SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange
Act of 1934
(Amendment No. )
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
X Definitive Proxy Statement
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)
Lincoln National Corporation
(Name of Registrant as Specified in this Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(j)(2), or Item 22(a)(2) of Schedule 14A.
$500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
Fee computed on table below per Exchange Act Rules 14a(i)(4) and
o-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of this fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.
3) Filing party:
4) Date filed:
* 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, 1995
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 11, 1995, at the Grand Wayne Center, 120 West Jefferson Boulevard,
Fort Wayne, Indiana, at 10:00 a.m., local time. Your Board of Directors
and Management look forward to greeting 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,
/S/IAN M. ROLLAND
Ian M. Rolland
Chairman
<PAGE> 1
LINCOLN NATIONAL CORPORATION
FORT WAYNE, INDIANA
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
April 11, 1995
The Annual Meeting of Shareholders of LINCOLN NATIONAL CORPORATION will
be held on Thursday, May 11, 1995, at 10:00 a.m., local time, at the
Grand Wayne Center, 120 West Jefferson Boulevard, Fort Wayne, Indiana
46802.
The items of business are:
1. to elect four directors for three-year terms, and
2. to consider and act upon such other matters as may properly come
before the meeting.
Only shareholders of record at the close of business on March 17, 1995,
are entitled to notice of and to vote at the annual 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,
/S/ C. SUZANNE WOMACK
C. Suzanne Womack
Secretary
<PAGE> 2
LINCOLN NATIONAL CORPORATION
200 East Berry Street
FORT WAYNE, INDIANA
Proxy Statement
Annual Meeting of Shareholders
May 11, 1995
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, 1995. 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 11, 1995, 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 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 28. 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 17, 1995,
will be entitled to vote at the meeting. As of that date, there were
99,007,855 shares of capital stock of the Corporation issued, outstanding
and entitled to vote as follows: 94,547,691 shares of Common Stock;
42,267 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. 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.
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 Earl L. Neal, John M. Pietruski,
Gordon A. Walker and Gilbert R. Whitaker, Jr. for terms expiring in 1998.
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>
NOMINEES FOR DIRECTOR
(Terms expiring in May 1998)
<CAPTION>
NAME AND POSITION
WITH THE Director PRINCIPAL OCCUPATION OTHER
CORPORATION Age Since AND EMPLOYMENT DIRECTORSHIPS
<S> <C> <C> <C> <C>
Earl L. Neal
Director 67 1985 Attorney at Law, Chicago Title and
Earl L. Neal & Trust Company,
Associates Chicago Title
Insurance Company,
Peoples Energy
Corporation, First
Chicago Corporation,
The First National
Bank of Chicago
John M. Pietruski
Director 62 1989 Chairman, Texas Hershey Foods
Biotechnology Corporation, General
Corporation, a Public Utilities
research and Corporation.
development company, McKesson Corp.
retired Chairman
and Chief Executive
Officer of Sterling
Drug Inc.
Gordon A. Walker
Director 67 1982 Chairman and Chief Turner Corporation
Executive Officer,
Hollinee Inc., a
privately-held holding
company
Gilbert R. Whitaker, Jr.
Director 63 1986 Provost and Executive Handleman Company,
Vice President of Johnson Controls,
Academic Affairs, Inc., Structural
University of Michigan Dynamics Research
(previously, Dean and Corp.
Professor of Business
Economics of the School
of Business Administration,
University of Michigan)
</TABLE>
<PAGE> 5
<TABLE>
DIRECTORS CONTINUING IN OFFICE
(Terms Expiring in May 1997)
<CAPTION>
NAME AND POSITION
WITH THE Director PRINCIPAL OCCUPATION OTHER
CORPORATION Age Since AND EMPLOYMENT DIRECTORSHIPS
<S> <C> <C> <C> <C>
Robert A. Anker
President, Chief
Operating Officer and
Director 53 1992 President and Chief EMPHESYS Financial
Operating Officer of Group, Inc., Fort
the Corporation and Wayne National
Chairman of the Board Corporation
and Chief Executive
Officer of The Lincoln
National Life Insurance
Company, a wholly-owned
life insurance subsidiary
of the Corporation
(previously, President
and Chief Operating
Officer, The Lincoln
National Life Insurance
Company; Chairman,
President, American States
Insurance Company, a
wholly-owned property/
casualty insurance
subsidiary of the
Corporation)
Harry L. Kavetas
Director 57 1990 Executive Vice President None
(previously, Senior Vice
President) 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
Director 52 1985 Managing Director, Chicago Title
Schroder Real and Trust
Estate Associates, a Company, Chicago
national real estate Title Insurance
investment management Company, Liberty
firm; Managing Property Trust
Director, Schroder
Mortgage Associates, a
national commercial
mortgage investment firm
Jill S. Ruckelshaus
Director 58 1975 Director, Seattle First Sea-First
Bank Corporation Corporation
(previously, Consultant,
William D. Ruckelshaus
Associates, environmental
consultants)
</TABLE>
<PAGE> 6
<TABLE>
DIRECTORS CONTINUING IN OFFICE
(Terms Expiring in May 1996)
<CAPTION>
NAME AND POSITION
WITH THE Director PRINCIPAL OCCUPATION OTHER
CORPORATION Age Since AND EMPLOYMENT DIRECTORSHIPS
<S> <C> <C> <C> <C>
J. Patrick Barrett
Director 58 1990 Chairman and Chief None
Executive
Officer of CARPAT
Investments, a private
investment company
Thomas D. Bell, Jr.
Director 45 1988 President and Chief None
Executive Officer
Worldwide of Burson-
Marsteller, a public
relations/public affairs
firm (previously,
Vice-Chairman,
Gulfstream Aerospace
Corporation; Vice-Chairman,
Chief Operating Officer
Worldwide and Director,
Burson-Marsteller)
Daniel R. Efroymson
Director 53 1993 President, Treasurer NBD Bank, N.A.
and Director, Real Silk Indiana
Investments, Inc.,
a closed-end investment
company, First Vice President
and Director, Moriah Fund,
Inc., a private foundation
Leo J. McKernan
Director 57 1991 Chairman, President,Chief 1st Source
Executive Officer and Corporation, VME
Director, Clark Group, N.V.
Equipment Company
Ian M. Rolland
Chairman of the
Board, Chief
Executive Officer
and Director 61 1975 Chairman of the Board Tokheim Corp.,
and Chief Executive NIPSCO Industries,
Officer of the Inc., Norwest
Corporation (previously, Corporation,
President of the EMPHESYS Financial
Corporation; Chairman of Group, Inc.
the Board, Chief
Executive Officer and
President of The Lincoln
National Life
Insurance Company,
a wholly-owned life
insurance subsidiary
of the Corporation)
</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 share ownership guidelines for its officers. These
guidelines were established in 1993, and officers are expected to meet them
within 5 years. Officers are expected to achieve stock ownership equivalent
to the following multiples of their base salary: chief executive officer -
8 times, chief operating officer - 7 times, executive vice presidents - 6
times, senior vice presidents - 4 times and vice presidents - 2 times base
salary. Similarly, directors are expected to achieve stock ownership of 5
times their annual retainer within a period of 5 years. The Corporation has
two classes of equity securities, Common Stock and Preferred Stock. None of
the persons listed below own Preferred Stock. The following table shows the
number of shares of the Corporation's Common Stock beneficially owned by
directors,nominees for director,and executive officers as of March 13, 1995:
<TABLE>
<CAPTION>
AMOUNT AND NATURE<F1,2,3> AMOUNT AND NATURE<F1,2,3>
NAME OF BENEFICIAL OWNERSHIP NAME OF BENEFICIAL OWNERSHIP
<S> <C> <C> <C>
Robert A. Anker 144,313 F. Cedric McCurley 57,385
J. Patrick Barrett 2,379 Leo J. McKernan 1,379
Thomas D. Bell, Jr. 579 Earl L. Neal 1,379
Jon A. Boscia 71,767 John M. Pietruski 2,379
P. Kenneth Dunsire 130,307 Ian M. Rolland 331,862
Daniel R. Efroymson 1,000,775 Jill S. Ruckelshaus 2,379
Harry L. Kavetas 979 Gordon A. Walker 971
M. Leanne Lachman 1,379 Gilbert R. Whitaker, Jr. 2,379
Directors and Executive
officers as a group - 24
persons 1,993,940
<FN>
<F1> Except for Mr. Efroymson,who beneficially owns 1.01% 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 13, 1995. As to shares
beneficially owned, each person, other than Mr. Efroymson, has sole voting and
investment power except that the following persons each share voting and
investment power with another person as to the number of shares indicated:
Mr. Anker, 4,000 shares; Mr. Boscia, 2,000 shares; Mr. McCurley, 1,000 shares;
Mr. Rolland,157 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, shared voting and investment power with respect to 995,966
shares, and sole voting power with respect to 379 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 First Vice President and a director. Mr. Efroymson disclaims
beneficial ownership of all but 4,809 shares.
<F2> This table includes the following shares which are subject to acquisition
within 60 days by the exercise of outstanding stock options: Mr. Anker, 89,500
shares; Mr. Boscia, 44,250 shares; Mr. Dunsire, 75,000 shares; Mr. McCurley,
38,400 shares; and Mr. Rolland, 194,500 shares.
<PAGE> 8
<F3> In addition to beneficial ownership of Common Stock reflected in the
above table, these directors and executive officers own the following amounts
of phantom stock: Mr. Anker,707 shares; Mr. Barrett,13 shares; Mr. Bell,
13 shares; Mr. Boscia, 444 shares; Mr. Dunsire, 564 shares; Mr. Efroymson,
183 shares; Mr. Kavetas, 339 shares; Ms. Lachman, 339 shares; Mr. McCurley,
429 shares; Mr. McKernan, 339 shares; Mr. Neal, 281 shares; Mr. Pietruski,
13 shares; Mr. Rolland, 4,844 shares; Ms. Ruckelshaus, 13 shares; Mr. Walker,
140 shares; Mr. Whitaker, 81 shares. Phantom stock is an artificial security
which mirrors the performance of the Corporation's Common Stock but does not
have voting rights.
</FN>
</TABLE>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
The table below sets forth, as of March 13, 1995, the names of persons known
to the Corporation to be the beneficial owners of more than 5% of its Common
or Preferred Stock.
<TABLE>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
<CAPTION>
Title of Class Name and Address of Amount and Nature Of Percent
Beneficial Owner Beneficial Ownership of Class
<S> <C> <C> <C>
Common The Dai-ichi Mutual 8,835,794 shares - sole 8.1%
Life Insurance Company voting and sole dispositive
13-1, Yurakucho 1-Chome power of all shares [Note:
Chiyoda-ku The Dai-ichi Mutual Life
Tokyo 100, Japan Insurance Company has the
right to acquire beneficial
ownership (as defined in
Rule 13d-3(d)(1) under the
Securities Exchange Act of
1934) of all of these shares.]
Common Capital Guardian Trust 7,573,300 shares 7.6%
Company and Capital sole dispositive power -
Research and Management 7,573,300 shares
Company, operating sole voting power - 3,000
subsidiaries of The shares
Capital Group Companies,
Inc. (formerly, The
Capital Group, Inc.)
333 South Hope Street
Los Angeles, California 90071
Preferred The Dai-ichi Mutual Life 4,417,897 shares 99.1%
Insurance Company sole voting and sole dispositive
13-1, Yurakucho 1-Chome power - 4,417,897 shares
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,
CERTAIN BUSINESS RELATIONSHIPS 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 $24,000 plus a fee of $1,100 for each Board and Board committee meeting
attended in 1994. One-fourth of the annual retainer is paid, each July 1,
in restricted shares of the Corporation's Common Stock. In addition, the
Corporation reimburses directors, and on some occasions their spouses, for
reasonable travel expenses incurred in attending Board and Board committee
meetings.
Beginning on July 1, 1994, each non-employee director received an award of
restricted shares of the Corporation's Common Stock equal to $10,000(rounded
upward to the nearest whole share). Until July 1,2004, on the July 1
following the date a non-employee director commences a new three-year term,
such director shall receive an additional award of restricted shares equal
to $10,000 (rounded up to the nearest whole share).
The restrictions on all Common Stock issued to directors will lapse on the
earliest of the non-employee director's death, disability or retirement 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. Directors
also have the option to defer fees in phantom stock units which mirror the
performance of the Corporation's Common Stock.
<PAGE> 10
Retirement Plan
Directors,who are not employees of the Corporation or any of its subsidiaries,
are eligible for retirement benefits. The annual benefit payable to a director
is equal to .833% of the director's retainer paid during the last year he/she
was a director multiplied by the number of months of service (with a maximum
of 120 months). Individuals who were directors on January 1, 1987, were given
credit for all years of past service. The benefit is payable either in a single
lump sum or monthly beginning at the later of age 65 or when the director
retires from the Corporation's Board. In the event of a director's death prior
to the commencement of retirement benefits, a death benefit is paid to a
beneficiary.
ATTENDANCE
The Board held five regularly scheduled meetings and one special meeting
during 1994. All directors 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 1994 the Audit
Committee met seven 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 six meetings during 1994.
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) reviewing and
confirming the selection and development of officers and key personnel,
(2) selecting and recommending to the Board for approval candidates for
chairman of
<PAGE> 11
the board and chief executive officer, (3) establishing salaries for
Executive Officers and approving salaries for other officers and key
personnel, (4) approving the payment of bonuses, both discretionary and
contractual, for officers and key personnel, (5) approving employment
contracts and agreements for officers and key personnel, (6) recommending
to the Board the establishment of employee and officer retirement, group
insurance and other benefit plans,(7) approving modifications to employee
benefit plans if all such modifications according to actuarial estimates
do not in the aggregate have a present value cost in excess of $10 million
for the next five calendar years after the effective date of such
modifications, (8) 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 (9) such other
functions as are necessary or desirable.
Development Committee
The members of the Development Committee are: M. Leanne Lachman
(Chairperson), Robert A. Anker, J. Patrick Barrett, Daniel R. Efroymson,
Leo J. McKernan, John M. Pietruski and Ian M. Rolland. During 1994 the
Development Committee met eight times. The Development Committee generally
has authority to authorize the following transactions and expenditures
between $5 million and $10 million: (1) acquisitions or divestitures of
companies, assets or blocks of business, mergers, strategic investments
and joint ventures, (2) creation or dissolution of any legal entity,
(3) movements or transfers of capital among affiliates, (4) capital
commitments or expenditures for leases and asset purchases, (5) sale of
an equity interest in a company, (6) 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, (7) transactions and expenditures related to entering a new
line of business, (8) acquisitions or dispositions of information systems
development projects and (9) 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. (Chairperson), Harry L. Kavetas, M. Leanne Lachman, Leo J.
McKernan, Ian M. Rolland, and Gordon A. Walker. During 1994 the Directors
and Nominations Committee met four 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 , 5) the determination of the size of the Board,
(6) review and confer on the selection of members of Board committees and
(7) develop governance principles which guide the Board in the conduct
of its business.
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 28).
<PAGE> 12
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 19), 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 1994 to file by these dates. All
of these filing requirements were satisfied except that a Form 4 for
Robert K. Malik which was filed on January 17, 1995 should have been filed
by January 10, 1995. 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.
CERTAIN BUSINESS RELATIONSHIPS
Earl L. Neal is a director of the Corporation and a nominee for re-election
for a three-year term expiring in 1998. During 1994, Earl L. Neal &
Associates, a Chicago law firm in which Mr. Neal is a partner, represented
the Corporation on one matter for which the Corporation paid this firm a fee
of $8,353.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Corporation's Compensation
Committee during the 1994 fiscal year: Thomas D. Bell, Jr., Earl L. Neal,
John M. Pietruski, Jill S. Ruckelshaus and Gordon A. Walker. 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
<PAGE> 13
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
charateristics similar to the Corporation's, currently includes 14 insurance
companies. The Corporation'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 27, 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 long-term shareholder
value creation. To accomplish this objective, the Corporation has adopted
a comprehensive business strategy. The overall goal of the Committee is to
develop executive compensation policies which are consistent with and linked
to the Corporation's strategic business objectives.
The Corporation's executive compensation program has been designed to
provide a strong and direct link between executive pay and the Corporation's
financial performance (as more specifically described below) and total
long-term shareholder return, both relative to the Peer Group. Consistent
with this objective, the Committee establishes performance criteria and
incentive targets, evaluates actual 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 Executive
Officers is long-term and at-risk, to focus management on the long-term
interests of share owners. Less emphasis is placed on annual compensation.
Equity Orientation: Stock-based plans comprise a major part of an
Executive Officer's compensation. This is to instill ownership thinking
and to more closely 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 and retaining leaders.
<PAGE> 14
Competitiveness: Base pay will be competitive with selected companies
within the Corporation's market. Total direct 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 pay practice.
Guided by these principles, the Committee began to restructure the total
compensation approach for key executives in 1989 and has utilized these key
principles in the design and administration of the executive compensation
program. Recognizing that many factors bear on corporate performance, the
Committee believes that the structure of the executive compensation approach
implemented in 1989 encourages the creation of share-owner value over the
long term.
EXECUTIVE COMPENSATION STRATEGY
The primary components of executive compensation used by the Committee are:
Base pay
Long-term incentives
Benefits
These components are structured to meet varying business objectives and to
cumulatively provide a level of total compensation opportunity that compares
favorably to levels of total compensation offered by other successful
companies in our industry. Annual incentives were eliminated beginning in
1992 and thereafter making the long-term incentive opportunity the only
variable component of total compensation. Top tier performance by the
Corporation will result in total compensation that exceeds the average of
our industry. For example, if our performance is in the top quartile, total
compensation will also be in the top quartile. On the contrary, performance
levels at or below the average will result in below average total compensation.
COMPONENTS OF EXECUTIVE COMPENSATION AND DISCUSSION OF CEO'S 1994 COMPENSATION
Following is a discussion of the components of the executive compensation
program along with a specific discussion of decisions regarding Mr. Rolland's
1994 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.
<PAGE> 15
The Committee emphasizes longer term compensation in the total compensation
strategy for Executive Officers 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 in 1994 for all Executive Officers, including the Named
Executive Officers, were based on individual and business performance. Also,
selective adjustments were made as necessary to assure that base salaries
were competitive with our defined market. The 1994 average base salary
increase for the Executive Officers, including the Named Officers, was 4.9%.
The increase in Mr. Rolland's base pay for 1994 was 5.6%. This increase was
based on his successful guidance of the Corporation in 1993 in achieving
"business success." Factors used to determine "business success" for 1993
included the total return to shareholders, a substantial increase in income
from operations, and initiating appropriate actions to implement long-term
business strategy, as evidenced by the initial public offering of Security-
Connecticut Life Insurance Company and EMPHESYS Financial Group, Inc.
(Employers Health Insurance).
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 the Executive Value Sharing Plan ("EVSP"). The Committee
has the authority to convert cash payments from the EVSP awards 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 1992 through 1994, the
Corporation performed at the 86th percentile of the Peer Group for total
shareholder return.
For 1994, approximately three-fourths of the value of Mr. Rolland's and the
other Named Executive Officers' total compensation was variable. This total
variable portion was comprised of long-term incentives which are based on
long-term corporate financial and the Corporation's 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 the Corporation's 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
<PAGE> 16
its May meeting. The option grants cover shares of Common Stock
authorized under shareholder-approved plans. Over 420 employees
across the Corporation received option grants in 1994.
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 17) 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 to Executive Officers, including the Named
Executive Officers, 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. The Committee does consider the amounts
and terms of prior option grants as an important component in achieving
a competitive total compensation package. Mr. Rolland was awarded a
grant of 30,000 stock options at the then fair market price of $39.44
per share on May 11, 1994. The Committee based Mr. Rolland's award on
the Corporation's 1991 - 1993 performance at the 79th percentile for
increase in book value and at the 86th percentile for total shareholder
return compared to the Peer Group. Further, the Committee's award was
based on Mr. Rolland's leadership in the development and implementation
of the business strategy as evidenced in the initial public offerings
of Security-Connecticut Life Insurance Company and EMPHESYS Financial
Group, Inc. (Employers Health Insurance).
Executive Value Sharing Plan ("EVSP"): In May 1994, the shareholders of
the Corporation approved the amended and restated EVSP so that awards
made by the Committee to the Named Executive Officers for Performance
Cycles beginning in 1994 might not be subject to the one million dollar
limit on deductibility that was enacted by the Omnibus Budget
Reconciliation Act of 1993 ("OBRA 1993"). Under the EVSP, participants
are awarded bonuses only 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. A new three-year cycle begins
each year. The Committee selects the participants, establishes the
performance goals or formula for measuring the Corporation's or a
business segment's performance, determines the peer groups, establishes
the maximum amounts which can become payable, certifies the extent to
which such performance goals or formulas have been attained, and
determines the actual award. The Committee does not have the authority
to increase an award above the maximum set by the formula nor can the
formula for a specific Performance Cycle be changed, once it has begun.
Consistent with proposed regulations interpreting this OBRA 1993 limit,
the Committee adopted the formula for the 1995-1997 Performance Cycle
for the Named Executive Officers including the Chief Executive Officer.
The Committee set the target EVSP award levels for Mr. Rolland for the
1995-1997 Performance Cycle at 0% for average or below average
performance as compared to a peer group established for that cycle,
and a maximum of $2,200,000 for the 75th percentile performance, and
$3,800,000 if the Corporation is the number one company in the peer
groups. The peer group for the 1995-1997 cycle, includes all the
companies listed on page 27 but excludes The Continental Corporation
and Kemper Corporation and includes The Equitable Companies, Inc.
<PAGE> 17
and Allstate Insurance Companies. The transition to the two new Peer
companies was in anticipation of the liklihood that Kemper would be
acquired by another company and the sale of Continental Corporation
to CNA Financial Corporation. The formula is based on the book value
of each company adjusted for unrealized gains (losses) and securities
as defined in the formula. These targets were set for Mr. Rolland and
all of the executive officers based on level of responsibility, job
description and job complexity, and on the results of an annual report
prepared by an independent compensation consulting firm. This report
(which gathered information on 1993 and 1994 compensation) surveys
the compensation levels of executive officers at a group of 14
companies similar to the Corporation in complexity and size.
For the performance cycle ended in 1994, the 1992-1994 Performance
Cycle, performance information on the Peer Group (which is the same
as the companies on the Performance Graph on page 27 for 1992 and
1993, but for 1994 Kemper Corporation was replaced with The Equitable
Companies, Inc.) is not available until the end of April, 1995;
therefore, the award to Mr. Rolland, the Named Executive Officers
and all executive officers cannot be discussed. Because this award
to Mr. Rolland is under the prior non-shareholder approved EVSP, the
Committee retains the option to exercise its discretion to award to
Mr. Rolland phantom units in the Corporation's Common Stock
rather than restricted stock. Such phantom units are payable to
Mr. Rolland on a date not earlier than one year after his retirement;
such amounts should be fully deductible by the Corporation.
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. The shares awarded are typically restricted from
sale or trade for three years after grant except in a situation
relating to death or disability. During the period that the shares are
issued but restricted, the executives may vote the shares. In addition,
at the time the restrictions lapse, compensation equal to the amount of
dividends that would have been paid during the period the shares were
restricted is paid to the executive. The Committee may also grant
individuals restricted stock to recognize exceptional performance or
in order to acquire or ensure retention of key executives.
Share Ownership Guidelines: The Committee endorses stock ownership by
directors, executive officers and key personnel in the belief that
stock ownership enhances the alignment of management and shareholder
interests. Further, the Committee endorses stock-based performance
compensation arrangements as being essential in achieving this
alignment. In support of achieving stock ownership, the Corporation
has adopted the following guidelines. 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.
<PAGE> 18
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 and beyond. In addition, both the Corporation's 1986
Stock Option Incentive Plan and the Executive Value Sharing Plan were
approved by shareholders at last year's annual meeting so that future
awards under those plans will not be subject to the one million dollar
limit on deductibility. Although the plans 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
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<PAGE> 19
SUMMARY ANNUAL AND LONG-TERM COMPENSATION
The Corporation's compensation program for executive officers for the fiscal
year ended December 31, 1994 consisted primarily of salaries, cash bonuses,
and other compensation. As a result of the amendment of the Executive Value
Sharing Plan in 1994, the numbers necessary to determine the amount
of the awards under the Plan are not available and are not included below,
but will be included in next year's statement. Shown below is information
concerning the annual compensation for services in all capacities to the
Corporation for the fiscal years ended December 31, 1994, 1993, and 1992, of
those persons who were, at December 31, 1994 (i) the chief executive officer
and (ii) the other four most highly compensated executive officers of the
Corporation (the "Named Executive Officers"):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUT
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND COMPEN- AWARDS OPTIONS/ LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION<F1> <F2,5> SARs PAYOUT(S) SATION<F3>
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IAN M. ROLLAND 1994 $ 938,077 -0- $ 1,923 $ ----<F6> 30,000 $ 8,218<F6> $125,683
Chairman and CEO 1993 896,494 -0- 69,450 1,522,520 46,000 138,891 123,338
of LNC 1992 820,769 -0- 20,046 1,178,874 40,000 107,453 109,000
ROBERT A.ANKER 1994 508,077 -0- -0- ----<F6> 18,000 3,825<F6> 69,383
President and 1993 467,648 -0- 24,107 778,146 24,000 69,146 61,315
COO of LNC 1992 423,654 -0- 84,093<F4> 599,052 22,000 50,048 53,799
P.KENNETH DUNSIRE 1994 414,423 -0- -0- ----<F6> 14,000 3,652<F6> 56,978
Executive Vice 1993 408,033 -0- 28,870 719,537 15,000 62,860 54,374
President of LNC 1992 373,077 -0- 10,497 448,654 16,000 47,868 48,247
JON A. BOSCIA 1994 359,422 -0- 104 ----<F6> 15,000 42,975<F6> 40,655
President and 1993 353,032 -0- 2,845 536,913 15,000 82,950 40,402
COO of The 1992 318,461 -0- 2,020 415,748 14,000 71,838 34,859
Lincoln National
Life Insurance
Company
F. CEDRIC 1994 352,000 -0- 164 ----<F6> 14,000 -0-<F6> 51,965
McCURLEY 1993 345,340 -0- 6,389 373,082 15,000 -0- 55,574
CEO of American 1992 320,000 -0- 739 225,273 12,000 -0- 50,717
States Insurance
Company
<FN>
<F1> 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.
<F2> Represents the fair market value on the date of grant of the award of
restricted shares of Common Stock awarded under the Management Incentive
Plan II for services rendered in 1991, 1992 and 1993, and awarded under the
Executive Value Sharing Plan for services rendered in 1992 and 1993. As of
December 31, 1994, the number and value of the aggregate restricted
<PAGE> 20
stockholdings of all employees of the corporation were 295,632 shares at
$10,347,120. 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 1991-93 performance cycle lapse on December 31, 1995. The
restrictions on the shares awarded under the Executive Value Sharing
Plan lapse on the third anniversary of January 1 of the year next
succeeding the applicable performance cycle.
<F3> 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 contributed for fiscal 1994 are
as follows: Mr. Rolland $14,071, Mr. Anker $7,621, Mr. Dunsire $6,216,
Mr. Boscia $5,391 and Mr. McCurley $5,280; however, the Board is expected
to determine the additional profit-sharing amount for 1994 at its May board
meeting, and this amount will be disclosed in the 1996 Proxy Statement. 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 1994 are as follows: Mr. Rolland $ 55,328, Mr. Anker $ 31,278,
Mr. Dunsire $ 25,898, Mr. Boscia $ 13,700 and Mr. McCurley $ 25,565.
<4> Of this amount, $63,834 was associated with the sale of Mr. Anker's
previous residence and move to Fort Wayne.
<F5> The restricted stockholdings, including restricted phantoms, of the
Named Executive Officers as of December 31, 1994, are as follows:
Mr. Rolland, 68,613 shares; Mr. Anker, 33,485 shares; Mr. Dunsire,
28,044 shares; Mr. Boscia, 24,108 shares and Mr. McCurley, 15,013 shares.
<F6> The LTIP Payout represents dividend equivalencies paid on the
restricted stock awards that vested on December 31, 1994 and Restricted
Stock Awards. Executive Value Sharing Plan ("EVSP") numbers for 1994 are
not available at this time because financial information on peer group
companies necessary to calculate these awards will not be available from
all peer group companies until late April or early May, 1995. These EVSP
awards will be included for the applicable year in next year's Proxy
Statement.
</FN>
</TABLE>
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<PAGE> 21
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 Corporation adopted, and
shareholders approved, a restatement of the Corporation's Executive Value
Sharing Plan (the "EVSP") at its May 1994 annual meeting of shareholders.
The Corporation believes that the EVSP, as approved, qualifies for a
"performance-based compensation" exception to this disallowance rule.
Shown below are the estimated future payouts for the 1995 to 1997
Performance Cycle under the Corporation's Executive Value Sharing Plan.
<TABLE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<CAPTION>
Estimated future payouts under
non-stock price-based plans
Number of Performance
shares, or other
units or period until
other maturation or Threshold<F2>
Name rights<F1> # payout $ or # Target<F3> Maximum<F4>
<S> <C> <C> <C> <C> <C>
Rolland N/A 1995-1997 $870,000 $ 2,200,000 $3,800,000
Anker N/A 1995-1997 525,000 1,310,000 2,300,000
Dunsire<F5> N/A 1995-1997 -0- -0- -0-
Boscia N/A 1995-1997 400,000 1,000,000 1,800,000
McCurley N/A 1995-1997 370,000 930,000 1,620,000
<FN>
<F1> The Corporation's Executive Value Sharing Plan permits the Compensation
Committee to establish performance goals. The 1995-1997 performance goals
for the Named Executive Officers relate the Corporation's performance to a
selected group of companies which are not the same as the peer group in the
performance graph on page 27. If the increase in the dividend-adjusted value
sharing return on equity of the Corporation for the three-year performance
cycle exceeds the average performance of selected companies, then an award
will be made according to a pre-established formula with Compensation
Committee discretion to adjust downward. The selected companies for the
1995-1997 cycle include Aetna Life & Casualty Company, Allstate Insurance
Companies, American General Corporation, CIGNA Corporation, Provident Life
and Accident Insurance Company of America, Providian Corporation (formerly
Capital Holding Corporation), ReliaStar (formerly, The NWNL Companies, Inc.),
SAFECO Corporation, The Equitable Companies, Inc., Torchmark Corporation,
Transamerica Corporation, Travelers Inc., USF&G Corporation, and US LIFE
Corporation.
<F2> The basic philosophy is to make no payment if performance is equal
to or below the average performance of the selected companies; however, the
maximums produced by the formula and payable at threshold are established
at higher levels than zero in order to permit the Compensation Committee
the discretion to adjust downward to comply with Section 162(m) of the Code.
The average performance is determined for each of the three years in a
performance cycle by deleting the top three and bottom three companies to
determine an annual average and then averaging the three years to determine
the Corporation's ranking.
<F3> The target is the estimated maximum to be paid in 1998 for the 1995-1997
three-year cycle if the Corporation's performance is at the 75th percentile
compared to the Peer Group. Upon completion of the cycle, any award may be
paid in restricted shares of the Corporation's Common Stock, phantom stock,
cash, or any combination.
<PAGE> 22
<F4> The maximum is the most that would be awarded if the Corporation was
the top company among the selected group of competitors for the 1995-1997
Performance Cycle. If there is no increase in book value for a performance
cycle, no payment is made.
<F5> Mr. Dunsire retired January 31, 1995, and no performance goal was
established for him.
</FN>
</TABLE>
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 1994 to
the Named Executive Officers which are reflected in the Summary Compensation
Table. No stock appreciation rights were granted under that Plan during
fiscal 1994.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term
(a) (b) (c) (d) (e) (f) (g)
Name Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base
Granted<F1> Fiscal Year<F2> Price <F3> Expiration
(#) ($/Shares) Date<F4> 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Rolland 30,000 6.92% $ 39.44 5/11/2004 $743,986 $ 1,885,522
Anker 18,000 4.15% 39.44 5/11/2004 446,392 1,131,313
Dunsire 14,000 3.23% 39.44 5/11/2004 347,193 879,910
Boscia 15,000 3.46% 39.44 5/11/2004 371,993 942,761
McCurley 14,000 3.23% 39.44 5/11/2004 347,193 879,910
<FN>
<F1> Options granted on May 11, 1994 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,
with full vesting occurring on the earliest of death, disability, fourth
anniversary or a change of control of the Corporation.
<F2> The Corporation granted options representing 438,200 shares to employees
in fiscal year 1994.
<F3> The exercise price and tax withholding obligations related to exercise
may be paid by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
<F4> The options were granted for a term of 10 years, subject to earlier
forfeiture in certain events related to termination of employment.
</FN>
</TABLE>
<PAGE> 23
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to option exercises in fiscal year
1994 and unexercised options to purchase the Corporation's Common Stock
granted in fiscal year 1994 and prior years under the Corporation's 1982 and
1986 Stock Option Incentive Plans to the Named Executive Officers.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
(a) (b) (c) (d) (e)
Number of Unexercised Options Value of Unexericised-in-the-money
held at December 31, 1994 Options Held at December 31, 1994<F1>
Name Shares Acquired
on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Rolland -0- -0- 175,500 84,500 $ 1,559,050 $ 145,600
Anker -0- -0- 79,000 47,000 749,605 80,080
Dunsire -0- -0- 67,750 33,250 581,620 58,240
Boscia -0- -0- 36,750 33,250 341,475 50,960
McCurley 2,000 $42,060 32,150 31,250 286,588 43,680
<FN>
<F1> Based on the closing price on the New York Stock Exchange Composite
Transactions of the Corporation's Common Stock on December 31, 1994 ($35.00).
</FN>
</TABLE>
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<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>
PENSION TABLE
<CAPTION>
Estimated annual retirement benefits for credited years of service<F1,3>
Final
Average
Salary<F2> 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
<S> <C> <C> <C> <C> <C> <C> <C>
$ 300,000 $ 49,963 $ 74,945 $ 99,926 $124,908 $149,890 $ 174,871 $ 182,371
350,000 58,463 87,695 116,926 146,158 175,390 204,621 213,371
400,000 66,963 100,445 133,926 167,408 200,890 234,371 244,371
450,000 75,463 113,195 150,926 188,658 226,390 264,121 275,371
500,000 83,963 125,945 167,926 209,908 251,890 293,871 306,371
550,000 92,463 138,695 184,926 231,158 277,390 323,621 337,371
600,000 100,963 151,445 201,926 252,408 302,890 353,371 368,371
650,000 109,463 164,195 218,926 273,658 328,390 383,121 399,371
700,000 117,963 176,945 235,926 294,908 353,890 412,871 430,371
750,000 126,463 189,695 252,926 316,158 379,390 442,621 461,371
800,000 134,963 202,445 269,926 337,408 404,890 472,371 492,371
850,000 143,463 215,195 286,926 358,658 430,390 502,121 523,371
900,000 151,963 227,945 303,926 379,908 455,890 531,871 554,371
950,000 160,463 240,695 320,926 401,158 481,390 561,621 585,371
1,000,000 168,963 253,445 337,926 422,408 506,890 591,371 616,371
<FN>
<F1> This table assumes retirement at age 65 (current normal retirement date),
and at age 65, the following individuals will have the number of years credited
service indicated: Mr. Rolland,41; Mr. Anker,31; Mr. Dunsire,11; Mr. McCurley,
14; and Mr. Boscia, 33.
<F2> Final average salary is the average of an employee's base salary paid in
any consecutive 60- month period during an employee's last ten years of active
employment which produces the highest average salary.
<F3> As a result of limitations under the Internal Revenue Code, a portion of
these amounts will be paid under supplemental benefit plans 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
was the only remaining participant in this plan, and upon his retirement on
January 31, 1995, benefits of $4,916 per month began.
<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 1994.
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 who had
an individual severance agreement in 1994. Mr. Dunsire's retirement on
January 31, 1995 caused this agreement to expire. Pursuant to that
agreement, if for any reason the Corporation had terminated Mr. Dunsire's
employment, one year of base salary would have been 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, CIGNA Corporation, Kemper
Corporation, Providian Corporation (formerly, Capital Holding Corporation),
Provident Life and Accident Insurance Company of America, ReliaStar
(formerly, The NWNL Companies, Inc.), SAFECO Corporation, The Continental
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.
<TABLE>
PERFORMANCE GRAPH
AMONG CORPORATION, S&P 500 AND PEER GROUP
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
LNC 100.00 74.23 100.25 142.41 173.92 145.75
S&P 100.00 96.88 126.42 136.08 149.80 151.78
Peer Group 100.00 76.39 110.08 133.21 154.00 140.70
Source: Media General Financial Services
</TABLE>
The Peformance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that the Corporation specifically incorporates
this graph by reference, and shall not otherwise be deemed filed under such
Acts.
There can be no assurance that the Corporation's stock performance will
continue into the future with the same or similar trends depicted in the
preceding graph. The Corporation will not make or endorse any predictions
as to future stock performance.
<PAGE> 28
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 1995. 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
1994 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 1996 annual meeting of shareholders
must be received by the Corporation no later than December 13,1995.
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> 29
ANNUAL REPORT
Form 10-K, annual report of the Corporation filed with the Securities and
Exchange Commission for the fiscal year 1994, 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,
/S/ C. SUZANNE WOMACK
C. Suzanne Womack
Secretary
April 11, 1995
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 11, 1995, 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 personally 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.
(Continued, and to be Signed, on reverse side) SEE REVERSE
SIDE
X Please mark
votes as in
this example
The Board of Directors recommends a vote for the following:
1. To elect four directors for three year terms:
Nominees: Earl L Neal, John M. Pietruski,
Gordon A. Walker, Gilbert R. Whitaker, Jr.
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
For, except vote withheld from the following nominee(s).
2. In their discretion, to act or vote upon other matters which
may properly come before the meeting or any adjournment
thereof.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
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 signer 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.
