plan for
Employees which also involves a transfer into Match Units, Paid Units, or
Vested Units will become effective six months after the date the election
decision is conveyed to the Corporation. At the time of the initial
transfer into Match Units, Paid Units, or Vested Units, the Insider may
specify another investment option to be applicable during the 6 months
between the date of the election and the effective date of the transfer, but
any investment selection pursuant to this Plan is merely a statement of
preference which may be overridden by the Corporation. Once an initial
election to transfer an amount into any Units has been made, this election
shall be irrevocable. Under no circumstances may an Insider dispose of any
Units within 6 months of the date on which the Units are first credited to
his or her account. For amounts which have already been placed into the
Lincoln National Corporation Executive Deferred Compensation Plan for
Employees, an Insider may transfer into or out of any Units by complying
with either one of the following two rules: 1) he or she may transfer
amounts into or out of Units pursuant to an irrevocable election which is
made at least six months prior to the effective date of the transaction; or
2) he or she may transfer amounts into or out of Units pursuant to an
election made during the period beginning on the third business day
following the date of release of the quarterly statements of sales and
earnings of Lincoln National Corporation and ending on the twelfth business
day following such date so long as this election to transfer occurs no
sooner than six months after the date of the previous intra-plan transfer
relating to any Units.
3.03 Administration of Unit Grants.
(a)Grant of Awards. The LNCC shall have full and complete authority in its
discretion, but consistent with and subject to the express provisions of the
Plan, to (i) select the Participants to whom Unpaid Units shall be awarded
under the Plan, (ii) determine the number of Unpaid Units to be awarded, and
(iii) adopt such rules and restrictions and make all other determinations
deemed necessary or desirable for the administration of Unpaid Units
pursuant to the Plan. Those individuals who receive Unpaid Units under the
Plan for a given year shall be individuals who qualify for participation in
the Lincoln National Corporation Executive Deferred Compensation Plan for
Employees and who are selected by the LNCC as persons who are expected to
materially contribute to the growth and profitability of the Corporation's
business. A Participant may be granted Unpaid Units under the Plan upon
more than one occasion.
(b)Awards to be Performance Based. Notwithstanding anything contained in
Section 3.03(a) to the contrary, the LNCC will only grant awards based upon
the attainment of performance goals which measure the Corporation's relative
performance against a peer group of companies selected by the LNCC. Each
performance goal must be established prior to the beginning of the year or
years for which an award is granted. Each performance goal shall measure
the value achieved for shareholders of Corporation as compared to its peer
group of companies.
(c)Timing. The LNCC may award Unpaid Units under the Plan for any year which
ends on or after the date that the Plan is approved by the board of
directors of the Corporation (the "Board") and the shareholders of the
Corporation. Awards may be made as of the first day of the first calendar
quarter commencing after adoption of the Plan by the Board (the "Plan
Inception Date.") Grants with respect to subsequent calendar years, if any;
shall be made as of the first day of the calendar year.
Any grants made prior to
<PAGE> 66
shareholder approval shall be made subject to shareholder approval
of this Plan. If any Unpaid Units awarded under the Plan shall be forfeited
or cancelled, such Unpaid Units may be awarded again.
(d)Phantom dividends. Phantom dividends shall be awarded, on each dividend
payment date, in an amount equal to the product of the dividend paid on a
share of Corporation common stock multiplied by the number of Unpaid Units
awarded under this Section 3.03. Any such phantom dividends shall also be
subject to forfeiture pursuant to Section 3.03(h).
(e)General Vesting Rules. Unpaid Units (unless forfeited in accordance with
Section 3.03(h)) shall become Vested Units on the later of: (i) the third
anniversary date of the day on which such shares were awarded by the LNCC
or (ii) any date specified by the LNCC at the time that such Units are
awarded which is at least 6 months after the date of the grant.
Participants may not receive payment for Vested Units except to the extent
that payment is authorized by the terms of the Lincoln National Corporation
Executive Deferred Compensation Plan for Employees.
(f)Certain Terminations of Employment Causing Vesting. If a Participant ceases
to be in the employ of the Employer by reason of the Participant's: (i)
involuntary termination within one year of a Change in Control of the
Corporation, (ii) death, (iii) Disability (as defined in the Lincoln
National Corporation long term disability plan, as amended), (iv)
termination of employment on account of retirement on or after age 55, or,
(v) involuntary termination other than for Cause, any Unpaid Units of the
Participant shall vest as of the last day of such Participant's employment
with the Employer or 6 months after the date of grant, whichever is later.
(g)Action of LNCC. The LNCC may for any reason vest any Unpaid Units.
(h)Forfeiture of Unvested Units. Subject to Section 3.03(f) (relating to
vesting of Unpaid Units upon death, Disability, involuntary termination
within one year of a Change in Control or other involuntary termination of
employment other than for Cause), and any action taken by the LNCC pursuant
to Section 3.03(g), all of a Participant's Unvested Units shall be forfeited
immediately upon the Participant's termination of employment with the
Employer for any reason.
3.04 Phantom Dividends on Units. To the extent dividends are paid by the
Corporation on common stock of the same class as the Units, Participants will
be credited with phantom dividends on Units. Phantom dividends shall be
calculated, on each dividend payment date, as an amount equal to the product of
the dividend paid on a share of Corporation common stock multiplied by the
number of Units.
3.05 Determination of Price for Units. The value of a Unit shall be equal
to the final sales price quoted by the New York Stock Exchange Composite
Listing of a share of Corporation common stock of the same class as the
Units on the last business day immediately preceding the calculation.
3.06 Payment for Units. All payment of amounts equal to shares shall be made
pursuant to the terms of the Lincoln National Corporation Executive Deferred
Compensation Plan for Employees.
3.07 Changes in Capital and Corporate Structure. In the event of any change
in the outstanding shares of common stock of the Corporation by reason of an
issuance of additional shares, recapitalization, reclassification, reorganiza-
tion,stock split, reverse stock split, combination of shares, stock dividend
or similar transaction, the number of Units held by Participants under the
Plan shall be proportionately adjusted, in an equitable manner. The foregoing
adjustment shall be made in a manner that will cause the relationship between
the aggregate
<PAGE> 67
appreciation in outstanding common stock and earnings per share of the
Corporation and the increase in value of each Performance Unit granted
hereunder to remain unchanged as a result of the applicable transaction.
3.08 Voting. Participant shall not be entitled to any voting rights, with
respect to the Common Stock of the Corporation as a result of receipt of Match
Units, Paid Units, Unpaid Units, or Vested Units.
3.09 Mandatory Deferral. In the event that any legislative body shall pass a
statute or a regulatory body or court of competent jurisdiction shall interpret
any law to limit the deductibility of any amount otherwise payable under this
Plan, then such amount and earnings thereon shall automatically be subject to
additional deferral as determined by the LNCC, but not for more than
five years, until the Corporation is permitted to claim a deduction for
amounts paid out pursuant to this Plan. The LNCC is authorized to establish
accounting procedures to segregate any amounts placed into any Units which the
LNCC believes would be nondeductible by the Corporation if paid out in cash
currently. If any amount is deferred pursuant to this Section 3.09 for five
years, then it shall be presumed that the amount will never be deductible by
the Employer and payments will commence pursuant to this Plan as if the
Participant had terminated from service in the year of the determination that
such amount shall never be deductible.
SECTION 4: MISCELLANEOUS PROVISIONS
4.01 Maximum Number of Units. The maximum number of Units which may be
outstanding pursuant to the Plan and the Lincoln National Corporation Phantom
Stock Plan for Agents together is equal to 1% of the outstanding shares of LNC
common stock as of December 31 of the year prior to the year for which the
calculation is being made.
4.02 Nontransferability of Units. Units shall not be transferred, assigned,
pledged or encumbered.
4.03 Amendment and Termination. Subject to Section 2.01 of this Plan, the
LNCC may terminate, amend or modify the Plan at any time in any respect it
deems advisable except that the LNCC shall not amend the Plan more frequently
than once every six months except as may be required to comply with the
Employment Retirement Income Security Act, the Internal Revenue Code, or any
other rules or regulations issued under these statutes.
4.04 Investment Purpose and Legal Requirements. At the time of the award of
Units, the Corporation may, if it shall deem it necessary or advisable for any
reason, require the Participant (i) to represent in writing to the Corporation
that it is the then intention of the Participant to acquire the Units for
investment and not with a view to the distribution thereof, or (ii) to postpone
the date of delivery of the Units until such time as the Corporation has
available for delivery to the Participant a prospectus meeting the requirements
of all applicable securities laws.
4.05 Right to Terminate Employment. Nothing contained in the Plan shall
confer upon any person a right to be employed by or to continue in the employ
of the Corporation or interfere in any way with the right of the Corporation
to terminate the employment of a Participant at any time, with or without cause.
4.06 Finality of Determinations. By participating in the Plan, each
Participant waives the right to litigate any dispute arising pursuant to this
Plan in any court of otherwise competent jurisdiction. For purposes of Section
3.03, each determination, interpretation, or other action made by the LNCC
shall be final and binding for all purposes. The LNCC may, but is not required
to, utilize a mediator to facilitate the resolution of any dispute, and such
mediator shall be a disinterested party to the dispute. For purposes of
all sections of this Plan other than
<PAGE> 68
Section 3.03, each determination, interpretation, or other
action made pursuant to the Lincoln National Corporation Executive Deferred
Compensation Plan for Employees shall be final and binding for all purposes.
4.07 Headings. Section headings are used for convenience of reference only
and shall not affect the meaning of any provision of the Plan.
4.08 Rules of Construction. Whenever the context so requires, the use of
the masculine gender shall be deemed to include the feminine and vice versa,
and the use of the singular shall be deemed to include the plural and vice
versa.
4.09 Governing Law. The Plan shall be governed by the internal laws of the
State of Indiana.
4.10 Withholding. The Corporation shall have the right to deduct from all
amounts paid pursuant to the Plan any taxes required by law to be withheld with
respect to such awards.
4.11 Awards Discretionary. No employee or other person shall have any claim
or right to be granted an award under the Plan.
4.12 Unfunded Plan. The Plan shall at all times be entirely unfunded and no
provision shall at any time be made with respect to segregating assets of the
Corporation for payment of any benefits. No Participant or other person shall
have any interest in any particular assets of the Corporation by reason of the
right to receive a benefit under the Plan and any such Participant or other
person shall have only the rights of a general unsecured creditor of the
Corporation with respect to any rights under the Plan.
4.13 Section 16 Compliance. This Plan is intended to comply with Section 16
of the Securities Exchange Act of 1934 ("Act"). Any provision found not to
comply with such Act shall be inoperative, and the LNCC may amend this Plan to
bring it into compliance with the Act.
4.14 Effective Date of Plan. This Plan shall become effective on the date on
which it is adopted by the Board of Directors of the Corporation, subject,
however,to the approval by the affirmative vote of the holders of a majority of
the votes cast by shareholders of the Corporation present, or represented and
entitled to vote, at the next annual meeting of the shareholders of the
Corporation duly held in accordance with the laws of the State of Indiana.
4.15 Relationship to Deferred Compensation Plan. This Plan may exist as
either an independent Plan or as an addendum to the Lincoln National
Corporation Executive Deferred Compensation Plan for Employees ("Deferred
Compensation Plan").
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<PAGE> 69
Exhibit 4
1994 AMENDED AND RESTATED
LINCOLN NATIONAL CORPORATION
EXECUTIVE VALUE SHARING PLAN
SECTION 1
GENERAL
1.1 History, Effective Date, and Purpose. The LINCOLN NATIONAL CORPORATION
EXECUTIVE VALUE SHARING PLAN was established by the Lincoln National Corpora-
tion, an Indiana Corporation (the "Corporation"), effective January 1, 1992.
The purpose of this 1994 AMENDED AND RESTATED LINCOLN NATIONAL CORPORATION
EXECUTIVE VALUE SHARING PLAN (the "Plan") is to make certain amendments to
the Plan, to allow Corporation shareholders to approve the Plan at the annual
shareholders' meeting of May 12, 1994, and to authorize shares of the
Corporation's Common Stock to be awarded under the Plan. The objective of
the Plan is to create rewards to participants for superior performance which
reflects corporate, business unit and individual contributions to the
Corporation. The Plan is also intended to aid in the retention of key
executives by providing for the payment of awards in shares of the
Corporation's restricted stock or restricted phantom stock.
1.2 Plan Administration. The Plan shall be administered by the Compensation
Committee (the "Committee") of the Board of Directors (the "Board") of the
Corporation. In addition to those rights, duties and powers vested in the
Committee by other provisions of the Plan, the Committee shall have exclusive
authority to:
(a) interpret the provisions of the Plan;
(b) adopt, amend and rescind rules and regulations for administration of the
Plan; and
(c) make all other determinations deemed by it to be necessary or advisable
for the administration of the Plan;
provided that the Committee shall exercise its authority in accordance with the
provisions of the Plan. The Committee may not exercise its authority at any
time that is has fewer than three members. The Committee shall exercise its
authority only by a majority vote of its members at a meeting or by a writing
without meeting. Prior to the first meeting of shareholders at which members of
the Board are to be elected that occurs after July 1, 1994, the Committee shall
be composed of members of the Board who qualify as "disinterested persons"
within the meaning of Rule 16b-3(c)(2)(i) as promulgated under the Securities
Exchange Act of 1934 (the "1934 Act"). Following the date of such a meeting,
however, the Committee shall be composed solely of members of the Board who
also qualify as "outside directors" within the meaning of section
162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended (the "Code").
For purposes of the Performance Cycle beginning January 1, 1994, any action
taken by the Committee before April 1, 1994 shall be deemed for purposes of
this Plan to have been taken on December 31, 1993.
<PAGE> 70
1.3 Applicable Laws. The Plan shall be construed and administered in
accordance with the laws of the State of Indiana to the extent that such laws
are not preempted by the laws of the United States of America.
1.4 Gender and Number. Where the context permits, words in any gender shall
include the other gender, words in the singular shall include the plural and
the plural shall include the singular.
1.5 Performance Period. The term "Performance Period" shall mean a
calendar-year period.
1.6 Performance Cycle. The term "Performance Cycle" generally means the
three-year period ending each December 31. Each three-year Performance Cycle
shall be composed of three Performance Periods. The Committee shall have the
discretion, however, to create Performance Cycles that are composed of one or
two Performance Periods and applicable to all or a portion of the participation
in the Plan of individuals designated by the Committee before the commencement
of such Performance Cycles.
1.7 Corporation. For purposes of Section 3 of the Plan, the Committee may
interpret the term "Corporation" to mean a Subsidiary or division of the
Corporation, and the Committee may establish separate Performance Goals
designed to measure the performance of a Subsidiary or division relative to a
designated Peer Group of companies. In such event, the Committee may
establish a separate Peer Group of companies for each Performance Goal
established, and the rules of Section 3 shall otherwise apply.
1.8 Subsidiary. The term "Subsidiary" means any corporation of which the
Corporation owns directly,or indirectly through an unbroken chain of Subsidiary
corporations, stock possessing a majority of the total combined voting power of
all classes of stock of that corporation.
1.9 Effective Date and Duration of the Plan. The Plan shall be effective
beginning January 1, 1994. The Plan shall continue indefinitely, subject to
amendment or termination pursuant to section 1.10.
1.10 Amendment and Termination of the Plan. The Board, or the Committee acting
pursuant to such authority as may be delegated to it by the Board, may amend or
terminate the Plan at any time. Amendment or termination of the Plan shall not
affect the validity or terms of any EVSP Award previously made to a participant
in any way which is adverse to the participant without the participant's
consent. Without the approval of the holders of a majority of Corporation
stock entitled to vote at a duly held meeting of Corporation shareholders,
neither the Board nor the Committee may (a) increase the number of shares of
the Corporation's Common Stock which may be issued under the Plan; (b) amend
the manner of determining the fair market value at which EVSP Awards are
converted into Restricted Stock Awards, unless such amendment would reduce the
number of shares of restricted stock awarded; (c) amend the standards for
eligibility set forth in this Plan; or (d) otherwise materially increase the
benefits available to employees under the Plan.
1.11 Shares Available. The aggregate number of shares of the Corporation's
Common Stock that may be awarded under Section 4.2 of the Plan as Restricted
Stock Awards ("RSAs") shall not exceed 2,500,000 shares. To the extent that an
RSA lapses or the rights of its holder terminate, any shares of Common Stock
subject to such RSA shall again be available for the grant of an RSA and not be
included in calculating the number of remaining shares available under this
subsection. In the event of a merger, consolidation, reorganization,
combination, exchange, recapitalization, stock dividend, stock split or other
similar change in the corporate structure or capitalization of the Corporation
which affects the Corporation's Common Stock, outstanding EVSP Awards granted
in the form of RSAs or Phantom Stock Awards shall be subject to adjustment.
Additionally, in the event of such changes in the corporate structure or
capitalization of the Corporation, the aggregate number of shares available
under the Plan shall be adjusted proportionately by the Committee.
<PAGE> 71
SECTION 2
PLAN PARTICIPATION
2.1 Participant Designations. Prior to the commencement of a Performance
Cycle, the Committee may designate any key executive, managerial, supervisory
or professional employee of the Corporation or a Subsidiary to be a
participant, provided that the number of participants designated for each
Performance Cycle shall not exceed 50. The Chief Executive Officer of the
Corporation will always be a participant. The Committee may also prescribe
rules allowing newly-hired employees of the Corporation or a Subsidiary to
become participants in the Plan during a Performance Cycle, provided that
such rules are consistent with deduction by the Corporation of payments made to
such participants in accordance with the provisions of Code section 162(m) and
the regulations promulgated thereunder. Each participant shall be notified of
his designation as a participant as soon as practicable following such
designation by the Committee.
The right to designate eligible employees of the Corporation or a Subsidiary
who are subject to Rule 16(a) of the 1934 Act ("Reporting Persons") as
participants is reserved exclusively to the Committee. The right to
designate eligible employees of the Corporation or a Subsidiary who are not
Reporting Persons as participants and the right to establish Performance
Cycles, Performance Goals and Peer Groups applicable to such participants may be
delegated in whole or in part by the Committee to the Chief Executive Officer or
Chief Operating Officer of the Corporation.
2.2 Participation Not a Contract of Employment. The Plan does not constitute
a contract of employment. Participation in the Plan does not give any employee
the right to be retained in the employ of the Corporation or a Subsidiary and
does not limit in any way the Corporation's or a Subsidiary's right to change
the duties or responsibilities of any employee.
2.3 Withholding Taxes on Plan Benefits. The Corporation or a Subsidiary
shall have the right to deduct from any payment of stock or cash made pursuant
to the Plan the amount of any tax required by law to be withheld from that
payment.
SECTION 3
PLAN BENEFITS
3.1 Peer Groups. In advance of each Performance Cycle, the Committee shall
establish a Peer Group of companies for the purpose of facilitating a
determination as to whether a Performance Goal (described in Section 3.2 below)
and its Hurdle Rate(s) (described in Section 3.3 below) have been attained. A
different Peer Group of companies may be established for each Performance Goal
and for each Performance Cycle. Each Peer Group of companies shall be designed
to enhance cooperation between major business units of the Corporation and its
Subsidiaries and to enhance the overall productivity and efficiency of
participants for the benefit of the Corporation and its shareholders. Upon the
establishment of a Peer Group of companies, the Committee shall also establish
objective procedures for adjusting the composition of the Peer Group upon the
occurrence of certain events during the Performance Cycle.
3.2 Performance Goals. In advance of each Performance Cycle, one or more
Performance Goals shall be established for the Performance Cycle. Performance
Goals shall be designed to measure the Corporation's performance relative to
the Peer Group of companies over the course of the Performance Cycle. Each
<PAGE> 72
Performance Goal shall be expressed in terms of objective formulae that
compare the average of the Corporation's growth rates in book value for the
Performance Periods contained within the Performance Cycle to averages of the
growth rates in book value of various companies contained within the Peer Group
of companies, adjusting book value in all instances by adding back dividends
paid during each Performance Period and by making such other adjustments as
the Committee may prescribe prior to the commencement of the Performance
Cycle. These formulae may be expressed in words, algebraically, in tabular
form or through a combination of these methods. Any additional written
guidelines for measuring the Corporation's and the Peer Group's performance
during a Performance Period and during the Performance Cycle that the
Committee deemed necessary to assure that a third party having knowledge of
the performance results of the Corporation and the Peer Group could calculate
the maximum EVSP Award for each Reporting Person shall also be established in
advance of each Performance Cycle. In no event shall a Performance Goal be
established such that it could be considered to be satisfied if the
Corporation's performance relative to the respective Peer Group, measured in
accordance with the formulae described above, is below the average performance
of the Peer Group over the course of the Performance Cycle.
3.3 Maximum EVSP Awards. For each Performance Goal, the Committee shall
establish objective formulae for determining the maximum amount payable to a
Reporting Person as an EVSP Award on account of attaining the Performance
Goal. The Committee shall have no discretion to increase the amount of a
Reporting Person participant's EVSP Award above the maximum amount determined
by applying the formulae described above. The Committee shall have
discretion, however, either to eliminate a participant's EVSP Award or to
reduce the amount of a participant's EVSP Award below the maximum amount. In
no event shall any EVSP Award for any Performance Cycle exceed $5,000,000 for
the Corporation's Chief Executive Officer, $3,500,000 for the Corporation's
Chief Operating Officer, $2,500,000 for the Corporation's Executive Vice-
Presidents or $1,000,000 in the case of any other participant;and in no event
shall the total amount awarded to all participants as EVSP Awards for any
Performance Cycle exceed 15% of the increase in book value of the
Corporation's Common Stock for a Performance Cycle.
SECTION 4
PAYMENT OF BENEFITS
4.1 Determination of Amount of Award. The determination of the amount of a
participant's EVSP Award shall be made at the end of each Performance Cycle in
accordance with Section 3 of the Plan. Prior to the payment of an EVSP Award,
the Committee shall certify the extent to which the Performance Goals and
Hurdle Rates for the Performance Cycle were attained. EVSP Awards shall be
distributed to all participants entitled to such awards (including any former
participants who have retired, become disabled or terminated employment and
who are entitled to such awards) as soon as practicable after such
certification by the Committee (the "Payment Date").
4.2 Payment of Award. The Committee may convert the cash value of each
participant's EVSP Award into an equivalent number of shares of the
Corporation's Common Stock as Restricted Stock Awards ("RSAs") under the terms
of either (1) Section 6 of the Lincoln National Corporation 1986 Stock Option
Incentive Plan (As Amended and Restated Effective as of May 12, 1994), or its
successor, or (2) Section 1.11 of the Plan. Alternatively, the Committee may
convert the cash value of each participant's EVSP Award into an equivalent
number of shares of Phantom Stock of the Corporation. Such Phantom Stock Awards
("PSAs") shall have the characteristics of, and be subject to the same terms
and conditions as, the "Unpaid Units" provided for under the 1994 Amendment and
Restatement of the Lincoln National Corporation Phantom Stock Plan for
Employees, except as otherwise provided in this Plan. The Committee shall
determine the time of vesting of RSAs and the
<PAGE> 73
time of payment of PSAs. No payment in exchange for any participant's PSA
awarded pursuant to this Plan shall be made before the calendar year following
the year in which the participant retires or otherwise terminates employment
with the Corporation and its Subsidiaries, and any such payment shall be made
only in cash. In no event shall entitlement to payment of a PSA or vesting of
an RSA occur less than six months and one day after the participant's receipt
of his or her EVSP Award in such form. The conversion of an EVSP Award into
either an RSA or a PSA shall be based on the Fair Market Value of the
Corporation's Common Stock as of the close of the business day immediately
preceding January 1, February 1, and March 1 of the next succeeding Performance
Cycle. These Fair Market Values shall be averaged to determine the price of a
share of the Corporation's Common Stock for that prior Performance Cycle (the
"19XX Stock Price"). "Fair Market Value" means the average of the highest and
lowest prices of a share of Common Stock, as quoted on the composite
transactions table covering transactions on the New York Stock Exchange, on
the first date that the stock was traded on that Exchange which next precedes
the date as of which the determination is being made. Any amount which is not
converted to an RSA or a PSA shall be paid to a participant in cash.
The Committee shall have the authority to adopt rules under which a participant
may choose that PSAs awarded to the participant shall constitute (after such
period of time as the Committee may specify in each PSA) phantom stock units
of the Corporation's Common Stock that are subject to the terms of the Lincoln
National Corporation Executive Deferred Compensation Plan for Employees,
including in such terms the ability to direct that future increases or
decreases in the value of the participant's award be measured by phantom
investment options other than such phantom stock units.
4.3 Exclusion. No participant or former participant whose personal
performance or conduct is, in the opinion of the Committee, less than
competent shall be paid or due an EVSP Award under the Plan. In addition, no
participant who voluntarily terminates employment (other than on account of
death, disability, retirement, or a resignation by mutual agreement) shall be
paid or due an EVSP Award under the Plan.
4.4 Termination of Employment. If a participant leaves the employ of the
Corporation and all of its affiliates during a Performance Cycle, the Committee
shall make EVSP Awards under Section 4.2 of the Plan in accordance with the
following guidelines:
(a) Retirement. If a participant retires during a Performance Cycle, the
participant shall be awarded an EVSP Award on the Payment Date in such
amount as the Committee may determine, provided that such EVSP Award shall
not exceed an amount determined under Section 3 of the Plan.
(b) Disability. If a participant's employment terminates during a Performance
Cycle because he or she becomes disabled (as defined in the Lincoln National
Corporation Employees' Retirement Plan), the Committee may award the
participant an EVSP Award on the Payment Date. The Committee may, however,
reduce or eliminate the participant's EVSP Award if, in the opinion of the
Committee, such reduction or elimination is appropriate.
(c) Death. In the event of a participant's death, the Committee may award an
EVSP Award on the Payment Date. The Committee may, however, reduce or
eliminate the participant's EVSP Award if, in the opinion of the Committee,
such reduction or elimination is appropriate. Payments under the Plan in
the event of a participant's death shall be made in accordance with a
writing filed with the Committee, or if no writing is filed, to the
participant's estate for disposition under the terms of the participant's
will or by the laws of descent or distribution.
(d) Termination After a Change in Control. In the event of a change of control
of the Corporation, as defined in the Lincoln National Corporation
Executives' Severance Benefit Plan (as in effect immediately
<PAGE> 74
prior to such change in control), any participant who terminates employment
with the Corporation and all of its subsidiaries within the Performance Cycle
in which the change of control occurs shall be deemed to have retired in that
year under paragraph (a) above, and paragraph (e) below shall not apply.
(e)Other Termination of Employment. If a participant's employment with the
Corporation and all of its affiliates terminates for reasons other than
those described in paragraphs (a) through (d) above, no EVSP Award shall be
payable with respect to any Performance Cycle which does not end prior to
the termination of the participant's employment.
4.5 Effect on Other Employee Benefits. EVSP Awards under the Plan shall have
no effect on the level of employee benefits or other forms of noncash
compensation that are salary-based.
SECTION 5
EMPLOYEE'S RIGHTS OR TITLE TO FUNDS
5.1 The Plan is an unfunded plan, and neither the Corporation nor its
Subsidiaries have any obligation to set aside, earmark, or entrust any fund,
policy, or money with which to pay any obligations under the Plan. The Plan
is also intended to be maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees, and therefore to be exempt from various provisions of the Employee
Retirement Income Security Act of 1974, and shall be administered and construed
accordingly.
5.2 The amount of any EVSP Award payable under the Plan with respect to any
participant shall be paid solely from the general assets of the Corporation.
5.3 Any participant or beneficiary shall be and remain a general creditor
of the Corporation with respect to any promises to pay under the Plan in the
same manner as any other creditor who has a general claim for an unpaid
liability.
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FRONT OF PROXY CARD
LINCOLN NATIONAL CORPORATION FORT WAYNE, INDIANA
The undersigned shareholder in LINCOLN NATIONAL CORPORATION, an Indiana
corporation, hereby constitutes and appoints EARL L. NEAL, IAN M. ROLLAND,
JILL S. RUCKELSHAUS and C. SUZANNE WOMACK or any one or more of them, the
true and lawful attorney in fact and proxy of the undersigned, with full
power of substitution to all or any one or more of them, to vote as proxy for
and in the name, place and stead of the undersigned at the ANNUAL MEETING of
the shareholders of the Corporation, to be held at the Grand Wayne Center, 120
West Jefferson Boulevard, Fort Wayne, Indiana, at 10:00 a.m., local time,
Thursday, May 12, 1994, or at any adjournment thereof, all the shares of
stock in the Corporation shown on the other side (whether Common Stock; $3.00
Cumulative Convertible Preferred Stock,Series A;5 1/2% Cumulative Convertible
Exchangeable Preferred Stock, Series F)which the undersigned would be entitled
to vote if then personnaly present, hereby revoking any proxy heretofore given.
A majority of such attorneys and proxies who shall be present and shall act
as such at the meeting or any adjournment thereof,or if only one such attorney
and proxy be present and act, then that one, shall have and may exercise all
the powers hereby conferred.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEMS 2, 3, 4, 5
AND 6.
(Continued, and to be Signed, on reverse side) SEE REVERSE SIDE
Please mark votes as in this example - x
The Board of Directors recommends a vote for the following:
1. To elect four directors for three year terms:
Nominees: Robert A. Anker, Harry L. Kavetas, M. Leanne Lachman, Jill S.
Ruckelshaus
FOR ALL NOMINEES WITHHELD FROM ALL NOMINEES
For, except vote withheld from the following nominee(s).
FOR AGAINST ABSTAIN
2. To approve or disapprove an amendment to
the Corporation's articles of incorporation
to increase the amount of authorized Common
Stock from 400 million to 800 million shares.
3. To approve or disapprove an amended and
restated stock option plan.
4. To approve or disapprove a stock plan
for directors.
5. To approve or disapprove a phantom stock
plan for employees.
6. To approve or disapprove an amendment and
restated executive value sharing plan.
7. In their discretion, upon other matters which may properly come before
the meeting or any adjournment thereof.
- -- all of the above in accordance with the Notice of Annual Meeting of
Shareholders and Proxy Statement for the meeting, receipt of which is hereby
acknowledged.
Signature _______________________ Date _________
Signature _______________________ Date _________
Signature must be that of the shareholder. If shares are held jointly, each
shareholder named should sign. If the signet is a corporation, please sign
full corporate name by duly authorized officer. If the signer is a
partnership, please sign partnership name by authorized person. Executors,
administrators, trustees, guardians, attorneys in fact, etc. should so
indicate when signing.
