THIS IS AN ELECTRONIC CONFIRMING COPY OF PROXY MATERIAL FILED BY
HARD COPY ON MARCH 16, 1994.
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. )
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Check the appropriate box:
X Preliminary Proxy Statement
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)
_____________________________________________________________________________
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Payment of Filing Fee (Check the appropriate box):
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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:
_____________________________________________________________________________
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to Exchange Act Rule 0-11:*
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Check box if any part of the fee is offset as provided by Exchange Act
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statement number, or the form or schedule and the date of its filing.
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*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
Draft
3/16/94
7:00 am
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 the
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 the
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 ________________________, a shareholder relations and proxy
solicitation firm. Representative 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 _. 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
[98,655,023] shares of capital stock of the Corporation issued,
outstanding and entitled to vote as follows: [94,189,885] shares of
Common Stock; [47,241] 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 of
and Director 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 and
Director Schroder Real Estate Trust Company,
Associates, a Chicago Title
national real estate Insurance Company
investment management
firm; Managing Director,
Schroder Mortgage
Associates, a national
commercial mortgage
investment firm
Jill S. Ruckelshaus 57 1975 Director, Seattle Sea-First
Director First Bank Corporation Corporation
(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, 44 1988 Vice-Chairman, Chief None
Jr. Operating Officer
Director Worldwide and Director, Burson-Marsteller,
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. 52 1993 President, Treasurer NBD Bank, N.A.
Efroymson Director, Real Silk
Director 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 Officer Corporation, VME
and Director, Group, N.V.
Clark Equipment
Company
Ian M. Rolland 60 1975 Chairman of the Board Tokheim Corp.,
Chairman of the and Chief Executive NIPSCO Industries,
Board, Chief Officer (previously Inc., Norwest
Executive Officer President) of the Corporation
and Director Corporation and of
The Lincoln National
Life Insurance
Company, a wholly-
owned life insurance
subsidiary of the
Corporation
</TABLE>
<PAGE> 6
<TABLE>
DIRECTORS CONTINUING IN OFFICE
(Terms expiring in May 1995)
<CAPTION>
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 General Public
research and Utilities
development company, Corporation,
retired Chairman and Cytogen
Chief Executive Corporation,
Officer of Sterling McKesson Corp.
Drug Inc.
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 Inc., Structural
Michigan (previously, Dynamics Research
Dean and Professor of Corp.
Business 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 compensation
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>
NAME AMOUNT AND NATURE (1,2)
OF BENEFICIAL OWNERSHIP
<S> <C>
Robert A. Anker 104,388
J. Patrick Barrett 2,000
Thomas D. Bell, Jr. 200
Jon A. Boscia 44,031
P. Kenneth Dunsire 98,356
Daniel R. Efroymson 1,000,396
Harry L. Kavetas 600
M. Leanne Lachman 1,000
F. Cedric McCurley 36,332
Leo J. McKernan 1,000
Earl L. Neal 1,000
John M. Pietruski 2,000
Ian M. Rolland 257,953
Jill S. Ruckelshaus 2,000
Gordon A. Walker 566
Thomas M. West 84,892
Gilbert R. Wwhitaker, 1,000
Jr.
Directors and
Executive Officers
as a group - 24
persons 1,843,161
________________________
<FN>
<fn1> 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
<PAGE> 8
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.
<fn2> 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>
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.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature Of Percent
of Beneficial Owner Beneficial Ownership of Class
<S> <C> <C> <C>
Common The Dai-ichi Mutual 8,834,794 shares - sole 8.58%
Life Insurance voting and sole disposi-
Company tive power of all shares
13-1, Yurakucho 1- [Note: The Dai-ichi
Chome Chiyoda-ku Mutual Life Insurance
Tokyo 100, Japan company has the right to
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, shares; sole dispositive
California 90071 power - 6,411,990 shares
Preferred The Dai-ichi Mutual 8,835,794 shares - sole 99.46%
Life Insurance Company voting and sole disposi-
13-1,Yurakucho 1-Chome tive power
Chiyoda-ku
Tokyo 100, Japan
</TABLE>
<PAGE> 9
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.
If shareholders approve the Lincoln National Corporation 1993 Stock
Plan for Non-Employee Directors (Item 4), each non-employee director
who commences a new term after the date of approval shall receive an
award of restricted shares of the Corporation's Common Stock equal to
$10,000; and beginning on July 1, 1994, 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
<PAGE> 10
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.
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.
<PAGE> 10
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 $1 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.
Directors and Nominations Committee
The members of the Directors and Nominations Committee are: Gilbert R.
Whitaker, Jr. (Chairman), 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 __).
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
__), 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.
<PAGE> 12
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.
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 __, 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
<PAGE> 13
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.
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.
<PAGE> 14
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 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.
<PAGE> 15
For 1993, approximately two-thirds 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
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 __)
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, 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 December 31, 1996.
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
<PAGE> 16
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 or restricted stock using a $42.125 per
share conversion price. The restrictions on these shares lapse at
the earliest of death, disability or December 31, 1996.
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 disallowance
to the Corporation of federal income tax deductions for compensation
paid to Named Executive Officers. The 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 the 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. All of the targets are maximum
incentives and Mr. Rolland expects only to receive two-thirds of
the maximum. 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 on page ___. In setting these target
awards, the Committee's objective is to achieve competitive total
direct 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
essential in achieving this alignment. In support of achieving stock
ownership, the Corporation has adopted the following guidelines.
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, 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. Similarly, directors are expected to achieve stock
ownership of 5 times their compensation within a period of 5 years.
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 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.
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 ALL
ANNUAL RESTRICTED UNDERLYING OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTPI COMPEN-
PRINCIPAL SALARY BONUS SATION(1,2) AWARDS(3,7) SARs PAYOUT(S) SATION(1,5)
POSITION YEAR ($) ($) ($) ($) # ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ian M. Rolland 1993 $896,464 -0- 69,450 $1,383,583 46,000 138,891 123,338
Chairman and 1992 820,769 -0- 20,046 1,178,874 40,000 107,453 109,000
CEO of LNC 1991 715,175 190,691 --- -0- 30,000 119,130 ---
ROBERT A. 1993 467,648 -0- 24,107 709,000 24,000 69,146 61,315
ANKER 1992 423,654 -0- 84,093(6) 599,052 22,000 50,048 53,799
President 1991 327,583 -0- --- -0- 15,000 49,590 ---
and COO of
LNC
P. KENNETH 1993 408,033 -0- 28,870 656,631 15,000 62,860 54,374
DUNSIRE 1992 373,077 -0- 10,497 448,654 16,000 47,868 48,247
Executive 1991 324,231 184,276 --- -0- 15,000 51,585 ---
Vice
President of
LNC
THOMAS M. 1993 396,302 -0- 3,118 669,230 15,000 61,325 48,286
WEST 1992 367,885 -0- 690 440,577 14,000 46,721 42,812
Executive 1991 314,366 43,659 --- -0- 15,000 50,160 ---
Vice
President
of Lincoln
Life Ins. Co.
F. CEDRIC 1993 345,340 -0- 6,389 373,082 15,000 -0- 55,574
McCurley 1992 320,000 -0- 739 225,273 12,000 -0- 50,717
CEO of American 1991 --- --- --- -0- --- --- ---
States
Insurance
Company
JON A. BOSCIA 1993 353,032 -0- 2,845 536,913 15,000 82,950 40,402
Exec. Vice 1992 318,461 -0- 2,020 415,748 14,000 71,838 34,589
President and 1991 253,900 95,608 --- -0- 9.000 62,000 ---
Chief
Investment
Officer of
LNC
<FN>
<fn1> 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.
<fn2> 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
<fn3> 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 December 31 of the last year of the applicable
performance cycle.
<fn4> 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.
<fn5> 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
$36,602, Mr. West $34,556, Mr. McCurley $30,009, and Mr. Boscia
$30,695. 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.
McCurley $25,565, and Mr. Boscia $9,707.
<fn6> Of this amount, $63,834 is associated with the sale of Mr. Anker's
previous residence and move to Fort Wayne.
<fn7> 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. McCurley, 6,156 shares; and Mr. Boscia, 11,362 shares.
</FN>
</TABLE>
<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 at page___, 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 SHARES, UNITS OR OTHER
OR OTHER RIGHTS(1) PERIOD UNTIL THRESH-
# MATURATION OR HOLD(2)
PAYOUT $ OR # TARGET(3) MAXIMUM(4)
PROPERTY PROPERTY
NAME CORPORATE LIFE-HEALTH CASUALTY CORPORATE LIFE-HEALTH CASUALTY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ROLLAND(5) 16% -0- -0- 1994-1996 -0- $1,205,200 $ -0- $ -0- $5,000,000
ANKER(5) 11% -0- -0- 1994-1996 -0- 828,600 -0- -0- 3,000,000
DUNSIRE(5) 9% -0- -0- 1994-1996 -0- 677,900 -0- -0- 2,000,000
WEST(6) 4% 9% -0- 1994-1996 -0- 301,300 305,800 -0- 2,000,000
MCCURLEY(7) 4% -0- 15% 1994-1996 -0- 301,300 -0- 318,300 2,000,000
BOSCIA(5) 9% -0- -0- 1994-1996 -0- 677,900 -0- -0- 2,000,000
________________________
<FN>
<fn1> The Corporation's Executive Value Sharing Plan has three
performance pools: Corporate, Life-Health and Property Casualty.
These numbers represent the percentage of each of the three
performance pools allocated to the Named Executive Officers. If the
growth of the dividend-adjusted book value of the Corporation or a
segment for the three year performance cycle exceeds the average
performance of selected companies, then a portion of the excess value
created is allocated to the appropriate pool and distributed according
to the participation percentages.
<fn2> No payment is made if performance is equal to or below the average
performance of the selected companies for each pool. The average 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.
<fn3> The target is the estimated amount to be paid for each of the
concurrently running three-year cycles if performance is at the 75th
percentile compared to the competitors. It is calculated assuming
that 4% of the excess value (2% for the Property Casualty pool) is
allocated to each pool. Upon completion of the cycle, any award may
be paid in restricted shares of LNC Common Stock, cash, or both.
<PAGE> 21
<fn4> The greater the increase in the Corporation's (or a segment's) book
value in excess of the average of the selected companies in the pool,
the higher the awards. If there is no increase in book value for a
performance cycle, no payment is made. Because the increase is
potentially infinite, the plan caps potential awards as show in this
column.
<fn5> These individuals are only participants in the Corporate Pool. The
selected companies used to determine contributions to the corporate
pool are the companies shown on the Performance Graph (the "Peer
Group"). Corporate performance is compared with the Peer Group
results (without adjustments for market capitalization) to determine
contributions to this pool. Mr. Rolland's participation percentage is
16%, Mr. Anker's is 11%, Mr. Dunsire's is 9% and Mr. Boscia's is 9%.
<fn6> Mr. West's participation in the Corporate Pool is 4% and in the
Life-Health Pool is 9%. The Life -Health Pool compares the
performance of the Corporation's Life-Health lines of business with a
group of the following competitors: American General, American
National, Capital Holding, Jefferson-Pilot, Kansas City Life, Liberty,
Northwestern National, Provident Life and Accident, Protective,
Torchmark, UNUM, USLICO, US Life, and Washington National.
<fn7> Mr. McCurley is a participant in the Corporate Pool at 4% and in
the Property Casualty Pool at 15%. The Property Casualty Pool
compares the performance of the Corporation's Property Casualty
segment with a group of peer companies which include: Aetna Life &
Casualty Company, Allmerica Property and Casualty Companies, Inc. (was
formerly Hanover), The Chubb Corporation, CIGNA Corporation, The
Continental Corporation, Cincinnati Financial Corporation, GEICO
Corporation, Ohio Casualty Corporation, Orion Capital Corporation,
SAFECO Corporation, The Progressive Corporation, The St. Paul
Companies, Inc., The Travelers Corporation and USF&G Corporation.
</FN>
</TABLE>
<PAGE> 22
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(1) Employees in Base Price(3) Expiration
NAME (#) Fiscal Year (2) ($/Shares) Date(4) 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
McCurley 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
<FN>
_________________________
<fn1> 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.
<fn2> The Corporation granted options representing 570,600 shares to
employees in fiscal year 1993.
<fn3> 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.
<fn4> 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>23
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 VALUE OF UNEXERCISED IN-THE-MONEY
DECEMBER 31, 1993 OPTIONS HELD AT DECEMBER 31,1993(1)
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
McCurley -0- -0- 27,400 24,000 527,708 198,270
Boscia -0- -0- 29,500 25,500 566,745 221,940
<FN>
<fn1> 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>
<PAGE> 24
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 (1,3)
Final
Average
Salary(2) 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>
<fn1> 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.
<fn2> 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.
<fn3> 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> 25
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> 26
CHANGE-IN-CONTROL ARRANGEMENTS
Recognizing that an unforeseen change of control is unsettling to the
Corporation's key executives, the Board adopted the Lincoln National
Corporation Executives' 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 some executives. Mr. Dunsire is the only Named Executive Officer
with an individual severance agreement. Pursuant to that agreement,
if for any reason the Corporation terminates Mr. Dunsire's employment,
one year of base salary will be paid as severance pay.
<PAGE> 27
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 500 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.
<PAGE> 28
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.
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 to
additional securities which the Corporation may issue.
<PAGE> 29
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, 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 measures in future proxy
solicitations which may be construed as having an anti-takeover
effect. 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 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.
<PAGE> 30
The following paragraphs summarize the principal features of the 1986
Plan which appears as Exhibit 1 in this proxy statement.
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
250 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.
<PAGE> 31
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 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.
<PAGE> 32
The Board recommends that you vote FOR the approval of the Amendment
and Restatement of the 1986 Plan.
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 ($) Number of Units (1)
<S> <C> <C>
Ian Rolland, Chairman and
Chief Executive Officer of LNC $132,520 49,317
Robert A. Anker, President and
Chief Operating Officer of LNC $ 66,000 26,650
P. Kenneth Dunsire, Executive Vice $ 60,000 16,500
President of LNC
Thomas M. West, Executive Vice $ 58,520 16,463
President of The Lincoln National
Life Insurance Company
F. Cedric McCurley, Chief Executive $ 0 15,000
Officer of American States Insurance
Company
Jon A. Boscia, Executive Vice $ 0 15,000
President and Chief Investment
Officer of LNC
Executive Group $517,480 185,528
Non-Executive Director Group 0 0
Non-Executive Officer Employee Group $202,040 375,051
<FN>
<fn1> Assumed a $40 per share price for valuing the 1993 restricted
shares granted from the Executive Value Sharing Plan and 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.
<fn2> 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
Corporation's Common Stock. The Directors' Stock Plan was adopted by
the Board on November 11, 1993, subject to approval by the
<PAGE> 33
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.
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
recruitment 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
on such date as reported in the Wall Street Journal equal, as near as
possible, to 25% of the then current director retainer. The value of
any fractional share would be rounded down so that only whole shares
will be awarded. 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.
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 shares of Common Stock may be issued under the
Directors' Stock Plan; however, only 30,000 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.
In addition to a portion of the retainer being paid in restricted
shares, each director, upon reelection to a new three year term, will
receive an award of shares with the fair market value equal, as near
as possible, to $10,000. These shares also shall be restricted and
<PAGE> 34
will be forfeited by the director in the event of termination as a
director prior to death, disability or retirement at age 70 unless
there is special approval by the remaining members of the Board. In
addition, the director may elect to defer the remaining 75% of the
retainer and all fees into phantom stock units. The value of these
phantom stock units can be paid in cash or shares of Common Stock, as
elected by the director pursuant to an irrevocable election filed at
least six months prior to the date of the distribution, and shall be
100% vested at all times. One phantom stock unit will have the same
value as one share of the Corporation's Common Stock on a given day.
Phantom stock units can not be transferred other than on account of
death. In the opinion of the Corporation, the securities under this
plan qualify for the private placement exemption from registration
under applicable federal securities laws, and, thus, will not be
registered at this time.
The Board recommends a vote FOR approval of the Directors' Stock Plan
and authorization to issue up to 150,000 shares of Common Stock under
the Plan.
The following table illustrates the benefits that would have been
provided under the Directors' Stock Plan if the plan had been in
effect during 1993.
<TABLE>
<CAPTION>
NEW DIRECTORS' STOCK PLAN BENEFITS
Name and Position Dollar Value ($) Number of Units
<S> <C> <C>
Ian Rolland, Chairman and Chief
Executive Officer of LNC 0 0
Robert A. Anker, President and Chief 0 0
Operating Officer of LNC
P. Kenneth Dunsire, Executive Vice 0 0
President of LNC
Thomas M. West, Executive Vice 0 0
President of The Lincoln National Life
Insurance Company
F. Cedric McCurley, Chief Executive 0 0
Officer of American States Insurance
Company
Jon A. Boscia, Executive Vice President 0 0
and Chief Investment Officer of LNC
Executive Group 0 0
Non-Executive Director Group $257,100 $6,428 (1)
Non-Executive Officer Employee Group 0 0
<FN>
<fn1> 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 retain and meeting fees would
continue this practice, but in the phantom stock of the Corporation.
</FN>
</TABLE>
<PAGE> 35
ITEM 5 - PROPOSED PHANTOM
STOCK PLANOR EMPLOYEES
The Corporation proposes shareholders approve the Lincoln National
Corporation Phantom Stock Plan for Employees (the "Employees' Phantom
Stock Plan"). This is a new plan that will provide participants in
the LNC Executive Deferred Compensation Plan for employees (the
"Employees 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 Employees' 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 Employees' 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 Employees' 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
Employees Phantom Stock Plan. This summary is subject, in all
respects, to the terms of the Employees Phantom Stock Plan, which is
attached as Exhibit 3 to this proxy statement.
Summary of Employees Phantom Stock Plan
The Employees' 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 ___ participants will participate in
the Employee 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 Employees' 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> 36
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 the
receipt of restricted 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 Employees 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 Employees' Phantom Stock Plan if the plan had been
in effect during 1993.
<TABLE>
<CAPTION>
NEW EMPLOYEES' PHANTOM STOCK PLAN BENEFITS
Name and Position Dollar Value ($) Number of Units
<S> <C> <C>
Ian Rolland, Chairman and Chief $ 53,079 1,327
Executive Officer of LNC
Robert A. Anker, President and $ 21,473 537
Operating Officer of LNC
P. Kenneth Dunsire, Executive $ 18,299 457
Vice President of LNC
Thomas M. West, Executive Vice $ 21,819 545
President of The Lincoln National
Life Insurance Company
F. Cedric McCurley, Chief Executive $ 13,750 344
Officer of American States Insurance
Company
Jon A. Boscia, Executive Vice $ 14,294 357
President and Chief Investment
Officer of LNC
Executive Group $179,546 4,489
Non-Executive Director Group 0 0
Non-Executive Officer Employee
Group $486,475 12,161
<FN>
<fn1> Assumed a $40 per share price for converting the dollar value of
the company contribution to Employees' Phantom Stock Plan within the
Corporation's Executive Deferred Compensation Plan, if this plan were
implemented in 1993.
</FN>
</TABLE>
<PAGE> 37
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) provide
that the award of such shares to Reporting Persons is exempt from the
short-swing profit provisions of Section 16(b) of the 1934 Act by
complying with Rule 16b-3 under the 1934 Act. The EVS Plan would
continue indefinitely, subject to amendment or termination 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
participants 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 Compensation Committee of the
Corporation's Board (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
<PAGE> 38
addition, key employees of the Corporation or its subsidiaries,
including but not limited to heads of business units, are eligible to
participate in the EVS Plan. The Committee may delegate to the Chief
Executive Officer or Chief Operating Officer of the Corporation the
right to designate as participants employees who are not Reporting
Persons. The Committee may also grant EVSP Awards based on service
for part of a Performance Cycle to new employees or employees
receiving a promotion 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 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, however; and in many instances, a
participant's EVSP Award will be reduced below the maximum amount
determined by applying the applicable formulae.
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 the "Peer Group
Average" for the years included in the Performance Cycle (all as
discussed in more detail below). The maximum EVSP Awards available
are then determined under a table that correlates the Awards with how
well the Corporation 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 calculations of VROE, the effect of all Performance Cycles
beginning in 1994 and subsequent years relates to standards
promulgated by the Financial Accounting Standards Board prior to SFAS
118.
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
<PAGE> 39
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 Table
[X] 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 are recognized
with the remaining gains 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 Value-Sharing Return on Equity (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 executive'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 top performing companies.
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
"Peer Group 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
For 1994, 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; The NWNL Companies;
Provident Life & Accident Insurance Co.; SAFECO Corp.; Torchmark
Corp.; Transamerica Corp.; Travelers Inc.; USF&G Corp.; USLIFE Corp.
If as a result of merger or otherwise, including a merger through
pooling of interests, any of these companies ceases to exist as a
<PAGE> 40
publicly-held company or if its primary business (as indicated by its
three digit Standard Industry Classification Code) changes, that
company will be excluded from the peer group calculation for the
calendar year in which the event occurs. The calculation of the Peer
Group Average, Top-Tier and Top Company VROE 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 "Value Sharing Return on Equity" 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
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.
The Adjusted Book Value per Share ("ABV") shall be computed by
deducting from the Adjusted Book Value the amount in shareholders'
equity applicable to of any preferred stock not considered as common
stock equivalents and dividing the remainder by the number of shares
of common stock and common stock equivalents applicable to such
preferred stock outstanding at the end of the year.
<PAGE> 41
Deferred Realized Gains (Losses) (DRG)
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
Peer Group 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 participant's maximum EVSP
Award for the Performance Cycle will be the Top Company Maximum Award
shown in Table [X] 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 Award shown in Table
[X]. If the Corporation's Average equals the average of Peer Group
VROEs, the maximum EVSP Award will be the relevant Peer Group Maximum
Award shown in Table [X].
Maximum EVSP Awards for Corporation Averages between the average of
Peer Group 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 Peer Group Maximum Awards and the Top Tier Maximum
Awards columns of Table [X]. 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 Award and Top Company
Maximum Award columns of the Table.
<TABLE>
<CAPTION>
Maximum Awards Expressed in Thousands
Title and Number Peer Group Maximum Top Tier Maximum Top Company
of Persons Award Award Maximum Award
<S> <C> <C> <C>
Chief Executive $ 700 $1,800 $3,200
Officer
President and Chief $ 500 $1,200 $2,200
Operating Officer
Executive Vice $ 400 $1,000 $1,800
Presidents (7)
Others (6) $ 180 $ 450 $ 800
</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
<PAGE> 42
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 book value 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.
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 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.
<PAGE> 43
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 $1,000,000 paid to certain
key executives. The Corporation believes, however, that the EVS Plan
would qualify for a "performance-based compensation" exception to this
disallowance rule if the Corporation's shareholders approve this Item
6 by the affirmative votes of a majority of the voting shares.
A copy of the EVS Plan is attached hereto as Exhibit 4, and the
foregoing discussion is qualified in its entirety by such reference.
The Board of Directors recommends a vote FOR approval of the
amendment and restatement of the Executive Value Sharing Plan.
The following table illustrates the benefits that would have been
provided under the EVS Plan if the plan, as proposed to be amended and
restated, had been in effect during 1990-1992 cycle. This table is
based upon the 1990-1992 cycle because information from the Form10-Ks
of peer group companies was not available at the time this proxy
statement was prepared.
<TABLE>
AMENDED AND RESTATED EVS PLAN BENEFITS
Name and Position Dollar Value ($) Number of Units (1)
<S> <C> <C>
Ian Rolland, Chairman and Chief $1,230,000 30,750
Executive Officer of LNC
Robert A. Anker, President and $ 837,000 20,925
Chief Operating Officer of LNC
P. Kenneth Dunsire, Executive Vice $ 689,000 17,225
President of LNC
Thomas M. West, Executive Vice $ 639,000 15,994
President of The Lincoln National Life
Insurance Company
F. Cedric McCurley, Chief Executive $ 639,000 15,994
Officer of American States Insurance
Company
Jon A. Boscia, Executive Vice $ 689,000 17,225
President and Chief Investment
Officer of LNC
Executive Group $6,410,000 1,600,305
Non-Executive Director Group $ 0 0
Non-Executive Officer Employee Group [not yet available] [not yet available]
<FN>
<fn1> Assumes all EVSP awards to Reporting Persons 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>
<PAGE> 44
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 1993. 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.
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 proposes to nominate for election or re-election as a
director: (i) the name, age, business 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.
<PAGE> 45
ANNUAL REPORT
Form 10-K, annual report of the Corporation filed with the Securities
and Exchange Commission for the fiscal year 1993, will be provided on
written request and without charge to each shareholder. 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> 46
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.
<PAGE> 47
(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 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.
<PAGE> 48
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;
(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.
<PAGE> 49
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 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
<PAGE> 50
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.
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
<PAGE> 51
(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.
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 Dollar 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 cannot exceed $100,000 (or such other individual
limits as may be in effect under the Code on the date of grant).
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
<PAGE> 52
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.
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. 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.
<PAGE> 53
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 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 may not be
transferred by the Holder except 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 subsection 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
<PAGE> 54
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
(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.
<PAGE> 55
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,
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.
<PAGE> 56
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
maximum or minimum settlement values, shall be specified by the award.
7.2 Terms of Performance Awards. Performance awards may be valued
by reference to the value of Common Stock of the Corporation or according
to any other formula or method. Performance awards may be paid in cash,
shares, or other 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 payable prior to the Holder's termination shall be
annulled as of the date of termination. If the grantee is determined to
have engaged in detrimental activity, any performance award or installment
thereof not payable prior to the date of such determination shall be
annulled as of such date.
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.
<PAGE> 57
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 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.
<PAGE> 58
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 on such 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
quoted on the New York 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).
<PAGE> 59
(b) Restrictions on Stock Awards. A stock certificate representing
the Stock Award shall be registered in each Non-Employee Director's name
but shall be held in custody by the Company for the Non-Employee Director's
account pursuant to a stock power. 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 that the
following restrictions shall apply: (i) the Non-Employee Director shall
not be entitled to delivery of the certificate until the expiration of the
Restricted Period, (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 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 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 Stock Awards, except to the extent
that a majority of the Board other than the Non-Employee
Director approves the vesting of such Stock Award. Upon
vesting, except as provided in Article X, all restrictions
applicable to such Stock Award shall lapse and a
certificate for such shares shall be delivered to the Non-
Employee Director, or the Non-Employee Director's
beneficiary or estate, in accordance with Article VI.
(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 (i) on or after age 70, or (ii) 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
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
<PAGE> 60
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
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-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 Article III 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 distribution 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.
ARTICLE IV - RESTRICTED STOCK BONUS
4.1 Restricted Stock Bonus for Non-Employee Directors on the Effective
Date. Each Non-Employee Director serving as such on the effective date of
the Plan shall be awarded 200 shares of Stock (a "Stock Bonus") in
consideration for services rendered as a Non-Employee Director of the
Corporation and its subsidiaries. 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 the Effective
Date. Each Non-Employee Director who commences serving a new three year
term after the effective date of the Plan shall be issued a whole number of
Shares of Stock ("Stock Bonus") equal to $10,000 divided by the Fair Market
Value of Stock on the July 1 on which he or she begins serving a new term as
a Non-Employee Director. 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> 61
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 held by the Corporation and Stock Units credited to his Account as
of the record date corresponding to such dividend payment date, divided by
the Fair Market Value of Stock on the date. Fractional Stock Units may be
awarded.
ARTICLE VI - DELIVERY OF STOCK CERTIFICATES
6.1 Stock Awards. The Stock certificate for shares of Stock issued to any
Non-Employee Director pursuant to a Retainer Stock Award or Stock Bonus with
respect to a Grant Date shall be held by the Corporation until the
restrictions lapse. 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 the 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 that such Stock
shall not be transferable by the Non-Employee Director other than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order.
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 thirty thousand (30,000) 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, reclassifications,
reorganizations or other changes in its corporate, capital or business
<PAGE> 62
structure, to participate in a merger, consolidation or share exchange or to
transfer its assets or dissolve or liquidate.
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 Stock Awards. Unless the Plan is sooner terminated, no
Stock Award shall be granted after July 1, 2004.
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
<PAGE> 63
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.
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 at its principal office.
ARTICLE XII - EFFECTIVE DATE OF PLAN
12.1 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.
<PAGE> 64
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 except to
the extent that such a modification in the definition would violate the
provisions of Section 4.03 of this Plan. If the modification of the
definition of a "Change in Control" would cause a violation of Section 4.03
of this Plan, then such modification 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.
<PAGE> 65
2.03 "Insider" means those individuals subject to the short-swing profit
recovery provisions of Section 16 of the Securities Exchange Act of 1934.
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
<PAGE> 66
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 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.
<PAGE> 67
(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 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
<PAGE> 68
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 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.
<PAGE> 69
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, reorganization, 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
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.
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. 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.
<PAGE> 70
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 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.
<PAGE> 71
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").
This Lincoln National Corporation Phantom Stock Plan for Employees is
hereby approved.
Ian M. Rolland Date
Chief Executive Officer
Lincoln National Corporation
<PAGE> 72
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 Corporation, an Indiana Corporation (the "Corporation"), effective
January 1, 1991 [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
<PAGE> 73
"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.
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.
<PAGE> 74
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.
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 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.
<PAGE> 75
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 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.
3.3 Hurdle Rates and EVSP Awards. Each Performance Goal applicable to a
Reporting Person shall incorporate one or more Hurdle Rates representing
the minimum level of performance required for eligibility to receive the
award associated with that Performance Goal. Different Hurdle Rates may be
established for each Performance Goal and for each Performance Cycle. For
each Hurdle Rate incorporated into a 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 Hurdle
Rate. In no event shall a Hurdle Rate be set at less than the average
performance of the Peer Group of companies over the course of the
Performance Cycle. 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
<PAGE> 76
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 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
<PAGE> 77
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
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.
<PAGE> 78
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.
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
<PAGE>
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.
