<PAGE>
SUBJECT TO COMPLETION, DATED JULY 10, 1998
INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS SUBJECT TO
COMPLETION OR AMENDMENT. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 27, 1998)
8,000,000 PREFERRED SECURITIES
LINCOLN NATIONAL CAPITAL III
% TRUST ORIGINATED PREFERRED SECURITIES(SM),
SERIES C ("TOPRS(SM)")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
LINCOLN NATIONAL CORPORATION
----------------------
The % Trust Originated Preferred Securities, Series C (the "Series C
TOPrS"), offered hereby represent beneficial interests in Lincoln National
Capital III, a trust formed under the laws of the State of Delaware (the "Series
C Issuer"). Lincoln National Corporation, an Indiana corporation (the "Company"
or "Lincoln"), will be the owner of all of the beneficial interests represented
by common securities of the Series C Issuer ("Series C Common Securities" and,
collectively with the Series C TOPrS, the "Series C Securities"). The First
National Bank of Chicago is the Property Trustee of the Series C Issuer. The
Series C Issuer exists for the sole purpose of issuing the Series C TOPrS
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES C TOPRS, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE SERIES C
TOPRS MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF SUCH DEFERRAL.
----------------
Application has been made to have the Series C TOPrS approved for listing on
the New York Stock Exchange, Inc. (the "New York Stock Exchange"). Trading of
the Series C TOPrS on the New York Stock Exchange is expected to commence within
a 30-day period after the initial delivery of the Series C TOPrS. See
"Underwriting."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING THE SERIES C
PUBLIC(1) COMMISSION(2) ISSUER(3)(4)
<S> <C> <C> <C>
Per Series C TOPrS........................................ $ (3) $
Total..................................................... $ (3) $
</TABLE>
(1) Plus accrued distributions, if any, from July , 1998.
(2) The Series C Issuer and Lincoln have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Series C TOPrS will
be invested in the Series C Subordinated Debentures, Lincoln has agreed to
pay to the Underwriters as compensation ("Underwriters' Compensation") for
their arranging the investment therein of such proceeds $ per Series C
TOPrS (or $ in the aggregate). See "Underwriting."
(4) Expenses of the offering, which are payable by Lincoln, are estimated to be
$225,000.
--------------------
The Series C TOPrS offered hereby are offered severally by the Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Series C TOPrS will be ready for delivery in book-entry form only through the
facilities of The Depository Trust Company in New York, New York, on or about
July , 1998, against payment therefor in immediately available funds.
--------------------
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
--------------------
The date of this Prospectus Supplement is July , 1998.
(SM) "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES C TOPRS.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF SERIES C TOPRS TO
COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
FOR NORTH CAROLINA INVESTORS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS SUCH
COMMISSIONER PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT.
------------------
(CONTINUED FROM PREVIOUS PAGE)
and the Series C Common Securities and investing the proceeds thereof in
$206,186,000 initial principal amount of % Junior Subordinated Deferrable
Interest Debentures, Series C (the "Series C Subordinated Debentures"), to be
issued by Lincoln. The Series C Subordinated Debentures will mature on September
30, 2028, which date may be extended to a date not later than September 30, 2047
if certain conditions are met. The Series C TOPrS will have a preference under
certain circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Series C Common Securities. See
"Description of Preferred Securities--Subordination of Common Securities" in the
accompanying Prospectus.
Holders of the Series C TOPrS will be entitled to receive preferential
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on the last day of March, June, September and
December of each year (or, if any such day is not a Business Day, the next
succeeding Business Day, except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day), commencing September 30, 1998, at the annual rate of
% of the Liquidation Amount of $25 per Series C TOPrS ("Distributions").
Lincoln has the right to defer payment of interest on the Series C Subordinated
Debentures at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each deferral period (each, an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity (as defined herein) of the Series C Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due, Lincoln may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Series C Subordinated
Debentures are so deferred, Distributions on the Series C TOPrS will also be
deferred and Lincoln will not be permitted, subject to certain exceptions
described herein, to declare or pay any cash distributions with respect to
Lincoln's capital stock or debt securities of Lincoln that rank PARI PASSU with
or junior to the Series C Subordinated Debentures. During an Extension Period,
interest on the Series C Subordinated Debentures will continue to accrue (and
the amount of Distributions to which holders of the Series C TOPrS are entitled
will accumulate) at the rate of % per annum, compounded quarterly, and holders
of Series C TOPrS will be required to accrue interest income for United States
federal income tax purposes. See "Certain Terms of Series C Subordinated
Debentures--Option to Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences--Original Issue Discount."
Lincoln has, through the Series C Guarantee, the Trust Agreement, the Series
C Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein), taken together, fully, irrevocably and unconditionally
guaranteed all of the Series C Issuer's obligations under the Series C TOPrS.
See "Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees--Full and Unconditional Guarantee" in
the accompanying Prospectus. The Series C Guarantee of Lincoln guarantees the
payment of Distributions and payments on liquidation or redemption of the Series
C TOPrS, but only in each case to the extent of funds held by the Series C
Issuer, as described herein (the "Series C Guarantee"). See "Description of
Guarantees" in the accompanying Prospectus. If Lincoln does not make interest
payments on the Series C Subordinated Debentures held by the Series C Issuer,
the Series C Issuer will have insufficient funds to pay Distributions on the
Series C TOPrS. The Series C Guarantee does not cover payment of Distributions
when the Series C Issuer does not have sufficient funds to pay such
Distributions. In such event, a holder of Series C TOPrS may institute a legal
proceeding directly against Lincoln to enforce payment of such Distributions to
such holder. See "Description of Junior Subordinated Debt
Securities--Enforcement of Certain Rights By Holders of Preferred Securities" in
the accompanying Prospectus. The obligations of Lincoln under the Series C
Guarantee and the Series C TOPrS are subordinate and junior in right of payment
to all Senior Debt (as defined in "Description of Junior Subordinated Debt
Securities--Subordination" in the accompanying Prospectus) of Lincoln.
S-2
<PAGE>
The Series C Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the Series C Subordinated Debentures at maturity or
their earlier redemption. The Series C Subordinated Debentures are redeemable
prior to maturity at the option of Lincoln (i) on or after , 2003, in
whole at any time or in part from time to time, at a redemption price equal to
the accrued and unpaid interest on the Series C Subordinated Debentures so
redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof or (ii) at any time, in whole (but not in part), upon the occurrence and
continuation of a Special Event (as defined herein), at a redemption price equal
to the accrued and unpaid interest on the Series C Subordinated Debentures so
redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof, in each case subject to the further conditions described under
"Description of Junior Subordinated Debt Securities--Redemption" in the
accompanying Prospectus.
At any time, Lincoln will have the right to terminate the Series C Issuer
and cause the Series C Subordinated Debentures to be distributed to the holders
of the Series C TOPrS in liquidation of the Series C Issuer. If Lincoln elects
to liquidate the Series C Issuer and thereby causes the Series C Subordinated
Debentures to be distributed to holders of the Series C TOPrS in liquidation of
the Series C Issuer, Lincoln shall have the right to extend the maturity of such
Series C Subordinated Debentures, provided that it can extend the maturity only
if at the time such election is made and at the time of extension (i) Lincoln is
not in bankruptcy, otherwise insolvent or in liquidation, (ii) Lincoln is not in
default in the payment of any interest or principal on the Series C Subordinated
Debentures, (iii) the Series C Issuer is not in arrears on payments of
Distributions on the Series C TOPrS and no deferred Distributions are
accumulated, (iv) the Series C Subordinated Debentures are rated not less than
BBB- by Standard & Poor's Ratings Services or Baa3 by Moody's Investors Service,
Inc. or the equivalent by any other nationally recognized statistical rating
organization and (v) the extended Stated Maturity is no later than the 49th
anniversary of the initial issuance of the Series C TOPrS. See "Certain Terms of
Series C Subordinated Debentures--General."
The Series C Subordinated Debentures are subordinate and junior in right of
payment to all Senior Debt of Lincoln. As of May 31, 1998, Lincoln had
approximately $811.7 million aggregate principal amount of Senior Debt
outstanding. The terms of the Series C Subordinated Debentures place no
limitation on the amount of Senior Debt that may be incurred by Lincoln. Lincoln
is a non-operating holding company and almost all of the operating assets of
Lincoln and its consolidated subsidiaries are owned by such subsidiaries.
Lincoln relies primarily on interest and dividends from such subsidiaries to
meet its obligations for payment of principal and interest on its outstanding
debt obligations and corporate expenses. See "Lincoln National Corporation."
Accordingly, the Series C Subordinated Debentures will be subordinated to all
Senior Debt of Lincoln and effectively subordinated to all existing and future
liabilities of Lincoln's subsidiaries, and holders of Series C Subordinated
Debentures should look only to the assets of Lincoln for payments on Series C
Subordinated Debentures. The payment of dividends and interest on surplus notes
by Lincoln's insurance company subsidiaries is limited under the insurance
holding company laws of the states in which such subsidiaries are domiciled. See
"Description of Junior Subordinated Debt Securities--Subordination" in the
accompanying Prospectus.
In the event of the termination of the Series C Issuer, after satisfaction
of liabilities to creditors of the Series C Issuer as required by applicable
law, the holders of the Series C TOPrS will be entitled to receive a Liquidation
Amount of $25 per Series C TOPrS plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a distribution of
such amount in Series C Subordinated Debentures, subject to certain exceptions.
See "Description of Preferred Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
Application has been made to have the Series C TOPrS approved for listing on
the New York Stock Exchange under the symbol "LNC PrZ." If the Series C
Subordinated Debentures are distributed to the holders of Series C TOPrS upon
the liquidation of the Series C Issuer, Lincoln will use its best efforts to
list the Series C Subordinated Debentures on the New York Stock Exchange or such
other stock exchanges or other self-regulatory organizations, if any, on which
the Series C TOPrS are then listed or traded.
The Series C TOPrS will be represented by global certificates registered in
the name of The Depository Trust Company ("DTC") or its nominee. Beneficial
interests in the Series C TOPrS will be shown on, and transfers thereof will be
effected only through, records maintained by participants in DTC. Except as
described in the accompanying Prospectus, Series C TOPrS in certificated form
will not be issued in exchange for the global certificates. See "Book-Entry
Issuance" in the accompanying Prospectus.
S-3
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH
THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS. AS USED HEREIN, (I)
THE "INDENTURE" MEANS THE JUNIOR SUBORDINATED INDENTURE, AS AMENDED AND
SUPPLEMENTED FROM TIME TO TIME, BETWEEN LINCOLN AND THE FIRST NATIONAL BANK OF
CHICAGO, AS TRUSTEE (THE "DEBENTURE TRUSTEE"), AND (II) THE "TRUST AGREEMENT"
MEANS THE AMENDED AND RESTATED TRUST AGREEMENT RELATING TO THE SERIES C ISSUER
AMONG LINCOLN, AS DEPOSITOR, THE FIRST NATIONAL BANK OF CHICAGO, AS PROPERTY
TRUSTEE (THE "PROPERTY TRUSTEE"), FIRST CHICAGO DELAWARE INC., AS DELAWARE
TRUSTEE (THE "DELAWARE TRUSTEE"), AND THE ADMINISTRATIVE TRUSTEES NAMED THEREIN
(COLLECTIVELY, WITH THE PROPERTY TRUSTEE AND DELAWARE TRUSTEE, THE "ISSUER
TRUSTEES"). EACH OF THE OTHER CAPITALIZED TERMS USED IN THIS PROSPECTUS
SUPPLEMENT AND NOT OTHERWISE DEFINED IN THIS PROSPECTUS SUPPLEMENT HAS THE
MEANING SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING
PROSPECTUS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Lincoln with the Commission are
incorporated into this Prospectus Supplement by reference:
1. Lincoln's Annual Report on Form 10-K for the year ended December 31,
1997.
2. Lincoln's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998.
3. Lincoln's Current Reports on Form 8-K, dated January 13, 1998, March 24,
and May 28, 1998.
Each document or report filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") after the date hereof and prior to the termination of any
offering of securities made by the Prospectus and this Prospectus Supplement
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such document. Any statement contained in the
Prospectus or this Prospectus Supplement, or in a document all or a portion of
which is incorporated or deemed to be incorporated by reference therein or
herein, shall be deemed modified or superseded for purposes of the Prospectus
and this Prospectus Supplement to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of the Prospectus or this Prospectus
Supplement.
The Company will provide without charge to any person to whom this
Prospectus Supplement is delivered, on the written or oral request of such
person, a copy of any or all of the foregoing documents incorporated by
reference herein (other than exhibits not specifically incorporated by reference
into the texts of such documents). Requests for such documents should be
directed to: C. Suzanne Womack, Secretary, Lincoln National Corporation, 200
East Berry Street, Fort Wayne, Indiana 46802-2706, telephone number (219)
455-3271.
S-4
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE SERIES C TOPRS SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN THE
ACCOMPANYING PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING MATTERS.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES C GUARANTEE AND THE SERIES
C SUBORDINATED DEBENTURES
The obligations of Lincoln under the Series C Guarantee issued by Lincoln
for the benefit of the holders of Series C TOPrS are unsecured and rank
subordinate and junior in right of payment to all Senior Debt of Lincoln. The
obligations of Lincoln under the Series C Subordinated Debentures are
subordinate and junior in right of payment to all such Senior Debt. At May 31,
1998, the Senior Debt of Lincoln was approximately $811.7 million. Lincoln is a
non-operating holding company and almost all of the operating assets of Lincoln
and its consolidated subsidiaries are owned by such subsidiaries. Lincoln relies
primarily on interest and dividends from such subsidiaries to meet its
obligations for payment of principal and interest on its outstanding debt
obligations and corporate expenses. Accordingly, the Series C Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of Lincoln's subsidiaries, and holders of Series C Subordinated
Debentures should look only to the assets of Lincoln for payments on the Series
C Subordinated Debentures. The payment of dividends and interest on surplus
notes by Lincoln's insurance company subsidiaries is limited under the insurance
holding company laws of the states in which such subsidiaries are domiciled. See
"Risk Factors--Holding Company Structure." Neither of the Indenture, the Series
C Guarantee nor the Trust Agreement places any limitation on the amount of
secured or unsecured debt, including Senior Debt, that may be incurred by
Lincoln. See "Description of Guarantees--Status of the Guarantees" and
"Description of Junior Subordinated Debt Securities--Subordination" in the
accompanying Prospectus.
The ability of the Series C Issuer to pay amounts due on the Series C TOPrS
is solely dependent upon Lincoln making payments on the Series C Subordinated
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
Lincoln has the right under the Indenture to defer the payment of interest
on the Series C Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated Maturity
of the Series C Subordinated Debentures. As a consequence of any such deferral,
quarterly Distributions on the Series C TOPrS by the Series C Issuer will be
deferred (and the amount of Distributions to which holders of the Series C TOPrS
are entitled will accumulate additional Distributions thereon at the rate of %
per annum, compounded quarterly from the relevant payment date for such
Distributions) during any such Extension Period. During any such Extension
Period, Lincoln may not, and may not permit any subsidiary of Lincoln to, (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of Lincoln's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of Lincoln (including other Junior
Subordinated Debentures) that rank PARI PASSU with or junior in interest to the
Series C Subordinated Debentures or make any guarantee payments with respect to
any guarantee by Lincoln of the debt securities of any subsidiary of Lincoln if
such guarantee ranks PARI PASSU or junior in interest to the Series C
Subordinated Debentures (other than (a) dividends or distributions in common
stock of Lincoln, (b) redemptions or purchases of any rights pursuant to
Lincoln's Rights Plan, or any successor to such Rights Plan, and the declaration
of a dividend of such rights or the issuance of stock under such plans in the
future, (c) payments under any Guarantee, and (d) purchases of common stock
related to the issuance of common stock or rights under any of Lincoln's benefit
plans for its directors, officers or employees). Prior to the termination of any
such Extension Period, Lincoln may further extend the interest payment period,
provided that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Series C Subordinated Debentures. Upon the
S-5
<PAGE>
termination of any Extension Period and the payment of all amounts then due,
Lincoln may elect to begin a new Extension Period subject to the above
requirements. There is no limitation on the number of times that Lincoln may
elect to begin an Extension Period. See "Certain Terms of Series C
TOPrS--Distributions" and "Certain Terms of Series C Subordinated
Debentures--Option to Extend Interest Payment Period."
Should an Extension Period occur, a holder of Series C TOPrS will continue
to accrue income (in the form of original issue discount on a constant yield
method) in respect of its pro rata share of the Series C Subordinated Debentures
held by the Series C Issuer for United States federal income tax purposes. As a
result, a holder of Series C TOPrS will include such income in gross income for
United States federal income tax purposes in advance of the receipt of cash, and
will not receive the cash related to such income from the Series C Issuer if the
holder disposes of the Series C TOPrS prior to the record date for the payment
of Distributions. See "Certain Federal Income Tax Consequences--Original Issue
Discount" and "--Sale or Redemption of Series C TOPrS."
Lincoln has no current intention of exercising its right to defer payments
of interest by extending the interest payment period on the Series C
Subordinated Debentures. However, should Lincoln elect to exercise such right in
the future, the market price of the Series C TOPrS is likely to be affected. A
holder that disposes of its Series C TOPrS during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Series C TOPrS. In addition, as a result of the existence
of Lincoln's right to defer interest payments, the market price of the Series C
TOPrS (which represent preferred beneficial interests in the Series C Issuer)
may be more volatile than the market prices of other securities on which
original issue discount accrues that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event, Lincoln has the
right to redeem the Series C Subordinated Debentures in whole (but not in part)
within 90 days following the occurrence of such Special Event and therefore
cause a mandatory redemption of the Series C Securities at the redemption price.
"Special Event" means an Investment Company Event or a Tax Event. An "Investment
Company Event" means the receipt by the Series C Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of the occurrence of
a change in law or regulation or change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the Series C Issuer is or will be
considered an investment company that is required to be registered under the
Investment Company Act of 1940, as amended, which Change in 1940 Act Law becomes
effective on or after the date of original issuance of the Series C TOPrS. A
"Tax Event" means the receipt by the Series C Issuer of an opinion of counsel
experienced in such matters to the effect that, (a) as a result of any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or (b) as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of issuance of the
Series C TOPrS under the Trust Agreement, there is more than an insubstantial
risk that (i) the Series C Issuer is, or will be within 90 days of the date of
such opinion, subject to United States federal income tax with respect to income
received or accrued on the Series C Subordinated Debentures, (ii) interest
payable by Lincoln on the Series C Subordinated Debentures is not, or within 90
days of such opinion, will not be, deductible by Lincoln, in whole or in part,
for United States federal income tax purposes, or (iii) the Series C Issuer is,
or will be within 90 days of the date of the opinion, subject to more than a DE
MINIMUS amount of other taxes, duties or other governmental charges.
EXCHANGE OF SERIES C TOPRS FOR SERIES C SUBORDINATED DEBENTURES
There can be no assurance as to the market prices for Series C TOPrS or
Series C Subordinated Debentures that may be distributed in exchange for Series
C TOPrS if a liquidation of the Series C Issuer
S-6
<PAGE>
occurs. Accordingly, the Series C TOPrS that an investor may purchase, whether
pursuant to the offer made hereby or in the secondary market, or the Series C
Subordinated Debentures that a holder of Series C TOPrS may receive on
liquidation of the Series C Issuer, may trade at a discount to the price that
the investor paid to purchase the Series C TOPrS offered hereby. In addition,
because Lincoln has the right to extend the maturity of the Series C
Subordinated Debentures upon a termination of the Series C Issuer and the
distribution of the Series C Subordinated Debentures to holders of Series C
TOPrS, there can be no assurance that Lincoln will not exercise its option to
change the maturity of the Series C Subordinated Debentures upon an exchange.
Under current United States federal income tax law and interpretations, a
distribution of the Series C Subordinated Debentures upon liquidation of the
Series C Issuer would not be a taxable event to holders of the Series C TOPrS.
However, if any event described in clauses (a) and (b) of the definition of "Tax
Event" above were to occur which would cause the Series C Issuer to be subject
to United States federal income tax with respect to income received or accrued
on the Series C Subordinated Debentures, as the case would be if, for example,
the Series C Issuer were treated as an association taxable as a corporation, a
distribution of the Series C Subordinated Debentures by the Series C Issuer
could be a taxable event to the Series C Issuer and the holders of the Series C
TOPrS. See "Certain Federal Income Tax Consequences-- Distribution of Series C
Subordinated Debentures to Holders of Series C TOPrS."
RIGHTS UNDER THE SERIES C GUARANTEE
The Series C Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The First
National Bank of Chicago will act as the indenture trustee under the Series C
Guarantee (the "Guarantee Trustee") for the purposes of compliance with the
Trust Indenture Act and will hold the Series C Guarantee for the benefit of the
holders of the Series C TOPrS. The First National Bank of Chicago will also act
as Debenture Trustee for the Series C Subordinated Debentures and as Property
Trustee and First Chicago Delaware, Inc. will act as Delaware Trustee under the
Trust Agreement. The Series C Guarantee guarantees to the holders of the Series
C TOPrS the following payments, to the extent not paid by the Series C Issuer:
(i) any accumulated and unpaid Distributions required to be paid on the Series C
TOPrS, to the extent that the Series C Issuer has funds on hand available
therefor at such time, (ii) the redemption price with respect to any Series C
TOPrS called for redemption, to the extent that the Series C Issuer has funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of the Series C Issuer (unless the Series
C Subordinated Debentures are distributed to holders of the Series C TOPrS), the
lesser of (a) the aggregate of the Liquidation Amount and all accumulated and
unpaid Distributions to the date of payment to the extent that the Series C
Issuer has funds on hand available therefor at such time and (b) the amount of
assets of the Series C Issuer remaining available for distribution to holders of
the Series C TOPrS. The holders of not less than a majority in aggregate
liquidation amount of the Series C TOPrS have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Series C Guarantee or to direct the exercise
of any trust power conferred upon the Guarantee Trustee under the Series C
Guarantee. Any holder of the Series C TOPrS may institute a legal proceeding
directly against Lincoln to enforce its rights under the Series C Guarantee
without first instituting a legal proceeding against the Series C Issuer, the
Guarantee Trustee or any other person or entity. If Lincoln were to default on
its obligation to pay amounts payable under the Series C Subordinated
Debentures, the Series C Issuer would lack funds for the payment of
Distributions or amounts payable on redemption of the Series C TOPrS or
otherwise, and, in such event, holders of the Series C TOPrS would not be able
to rely upon the Series C Guarantee for payment of such amounts. Instead, in the
event a Debenture Event of Default shall have occurred and be continuing and
such event is attributable to the failure of Lincoln to pay interest on or
principal of the Series C Subordinated Debentures on the payment date on which
such payment is due and payable, then a holder of Series C TOPrS may institute a
legal proceeding directly against Lincoln for enforcement of payment to such
holder of the principal of or interest on such Series C Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Series C TOPrS of such holder (a "Direct
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<PAGE>
Action"). In connection with such Direct Action, Lincoln will have a right of
set-off under the Indenture to the extent of any payment made by Lincoln to such
holder of Series C TOPrS in the Direct Action. Except as described herein,
holders of Series C TOPrS will not be able to exercise directly any other remedy
available to the holders of the Series C Subordinated Debentures or assert
directly any other rights in respect of the Series C Subordinated Debentures.
See "Description of Junior Subordinated Debt Securities--Enforcement of Certain
Rights by Holders of Preferred Securities," "Description of Junior Subordinated
Debt Securities--Junior Subordinated Debt Security Events of Default" and
"Description of Guarantees" in the accompanying Prospectus. The Trust Agreement
provides that each holder of Series C TOPrS by acceptance thereof agrees to the
provisions of the Series C Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series C TOPrS will generally have limited voting rights relating
only to the modification of the Series C TOPrS, the dissolution, winding-up or
liquidation of the Series C Issuer, and the exercise of the Series C Issuer's
rights as holder of Series C Subordinated Debentures. Holders of Series C TOPrS
will not be entitled to vote to appoint, remove or replace the Property Trustee
or the Delaware Trustee, and such voting rights are vested exclusively in the
holder of the Series C Common Securities except upon the occurrence of certain
events described herein. The Property Trustee, the Administrative Trustees and
Lincoln may amend the Trust Agreement without the consent of holders of Series C
TOPrS to ensure that the Series C Issuer will be classified for United States
federal income tax purposes as a grantor trust even if such action adversely
affects the interests of such holders. See "Description of Preferred
Securities--Voting Rights; Amendment of Each Trust Agreement" and "--Removal of
Issuer Trustees" in the accompanying Prospectus.
TRADING CHARACTERISTICS OF SERIES C TOPRS
Application has been made to have the Series C TOPrS approved for listing on
the New York Stock Exchange. The Series C TOPrS may trade at prices that do not
fully reflect the value of accrued but unpaid interest with respect to the
underlying Series C Subordinated Debentures. A holder of Series C TOPrS that
disposes of its Series C TOPrS between record dates for payments of
Distributions (and consequently does not receive a Distribution from the Series
C Issuer for the period prior to such disposition) will nevertheless be required
to include accrued but unpaid interest on the Series C Subordinated Debentures
through the date of disposition in income as ordinary income and to add such
amount to its adjusted tax basis in the Series C TOPrS disposed of. Such holder
will recognize a capital loss to the extent the selling price (which may not
fully reflect the value of accrued but unpaid interest) is less than its
adjusted tax basis (which will include accrued but unpaid interest). Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes. See "Certain Federal
Income Tax Consequences--Sale or Redemption of Series C TOPrS."
As indicated above, application has been made to have the Series C TOPrS
approved for listing on the New York Stock Exchange. If the Series C TOPrS are
not listed on a national securities exchange or the NASDAQ National Market and
the Underwriters do make a market in the Series C TOPrS, the liquidity of the
Series C TOPrS could be adversely affected.
HOLDING COMPANY STRUCTURE
As a holding company with no significant business operations of its own,
Lincoln relies on dividends and interest on surplus notes from its insurance
company subsidiaries, which are primarily domiciled in Indiana, as the principal
source of cash to meet its obligations, including the payment of principal of
(and premium, if any) and any interest on debt obligations of Lincoln (including
the Series C Subordinated Debentures), and to pay dividends to holders of its
capital stock. An Indiana-domiciled insurer may not pay a dividend or interest
on surplus notes without notifying the state insurance department and providing
certain information. In addition, the payment of dividends by Indiana-domiciled
insurers is limited under the insurance holding company laws which require
notice to and approval by the state insurance
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<PAGE>
commissioner for the declaration or payment of any dividend, which together with
other dividends or distributions made within the preceding twelve months,
exceeds the greater of (i) 10% of the insurer's statutory surplus as of December
31 of the preceding year or (ii) net income if the insurer is a property-
casualty insurance company or net gain from operations if the insurer is a life
insurance company, for the twelve-month period ending on the thirty-first day of
December last preceding. The insurance holding company laws of the other
jurisdictions in which Lincoln's insurance subsidiaries are incorporated
generally contain similar (although in certain instances somewhat more
restrictive) limitations on the payment of dividends. Based upon these
regulations, Lincoln's insurance subsidiaries could pay dividends to Lincoln in
1998 of approximately $396.2 million, without obtaining specific approval from
the insurance commissioners. Dividends payable by non-insurance subsidiaries are
not subject to regulatory limitations.
In connection with the acquisition of the CIGNA individual life insurance
and annuity business, Lincoln National Life Insurance Company issued a $500
million surplus note to Lincoln. The note bears interest at a fixed 6.56% rate.
Principal repayments are not required until the note matures in the year 2028.
However, beginning in the year 2003, Lincoln has an annual demand right for
repayment of all, or any portion, of the outstanding principal balance of the
surplus note. Under applicable law, approval of the Commissioner of Insurance of
the State of Indiana must be obtained prior to the payment of any interest or
principal on the surplus note. It is anticipated that an additional intercompany
surplus note will be issued in connection with the acquisition of Aetna's
domestic individual life insurance business by Lincoln National Life Insurance
Company.
FORWARD-LOOKING STATEMENTS
Investors are cautioned that certain statements contained or incorporated by
reference in this Prospectus are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements
which are predictive in nature, which depend upon or refer to future events or
conditions, or which include words such as "expects," "anticipates," "intends,"
"plans," "believes," "estimates" and similar expressions constitute
forward-looking statements. In addition, any statements concerning future
financial performance (including future revenues, earnings or growth rates),
ongoing business strategies or prospects, and possible future Lincoln actions,
are also forward-looking statements as defined by the Act. Forward-looking
statements are based on current expectations and projections about future events
and are subject to, among other things, risks, uncertainties and assumptions
about Lincoln, economic factors and the insurance industry generally. Such
statements are not guaranties of future performance and Lincoln has no specific
intentions to update those statements.
Actual events and results could differ materially from those indicated in
the forward-looking statements made by Lincoln due to, among other changes not
currently known, subsequent significant changes in: Lincoln (E.G., acquisitions
and dispositions), financial markets (E.G., interest rates and securities
markets), legislation (E.G., taxes and product taxation), regulation (insurance
and securities regulation), acts of God (E.G., hurricanes, earthquakes and
storms), insurance risks (E.G., policyholder mortality and morbidity) and
competition.
LINCOLN NATIONAL CAPITAL III
Lincoln National Capital III is a statutory business trust formed under
Delaware law pursuant to (i) the Trust Agreement executed by Lincoln, as
Depositor, The First National Bank of Chicago, as Property Trustee, First
Chicago Delaware, Inc., Delaware Trustee, and the Administrative Trustees named
therein, and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on May 20, 1996. The Series C Issuer's business and affairs
are conducted by the Issuer Trustees: The First National Bank of Chicago, as
Property Trustee, and First Chicago Delaware, Inc., Delaware Trustee, and two
individual Administrative Trustees who are employees or officers of or
affiliated with Lincoln. The Series C Issuer exists for the exclusive purposes
of (i) issuing and selling the Series C TOPrS and Series C Common Securities,
(ii) using the proceeds from the sale of Series C TOPrS and Series C Common
Securities to acquire Series C Subordinated Debentures issued by Lincoln and
(iii) engaging in only those other
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<PAGE>
activities necessary or incidental thereto (such as registering the transfer of
the Series C Securities). Accordingly, the Series C Subordinated Debentures will
be the sole assets of the Series C Issuer, and payments under the Series C
Subordinated Debentures will be the sole revenue of the Series C Issuer. All of
the Series C Common Securities will be owned by Lincoln. The Series C Common
Securities will rank PARI PASSU, and payments will be made thereon pro rata,
with the Series C TOPrS, except that upon the occurrence and continuance of an
event of default under the Trust Agreement resulting from an Event of Default
under the Indenture, the rights of Lincoln as holder of the Series C Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption or otherwise will be subordinated to the rights of the holders of the
Series C TOPrS. See "Description of Preferred Securities--Subordination of
Common Securities" in the accompanying Prospectus. Lincoln will acquire Series C
Common Securities in an aggregate liquidation amount equal to approximately 3%
of the total capital of the Series C Issuer. The Series C Issuer has a term of
55 years, but may terminate earlier as provided in the Trust Agreement. The
principal executive office of the Series C Issuer is 200 East Berry Street, Fort
Wayne, Indiana 46802, Attention: Secretary, and its telephone number is (219)
455-3271.
No separate financial statements of the Series C Issuer have been included
herein. The Company and the Series C Issuer do not consider that such financial
statements would be material to holders of the Series C TOPrS because the Series
C Issuer is a special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than its holding as trust assets the Series C Subordinated Debentures and
the issuance of the Series C TOPrS. The Series C Issuer is not currently subject
to the information reporting requirements of the Exchange Act. The Series C
Issuer will become subject to such requirements upon the effectiveness of the
Registration Statement, although the Trust intends to seek and expects to
receive an exemption therefrom.
LINCOLN NATIONAL CORPORATION
Lincoln National Corporation is a holding company with consolidated assets
as of March 31, 1998 of approximately $87.9 billion and shareholders' equity of
approximately $5.1 billion. Through subsidiaries, Lincoln operates multiple
insurance and investment management businesses. Operations are divided into four
business segments: (1) Life Insurance and Annuities, (2) Lincoln UK, (3)
Reinsurance and (4) Investment Management. Lincoln is an Indiana corporation
with its principal office at 200 East Berry Street, Fort Wayne, Indiana
46802-2706. Its telephone number is (219) 455-2000.
LIFE INSURANCE AND ANNUITIES. The Life Insurance and Annuities segment is
comprised of the operations of Lincoln National Life Insurance Company, First
Penn-Pacific Life Insurance Company, Lincoln Life & Annuity Company of New York
and Lincoln Financial Advisors Corporation. A network of 68 life insurance
agencies, independent life insurance brokers, insurance agencies located within
financial institutions and specifically trained employees sells fixed annuities,
variable annuities, pension products, universal life insurance, variable
universal life insurance, whole life and other individual insurance coverages in
most states of the United States. The distribution network includes
approximately 2,200 career agents, 15,600 brokers and access to 51,800
stockbrokers and financial planners. This segment reported income from
operations of $255.8 million in 1997, a 20% increase over the $212.5 million
reported in 1996. This earnings growth is primarily attributable to the annuity
business where earnings increased 23% in 1997 to $203.0 million.
Account values for this segment's annuities, 401(k) retirement plans, life
insurance and pensions totaled $53.7 billion as of December 31, 1997, an
increase of 14.5% over the account values as of December 31, 1996. Life
insurance in force in this segment as of December 31, 1997, totaled $63.5
billion, an increase of 29% over $49.1 billion as of December 31, 1996.
Income from operations for the quarter ended March 31, 1998 was $90.0
million versus $56.8 million in the prior year quarter. This increase is the
result of the addition of the life and annuity business acquired from CIGNA
Corporation ("CIGNA") and the continuation of strong earnings from annuities. As
of March 31, 1998 account values and life insurance in-force totaled $61.7
billion and $108.8 billion,
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respectively. The growth since December 31, 1997 includes $4.4 billion and $42
billion related to the business acquired from CIGNA.
Prior to the acquisition of additional life insurance and annuities business
(see "--Recent Developments" below), this segment accounted for approximately
50% of income from operations. Following the completion of these acquisitions,
it is anticipated that this segment will account for approximately 75% of
Lincoln's consolidated income from operations.
LINCOLN UK. Lincoln UK offers life, investment and income protection and
retirement planning products in the U.K. market, primarily through 1,800 direct
sales representatives and tied agents. The products offered are primarily
unit-linked products where investment risk is borne by the policyholder. The
segment reported income from operations of $66.6 million in 1997, excluding an
after-tax charge of $174.9 million to strengthen reserves for future liabilities
concerning past sales of pension products to individuals. Excluding the charge,
this segment's 1997 income from operations was slightly higher than in 1996.
Income from operations for the quarter ended March 31, 1998 was $17.2
million versus $16.5 million in the prior year quarter.
REINSURANCE. The Reinsurance segment, conducted through Lincoln's
reinsurance companies ("Lincoln Re"), is one of the leading life-health
reinsurers in the world, with worldwide net premium income of $1.7 billion in
1997. As of December 31, 1997, Lincoln Re's individual and group life business
in-force was $183.5 billion, an increase of 14% over the prior year.
By providing innovative programs, tailored to clients' needs, Lincoln Re has
achieved a client base of more than 1,700 U.S. and 350 international companies
and a client retention rate of more than 95%. Lincoln Re does business in more
than 50 countries and has offices in Toronto, Brussels, London, Mexico City,
Buenos Aires, Manila and Singapore. Lincoln also maintains representative
offices in China.
This segment had income from operations, excluding special charges, of $92.1
million in 1997, a 24% increase over the $74 million reported in 1996. Two
special charges were taken in 1997: (i) $130 million for disability income
reserve strengthening, a business that has proven to be one of the most
difficult for the insurance industry in this decade, and (ii) $113.7 million for
reserve strengthening for certain personal accident reinsurance business
(certain excess-of-loss personal accident reinsurance programs created in the
London market have produced unexpectedly heavy losses). These charges resulted
in a net operating loss of $136.4 million in 1997.
Income from operations for the quarter ended March 31, 1998 was $26.4
million versus $19.4 million in the prior year quarter. This 36% increase was
the result of the continuation of strong individual life reinsurance sales and
favorable mortality. Individual and group life insurance in-force was $190.0
billion as of March 31, 1998.
INVESTMENT MANAGEMENT. The investment management segment is composed of the
operations of Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and
Vantage Global Advisors, Inc. Each of these operating companies operates
autonomously and is encouraged to preserve its distinctive investment style.
Lincoln is focused on expanding its role as a money manager for both retail and
institutional business. Particular emphasis is being given to accelerating the
growth of the segment's retail mutual funds operation.
The investment management segment had assets under management of $54.0
billion at December 31, 1997, a 25% increase over the preceding year. The
segment's retail mutual fund and wrap fee assets totaled $22.5 billion at
December 31, 1997, which was a 40% increase from the $16.1 billion at December
31, 1996. While some of this growth was due to the acquisition in 1997 of the
Voyageur Fund Managers, representing $2.6 billion in assets, most of the growth
was internal and is attributable to enhanced service quality and the expansion
of distribution channels. The institutional investment management business had
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<PAGE>
assets under management of $31.5 billion at December 31, 1997, compared with
$27.1 billion at December 31, 1996.
The investment management segment had income from operations of $4.5 million
in 1997, compared with $10.2 million in 1996. This decrease in income was due to
increased spending to expand retail operations at Delaware Management, including
increasing marketing personnel, broadening product offerings and upgrading
customer service. Lincoln believes such efforts are key to the growth of the
retail mutual funds operation.
Income from operations for the quarter ended March 31, 1998 was $2.9 million
versus $523,000 in the prior year quarter. This increase resulted from the
expansion of distribution channels during 1997. Retail and institutional assets
under management were $25.0 billion and $35.2 billion, respectively, as of March
31, 1998.
RECENT DEVELOPMENTS. On January 2, 1998, Lincoln completed the purchase of
a block of individual life insurance and annuity business from CIGNA for
approximately $1.4 billion. This acquisition also required additional
expenditures to cover expenses associated with the purchase and to provide
additional capital for the Life Insurance and Annuities segment to support this
business totaling $228.5 million. This transaction is being accounted for using
purchase accounting and, accordingly, the operating results generated by this
block of business have been included in Lincoln's consolidated financial
statements starting January 2, 1998. In addition to approximately $41 billion of
individual life insurance in force, Lincoln acquired a career agency force with
600 financial planners, expanded estate and financial planning capabilities, a
life brokerage operation and an annuity distribution system. During 1997, this
block produced premiums, fees and deposits of approximately $1.2 billion and
earnings of $98 million on a basis of generally accepted accounting principles
and prior to any adjustments required by purchase accounting.
Lincoln recorded a restructuring charge to its Life Insurance and Annuities
segment during the first quarter of 1998 of $20.0 million ($30.8 million
pre-tax) to cover certain costs of integrating the existing operations with the
new block of business.
On May 21, 1998, Lincoln announced that it signed a definitive agreement to
acquire a block of individual life insurance business from Aetna Inc. ("Aetna")
for $1.0 billion. The transaction includes approximately $50 billion of
individual life insurance in-force and the services of 57 managing general
agents and 29 life brokerage managers. The acquisition is expected to involve
additional expenditures totaling approximately $165 million to cover expenses
associated with the purchase and to provide additional capital to the Life
Insurance and Annuities segment to support this business. The transaction will
be accounted for using purchase accounting and, accordingly, the operating
results generated by this block of business after the closing will be included
in Lincoln's consolidated financial statements from the closing date. The
transaction is expected to close in the fourth quarter of 1998. As of June 30,
1998, this block of business had liabilities, measured on a statutory basis, of
$3.0 billion. The liabilities as updated to the closing date will become
Lincoln's obligation at the time of closing. Lincoln will also receive assets,
measured on a historic statutory basis, equal to the liabilities. During 1997,
this block produced premiums and fees of $277 million and net income of $77
million on a basis of generally accepted accounting principles, prior to
adjustments required by purchase accounting. An initial application of purchase
accounting to this block of business would indicate that goodwill and other
intangible assets will be approximately $300 million and $800 million,
respectively. Additional analysis of this block of business after closing could
result in a change in these amounts or the shifting of amounts between goodwill
and other intangible assets. Approximately one-half of the funding for this
acquisition is expected to be financed from available cash reserves, and the
other one-half is expected to be financed from the net proceeds from the sale of
securities, including the Series C TOPrS. See "Use of Proceeds."
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data of the
Company. The data at December 31, 1997, 1996 and 1995 and for the three years
ended December 31, 1997 are derived from the Company's audited financial
statements for those years. Selected unaudited financial data at March 31, 1998
and 1997 and for each of the three month periods ended March 31, 1998 and 1997
reflect, in the opinion of the Company, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the results
of operations for these periods. The results of operations for the three months
ended March 31, 1998 are not necessarily indicative of results to be expected
for the full year. The following data should be read in conjunction with the
financial statements and the related notes thereto incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH
31, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total revenue........................................... $ 1,448.0 $ 1,198.1 $ 4,898.5 $ 4,733.6 $ 4,586.5
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income from continuing operations(1)................ $ 122.0 $ 83.0 $ 22.2 $ 356.4 $ 301.4
Net income from discontinued operations................. -- 48.3 134.9 157.2 180.8
Gain on sale of discontinued operations................. -- -- 776.9 -- --
--------- --------- --------- --------- ---------
Net Income(1)......................................... $ 122.0 $ 131.3 $ 934.0 $ 513.6 $ 482.2
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Per Share Data:(2)
Net income from continuing operations................... $ 1.22 $ .79 $ .21 $ 3.38 $ 2.88
Net income from discontinued operations................. -- .47 1.30 1.49 1.72
Gain on sale of discontinued operations................. -- -- 7.47 -- --
--------- --------- --------- --------- ---------
Net Income--Diluted................................... $ 1.22 $ 1.26 $ 8.98 $ 4.87 $ 4.60
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net Income--Basic..................................... $ 1.22 $ 1.27 $ 9.11 $ 4.95 $ 4.78
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Common stock dividend................................... $ .52 $ .49 $ 1.99 $ 1.87 $ 1.75
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------------- ----------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Assets........................................... $ 87,884.5 $ 71,996.6 $ 77,174.7 $ 71,713.4 $ 63,257.7
Long-term debt(3)................................ 811.7 625.7 511.0 626.3 659.3
Minority interest-preferred securities of
subsidiary companies............................ 315.0 315.0 315.0 315.0 --
Shareholders' equity............................. 5,054.2 4,281.1 4,982.9 4,470.0 4,378.1
Per Share Data:(2)
Shareholders' equity (Securities at market)...... $ 50.24 $ 41.36 $ 49.27 $ 43.00 $ 41.89
Shareholders' equity (Securities at cost)........ 45.52 39.44 44.96 39.03 35.21
</TABLE>
- ------------------------
(1) Net income from continuing operations and net income for 1995 and 1997
include the impact of the changes in estimate of the reserve level needed
for the Company's disability income business ($121.6 million and $130.0
million, respectively, after-tax). Also, 1997 includes a change in estimate
for reserves of (1) Lincoln UK's pension business of $174.9 million
after-tax and (2) Reinsurance's personal accident programs of $113.7 million
after-tax. See "Lincoln National Corporation."
(2) Per share amounts were also affected by the issuance of 1,398,112 shares of
Common Stock in 1997, and the retirement of 694,582 and 4,948,900 shares of
Common Stock in 1996 and 1997, respectively.
(3) Long-term debt as of May 31, 1998 was unchanged from the $811.7 million
shown for March 31, 1998.
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<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of Lincoln
and its subsidiaries as of March 31, 1998 and as adjusted to give effect to the
consummation of the offering of the Series C TOPrS. See "Use of Proceeds." The
following data should be read in conjunction with the consolidated financial
statements and notes thereto of Lincoln and its subsidiaries incorporated herein
by reference.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term debt (including current maturities of long-term debt)......................... $ 364.9 $ 364.9
--------- -----------
--------- -----------
Long-term debt less current portion:
7 1/8% Notes due 1999.................................................................. 99.8 99.8
7 5/8% Notes due 2002.................................................................. 99.5 99.5
7 1/4% Debentures due 2005............................................................. 191.4 191.4
6 1/2% Notes due 2008.................................................................. 100.2 100.2
7% Notes due 2018...................................................................... 200.3 200.3
9 1/8% Debentures due 2024............................................................. 119.8 119.8
Mortgages and other notes.............................................................. .7 .7
--------- -----------
Total long-term debt (less current portion).......................................... 811.7 811.7
Minority Interest--Preferred Securities of Subsidiary Companies, Series A and Series
B(1)................................................................................... 315.0 315.0
Minority Interest--Preferred Securities of Subsidiary Companies, Series C(2)............. -- 200.0
--------- -----------
Total long-term debt (less current portion) and minority interests................... 1,126.7 1,326.7
Shareholders' Equity:
Preferred Stock, without par value:
Authorized: 10,000,000 shares
Issued and outstanding:
35,091 shares of $3.00 Convertible Cumulative Preferred Stock, Series A............ 1.1 1.1
Common Stock, without par value:
Authorized: 800,000,000 shares
Issued and outstanding: 100,325,208 shares........................................... 963.4 963.4
Earned surplus........................................................................... 3,562.3 3,562.3
Foreign currency translation adjustment.................................................. 52.4 52.4
Net unrealized gain on securities available-for-sale..................................... 475.0 475.0
--------- -----------
Total shareholders' equity........................................................... 5,054.2 5,054.2
Total capitalization............................................................... $ 6,180.9 $ 6,380.9
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) In July 1996, Lincoln National Capital I issued 8,600,000 8 3/4% Cumulative
Quarterly Income Preferred Securities, Series A. The sole assets of Lincoln
National Capital I are the 8 3/4% Junior Subordinated Deferrable Interest
Debentures, Series A, issued by Lincoln to the Series A Issuer. In August
1996, Lincoln National Capital II issued 4,000,000 8.35% Trust Originated
Preferred Securities, Series B. The sole assets of Lincoln National Capital
II are the 8.35% Junior Subordinated Deferrable Interest Debentures, Series
B issued by Lincoln to the Series B Issuer. These Series A Debentures and
Series B Debentures will mature on September 30, 2026, which date may be
extended to a date not later than September 30, 2045 if certain conditions
are met. Lincoln owns all of the common securities of both Lincoln National
Capital I and Lincoln National Capital II.
The obligations of Lincoln, under certain documents, including without
limitation guarantee agreements, constitute a full and unconditional
guarantee by Lincoln of the obligations of Lincoln National Capital I and
Lincoln National Capital II under the preferred securities. Lincoln National
Capital I
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<PAGE>
and Lincoln National Capital II are not subject to the reporting
requirements under the Exchange Act.
(2) As described herein, the sole assets of the Series C Issuer will be
$206,186,000 of % Junior Subordinated Deferrable Interest Debentures,
Series C, issued by Lincoln to the Series C Issuer. The Series C
Subordinated Debentures will mature on September 30, 2028, which date may be
extended to a date not later than September 30, 2047 if certain conditions
are met. Lincoln owns all of the Series C Common Securities of the Series C
Issuer. It is anticipated that the Series C Issuer will not be subject to
the reporting requirements under the Exchange Act.
USE OF PROCEEDS
All of the proceeds from the sale of Series C TOPrS will be invested by the
Series C Issuer in Series C Subordinated Debentures. Lincoln intends that the
proceeds from the sale of such Series C Subordinated Debentures will be used to
fund a portion of the purchase price of the block of insurance business
purchased from Aetna. See "Lincoln National Corporation--Recent Developments."
Until so utilized, the net proceeds will be invested in income producing
securities.
ACCOUNTING TREATMENT
For financial reporting purposes, the Series C Issuer will be treated as a
subsidiary of Lincoln and, accordingly, the accounts of the Series C Issuer will
be included in the consolidated financial statements of Lincoln. The Series C
TOPrS will be presented in the consolidated balance sheets of Lincoln on a line
entitled "Minority Interest--Preferred Securities of Subsidiary Companies" and
appropriate disclosures about the Series C TOPrS, the Series C Guarantee and the
Series C Subordinated Debentures will be included in the notes to the
consolidated financial statements. For financial reporting purposes, Lincoln
will record Distributions payable on the Series C TOPrS as an expense in the
consolidated statements of income.
Lincoln has agreed that future financial reports of Lincoln will: (i)
present the securities issued by the trusts on the balance sheet on a line item
entitled "Minority Interest--Preferred Securities of Subsidiary Companies"; (ii)
include in a footnote to the financial statements disclosure that the sole
assets of the Trusts are the Junior Subordinated Deferrable Interest Debentures
(specifying as to each Trust the principal amount, interest rate and maturity
date of Junior Subordinated Deferrable Interest Debentures held) and whether
Staff Accounting Bulletin 53 treatment is sought; (iii) include, in an audited
footnote to the financial statements, disclosure that (a) the Trusts are
wholly-owned; (b) the sole assets of the Trusts are the Junior Subordinated
Deferrable Interest Debentures (specifying as to each Trust the principal
amount, interest rate and maturity date of the Junior Subordinated Deferrable
Interest Debentures held); and (c) the obligations of Lincoln under the
documents, in the aggregate, constitute a full and unconditional guarantee by
Lincoln of the Trusts' obligations under the Preferred Securities issued by each
Trust.
CERTAIN TERMS OF SERIES C TOPRS
GENERAL
The following summary of certain terms and provisions of the Series C TOPrS
supplements the description of the terms and provisions of the Preferred
Securities set forth in the accompanying Prospectus under the heading
"Description of Preferred Securities," to which description reference is hereby
made. This summary of certain terms and provisions of the Series C TOPrS does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Trust Agreement. The form of the Trust Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus
Supplement and accompanying Prospectus are a part.
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DISTRIBUTIONS
The Series C TOPrS represent beneficial interests in the Series C Issuer,
and Distributions on each Series C TOPrS will be payable at the annual rate of
% of the stated Liquidation Amount of $25, payable quarterly in arrears on
the last day of March, June, September and December of each year. Distributions
will accumulate from the date of original issuance. The first Distribution
payment date for the Series C TOPrS will be September 30, 1998. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which Distributions
are payable on the Series C TOPrS is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any additional Distributions or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. See "Description of Preferred
Securities--Distributions" in the accompanying Prospectus.
So long as no Event of Default under the Indenture has occurred and is
continuing, Lincoln has the right under the Indenture to defer the payment of
interest on the Series C Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series C Subordinated Debentures. As a consequence of any such
election, quarterly Distributions on the Series C TOPrS will be deferred by the
Series C Issuer during any such Extension Period. Distributions to which holders
of the Series C TOPrS are entitled will accumulate additional Distributions
thereon at the rate per annum of % thereof, compounded quarterly from the
relevant payment date for such Distributions. The terms "Distributions" as used
herein shall include any such additional Distributions. During any such
Extension Period, Lincoln may not, and may not permit any subsidiary of Lincoln
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of Lincoln's capital
stock or (ii) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of Lincoln (including other
Junior Subordinated Debentures) that rank PARI PASSU with or junior in interest
to the Series C Subordinated Debentures or make any guarantee payments with
respect to any guarantee by Lincoln of the debt securities of any subsidiary of
Lincoln if such guarantee ranks PARI PASSU or junior in interest to the Series C
Subordinated Debentures (other than (a) dividends or distributions in common
stock of Lincoln, (b) redemptions or purchases of any rights pursuant to
Lincoln's Rights Plan, or any successor to such Rights Plan, and the declaration
of a dividend of such rights or the issuance of stock under such plans in the
future, (c) payments under any Guarantee, and (d) purchases of common stock
related to the issuance of common stock or rights under any of Lincoln's benefit
plans for its directors, officers or employees). Prior to the termination of any
such Extension Period, Lincoln may further extend the interest payment period,
provided that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Series C Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due, Lincoln may elect to begin a new Extension Period. There is no limitation
on the number of times that Lincoln may elect to begin an Extension Period. See
"Certain Terms of Series C Subordinated Debentures--Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences--Original Issue
Discount."
Lincoln has no current intention of exercising its right to defer payments
of interest by extending the interest payment period on the Series C
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series C
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined in
the accompanying Prospectus) of the Series C Securities, upon not less than 30
nor more than 60 days notice prior to the date fixed for repayment or
redemption, at a redemption price, with respect to
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the Series C TOPrS (the "Redemption Price"), equal to the aggregate Liquidation
Amount of such Series C TOPrS plus accumulated and unpaid Distributions thereon
to the date of redemption (the "Redemption Date"). See "Description of Preferred
Securities--Redemption or Exchange" in the accompanying Prospectus and "Certain
Terms of Series C Subordinated Debentures--Redemption."
Lincoln will have the right to redeem the Series C Subordinated Debentures
(i) on or after , 2003, in whole at any time or in part from time to
time, at a redemption price equal to the accrued and unpaid interest on the
Series C Subordinated Debentures so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof or (ii) at any time, in whole (but not
in part), upon the occurrence and continuation of a Tax Event or an Investment
Company Event (each as defined in the accompanying Prospectus, and as so
collectively defined, a "Special Event"), at a redemption price equal to the
accrued and unpaid interest on the Series C Subordinated Debentures so redeemed
to the date fixed for redemption, plus 100% of the principal amount thereof, in
each case subject to conditions described under "Description of Junior
Subordinated Debt Securities--Redemption" in the accompanying Prospectus.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF SERIES C SUBORDINATED DEBENTURES
If a Special Event shall occur and be continuing, Lincoln will have the
right to redeem the Series C Subordinated Debentures in whole (but not in part)
and thereby cause a mandatory redemption of the Series C Securities in whole
(but not in part) at the Redemption Price within 90 days following the
occurrence of such Special Event. At any time, Lincoln will have the right to
terminate the Series C Issuer and after satisfaction of the liabilities of
creditors of the Series C Issuer as provided by applicable law, cause the Series
C Subordinated Debentures to be distributed to the holders of the Series C TOPrS
in liquidation of the Series C Issuer. Under current United States federal
income tax law and interpretations, a distribution of the Series C Subordinated
Debentures upon liquidation of the Series C Issuer would not be a taxable event
to holders of the Series C TOPrS. However, if any event described in clauses (a)
and (b) of the definition of "Tax Event" above were to occur which would cause
the Series C Issuer to be subject to United States federal income tax with
respect to income received or accrued on the Series C Subordinated Debentures,
as the case would be if, for example, the Series C Issuer were treated as an
association taxable as a corporation, a distribution of the Series C
Subordinated Debentures by the Series C Issuer could be a taxable event to the
Series C Issuer and the holders of the Series C TOPrS. See "Certain Federal
Income Tax Consequences--Distribution of Series C Subordinated Debentures to
Holders of Series C TOPrS." If Lincoln does not elect either option described
above, the Series C TOPrS will remain outstanding until the repayment of the
Series C Subordinated Debentures.
If Lincoln elects to liquidate the Series C Issuer and thereby causes the
Series C Subordinated Debentures to be distributed to holders of the Series C
TOPrS in liquidation of the Series C Issuer, Lincoln shall have the right to
extend the maturity of such Series C Subordinated Debentures, provided that it
can extend the maturity only if certain conditions are met. See "Description of
Preferred Securities--Redemption or Exchange--Extension of Maturity of
Corresponding Junior Subordinated Debt Securities" in the accompanying
Prospectus and "Certain Terms of Series C Subordinated Debentures--General."
LIQUIDATION VALUE
The amount payable on the Series C TOPrS in the event of any liquidation of
the Series C Issuer is $25 per Series C TOPrS plus accumulated and unpaid
Distributions, which may be in the form of a distribution of such amount in
Series C Subordinated Debentures, subject to certain exceptions. See
"Description of Preferred Securities--Liquidation Distribution Upon Termination"
in the accompanying Prospectus.
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CERTAIN TERMS OF SERIES C SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series C
Subordinated Debentures supplements the description of the terms and provisions
of the Corresponding Junior Subordinated Debt Securities set forth in the
accompanying Prospectus under the headings "Description of Junior Subordinated
Debt Securities" and "Description of Junior Subordinated
Debentures--Corresponding Junior Subordinated Debt Securities", to which
description reference is hereby made. The summary of certain terms and
provisions of the Series C Subordinated Debt Securities set forth below does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Indenture. The Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and accompanying
Prospectus is a part.
Concurrently with the issuance of the Series C TOPrS, the Series C Issuer
will invest the proceeds thereof, together with the consideration paid by
Lincoln for the Series C Common Securities, in the Series C Subordinated
Debentures issued by Lincoln. The Series C Subordinated Debentures will bear
interest accruing from the date of original issuance, at the annual rate of %
of the principal amount thereof, payable quarterly in arrears on the last day of
March, June, September and December of each year (each, an "Interest Payment
Date"), commencing September 30, 1998, to the person in whose name each Series C
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
It is anticipated that, until the liquidation, if any, of the Series C Issuer,
each Series C Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Series C TOPrS. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on, the Series C Subordinated Debentures is not a Business
Day, then payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. Accrued interest that is not
paid on the applicable Interest Payment Date will bear additional interest on
the amount thereof (to the extent permitted by law) at the rate per annum of %
thereof, compounded quarterly. The term "interest" as used herein shall include
quarterly interest payments, interest on quarterly interest payments not paid on
the applicable Interest Payment Date and Additional Sums (as defined below), as
applicable.
The Series C Subordinated Debentures will be issued as a series of junior
subordinated debentures under the Indenture. The Series C Subordinated
Debentures will mature on September 30, 2028, which date may be extended at any
time at the election of Lincoln for one or more periods, but in no event to a
date later than September 30, 2047 (such date, as it may be extended, the
"Stated Maturity"), provided that at the time such election is made and at the
time of extension (i) Lincoln is not in bankruptcy, otherwise insolvent or in
liquidation, (ii) Lincoln is not in default in, the payment of any interest or
principal on the Series C Subordinated Debentures, (iii) the Series C Issuer is
not in arrears on payments of Distributions on the Series C TOPrS and no
deferred Distributions are accumulated, (iv) the Series C Subordinated
Debentures are rated not less than BBB- by Standard & Poor's Ratings Services or
Baa3 by Moody's Investors Service, Inc. or the equivalent by any other
nationally recognized statistical rating organization and (v) the extended
Stated Maturity is no later than the 49th anniversary of the initial issuance of
the Series C TOPrS; PROVIDED, HOWEVER, that, if Lincoln exercises its right to
liquidate the Series C Issuer and distribute the Series C Subordinated
Debentures, effective upon such exercise the Stated Maturity of the Series C
Subordinated Debentures may be changed to any date elected by Lincoln that is
(i) no earlier than the date five years after the initial issuance of the Series
C TOPrS and (ii) no later than the date 30 years (plus an extended term of up to
an additional 19 years if the above-referenced conditions are satisfied) after
the date of the initial issuance of the Series C TOPrS.
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The Series C Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt of Lincoln. See
"Description of Junior Subordinated Debt Securities-- Subordination" in the
accompanying Prospectus. Lincoln is a non-operating holding company and almost
all of the operating assets of Lincoln and its consolidated subsidiaries are
owned by such subsidiaries. Lincoln relies primarily on interest and dividends
from such subsidiaries to meet its obligations for payment of principal and
interest on its outstanding debt obligations and corporate expenses.
Accordingly, the Series C Subordinated Debentures will be subordinated to all
Senior Debt of Lincoln and effectively subordinated to all existing and future
liabilities of Lincoln's subsidiaries, and holders of Series C Subordinated
Debentures should look only to the assets of Lincoln for payments on the Series
C Subordinated Debentures. The Series C Subordinated Debentures will rank PARI
PASSU with the 8 3/4% Junior Subordinated Deferrable Interest Debentures, Series
A issued on July 2, 1996 and the 8.35% Junior Subordinated Deferrable Interest
Debentures, Series B issued on August 21, 1996. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of Lincoln, whether
under the Indenture or any existing or other indenture that Lincoln may enter
into in the future or otherwise, including Lincoln's Senior and Subordinated
Indentures entered into with The Bank of New York and The First National Bank of
Chicago, respectively. See "Description of Junior Subordinated Debt
Securities--Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred or is
continuing, Lincoln has the right under the Indenture at any time during the
term of the Series C Subordinated Debentures to defer the payment of interest at
any time or from time to time for a period not exceeding 20 consecutive quarters
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity of the Series C TOPrS. At the end of such
Extension Period, Lincoln must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of %, compounded quarterly,
to the extent permitted by applicable law). During an Extension Period, interest
will continue to accrue and holders of Series C Subordinated Debentures (or
holders of Series C TOPrS while such series is outstanding) will be required to
accrue interest income for United States federal income tax purposes. See
"Certain Federal Income Tax Consequences--Original Issue Discount."
During any such Extension Period, Lincoln may not, and may not permit any
subsidiary of Lincoln to, (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to, any
of Lincoln's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of
Lincoln (including other Junior Subordinated Debentures) that rank PARI PASSU
with or junior in interest to the Series C Subordinated Debentures or make any
guarantee payments with respect to any guarantee by Lincoln of the debt
securities of any subsidiary of Lincoln if such guarantee ranks PARI PASSU or
junior in interest to the Series C Subordinated Debentures (other than (a)
dividends or distributions in common stock of Lincoln, (b) redemptions or
purchases of any rights pursuant to Lincoln's Rights Plan, or any successor to
such Rights Plan, and the declaration of a dividend of such rights or the
issuance of preferred stock under such plans in the future, (c) payments under
any Guarantee, and (d) purchases of Common Stock related to the issuance of
Common Stock under any of Lincoln's benefit plans for its directors, officers or
employees). Prior to the termination of any such Extension Period, Lincoln may
further extend the interest payment period, provided that no Extension Period
may exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Series C Subordinated Debentures. Upon the termination of any such Extension
Period and the payment of all amounts then due on any Interest Payment Date,
Lincoln may elect to begin a new Extension Period subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof Lincoln must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election of such
Extension Period at least one Business Day prior to the earlier of (i) the date
the Distributions on the Series C TOPrS would have been payable except for the
election to begin such Extension Period or (ii) the date the Administrative
Trustees are
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required to give notice to the New York Stock Exchange, the Nasdaq National
Market or other applicable self regulatory organization or to holders of such
Series C TOPrS of the record date or the date such Distributions are payable,
but in any event not less than one Business Day prior to such record date. The
Debenture Trustee shall give notice of Lincoln's election to begin a new
Extension Period to the holders of the Series C TOPrS. There is no limitation on
the number of times that Lincoln may elect to begin an Extension Period. See
"Description of Junior Subordinated Debt Securities--Option to Extend Interest
Payment Date" in the accompanying Prospectus.
ADDITIONAL SUMS
If the Series C Issuer is required to pay any additional taxes, duties or
other governmental charges ("Additional Sums") as a result of a Tax Event,
Lincoln will pay as additional amounts on the Series C Subordinated Debentures
such amounts as shall be required so that the Distributions payable by the
Series C Issuer shall not be reduced as a result of any such additional taxes,
duties or other governmental charges, subject to the conditions described under
"Description of Preferred Securities--Redemption or Exchange--Special Event
Redemption or Distribution of Corresponding Junior Subordinated Debt Securities"
in the accompanying Prospectus.
REDEMPTION
The Series C Subordinated Debentures are redeemable prior to maturity at the
option of Lincoln on or after , 2003, in whole at any time or in
part from time to time, at a redemption price equal to the accrued and unpaid
interest on the Series C Subordinated Debentures so redeemed to the date fixed
for redemption, plus 100% of the principal amount thereof, or at any time in
whole (but not in part), upon the occurrence and continuation of a Special
Event, at a redemption price equal to the accrued and unpaid interest on the
Series C Subordinated Debentures so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof, in each case subject to the further
conditions described under "Description of Junior Subordinated Debt
Securities--Redemption" in the accompanying Prospectus.
DISTRIBUTION OF SERIES C SUBORDINATED DEBENTURES
Under certain circumstances involving the termination of the Series C
Issuer, Series C Subordinated Debentures may be distributed to the holders of
the Series C TOPrS in liquidation of the Series C Issuer after satisfaction of
liabilities to creditors of the Series C Issuer as provided by applicable law.
If distributed to holders of Series C TOPrS in liquidation, the Series C
Subordinated Debentures will initially be issued in the form of one or more
global securities and DTC, or any successor depositary for the Series C TOPrS,
will act as depositary for the Series C Subordinated Debentures. It is
anticipated that the depositary arrangements for the Series C Subordinated
Debentures would be substantially identical to those in effect for the Series C
TOPrS. If the Series C Subordinated Debentures are distributed to the holders of
Series C TOPrS upon the liquidation of the Series C Issuer, Lincoln will use its
best efforts to list the Series C Subordinated Debentures on the New York Stock
Exchange or such other stock exchanges, if any, on which the Series C TOPrS are
then listed. There can be no assurance as to the market price of any Series C
Subordinated Debentures that may be distributed to the holders of Series C
TOPrS. For a description of DTC and the terms of the depositary matters, see
"Book-Entry Issuance" in the accompanying Prospectus.
REGISTRATION OF SERIES C SUBORDINATED DEBENTURES
A global security shall be exchangeable for Series C Subordinated Debentures
registered in the names of persons other than DTC or its nominee only if (i) DTC
notifies Lincoln that it is unwilling or unable to continue as a depository for
such global security and no successor depository shall have been appointed, or
if at any time DTC ceases to be a clearing agency registered under the Exchange
Act at a time when DTC is required to be so registered to act as such
depository, (ii) Lincoln in its sole discretion determines that such global
security shall be so exchangeable, or (iii) there shall have occurred and be
continuing an Event
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of Default under the Indenture with respect to such global security. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants (as defined in the accompanying
Prospectus) with respect to ownership of beneficial interests in such global
security. In the event that Series C Subordinated Debentures are issued in
definitive form, such Series C Subordinated Debentures will be in denominations
of $25 and integral multiples thereof and may be transferred or exchanged at the
offices described below.
Payments on Series C Subordinated Debentures represented by a global
security will be made to DTC, as the depositary for the Series C Subordinated
Debentures. In the event Series C Subordinated Debentures are issued in
definitive form, principal and interest will be payable, the transfer of the
Series C Subordinated Debentures will be registrable, and Series C Subordinated
Debentures will be exchangeable for Series C Subordinated Debentures of other
denominations of a like aggregate principal amount, at the corporate office of
the Debenture Trustee in Chicago, Illinois, or at the offices of any paying
agent or transfer agent appointed by Lincoln, provided that payment of interest
may be made at the option of Lincoln by check mailed to the address of the
persons entitled thereto or by wire transfer. In addition, if the Series C
Subordinated Debentures are issued in certificated form, the record dates for
payment of interest will be the 15th day of the last month of each calendar
quarter. For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Book-Entry Issuance" in the accompanying Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Series C TOPrS. This
summary only addresses the tax consequences to a person that acquires Series C
TOPrS on their original issue at their original offering price and that is (i)
an individual citizen or resident of the United States, (ii) a corporation or
partnership organized (or treated as created or organized for federal income tax
purposes) in or under the laws of the United States or any state thereof or the
District of Columbia, (iii) an estate the income of which is subject to United
States federal income tax regardless of source or (iv) a trust if (a) a United
States court can exercise primary supervision over the administration of the
trust and (b) one or more United States persons have the authority to control
all of the substantial decisions of the trust (a "United States Person"). This
summary does not address all tax consequences that may be applicable to a United
States Person that is a beneficial owner of Series C TOPrS, nor does it address
the tax consequences to (i) persons that are not United States Persons, (ii)
persons that may be subject to special treatment under United States federal
income tax law, such as banks, insurance companies, thrift institutions,
regulated investment companies, real estate investment trusts, tax-exempt
organizations, traders in securities that elect to mark to market and dealers in
securities or currencies, (iii) persons that will hold Series C TOPrS as part of
a position in a "straddle" or as part of a "hedging," "conversion" or other
integrated investment transaction for federal income tax purposes, (iv) persons
whose functional currency is not the United States dollar or (v) persons that do
not hold Series C TOPrS as capital assets. This summary also does not address
the United States federal alternative minimum tax consequences to any owner of
Series C TOPrS or the consequences under any state, local or foreign tax law of
holding Series C TOPrS.
The statements of law or legal conclusion set forth in this summary
constitute the opinion of Sonnenschein Nath & Rosenthal, counsel to Lincoln and
the Series C Issuer. This summary is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service
rulings and pronouncements and judicial decisions now in effect, all of which
are subject to change at any time. Such changes may be applied retroactively in
a manner that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting a beneficial owner of
Series C TOPrS.
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In particular, a decision by the Tax Court in the Enron Corporation case
could adversely affect Lincoln's ability to deduct interest on the Series C
Subordinated Debentures, which may in turn permit Lincoln to cause a redemption
of the Series C TOPrS. See "--Possible Tax Law Changes." The authorities on
which this summary is based are subject to various interpretations, and it is
therefore possible that the federal income tax treatment of the purchase,
ownership and disposition of Series C TOPrS may differ from the treatment
described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES C TOPRS, AS WELL AS THE
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE SERIES C ISSUER
In connection with the issuance of the Series C TOPrS, Sonnenschein Nath &
Rosenthal will render its opinion to the effect that, under then current law and
assuming compliance with the terms of the Trust Agreement, the Indenture and
other relevant documents and based on the facts, assumptions and representations
contained in this Prospectus Supplement and in the Prospectus, the Series C
Issuer will be classified as a grantor trust and not as an association taxable
as a corporation for United States federal income tax purposes. As a result,
each beneficial owner of Series C TOPrS (a "Securityholder") will be treated as
owning an undivided beneficial interest in the Series C Subordinated Debentures.
Accordingly, each Securityholder will be required to include in its gross income
its pro rata share of the interest income or gain recognized with respect to the
Series C Subordinated Debentures in accordance with the Securityholder's method
of accounting; provided that income constituting original issue discount must be
taken into account by the Securityholders as accrued, whether or not cash is
actually distributed to the Securityholders. See "--Original Issue Discount." No
amount included in income with respect to the Series C TOPrS will be eligible
for the dividends-received deduction.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, Lincoln has the right to defer the payment of interest
on the Series C Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated Maturity
of the Series C Subordinated Debentures. Under Treasury Regulations, if interest
under an instrument is payable at least annually at a fixed stated rate, and the
instrument contains terms and conditions that make the nonpayment of the
interest no more than a remote contingency, the instrument will not be
considered to be issued with original issue discount ("OID"). If interest is
deferred under the Series C Subordinated Debentures, Lincoln would be unable
under the terms of the Indenture to pay dividends on its capital stock or to pay
interest on equal or junior ranking debt securities. Thus, Lincoln believes that
the likelihood that interest will be deferred under the Series C Subordinated
Debentures is remote. As a result, each Securityholder will be taxable a pro
rata share of the interest on the Series C Subordinated Debentures as paid or
accrued, depending upon such Securityholder's method of accounting.
If Lincoln elects to defer payments of interest, the Series C Subordinated
Debentures will be treated as re-issued with OID, and all interest from that
time will be treated as OID. In that event, a Securityholder will recognize
income (in the form of OID) on a daily basis under a constant yield method over
the term of the Series C Subordinated Debentures (including during any Extension
Period), regardless of the receipt of cash with respect to the period to which
such income is attributable. (Subsequent uses of the term "interest" in this
summary shall include income in the form of OID.)
As a result, Securityholders during an Extension Period will include
interest in gross income in advance of the receipt of cash, and any
Securityholders who dispose of Series C TOPrS prior to the record date for the
payment of Distributions following such Extension Period will include interest
in gross income
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but will not receive any cash related thereto from the Series C Issuer. Any
amount of OID included in a Securityholder's gross income (whether or not during
an Extension Period) will increase such Securityholder's tax basis in its Series
C TOPrS, and the amount of Distributions received by a Securityholder will
reduce such Securityholder's tax basis in its Series C TOPrS.
These Treasury Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service ("IRS"), and it is possible that
the IRS could take a position contrary to the interpretation herein.
DISTRIBUTION OF SERIES C SUBORDINATED DEBENTURES TO HOLDERS OF SERIES C TOPRS
Under current United States federal income tax law and interpretations, a
distribution of the Series C Subordinated Debentures as described under the
caption "Certain Terms of Series C TOPrS--Special Event Redemption or
Distribution of Series C Subordinated Debentures" upon liquidation of the Series
C Issuer would not be a taxable event to holders of the Series C TOPrS. Such a
distribution would result in the Securityholder receiving directly his pro rata
share of the Series C Subordinated Debentures previously held indirectly through
the Series C Issuer, with a holding period and aggregate tax basis equal to the
holding period and aggregate tax basis such Securityholder had in its Series C
TOPrS before such distribution. However, if any event described in clauses (a)
and (b) of the definition of "Tax Event" above were to occur which would cause
the Series C Issuer to be subject to United States federal income tax with
respect to income received or accrued on the Series C Subordinated Debentures,
as the case would be if, for example, the Series C Issuer were treated as an
association taxable as a corporation, a distribution of the Series C
Subordinated Debentures by the Series C Issuer could be a taxable event to the
Series C Issuer and the holders of the Series C TOPrS. A Securityholder will
accrue interest in respect of Series C Subordinated Debentures received from the
Series C Issuer in the manner described above under "--Original Issue Discount."
SALE OR REDEMPTION OF SERIES C TOPRS
Gain or loss will be recognized by a Securityholder on a sale of Series C
TOPrS (including a redemption for cash) in an amount equal to the difference
between the amount realized and the Securityholder's adjusted tax basis in the
Series C TOPrS sold or so redeemed (as adjusted for any OID accrued and
distributions made if interest has been deferred by Lincoln). Gain or loss
recognized by a Securityholder on Series C TOPrS held for more than one year
will generally be taxable as long-term capital gain or loss. Also, for taxable
years beginning after December 31, 2000, a lower capital gains rate may be
available on the sale of property held by the taxpayer for more than five years.
All capital gains of a corporate taxpayer are taxed at ordinary income rates.
The Series C TOPrS may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Series C
Subordinated Debentures. A Securityholder that disposes of its Series C TOPrS
between record dates for payments of Distributions (and consequently does not
receive a Distribution from the Series C Issuer for the period prior to such
disposition) will nevertheless be required to include in income as ordinary
income accrued but unpaid interest on the Series C Subordinated Debentures
through the date of disposition and to add such amount to its adjusted tax basis
in its Series C TOPrS disposed of. Such Securityholder will recognize a capital
loss on the disposition of its Series C TOPrS to the extent the selling price
(which may not fully reflect the value of accrued but unpaid interest) is less
than the Securityholder's adjusted tax basis in the Series C TOPrS (which will
include accrued but unpaid interest). Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for federal income
tax purposes.
S-23
<PAGE>
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of OID accrued on the Series C TOPrS held of record by United
States Persons (other than corporations and other exempt Securityholders) will
be reported to the Internal Revenue Service. "Backup" withholding at a rate of
31% will apply to payments of interest to non-exempt United States Persons
unless the Securityholder furnishes its taxpayer identification number in the
manner prescribed in applicable Treasury Regulations, certifies that such number
is correct, certifies as to no loss of exemption from backup withholding and
meets certain other conditions.
Payment of the proceeds from the disposition of Series C TOPrS to or through
the United States office of a broker is subject to information reporting and
backup withholding unless the holder or beneficial owner establishes an
exemption from information reporting and backup withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.
It is anticipated that income on the Series C TOPrS will be reported to
holders on Form 1099 and mailed to holders of the Series C TOPrS by January 31
following each calendar year.
POSSIBLE TAX LAW CHANGES
Prospective investors should be aware that Enron Corporation has filed a
petition in U.S. Tax Court challenging the proposed disallowance by the IRS of
the deduction of interest expense on securities issued by Enron Corporation in
1993 and 1994 that are similar to, although different in a number of respects
from, the Series C Subordinated Debentures. It is possible that a decision in
that case could give rise to a Tax Event, which would permit Lincoln to cause a
redemption of the Series C TOPrS, as described more fully under "Description of
Preferred Securities--Redemption or Exchange" in the accompanying Prospectus.
Prospective investors also should be aware that legislation has been proposed by
the Clinton Administration in the past that, if enacted, would have denied an
interest expense deduction to issuers of instruments such as the Series C
Subordinated Debentures. No such legislation is currently pending. There can be
no assurance, however, that similar legislation will not ultimately be enacted
into law, or that other developments will not occur on or after the date hereof
that would adversely affect the tax treatment of the Series C Subordinated
Debentures or the Series C Issuer. Such changes also could give rise to a Tax
Event.
S-24
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), Lincoln and the Series C Issuer have agreed that
the Series C Issuer will sell to each of the Underwriters named below, and each
of the Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Chase Securities Inc., Lehman Brothers Inc., Morgan Stanley & Co.
Incorporated and PaineWebber Incorporated are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Series C Issuer,
the respective number of Series C TOPrS set forth opposite its name below. In
the Underwriting Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Series C TOPrS
offered hereby if any of the Series C TOPrS are purchased. In the event of a
default by an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the non-defaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SERIES C TOPRS
---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................................
Chase Securities Inc. .......................................................
Lehman Brothers Inc. ........................................................
Morgan Stanley & Co. Incorporated............................................
PaineWebber Incorporated.....................................................
---------------
Total............................................................. 8,000,000
---------------
---------------
</TABLE>
The Underwriters propose initially to offer the Series C TOPrS to the public
at the public offering price set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in excess
of $ per Series C TOPrS. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per Series C TOPrS to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may from time to time be varied by the Representatives.
In view of the fact that the proceeds from the sale of the Series C TOPrS
will be used to purchase the Series C Subordinated Debentures issued by Lincoln,
the Underwriting Agreement provides that Lincoln will pay as Underwriters'
Compensation for the Underwriters' arranging the investment therein of such
proceeds an amount of $ per Series C TOPrS for the accounts of the
several Underwriters.
Prior to this offering, there has been no public market for the Series C
TOPrS. Application has been made to have the Series C TOPrS approved for listing
on the New York Stock Exchange. Trading of the Series C TOPrS on the New York
Stock Exchange is expected to commence within a 30-day period after the initial
delivery of the Series C TOPrS. The Underwriters have advised Lincoln that they
intend to make a market in the Series C TOPrS prior to commencement of trading
on the New York Stock Exchange, but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Series C TOPrS.
S-25
<PAGE>
Until the distribution of the Series C TOPrS is complete, the rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Series C TOPrS. As an
exception to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the Series C TOPrS. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Series C TOPrS.
If the Underwriters create a short position in the Series C TOPrS in
connection with this offering, I.E., if they sell more Series C TOPrS than are
set forth on the cover page of this Prospectus Supplement, the Representatives
may reduce that short position by purchasing Series C TOPrS in the open market.
The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
Series C TOPrS in the open market to reduce the Underwriters' short position or
to stabilize the price of the Series C TOPrS, they may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
those Series C TOPrS as part of this offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might also have an effect on the price of a security
to the extent that it were to discourage resales of the security.
None of Lincoln, the Series C Issuer or any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Series C TOPrS. In
addition, none of Lincoln, the Series C Issuer or any of the Underwriters makes
any representation that the Representatives will engage in such transactions or
that such transactions, once commenced, will not be discontinued without notice.
In order to meet one of the requirements for listing the Series C TOPrS on
the New York Stock Exchange, the Underwriters will undertake to sell lots of 100
or more Series C TOPrS to a minimum of 400 beneficial holders.
Lincoln and the Series C Issuer have agreed to indemnify the several
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to Lincoln and its affiliates, for which such Underwriters or their
affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series C
TOPrS, the enforceability of the Trust Agreement and the formation of the Series
C Issuer will be passed upon by Richards, Layton & Finger, special Delaware
Counsel to Lincoln and the Series C Issuer. The validity of the Series C
Guarantee and the Series C Subordinated Debentures will be passed upon for
Lincoln by Sonnenschein Nath & Rosenthal, and for the Underwriters by Sullivan &
Cromwell, New York, New York. Sonnenschein Nath & Rosenthal and Sullivan &
Cromwell will rely on the opinion of Richards, Layton & Finger as to matters of
Delaware law and upon the opinion of Jack D. Hunter, Esq., Executive Vice
President and General Counsel of Lincoln, as to matters of Indiana law. Sullivan
& Cromwell from time to time performs legal services for Lincoln. Certain
matters relating to United States federal income tax considerations will be
passed upon for Lincoln by Sonnenschein Nath & Rosenthal.
S-26
<PAGE>
P R O S P E C T U S
- -----------------
$1,300,000,000
LINCOLN NATIONAL CORPORATION
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
--------------
LINCOLN NATIONAL CAPITAL III
LINCOLN NATIONAL CAPITAL IV
LINCOLN NATIONAL CAPITAL V
LINCOLN NATIONAL CAPITAL VI
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY
LINCOLN NATIONAL CORPORATION
Lincoln National Corporation (the "Company") may offer and sell from time to
time (i) its unsecured senior debt securities ("Senior Debt Securities) and its
unsecured junior subordinated debt securities (the "Junior Subordinated Debt
Securities"), consisting of debentures, notes and/or other evidences of
indebtedness (the "Debt Securities"), (ii) shares of its preferred stock, no par
value per share (the "Preferred Stock"), which may be represented by depositary
shares as described herein, (iii) shares of its common stock, no par value per
share (the "Common Stock"), (iv) warrants to purchase any of the foregoing Debt
Securities, Preferred Stock and Common Stock (the "Warrants"), (v) stock
purchase contracts ("Stock Purchase Contracts") to purchase shares of Common
Stock or (vi) stock purchase units ("Stock Purchase Units"), each representing
ownership of a Stock Purchase Contract and any of (x) Debt Securities, (y) debt
obligations of third parties, including U.S. Treasury Securities, or (z)
Preferred Securities (as defined below) of a Lincoln Trust (as defined below),
securing the holder's obligation to purchase Common Stock under the Stock
Purchase Contract. Such securities may be offered in one or more separate
classes or series, in amounts, at prices and on terms to be determined by market
conditions at the time of sale and to be set forth in a supplement or
supplements to this Prospectus (a "Prospectus Supplement"). Such securities may
be sold for U.S. dollars, foreign denominated currency or currency units;
amounts payable with respect to any such securities may likewise be payable in
U.S. dollars, foreign denominated currency or currency units, in each case as
the Company specifically designates.
(CONTINUED ON FOLLOWING PAGE)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------
This Prospectus may not be used to consummate sales of Offered Securities (as
defined herein)
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is April 27, 1998.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Lincoln National Capital III, Lincoln National Capital IV, Lincoln National
Capital V and Lincoln National Capital VI, each a statutory business trust
formed under the laws of the State of Delaware (each, a "Lincoln Trust," and
collectively, the "Lincoln Trusts"), may severally offer, from time to time,
preferred securities (the "Preferred Securities") representing preferred
undivided beneficial interests in such Lincoln Trust. The Company will be the
owner of the common securities (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities") of each Lincoln Trust. The payment
of periodic cash distributions ("Distributions") with respect to Preferred
Securities of each of the Lincoln Trusts out of monies held by the Property
Trustee (as defined herein) of each of the Lincoln Trusts and payments on
liquidation of each Lincoln Trust and on redemption of Preferred Securities of
such Lincoln Trust, will be guaranteed by the Company as and to the extent
described herein (each, a "Guarantee"). See "Description of Guarantees." The
Company's obligation under each Guarantee is an unsecured obligation of the
Company and will rank subordinate and junior in right of payment to all Senior
Debt (as defined herein) of the Company. Except as otherwise provided in the
applicable Prospectus Supplement, (i) concurrently with the issuance by a
Lincoln Trust of its Preferred Securities, such Lincoln Trust will invest the
proceeds thereof and any contributions made in respect of the Common Securities
in a corresponding series of the Company's Junior Subordinated Debt Securities
(the "Corresponding Junior Subordinated Debt Securities") with terms directly
corresponding to the terms of that Lincoln Trust's Preferred Securities (the
"Related Preferred Securities"), (ii) the Corresponding Junior Subordinated Debt
Securities will be the sole assets of each Lincoln Trust, and (iii) payments
under the Corresponding Junior Subordinated Debt Securities and the related
Expense Agreement (as defined herein) will be the only revenue of each Lincoln
Trust. The Company may redeem the Corresponding Junior Subordinated Debt
Securities (and cause the redemption of the Trust Securities) or may terminate
each Lincoln Trust and cause the Corresponding Junior Subordinated Debt
Securities to be distributed to the holders of Preferred Securities in
liquidation of their interests in such Issuer in certain circumstances. See
"Description of Preferred Securities-- Liquidation Distribution Upon
Termination."
Specific terms of the particular Debt Securities, Preferred Stock, Common
Stock, Warrants, Stock Purchase Contracts, Stock Purchase Units, Preferred
Securities and the related Guarantee, in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in an accompanying
Prospectus Supplement or Supplements, together with the terms of the offering of
the Offered Securities, the initial price thereof and the net proceeds from the
sale thereof. The Prospectus Supplement will set forth with regard to the
particular Offered Securities, certain terms thereof, including, where
applicable, (i) in the case of Debt Securities, the ranking as senior or junior
subordinated Debt Securities, the specific designation, aggregate principal
amount, purchase price, maturity, interest rate (which may be fixed or
variable), if any, the time and method of calculating interest payments, if any,
the right of the Company, if any, to defer payments of interest on the Junior
Subordinated Debt Securities and the maximum length of such deferred period,
time of payment of interest, if any, listing, if any, on a securities exchange,
authorized denomination, any exchangeability, conversion, redemption, prepayment
or sinking fund provisions, the currency or currencies or currency unit or units
in which principal, premium, if any, or interest, if any, is payable, public
offering price and any other specific terms of the Debt Securities; (ii) in the
case of Preferred Stock, the specific designation, number of shares, purchase
price and the rights, preferences and privileges thereof and any qualifications
or restrictions thereon (including dividends, liquidation value, voting rights,
terms for the redemption, conversion or exchange thereof and any other specific
terms of the Preferred Stock), listing, if any, on a securities exchange and
whether the Company has elected to offer the Preferred Stock in the form of
depositary shares; (iii) in the case of Common Stock, the number of shares
offered, the initial offering price, market price and dividend information; (iv)
in the case of Warrants, the specific designation, the number, purchase price
and terms thereof, any listing of the Warrants or the underlying securities on a
securities exchange or any other terms in connection with the offering, sale and
exercise of the Warrants, as well as the terms on which and the securities for
which such Warrants may be exercised; (v) in the case of Stock Purchase
Contracts, the designation and number of shares of Common Stock issuable
thereunder, the purchase price of the Common Stock, the date or dates on which
the Common Stock is required to be purchased by the holders of the Stock
Purchase Contracts, any periodic payments required to be made by the Company to
the holders of the Stock Purchase Contracts or vice versa, and the terms of the
offering and sale thereof; (vi) in the case of Stock Purchase Units, the
specific terms of the Stock Purchase Contracts and any Debt Securities or debt
obligations of third parties or Preferred Securities of a Lincoln Trust securing
the holders' obligation to purchase the Common Stock under the Stock Purchase
Contracts, the ability of a holder of such Stock Purchase Units to settle early
the
2
<PAGE>
underlying Stock Purchase Contract by delivering cash in exchange for the
underlying collateral and, if applicable, whether the Company will issue to such
holder a Prepaid Stock Purchase Contract as a result of such early settlement
and the specific terms of the Prepaid Stock Purchase Contract and the terms of
the offering and sale of such Stock Purchase Units; and (vii) in the case of
Preferred Securities of a Lincoln Trust, the specific designation, number of
securities, liquidation amount per security, initial public offering price, and
any listing on a securities exchange, distribution rate (or method of
calculation thereof), dates on which distributions shall be payable and dates
from which distributions shall accrue, voting rights, if any, terms for any
conversion or exchange into other securities, any redemption or sinking fund
provisions, any other rights, preferences, privileges, limitations or
restrictions relating to the Preferred Securities and the terms upon which the
proceeds of the sale of the Preferred Securities shall be used to purchase a
specific series of Junior Subordinated Debt Securities of the Company.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that the aggregate
offering price to the public of the Offered Securities will be limited to
$1,300,000,000. Any Prospectus Supplement relating to any Offered Securities
will contain information concerning certain United States federal income tax
considerations, if applicable, to the Offered Securities.
The Company and/or each Lincoln Trust may sell the Offered Securities
directly, through agents designated from time to time or through underwriters or
dealers. See "Plan of Distribution." If any agents of the Company and/or any
Lincoln Trust or any underwriters or dealers are involved in the sale of the
Offered Securities, the names of such agents, underwriters or dealers and any
applicable commissions and discounts will be set forth in the related Prospectus
Supplement. The managing underwriter or underwriters with respect to each series
sold to or through underwriters will be named in the accompanying Prospectus
Supplement. See "Plan of Distribution" for possible indemnification arrangements
for dealers, underwriters and agents.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, AND, WITH RESPECT TO PARTICULAR OFFERED SECURITIES, THE PROSPECTUS
SUPPLEMENT RELATING THERETO, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS
PROSPECTUS NOR SUCH PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER FOR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS OR SUCH PROSPECTUS SUPPLEMENT
NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ANY LINCOLN TRUST
SINCE THE DATE HEREOF OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA, NOR
HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF
THIS DOCUMENT.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, Suite 1300, New York,
New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition,
such reports, proxy statements and other information concerning the Company can
be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005, at the offices of the Chicago Stock Exchange,
Inc. at 440 South LaSalle Street, Chicago, Illinois 60603 and at the offices of
the Pacific Stock Exchange, Inc. at 301 Pine Street, San Francisco, California
94104. The Commission maintains a Web site (located at http://www.sec.gov) which
includes reports, proxy statements and other
3
<PAGE>
information, including the Registration Statement of which this Prospectus is a
part, filed electronically by registrants with the Commission.
The Company and the Lincoln Trusts have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement and the exhibits and the financial statements, notes
and schedules filed as a part thereof or incorporated by reference therein,
which may be inspected at the public reference facilities of the Commission, at
the addresses set forth above. Statements made in this Prospectus concerning the
contents of any documents referred to herein are not necessarily complete, and
in each instance are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement.
No separate financial statements of the Lincoln Trusts have been included
herein. The Company and the Lincoln Trusts do not consider that such financial
statements would be material to holders of the Preferred Securities because (i)
all of the voting securities of the Lincoln Trusts will be owned, directly or
indirectly, by the Company, a reporting company under the Exchange Act, (ii)
each Lincoln Trust is a newly formed special purpose entity, has no operating
history or independent operations and is not engaged in and does not propose to
engage in any activity other than holding as trust assets the Corresponding
Junior Subordinated Debt Securities of the Company and issuing the Trust
Securities, and (iii) the Company's obligations described herein and in any
accompanying Prospectus Supplement, through the applicable Guarantee, the
applicable Trust Agreement, the Junior Subordinated Debt Securities, the Junior
Subordinated Indenture and any supplemental indentures thereto, and the Expense
Agreement, taken together, constitute a full, irrevocable and unconditional
guarantee by the Company of payments due on the Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Lincoln Trust's obligations under the Preferred
Securities. See "The Lincoln Trusts," "Description of Preferred Securities,"
"Description of Junior Subordinated Debt Securities" and "Description of
Guarantees."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference and made a part hereof: (a) the
Company's Annual Report on Form 10-K for the year ended December 31, 1997; and
(b) the Company's Current Report on Form 8-K filed on March 24, 1998. Each
document or report filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the termination of
any offering of securities made by this Prospectus shall be deemed to be
incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained
herein, or in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein (other
than exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: C. Suzanne
Womack, Secretary, Lincoln National Corporation, 200 East Berry Street, Fort
Wayne, Indiana, 46802-2706, telephone number (219) 455-3271.
-------------------
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars" or
"U.S.$").
4
<PAGE>
LINCOLN NATIONAL CORPORATION
The Company is a holding company with consolidated assets at December 31,
1997 of approximately $77.2 billion and shareholders' equity of approximately
$5.0 billion. The Company, through its subsidiaries, provides life insurance and
annuities, life-health reinsurance, property-casualty insurance, and investment
management services to its customers.
Lincoln National Corporation is an Indiana corporation with its principal
office at 200 East Berry Street, Fort Wayne, Indiana 46802-2706. Its telephone
number is (219) 455-2000.
THE LINCOLN TRUSTS
Each Lincoln Trust is a statutory business trust formed under Delaware law
pursuant to (i) a trust agreement executed by the Company, as sponsor of the
Lincoln Trust, and the Delaware Trustee (as defined herein) of such Lincoln
Trust and (ii) the filing of a certificate of trust with the Delaware Secretary
of State. Each trust agreement will be amended and restated in its entirety
(each, as so amended and restated, a "Trust Agreement") substantially in the
form filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. Each Trust Agreement will be qualified as an indenture under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Each
Lincoln Trust exists for the exclusive purposes of (i) issuing and selling its
Trust Securities, (ii) using the proceeds from the sale of such Trust Securities
to acquire a series of Corresponding Junior Subordinated Debt Securities issued
by the Company, and (iii) engaging in only those other activities necessary,
convenient or incidental thereto.
All of the Common Securities of each Lincoln Trust will be owned by the
Company. The Common Securities of a Lincoln Trust will rank PARI PASSU, and
payments will be made thereon PRO RATA, with the Preferred Securities of such
Lincoln Trust, except that upon the occurrence and continuance of an event of
default under a Trust Agreement resulting from a Junior Subordinated Debt
Security Event of Default (as defined herein), the rights of the Company as
holder of the Common Securities to payment in respect of Distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the Preferred Securities of such Lincoln Trust. See
"Description of Preferred Securities-- Subordination of Common Securities." The
Company will acquire Common Securities in an aggregate liquidation amount equal
to not less than 3% of the total capital of each Lincoln Trust.
Unless otherwise specified in the applicable Prospectus Supplement, each
Lincoln Trust has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Lincoln Trust's business and
affairs are conducted by its trustees, each appointed by the Company as holder
of the Common Securities. Unless otherwise specified in the applicable
Prospectus Supplement, the trustees for each Lincoln Trust will be The First
National Bank of Chicago, as the Property Trustee (the "Property Trustee"),
First Chicago Delaware, Inc., as the Delaware Trustee (the "Delaware Trustee"),
and two individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Company (collectively, the "Issuer
Trustees"). The First National Bank of Chicago, as Property Trustee, will act as
sole indenture trustee under each Trust Agreement for purposes of compliance
with the Trust Indenture Act. The First National Bank of Chicago will also act
as trustee under the Guarantees and the Junior Subordinated Indenture (as
defined herein). See "Description of Guarantees" and "Description of Junior
Subordinated Debt Securities." The holder of the Common Securities of a Lincoln
Trust, or the holders of a majority in liquidation preference of the related
Preferred Securities if a Junior Subordinated Debt Security Event of Default
under the Trust Agreement for such Lincoln Trust has occurred and is continuing,
will be entitled to appoint, remove or replace the Property Trustee and/or the
Delaware Trustee for such Lincoln Trust. In no event will the holders of the
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the holder
of the Common Securities. The duties and obligations of each Issuer Trustee are
governed by the applicable Trust Agreement. The Company will pay all fees and
expenses related to each Lincoln Trust
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and the offering of the Preferred Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of each Lincoln Trust.
The principal executive office of each Lincoln Trust is 200 East Berry
Street, Fort Wayne, Indiana 46802-2706 and its telephone number is (219)
455-2000.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement with
respect to the proceeds from the sale of the particular Offered Securities to
which such Prospectus Supplement relates, the net proceeds from the sale of the
Offered Securities are expected to be used by the Company for general corporate
purposes, including repayment or redemption of outstanding debt or preferred
stock, the possible acquisition of financial services businesses or assets
thereof, investments in portfolio assets and working capital needs. The Company
routinely reviews opportunities to acquire financial services businesses or
assets thereof. Each Lincoln Trust will use all proceeds received from the sale
of its Trust Securities to purchase Junior Subordinated Debt Securities of the
Company.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Set forth below are the Company's historical ratios of earnings to fixed
charges for each of the years in the five-year period ended December 31, 1997.
In addition, set forth below are pro forma ratios giving effect to the sale of
$100,000,000 aggregate principal amount of 6 1/2% Notes due March 15, 2008 (the
"2008 Notes") and $200,000,000 aggregate principal amount of 7% Notes due March
15, 2018 (together with the 2008 Notes, the "Notes") in March 1998 and the
application of the proceeds thereof (without giving effect to the reduction of
offering proceeds due to discounted price to public, underwriting discount and
expenses).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding Interest on Annuities and Financial Products (1)
Historical............................................................... 13.58 7.37 7.51 6.43 10.35
Pro Forma (2)............................................................ 13.23
Including Interest on Annuities and Financial Products (3)
Historical............................................................... 1.90 1.45 1.41 1.25 1.43
Pro Forma (2)............................................................ 1.89
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(4)
Historical............................................................... 1.90 1.45 1.40 1.23 1.40
Pro Forma (2)............................................................ 1.89
</TABLE>
- ------------------------
(1) For purposes of determining this ratio, earnings consist of income before
federal income taxes, cumulative effect of accounting change and minority
interests adjusted for the difference between income or losses from
unconsolidated equity investments and cash distributions from such
investments, plus fixed charges. Fixed charges consist of: (i) interest and
debt expense on short and long-term debt and distributions to minority
interest-preferred securities of subsidiary companies and (ii) the portion
of operating leases that are representative of the interest factor.
(2) Pro forma ratios after giving effect to the net increase in interest expense
due to the issuance of the Notes at a blended rate of 6.833% per annum less
the repayment of $200 million of short-term debt and earnings on $100
million of short-term investments at a weighted average interest rate of
5.83% per annum.
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(3) Same as the ratio of earnings to fixed charges, excluding interest on
annuities and financial products, except fixed charges and earnings include
interest on annuities and financial products.
(4) Same as the ratio of earnings to fixed charges, including interest on
annuities and financial products, except that fixed charges include the
pre-tax earnings required to cover preferred stock dividend requirements.
(5) Coverage ratios in 1997 are higher than other historical periods due to the
inclusion of a gain on sale of discontinued operations of $777 million.
DESCRIPTION OF THE SENIOR DEBT SECURITIES
The Senior Debt Securities (for purposes of this Section only, the "Debt
Securities") may be issued in one or more series under an Indenture dated as of
September 15, 1994, as supplemented from time to time (as so supplemented, the
"Indenture"), between the Company and The Bank of New York, as trustee (the
"Trustee"). This summary of certain terms and provisions of the Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Indenture, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and to the Trust
Indenture Act. The Indenture is qualified under the Trust Indenture Act.
Parenthetical references in this Section are to provisions of the Indenture.
Certain terms defined in the Indenture are capitalized in this Prospectus.
Whenever particular defined terms of the Indenture are referred to herein or in
a Prospectus Supplement, such defined terms are incorporated herein or therein
by reference.
GENERAL
The Debt Securities will be unsecured and will rank on the parity with all
other unsecured and unsubordinated indebtedness of the Company.
The Indenture does not limit the amount of Debt Securities which may be
issued thereunder and provides that Debt Securities may be issued up to the
aggregate principal amount which may be authorized from time to time by the
Company. Reference is made to the Prospectus Supplement for the following terms
of Debt Securities being offered thereby: (i) the title, aggregate principal
amount and authorized denominations of Debt Securities; (ii) the percentage of
their principal amount at which such Debt Securities will be issued; (iii) the
date or dates on which Debt Securities will mature; (iv) the rate or rates per
annum (which may be fixed or variable), if any, at which Debt Securities will
bear interest (or the method of determination or calculation thereof); (v) the
times at which any such interest will be payable; (vi) the currency or units
based on or relating to currencies in which the Debt Securities are denominated
and in which principal, premium, if any, any interest and Additional Amounts (as
defined below) will or may be payable; (vii) the dates, if any, on which and the
price or prices at which the Debt Securities will, pursuant to any mandatory
sinking fund provisions, or may, pursuant to any optional sinking fund
provisions, be redeemed by the Company, and other terms and provisions of such
sinking fund; (viii) any redemption terms or any terms for repayment of
principal amount at the option of the holder; (ix) whether and under what
circumstances the Company will pay additional amounts ("Additional Amounts") in
respect of certain taxes imposed on certain holders or as otherwise provided;
(x) the terms and conditions upon which such Debt Securities may be convertible
into shares of Common Stock or other securities of the Company, including the
conversion price, conversion period and other conversion provisions; (xi) the
defeasance provisions, if any, that are applicable to such Debt Securities
(other than those described herein); (xii) whether the Debt Securities are to be
issuable in global form and, if so, the terms and conditions, if any, upon which
interests in such Debt Securities in global form may be exchanged, in whole or
in part, for the individual Debt Securities represented thereby and the initial
Depository with respect to such global Debt Security; (xiii) the person to whom
any interest on a Registered Security is payable, if other than the registered
holder thereof, or the manner in which any interest is payable on a Bearer
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<PAGE>
Security if other than upon presentation of the coupons pertaining thereto, as
the case may be; or (xiv) any other specific terms of such Debt Securities.
Principal, interest and premium and Additional Amounts, if any, will be
payable in the manner, at the places and subject to the restrictions set forth
in the Indenture, the Debt Securities and the Prospectus Supplement relating
thereto.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Debt Securities will be issued in fully registered form without coupons.
Where Debt Securities of any series are issued in bearer form, the special
restrictions and considerations, including special offering restrictions and
special Federal income tax considerations, applicable to any such Debt
Securities and to payment on and transfer and exchange of such Debt Securities
will be described in the applicable Prospectus Supplement.
Some of the Debt Securities may be issued as discounted Debt Securities
(bearing no interest or at a rate which at the time of issuance is below market
rates) to be sold at the substantial discount below their stated principal
amount. Federal income tax consequences and other special considerations
applicable to any such discounted Debt Securities will be described in the
Prospectus Supplement relating thereto.
If the purchase price of any Debt Securities is payable in one or more
foreign currencies or currency units or if any Debt Securities are denominated
in one or more foreign currencies or currency units or if the principal of,
premium, if any, or interest, if any, on any Debt Securities is payable in one
or more foreign currencies or currency units, the restrictions, elections,
certain Federal income tax considerations, specific terms and other information
with respect to such issue of Debt Securities and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
Debt Securities may be presented for exchange, and registered Debt
Securities may be presented for transfer, in the manner, at the places and
subject to the restrictions set forth in the Indenture, the Debt Securities and
the Prospectus Supplement relating thereto. Debt Securities in bearer form and
the coupons, if any, appertaining thereto will be transferable by delivery. No
service charge will be made for any transfer or exchange of Debt Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section 2.06)
Unless otherwise indicated in the applicable Prospectus Supplement, the
covenants contained in the Indenture and the Debt Securities would not
necessarily afford Holders of the Debt Securities protection in the event of a
highly leveraged or other transaction involving the Company that may adversely
affect Holders.
If the Debt Securities are convertible into shares of Common Stock, the
conversion price payable and the number of shares purchasable upon conversion
may be subject to adjustment in certain events as set forth in the applicable
Prospectus Supplement.
FORM, REGISTRATION, TRANSFER AND EXCHANGE
The Debt Securities of a series may be issued solely as Registered
Securities, solely as Bearer Securities (with or without coupons attached) or as
both Registered Securities and Bearer Securities. Debt Securities of a series
may be issuable in whole or part in the form of one or more global Debt
Securities ("Global Securities"), as described below under "Book-Entry Debt
Securities."
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Debt Securities of
any series are issuable as both Registered Securities and as Bearer Securities,
at the option of the holder, subject to the terms of the Indenture, Bearer
Securities (accompanied by all unmatured coupons, except as provided below, and
all matured coupons in default) of such series will be exchangeable for
Registered Securities of the same series of any authorized denominations and of
a like
8
<PAGE>
aggregate principal amount and tenor. Unless otherwise indicated in the
applicable Prospectus Supplement, any Bearer Security surrendered in exchange
for a Registered Security between a record date or a special record date for
defaulted interest and the relevant date for payment of interest will be
surrendered without the coupon relating to such date for payment of interest and
interest will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the holder of
such coupon when due in accordance with the terms of the Indenture. Bearer
Securities will not be issued in exchange for Registered Securities. (Sections
2.06, 2.12 and 4.01)
Debt Securities may be presented for exchange as provided above, and unless
otherwise indicated in the applicable Prospectus Supplement, Registered
Securities may be presented for registration of transfer (duly endorsed, or
accompanied by a duly executed written instrument of transfer), at the office of
any transfer agent designated by the Company for such purpose with respect to
any series of Debt Securities and referred to in the applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the Indenture. Such transfer or exchange
will be effected upon such transfer agent being satisfied with the documents of
title and identity of the person making the request. The Company may at any time
rescind the designation of any transfer agent, provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment for Debt
Securities of such series. The Company may at any time designate additional
transfer agents with respect to any series of Debt Securities. (Sections 2.06
and 4.02)
In the event of any redemption of Debt Securities of any series, the Company
will not be required to (i) register the transfer of or exchange Debt Securities
of that series during a period of 15 days next preceding the selection of
securities of such series to be redeemed; (ii) register the transfer of or
exchange any Registered Security, or portion thereof, called for redemption,
except the unredeemed portion of any Registered Security being redeemed in part;
or (iii) exchange any Bearer Security called for redemption except, to the
extent provided with respect to any series of Debt Securities and referred to in
the applicable Prospectus Supplement, to exchange such Bearer Security for a
Registered Security of that series and of like tenor and principal amount that
is immediately surrendered for redemption. (Section 2.06)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal, premium, if any, interest and Additional Amounts, if any, on
Registered Securities will be made at the office of such paying agent or paying
agents as the Company may designate from time to time, except that at the option
of the Company payment of any interest and any Additional Amounts may be made by
check or draft mailed to the address of the Person entitled thereto as such
address shall appear in the Debt Security Register. Unless indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the record date for such
interest. (Section 4.01)
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal, premium, if any, interest and Additional Amounts, if any, on
Bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such paying agents outside the United States as
the Company may designate from time to time, or by check or by transfer to an
account maintained by the payee outside the United States. Unless otherwise
indicated in the applicable Prospectus Supplement, any payment of interest on
any Bearer Securities will be made only against surrender of the coupon relating
to such interest installment. (Sections 2.06 and 4.02)
Any paying agents in or outside the United States initially designated by
the Company for the Debt Securities will be named in the applicable Prospectus
Supplement. If the Debt Securities of a series are listed on a stock exchange
located outside the United States, and such stock exchange shall
9
<PAGE>
so require, the Company will maintain a paying agent with respect to such series
in London, Luxembourg or any other city so required located outside the United
States so long as the Debt Securities of such series are listed on such
exchange. The Company may at any time designate additional paying agents or
rescind the designation of any paying agent, provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment. (Section
4.02)
All monies paid by the Company to a paying agent for the payment of
principal of or interest or Additional Amounts, if any, on any Debt Security
which remain unclaimed at the end of one year after such principal, interest or
Additional Amounts shall have become due and payable will be repaid to the
Company and the holder of such Debt Security or any coupon will thereafter look
only to the Company for payment thereof. (Section 4.03)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depository or its nominee
identified in the applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Global Security or Global
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in registered form, a Global Security may not, subject to certain
exceptions, be registered for transfer or exchange except to the Depository for
such Global Security or a nominee of such Depository. (Section 2.06)
The specific terms of the depository arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security will be
described in the applicable Prospectus Supplement. The Company expects that the
provisions described below will be applicable to depository arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depository will be represented by a Global Security registered
in the name of such Depository or its nominee. Upon the issuance of such Global
Security and the deposit of such Global Security with or on behalf of the
Depository for such Global Security, the Depository will credit on its
book-entry registration and transfer system the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depository or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in such Global Security will be limited to participants or persons
that may hold interests through participants. Ownership of beneficial interest
by participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depository for such Global Security. Ownership of beneficial interests in such
Global Security by persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations and
such laws may impair the ability to transfer beneficial interests in such Global
Securities.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Unless otherwise specified in the applicable Prospectus Supplement,
owners of beneficial interests in such Global Security will not be entitled to
have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of
10
<PAGE>
such series in certificated form and will not be considered the holders thereof
for any purposes under the Indenture. (Sections 2.06 and 11.03) Accordingly,
each person owning a beneficial interest in such Global Security must rely on
the procedures of the Depository and, if such person is not a participant, on
the procedures of the participant through which such person owns its interest to
exercise any rights of a holder under the Indenture. The Company understands
that, under existing industry practices, if the Company requests any action of
holders or an owner of a beneficial interest in such Global Security desires to
give any notice or take any action a holder is entitled to give or take under
the Indenture, the Depository would authorize the participants to give such
notice or take such action, and participants would authorize beneficial owners
owning through such participants to give such notice or take such action or
would otherwise act upon the instructions of beneficial owners owning through
them.
Principal of and any premium, interest and Additional Amounts on a Global
Security will be payable in the manner described in the applicable Prospectus
Supplement.
LIMITATION ON LIENS ON STOCK OF RESTRICTED SUBSIDIARIES
The Company will not, nor will it permit any Restricted Subsidiary to,
issue, assume or guarantee any indebtedness for borrowed money (hereinafter
referred to as "Debt") secured by a mortgage, security interest, pledge, lien or
other encumbrance upon any shares of stock of any Restricted Subsidiary without
effectively providing that the Debt Securities (together with, if the Company
shall so determine, any other indebtedness of or guarantee by the Company
ranking equally with the Debt Securities and then existing or thereafter
created) shall be secured equally and ratably with such Debt. (Section 4.06).
For purposes of the Indenture, "Restricted Subsidiary" means The Lincoln
National Life Insurance Company so long as it remains a subsidiary, as well as
any successor to all or a principal part of the business of any such subsidiary
and any other subsidiary which the Board of Directors designates as a Restricted
Subsidiary. (Section 1.01) The Restricted Subsidiary accounted for approximately
78% of the consolidated revenues of the Company during the year ended December
31, 1997 and 86% of the consolidated assets of the Company at December 31, 1997.
Prior to June 1997, the Company's ownership in American States Insurance Company
also was considered a Restricted Subsidiary. Upon the announcement of the sale
of the Company's interest in American States Insurance Company in June 1997,
American States Insurance Company became a discontinued operation of the Company
and therefor ceased to be considered a Restricted Subsidiary for purposes of the
Indenture.
LIMITATION ON ISSUANCE OR DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES
The Company will not, nor will it permit any Restricted Subsidiary to,
issue, sell, assign, transfer or otherwise dispose of, directly or indirectly,
any Capital Stock (other than nonvoting preferred stock) of any Restricted
Subsidiary, except for (i) the purpose of qualifying directors; (ii) sales or
other dispositions to the Company or one or more Restricted Subsidiaries; (iii)
the disposition of all or any part of the Capital Stock of any Restricted
Subsidiary for consideration which is at least equal to the fair value of such
Capital Stock as determined by the Company's Board of Directors (acting in good
faith); or (iv) an issuance, sale, assignment, transfer or other disposition
required to comply with an order of a court or regulatory authority of competent
jurisdiction, other than an order issued at the request of the Company or any
Restricted Subsidiary. (Section 4.07)
For the purposes of the Indenture, "Capital Stock" means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock. (Section
1.01)
DEFAULTS AND REMEDIES
An Event of Default with respect to Debt Securities of any series is defined
in the Indenture as being: (a) default for 30 days in payment of any interest or
Additional Amounts on the Debt Securities of such
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series; (b) default in payment of principal or premium, if any, on the Debt
Securities of such series when due either at maturity, upon redemption, by
declaration or otherwise (except a failure to make payment resulting from
mistake, oversight or transfer difficulties not continuing for more than 3
Business Days beyond the date on which such payment is due); (c) default in
payment of any sinking fund installment when due and payable (except a failure
to make payment resulting from mistake, oversight or transfer difficulties not
continuing for more than three Business Days beyond the date on which such
payment is due); (d) default by the Company in the performance or breach of any
other covenant or warranty of the Company in respect of the Debt Securities of
such series for a period of 60 days after notice thereof to the Company or
Trustee; (e) certain events involving the bankruptcy or insolvency of the
Company; or (f) other Events of Default as specified in the Supplemental
Indenture or Board Resolution under which such series of Debt Securities was
issued. (Section 6.01)
The Indenture provides that (1) if an Event of Default described in clauses
(a), (b), (c) or, in the event of a default with respect to less than all
Outstanding series under the Indenture, (d) above shall have occurred and be
continuing with respect to one or more series, either the Trustee or the holders
of 25 percent in principal amount of the Debt Securities of such series then
Outstanding (each such series voting as a separate class) may declare the
principal (or, in the case of original issue discount Debt Securities, the
portion thereof specified in the terms thereof) of all Outstanding Debt
Securities of such series and the interest accrued thereon and Additional
Amounts payable in respect thereof, if any, to be due and payable immediately
and (2) if an Event of Default described in clause (d) (in the event of a
default with respect to all Outstanding series) or (e) above shall have occurred
and be continuing, either the Trustee or the holders of 25 percent in principal
amount of all Debt Securities then Outstanding (voting as one class) may declare
the principal (or, in the case of original issue discount Debt Securities, the
portion of the principal amount thereof specified in the terms thereof) of all
Debt Securities then Outstanding and the interest accrued thereon and Additional
Amounts payable in respect thereof, if any, to be due and payable immediately,
but upon certain conditions such declarations may be annulled and past defaults
(except for defaults in the payment of principal of, or premium, interest or
Additional Amounts, if any, on such Debt Securities) may be waived by the
holders of a majority in principal amount of the Debt Securities of such series
(or of all series, as the case may be) then Outstanding. (Sections 6.01 and
6.10)
Holders may not enforce the Indenture or the Debt Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Debt Securities unless it receives indemnity satisfactory to it. Subject to
certain limitations, holders of a majority in principal amount of the Debt
Securities of any series may direct the Trustee in its exercise of any trust or
power. The Company is required to deliver annually to the Trustee an officer's
statement indicating whether the signer knows of any default by the Company in
performing any of its obligations under the Indenture. The Trustee may withhold
from Holders notice of any continuing default (except a default in payment of
principal, premium, if any, interest or Additional Amounts, if any, or any
sinking or purchase fund installment) if it determines that withholding notice
is in their interest. (Sections 4.05, 6.06, 6.09, 6.11, 7.01 and 7.05).
DEFEASANCE
Unless otherwise described in a Prospectus Supplement with respect to any
series of Debt Securities, the Company, at its option, (a) will be discharged
from any and all obligations in respect of such Debt Securities (except in each
case for certain obligations to register the transfer or exchange of such Debt
Securities, replace stolen, lost or mutilated Debt Securities, maintain paying
agencies and hold moneys for payment in trust) on the ninety-first day after
satisfaction of all conditions thereto or (b) effective upon the satisfaction of
all conditions thereto, need not comply with certain restrictive covenants
(including any covenants or agreements applicable with respect to a particular
series of Debt Securities) under the Indenture and will not be limited by any
restrictions with respect to merger, consolidation or sales of assets, in each
case if the Company deposits with the Trustee, in trust, (x) money or (y)
Government
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Obligations or a combination of (x) and (y) which, through the payment of
interest thereon and principal thereof in accordance with their terms, will in
the written opinion of independent public accountants selected by the Company,
provide money in an amount sufficient to pay all the principal (including any
mandatory sinking fund payments) of, and interest and Additional Amounts, if
any, and premium, if any, on, such Debt Securities on the dates such payments
are due in accordance with the terms of such series. (Section 8.02) In order to
avail itself of either of the foregoing options, no Event of Default shall have
occurred and be continuing under the Indenture and the Company must provide to
the Trustee (i) an opinion of counsel to the effect that holders of the Debt
Securities of such series will not recognize income, gain or loss for Federal
income tax purposes as a result of the Company's exercise of its option and will
be subject to Federal income tax on the same amount and in the same manner, and
at the same time as would have been the case if such option had not been
exercised and, in the case of Debt Securities being discharged, such opinion
shall be accompanied by a private letter ruling to that effect received from the
United States Internal Revenue Service (the "Service") or a revenue ruling
pertaining to a comparable form of transaction to that effect published by the
Service, (ii) an officers' certificate to the effect that no Event of Default or
event which with the giving of notice or lapse of time, or both, would become an
Event of Default, with respect to such Debt Securities shall have occurred and
be continuing on the date of the deposit, and (iii) if the Debt Securities are
listed on the New York Stock Exchange, an opinion of counsel to the effect that
the exercise of such option will not cause the Debt Securities to be delisted.
(Section 8.02) "Government Obligations" means generally direct noncallable
obligations of the government which issued the currency in which the Debt
Securities of the applicable series are denominated, noncallable obligations the
payment of the principal of and interest on which is fully guaranteed by such
government, and noncallable obligations on which the full faith and credit of
such government is pledged to the payment of the principal thereof and interest
thereon. (Section 1.01). In addition, the Company may obtain a discharge under
the Indenture with respect to all the Debt Securities of a series by depositing
with the Trustee, in trust, moneys or Government Obligations sufficient to pay
at maturity or upon redemption principal of, premium, if any, and any interest
and Additional Amounts on, all of the Debt Securities of such series, provided
that all of the Debt Securities of such series are by their terms to become due
and payable within one year or are to be called for redemption within one year.
No opinion of counsel or ruling relating to the tax consequences to holders is
required with respect to a discharge pursuant to the provisions described in the
immediately preceding sentence. (Section 8.01) In the event of any discharge of
Debt Securities pursuant to the terms of the Indenture described above, the
holders of such Debt Securities will thereafter be able to look solely to such
trust fund, and not to the Company, for payments of principal, premium, if any,
and interest and Additional Amounts, if any. (Sections 8.01 and 8.02)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into, or sell, lease or convey
all or substantially all of its assets to, another corporation unless (i) the
successor or transferee corporation, which shall be a corporation organized and
existing under the laws of the United States or a State thereof, assumes by
supplemental indenture all the obligations of the Company under the Debt
Securities and the Indenture and (ii) the Company or successor corporation, as
the case may be, will not, immediately after such consolidation or merger or
sale, lease or conveyance, be in default in the performance of any covenant or
condition with respect to the Debt Securities or the Indenture. The Company will
deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such supplemental
indenture comply with the terms of the Indenture. Upon any consolidation or
merger, or any sale, lease or conveyance of all or substantially all of the
assets of the Company, the successor corporation formed by such consolidation or
into which the Company is merged or to which such transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under the Indenture. (Sections 5.01 and 5.02). Thereafter all
obligations of the predecessor corporation shall terminate. (Section 5.01)
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MODIFICATION OF THE INDENTURE
The Indenture permits the Company and the Trustee to amend or supplement the
Indenture or the Debt Securities without notice to or consent of any holder of a
Debt Security for certain purposes, including without limitation, to cure any
ambiguity, defect or inconsistency, to comply with Section 5.01 (relating to
when the Company may consolidate, merge or sell all or substantially all of its
assets), to provide for uncertificated Debt Securities, to establish the form or
terms of Debt Securities of any series or to make any change that does not
adversely affect the rights of any holder of a Debt Security. (Section 9.01)
Certain modifications and amendments of the Indenture may be made by the Company
and the Trustee only with the consent of the holders of at least a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
issued under the Indenture which is affected by the modification or amendment
(voting as one class). However, no such modification or amendment may, without
the consent of the holder of each Debt Security affected thereby, (i) reduce the
aforesaid percentage of Debt Securities whose holders must consent to an
amendment, supplement or waiver; (ii) reduce the rate or rates or extend the
time for payment of interest or Additional Amounts, if any, on any Debt
Security; (iii) reduce the principal of or premium, if any, on or extend the
fixed maturity of any Debt Security; (iv) modify or effect in any manner adverse
to the holders of Debt Securities the terms and conditions of the obligations of
the Company in respect of its obligations under the Indenture; (v) waive a
default in the payment of principal of or premium or interest or Additional
Amounts, if any, on any Debt Security; (vi) impair the right to institute a suit
for the enforcement of any payment on or with respect to any series of Debt
Securities; (vii) change a Place of Payment; or (viii) make any Debt Security
payable in currency other than that stated in the Debt Security. (Section 9.02)
REGARDING THE TRUSTEE
The Trustee is a participant in the Company's revolving credit agreement,
and the Company has maintained other banking relationships with the Trustee in
the normal course of business. The Trustee also acts as trustee and paying agent
for the Company's 7 1/8% Notes due July 15, 1999, 7 5/8% Notes due July 15,
2002, 7 1/4% Debentures due May 15, 2005, 6 1/2% Notes due March 15, 2008, 7%
Notes due March 15, 2018 and 9 1/8% Debentures due October 1, 2024.
DESCRIPTION OF JUNIOR SUBORDINATED DEBT SECURITIES
The Junior Subordinated Debt Securities may be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as so
supplemented, the "Junior Subordinated Indenture"), between the Company and The
First National Bank of Chicago, as trustee (the "Junior Subordinated Indenture
Trustee"). This summary of certain terms and provisions of the Junior
Subordinated Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Junior Subordinated Indenture,
the form of which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and to the Trust Indenture Act. The Junior
Subordinated Indenture is qualified under the Trust Indenture Act. Parenthetical
references in this Section are to provisions of the Junior Subordinated
Indenture. Certain terms defined in the Junior Subordinated Indenture are
capitalized in this Prospectus. Whenever particular defined terms of the Junior
Subordinated Indenture are referred to herein or in a Prospectus Supplement,
such defined terms are incorporated herein or therein by reference.
GENERAL
Each series of Junior Subordinated Debt Securities will rank PARI PASSU with
all other series of Junior Subordinated Debt Securities and will be unsecured
and subordinate and junior in right of payment to the extent and in the manner
set forth in the Junior Subordinated Indenture to all Senior Debt (as defined
below) of the Company. See "--Subordination." The Company is a non-operating
holding company and almost all of the operating assets of the Company and its
consolidated subsidiaries are owned by such
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subsidiaries. The Company relies primarily on dividends from such subsidiaries
to meet its obligations. The payment of dividends by the Company's insurance
company subsidiaries is limited under the insurance company holding company laws
of the states in which such subsidiaries are domiciled. Accordingly, the Junior
Subordinated Debt Securities will be effectively subordinated to all existing
and future liabilities of the Company's subsidiaries, and holders of Junior
Subordinated Debt Securities should look only to the assets of the Company for
payments on the Junior Subordinated Debt Securities. The payment of dividends by
the Company's insurance company subsidiaries is limited under the insurance
holding company laws of the states in which such subsidiaries are domiciled.
Except as otherwise provided in the applicable Prospectus Supplement, the Junior
Subordinated Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, whether under the Junior Subordinated
Indenture, any other indenture that the Company may enter into in the future or
otherwise. See "--Subordination" and the Prospectus Supplement relating to any
offering of Offered Securities.
The Junior Subordinated Debt Securities will be issuable in one or more
series pursuant to an indenture supplemental to the Junior Subordinated
Indenture or a resolution of the Company's Board of Directors or a committee
thereof.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Junior Subordinated Debt Securities: (1) the title of
the Junior Subordinated Debt Securities; (2) any limit upon the aggregate
principal amount of the Junior Subordinated Debt Securities; (3) the date or
dates on which the principal of the Junior Subordinated Debt Securities is
payable (the "Stated Maturity") or the method of determination thereof; (4) the
rate or rates, if any, at which the Junior Subordinated Debt Securities shall
bear interest, the Interest Payment Dates on which any such interest shall be
payable, the right, if any, of the Company to defer or extend an Interest
Payment Date, and the Regular Record Date for any interest payable on any
Interest Payment Date or the method by which any of the foregoing shall be
determined; (5) the place or places where, subject to the terms of the Junior
Subordinated Indenture as described below under "Payment and Paying Agents", the
principal of and premium, if any, and interest on the Junior Subordinated Debt
Securities will be payable and where, subject to the terms of the Junior
Subordinated Indenture as described below under "--Denominations, Registration
and Transfer," the Junior Subordinated Debt Securities may be presented for
registration of transfer or exchange and the place or places where notices and
demands to or upon the Company in respect of the Junior Subordinated Debt
Securities and the Junior Subordinated Indentures may be made ("Place of
Payment"); (6) any period or periods within or date or dates on which, the price
or prices at which and the terms and conditions upon which Junior Subordinated
Debt Securities may be redeemed, in whole or in part, at the option of the
Company or a holder thereof; (7) the obligation or the right, if any, of the
Company or a holder thereof to redeem, purchase or repay the Junior Subordinated
Debt Securities and the period or periods within which, the price or prices at
which, the currency or currencies (including currency unit or units) in which
and the other terms and conditions upon which the Junior Subordinated Debt
Securities shall be redeemed, repaid or purchased, in whole or in part, pursuant
to such obligation; (8) the denominations in which any Junior Subordinated Debt
Securities shall be issuable if other than denominations of $25 and any integral
multiple thereof; (9) if other than in U.S. Dollars, the currency or currencies
(including currency unit or units) in which the principal of (and premium, if
any) and interest, if any, on the Junior Subordinated Debt Securities shall be
payable, or in which the Junior Subordinated Debt Securities shall be
denominated; (10) any additions, modifications or deletions in the Events of
Default or covenants of the Company specified in the Junior Subordinated
Indenture with respect to the Junior Subordinated Debt Securities; (11) if other
than the principal amount thereof, the portion of the principal amount of Junior
Subordinated Debt Securities that shall be payable upon declaration of
acceleration of the maturity thereof; (12) any additions or changes to the
Junior Subordinated Indenture with respect to a series of Junior Subordinated
Debt Securities as shall be necessary to permit or facilitate the issuance of
such series in bearer form, registrable or not registrable as to principal, and
with or without interest coupons; (13) any index or indices used to determine
the amount of payments of principal of and premium, if any, on the Junior
Subordinated Debt Securities and the manner in which such amounts will be
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determined; (14) the terms and conditions relating to the issuance of a
temporary Global Security representing all of the Junior Subordinated Debt
Securities of such series and the exchange of such temporary Global Security for
definitive Junior Subordinated Debt Securities of such series; (15) subject to
the terms described under "--Global Junior Subordinated Debt Securities",
whether the Junior Subordinated Debt Securities of the series shall be issued in
whole or in part in the form of one or more Global Securities and, in such case,
the Depositary for such Global Securities, which Depositary shall be a clearing
agency registered under the Exchange Act; (16) the appointment of any Paying
Agent or Agents; (17) the terms and conditions of any obligation or right of the
Company or a holder to convert or exchange the Junior Subordinated Debt
Securities into Preferred Securities; (18) the form of Trust Agreement and
Guarantee Agreement, if applicable; (19) the relative degree, if any, to which
such Junior Subordinated Debt Securities of the series shall be senior to or be
subordinated to other series of such Junior Subordinated Debt Securities or
other indebtedness of the Company in right of payment, whether such other series
of Junior Subordinated Debt Securities or other indebtedness are outstanding or
not; and (20) any other terms of the Junior Subordinated Debt Securities not
inconsistent with the provisions of the Junior Subordinated Indenture.
Junior Subordinated Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Certain United States
Federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debt Securities will be described in the applicable
Prospectus Supplement.
If the purchase price of any of the Junior Subordinated Debt Securities is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debt Securities are denominated in one or more foreign currencies
or currency units or if the principal of, premium, if any, or interest, if any,
on any Junior Subordinated Debt Securities is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain United States
Federal income tax consequences, specific terms and other information with
respect to such issue of Junior Subordinated Debt Securities and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debt
Securities, special United States Federal income tax, accounting and other
considerations applicable thereto will be described in the applicable Prospectus
Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debt Securities will be issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.
Junior Subordinated Debt Securities of any series will be exchangeable for other
Junior Subordinated Debt Securities of the same issue and series, of any
authorized denominations, of a like aggregate principal amount, of the same
Original Issue Date and Stated Maturity and bearing the same interest rate.
Junior Subordinated Debt Securities may be presented for exchange as
provided above, and may be presented for registration of transfer (with the form
of transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate Securities Registrar or at the
office of any transfer agent designated by the Company for such purpose with
respect to any series of Junior Subordinated Debt Securities and referred to in
the applicable Prospectus Supplement, without service charge and upon payment of
any taxes and other governmental charges as described in the Junior Subordinated
Indenture. The Company will appoint the Trustee as Securities Registrar under
the Junior Subordinated Indenture. If the applicable Prospectus Supplement
refers to any transfer agents (in addition to the Securities Registrar)
initially designated by the Company with respect to any series of Junior
Subordinated Debt Securities, the Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that the
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Company maintains a transfer agent in each Place of Payment for such series. The
Company may at any time designate additional transfer agents with respect to any
series of Junior Subordinated Debt Securities.
In the event of any redemption, neither the Company nor the Junior
Subordinated Indenture Trustee shall be required to (i) issue, register the
transfer of or exchange Junior Subordinated Debt Securities of any series during
a period beginning at the opening of business 15 days before the day of
selection for redemption of Junior Subordinated Debt Securities of that series
and ending at the close of business on the day of mailing of the relevant notice
of redemption or (ii) transfer or exchange any Junior Subordinated Debt
Securities so selected for redemption, except, in the case of any Junior
Subordinated Debt Securities being redeemed in part, any portion thereof not to
be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBT SECURITIES
The Junior Subordinated Debt Securities of a series may be issued in whole
or in part in the form of one or more Global Junior Subordinated Debt Securities
that will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the Prospectus Supplement relating to such series. Global Junior
Subordinated Debt Securities may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is exchanged in whole or
in part for the individual Junior Subordinated Debt Securities represented
thereby, a Global Junior Subordinated Debt Security may not be transferred
except as a whole by the Depositary for such Global Junior Subordinated Debt
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by the Depositary or
any nominee to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Junior Subordinated Debt Securities will be described in the Prospectus
Supplement relating to such series. The Company anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debt Security, and the
deposit of such Global Junior Subordinated Debt Security with or on behalf of
the Depositary, the Depositary for such Global Junior Subordinated Debt Security
or its nominee will credit, on its book-entry registration and transfer system,
the respective principal amounts of the individual Junior Subordinated Debt
Securities represented by such Global Junior Subordinated Debt Security to the
accounts of persons that have accounts with such Depositary ("Participants").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Junior Subordinated Debt Securities or by the Company if such
Junior Subordinated Debt Securities are offered and sold directly by the
Company. Ownership of beneficial interests in a Global Junior Subordinated Debt
Security will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in such Global Junior
Subordinated Debt Security will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the applicable Depositary
or its nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Junior Subordinated Debt Security.
So long as the Depositary for a Global Junior Subordinated Debt Security, or
its nominee, is the registered owner of such Global Junior Subordinated Debt
Security, such Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debt Securities
represented by such Global Junior Subordinated Debt Security for all purposes
under the Junior Subordinated Indenture governing such Junior Subordinated Debt
Securities. Except as provided below, owners of beneficial interests in a Global
Junior Subordinated Debt Security will not be entitled to have any of the
individual Junior Subordinated Debt Securities of the series represented by such
Global Junior Subordinated Debt Security registered in their names, will not
receive or be entitled to receive physical delivery of
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any such Junior Subordinated Debt Securities of such series in definitive form
and will not be considered the owners or holders thereof under the Junior
Subordinated Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debt Securities represented by a Global Junior Subordinated
Debt Security registered in the name of a Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner of
the Global Junior Subordinated Debt Security representing such Junior
Subordinated Debt Securities. None of the Company, the Junior Subordinated
Indenture Trustee, any Paying Agent, or the Securities Registrar for such Junior
Subordinated Debt Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Global Junior Subordinated Debt Security representing
such Junior Subordinated Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depositary for a series of Junior Subordinated
Debt Securities or its nominee, upon receipt of any payment of principal,
premium or interest in respect of a permanent Global Junior Subordinated Debt
Security representing any of such Junior Subordinated Debt Securities,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
such Global Junior Subordinated Debt Security for such Junior Subordinated Debt
Securities as shown on the records of such Depositary or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Junior Subordinated Debt Security held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debt Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
issue individual Junior Subordinated Debt Securities of such series in exchange
for the Global Junior Subordinated Debt Security representing such series of
Junior Subordinated Debt Securities. In addition, the Company may at any time
and in its sole discretion, subject to any limitations described in the
Prospectus Supplement relating to such Junior Subordinated Debt Securities,
determine not to have any Junior Subordinated Debt Securities of such series
represented by one or more Global Junior Subordinated Debt Securities and, in
such event, will issue individual Junior Subordinated Debt Securities of such
series in exchange for the Global Junior Subordinated Debt Security or
Securities representing such series of Junior Subordinated Debt Securities.
Further, if the Company so specifies with respect to the Junior Subordinated
Debt Securities of a series, an owner of a beneficial interest in a Global
Junior Subordinated Debt Security representing Junior Subordinated Debt
Securities of such series may, on terms acceptable to the Company, the Junior
Subordinated Indenture Trustee and the Depositary for such Global Junior
Subordinated Debt Security, receive individual Junior Subordinated Debt
Securities of such series in exchange for such beneficial interests, subject to
any limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debt Securities. In any such instance, an owner of a beneficial
interest in a Global Junior Subordinated Debt Security will be entitled to
physical delivery of individual Junior Subordinated Debt Securities of the
series represented by such Global Junior Subordinated Debt Security equal in
principal amount to such beneficial interest and to have such Junior
Subordinated Debt Securities registered in its name. Individual Junior
Subordinated Debt Securities of such series so issued will be issued in
denominations, unless otherwise specified by the Company, of $25 and integral
multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debt Securities will be made at the office of the Junior Subordinated Indenture
Trustee in the City of New York or at the office of such Paying Agent or
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Paying Agents as the Company may designate from time to time in the applicable
Prospectus Supplement, except that at the option of the Company payment of any
interest may be made (i), except in the case of Global Junior Subordinated Debt
Securities, by check mailed to the address of the Person entitled thereto as
such address shall appear in the Securities Register or (ii) by transfer to an
account maintained by the Person entitled thereto as specified in the Securities
Register, provided that proper transfer instructions have been received by the
Regular Record Date. Unless otherwise indicated in the applicable Prospectus
Supplement, payment of any interest on Junior Subordinated Debt Securities will
be made to the Person in whose name such Junior Subordinated Debt Security is
registered at the close of business on the Regular Record Date for such
interest, except in the case of Defaulted Interest. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent; however the Company will at all times be required to maintain a Paying
Agent in each Place of Payment for each series of Junior Subordinated Debt
Securities.
Any moneys deposited with the Junior Subordinated Indenture Trustee or any
Paying Agent, or then held by the Company in trust, for the payment of the
principal of (and premium, if any) or interest on any Junior Subordinated Debt
Security and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall, at the request of
the Company, be repaid to the Company and the holder of such Junior Subordinated
Debt Security shall thereafter look, as a general unsecured creditor, only to
the Company for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE
If provided in the applicable Prospectus Supplement, the Company shall have
the right at any time and from time to time during the term of any series of
Junior Subordinated Debt Securities to defer payment of interest for such number
of consecutive interest payment periods as may be specified in the applicable
Prospectus Supplement (each, an "Extension Period"), subject to the terms,
conditions and covenants, if any, specified in such Prospectus Supplement,
PROVIDED that such Extension Period may not extend beyond the Stated Maturity of
such series of Junior Subordinated Debt Securities. Certain United States
Federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debt Securities will be described in the applicable
Prospectus Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debt Securities will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may, at its option, redeem the Junior Subordinated Debt Securities of
any series in whole at any time or in part from time to time. Junior
Subordinated Debt Securities in denominations larger than $25 may be redeemed in
part but only in integral multiples of $25. Except as otherwise specified in the
applicable Prospectus Supplement, the redemption price for any Junior
Subordinated Debt Security so redeemed shall equal any accrued and unpaid
interest thereon to the redemption date, plus the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Junior Subordinated Debt Security Tax Event (as defined below) in respect of a
series of Junior Subordinated Debt Securities shall occur and be continuing, the
Company may, at its option, redeem such series of Junior Subordinated Debt
Securities in whole (but not in part) at any time within 90 days of the
occurrence of such Junior Subordinated Debt Security Tax Event, at a redemption
price equal to 100% of the principal amount of such Junior Subordinated Debt
Securities then outstanding plus accrued and unpaid interest to the date fixed
for redemption.
"Junior Subordinated Debt Security Tax Event" means the receipt by the
Company of an opinion of counsel experienced in such matters to the effect that,
as a result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United
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States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of the applicable series of Junior Subordinated Debt Securities
under the Junior Subordinated Indenture, there is more than an insubstantial
risk that interest payable by the Company on such series of Junior Subordinated
Debt Securities is not, or within 90 days of the date of such opinion will not
be, deductible by the Company, in whole or in part, for United States Federal
income tax purposes.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Junior Subordinated Debt
Securities to be redeemed at its registered address. Unless the Company defaults
in payment of the redemption price, on and after the redemption date interest
ceases to accrue on such Junior Subordinated Debt Securities or portions thereof
called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Company will also covenant, as to each series of Junior Subordinated
Debt Securities, that it will not, and will not permit any subsidiary of the
Company to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of the
Company (including other Junior Subordinated Debt Securities) that rank PARI
PASSU with or junior in interest to the Junior Subordinated Debt Securities or
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks PARI
PASSU or junior in interest to the Junior Subordinated Debt Securities (other
than (a) dividends or distributions in common stock of the Company, (b)
redemptions or purchases of any rights pursuant to the Company's Rights Plan, or
any successor to such Rights Plan, and the declaration of a dividend of such
rights or the issuance of stock under such plans in the future, (c) payments
under any Guarantee and (d) purchases of common stock related to the issuance of
common stock under any of the Company's benefit plans for its directors,
officers or employees) if at such time (i) there shall have occurred any event
of which the Company has actual knowledge that (a) with the giving of notice or
the lapse of time, or both, would constitute an "Event of Default" under the
Junior Subordinated Indenture with respect to the Junior Subordinated Debt
Securities of such series and (b) in respect of which the Company shall not have
taken reasonable steps to cure, (ii) if such Junior Subordinated Debt Securities
are held by a Lincoln Trust of a series of Related Preferred Securities, the
Company shall be in default with respect to its payment of any obligations under
the Guarantee relating to such Related Preferred Securities or (iii) the Company
shall have given notice of its selection of an Extension Period as provided in
the Junior Subordinated Indenture with respect to the Junior Subordinated Debt
Securities of such series and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
MODIFICATION OF JUNIOR SUBORDINATED INDENTURE
From time to time the Company and the Junior Subordinated Indenture Trustee
may, without the consent of the holders of any series of Junior Subordinated
Debt Securities, amend, waive or supplement the Junior Subordinated Indenture
for specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies (provided that any such action does not materially
adversely affect the interest of the holders of any series of Junior
Subordinated Debt Securities or, in the case of Corresponding Junior
Subordinated Debt Securities, the holders of the Related Preferred Securities so
long as they remain outstanding) and qualifying, or maintaining the
qualification of, the Junior Subordinated Indenture under the Trust Indenture
Act. The Junior Subordinated Indenture contains provisions permitting the
Company and the Junior Subordinated Indenture Trustee, with the consent of the
holders of not less than a majority in principal amount of each outstanding
series of Junior Subordinated Debt Securities affected,
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to modify the Junior Subordinated Indenture in a manner affecting the rights of
the holders of such series of the Junior Subordinated Debt Securities; PROVIDED,
that no such modification may, without the consent of the holder of each
outstanding Junior Subordinated Debt Security so affected, (i) change the Stated
Maturity of any series of Junior Subordinated Debt Securities, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon (except such extension as is contemplated hereby) or (ii)
reduce the percentage of principal amount of Junior Subordinated Debt Securities
of any series, the holders of which are required to consent to any such
modification of the Junior Subordinated Indenture, PROVIDED that, in the case of
Corresponding Junior Subordinated Debt Securities, so long as any of the Related
Preferred Securities remain outstanding, no such modification may be made that
adversely affects the holders of such Preferred Securities in any material
respect, and no termination of the Junior Subordinated Indenture may occur, and
no waiver of any Junior Subordinated Debt Security Event of Default or
compliance with any covenant under the Junior Subordinated Indenture may be
effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation preference of such Related Preferred Securities unless
and until the principal of the Corresponding Junior Subordinated Debt Securities
and all accrued and unpaid interest thereon have been paid in full and certain
other conditions are satisfied.
In addition, the Company and the Junior Subordinated Indenture Trustee may
execute, without the consent of any holder of Junior Subordinated Debt
Securities, any supplemental Junior Subordinated Indenture for the purpose of
creating any new series of Junior Subordinated Debt Securities.
JUNIOR SUBORDINATED DEBT SECURITY EVENTS OF DEFAULT
The Junior Subordinated Indenture provides that any one or more of the
following described events with respect to a series of Junior Subordinated Debt
Securities that has occurred and is continuing constitutes a "Junior
Subordinated Debt Security Event of Default" with respect to such series of
Junior Subordinated Debt Securities:
(i) failure for 30 days to pay any interest on such series of the Junior
Subordinated Debt Securities, when due (subject to the deferral of any due date
in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debt Securities when due whether at maturity, upon
redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Junior Subordinated Indenture for 90 days after
written notice to the Company from the Junior Subordinated Indenture Trustee or
the holders of at least 25% in aggregate outstanding principal amount of such
series of outstanding Junior Subordinated Debt Securities; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of such
series of Junior Subordinated Debt Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Junior Subordinated Indenture Trustee. The Junior Subordinated Indenture Trustee
or the holders of not less than 25% in aggregate outstanding principal amount of
such series of Junior Subordinated Debt Securities may declare the principal due
and payable immediately upon a Junior Subordinated Debt Security Event of
Default, and, in the case of Corresponding Junior Subordinated Debt Securities,
should the Junior Subordinated Indenture Trustee or such holders of such
Corresponding Junior Subordinated Debt Securities fail to make such declaration,
the holders of at least 25% in aggregate liquidation preference of the Related
Preferred Securities shall have such right. The holders of a majority in
aggregate outstanding principal amount of such series of Junior Subordinated
Debt Securities may annul such declaration and waive the default if the default
(other than the non-payment of the principal of such series of Junior
Subordinated Debt Securities which has become due solely by such acceleration)
has been cured and a sum sufficient to pay all matured installments of interest
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and principal due otherwise than by acceleration has been deposited with the
Junior Subordinated Indenture Trustee. In the case of Corresponding Junior
Subordinated Debt Securities, should the holders of such Corresponding Junior
Subordinated Debt Securities fail to annul such declaration and waive such
default, the holders of a majority in aggregate liquidation preference of the
Related Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities affected thereby may, on behalf of the
holders of all the Junior Subordinated Debt Securities, waive any past default,
except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Junior Subordinated Indenture Trustee) or a default in respect of a covenant or
provision which under the Junior Subordinated Indenture cannot be modified or
amended without the consent of the holder of each outstanding Junior
Subordinated Debt Security. In the case of Corresponding Junior Subordinated
Debt Securities, should the holders of such Corresponding Junior Subordinated
Debt Securities fail to annul such declaration and waive such default, the
holders of a majority in aggregate liquidation preference of the Related
Preferred Securities shall have such right. The Company is required to file
annually with the Junior Subordinated Indenture Trustee a certificate as to
whether or not the Company is in compliance with all the conditions and
covenants applicable to it under the Junior Subordinated Indenture.
In case a Junior Subordinated Debt Security Event of Default shall occur and
be continuing as to a series of Corresponding Junior Subordinated Debt
Securities, the Property Trustee will have the right to declare the principal of
and the interest on such Corresponding Junior Subordinated Debt Securities, and
any other amounts payable under the Junior Subordinated Indenture, to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to such Corresponding Junior Subordinated Debt Securities.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Junior Subordinated Debt Security Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the related Junior Subordinated Debt Securities on the
date such interest or principal is otherwise payable, a holder of Preferred
Securities may institute a legal proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest on such
related Junior Subordinated Debt Securities having a principal amount equal to
the aggregate Liquidation Amount of the related Preferred Securities of such
holder (a "Direct Action"). The Company may not amend the Junior Subordinated
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Preferred Securities. If the
right to bring a Direct Action is removed, the applicable Issue may become
subject to the reporting obligations under the Securities Exchange Act of 1934,
as amended. The Company shall have the right under the Junior Subordinated
Indenture to set-off any payment made to such holder of Preferred Securities by
the Company in connection with a Direct Action. The holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the related Junior Subordinated Debt Securities.
The holders of the Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debt Securities unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Junior Subordinated Indenture provides that the Company shall not
consolidate with or merge into any other Person or convey, transfer or lease its
properties and assets substantially as an entirety to
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any Person, and no Person shall consolidate with or merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless (i) in case the Company consolidates with or merges into
another Person or conveys or transfers its properties and assets substantially
as an entirety to any Person, the successor Person is organized under the laws
of the United States or any state or the District of Columbia, and such
successor Person expressly assumes the Company's obligations on the Junior
Subordinated Debt Securities issued under the Junior Subordinated Indenture;
(ii) immediately after giving effect thereto, no Junior Subordinated Debt
Security Event of Default, and no event which, after notice or lapse of time or
both, would become a Junior Subordinated Debt Security Event of Default, shall
have happened and be continuing; (iii) in the case of Corresponding Junior
Subordinated Debt Securities, such transaction is permitted under the related
Trust Agreement or Guarantee and does not give rise to any breach or violation
of the related Trust Agreement and Guarantee, and (iv) certain other conditions
as prescribed in the Junior Subordinated Indenture are met.
The general provisions of the Junior Subordinated Indenture do not afford
holders of the Junior Subordinated Debt Securities protection in the event of a
highly leveraged or other transaction involving the Company that may adversely
affect holders of the Junior Subordinated Debt Securities.
SATISFACTION AND DISCHARGE
The Junior Subordinated Indenture provides that when, among other things,
all Junior Subordinated Debt Securities not previously delivered to the Junior
Subordinated Indenture Trustee for cancellation (i) have become due and payable
or (ii) will become due and payable at their Stated Maturity within one year,
and the Company deposits or causes to be deposited with the Junior Subordinated
Indenture Trustee trust funds, in trust, for the purpose and in an amount in the
currency or currencies in which the Junior Subordinated Debt Securities are
payable sufficient to pay and discharge the entire indebtedness on the Junior
Subordinated Debt Securities not previously delivered to the Junior Subordinated
Indenture Trustee for cancellation, for the principal (and premium, if any) and
interest to the date of the deposit or to the Stated Maturity, as the case may
be, then the Junior Subordinated Indenture will cease to be of further effect
(except as to the Company's obligations to pay all other sums due pursuant to
the Junior Subordinated Indenture and to provide the officers' certificates and
opinions of counsel described therein), and the Company will be deemed to have
satisfied and discharged the Junior Subordinated Indenture.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debt Securities of any series may be convertible or
exchangeable into Preferred Securities or other securities. The specific terms
on which Junior Subordinated Debt Securities of any series may be so converted
or exchanged will be set forth in the applicable Prospectus Supplement. Such
terms may include provisions for conversion or exchange, either mandatory, at
the option of the holder, or at the option of the Company, in which case the
number of shares of Preferred Securities or other securities to be received by
the Holders of Junior Subordinated Debt Securities would be calculated as of a
time and in the manner stated in the applicable Prospectus Supplement.
SUBORDINATION
In the Junior Subordinated Indenture, the Company has covenanted and agreed
that any Junior Subordinated Debt Securities issued thereunder will be
subordinate and junior in right of payment to all Senior Debt to the extent
provided in the Junior Subordinated Indenture. Upon any payment or distribution
of assets to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshaling of assets or
any bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of the Company, the
holders of Senior Debt will first be entitled to receive payment in full of
principal of (and premium, if any) and interest, if any, on such Senior Debt
before the holders of Junior Subordinated Debt Securities or, in
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the case of Corresponding Junior Subordinated Debt Securities, the Property
Trustee on behalf of the holders, will be entitled to receive or retain any
payment in respect of the principal of (and premium, if any) or interest, if
any, on the Junior Subordinated Debt Securities.
In the event of the acceleration of the maturity of any Junior Subordinated
Debt Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
Junior Subordinated Debt Securities will be entitled to receive or retain any
payment in respect of the principal of (or premium, if any) or interest, if any,
on the Junior Subordinated Debt Securities.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debt Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt, or an event of default with respect to any Senior Debt resulting in
the acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Junior Subordinated Indenture or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated Debt
Securities or to other Debt which is PARI PASSU with, or subordinated to, the
Junior Subordinated Debt Securities; PROVIDED, however, that Senior Debt shall
not be deemed to include (i) any Debt of the Company which when incurred and
without respect to any election under Section 1111(b) of the Bankruptcy Code,
was without recourse to the Company, (ii) any Debt of the Company to any of its
subsidiaries, (iii) Debt to any employee of the Company, (iv) any liability for
taxes, (v) indebtedness or monetary obligations to trade creditors or assumed by
the Company or any of its subsidiaries in the ordinary course of business in
connection with the obtaining of materials or services, and (vi) any other debt
securities issued pursuant to the Junior Subordinated Indenture.
The Company is a non-operating holding company and almost all of the
operating assets of the Company are owned by such subsidiaries. The Company
relies primarily on dividends from such subsidiaries to meet its obligations for
payment of principal and interest on its outstanding debt obligations and
corporate expenses. Accordingly, the Junior Subordinated Debt Securities will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, including liabilities under contracts of insurance and annuities
written by the Company's insurance subsidiaries. Holders of Junior Subordinated
Debt Securities should look only to the assets of the Company for payments of
interest and principal and premium, if any.
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The Junior Subordinated Indenture places no limitation on the amount of
additional Senior Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior Debt.
The Junior Subordinated Indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of Junior
Subordinated Debt Securities, may be changed prior to such issuance. Any such
change would be described in the applicable Prospectus Supplement.
GOVERNING LAW
The Junior Subordinated Indenture and the Junior Subordinated Debt
Securities will be governed by and construed in accordance with the laws of the
State of New York.
INFORMATION CONCERNING THE JUNIOR SUBORDINATED INDENTURE TRUSTEE
The Junior Subordinated Indenture Trustee shall have and be subject to all
the duties and responsibilities specified with respect to an indenture trustee
under the Trust Indenture Act. Subject to such provisions, the Junior
Subordinated Indenture Trustee is under no obligation to exercise any of the
powers vested in it by the Junior Subordinated Indenture at the request of any
holder of Junior Subordinated Debt Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Junior Subordinated Indenture Trustee is not required
to expend or risk its own funds or otherwise incur personal financial liability
in the performance of its duties if the Junior Subordinated Indenture Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBT SECURITIES
The Corresponding Junior Subordinated Debt Securities may be issued in one
or more series of Junior Subordinated Debt Securities under the Junior
Subordinated Indenture with terms corresponding to the terms of a series of
Related Preferred Securities. In that event, concurrently with the issuance of
each Lincoln Trust's Preferred Securities, such Lincoln Trust will invest the
proceeds thereof and the consideration paid by the Company for the Common
Securities in a series of Corresponding Junior Subordinated Debt Securities
issued by the Company to such Lincoln Trust. Each series of Corresponding Junior
Subordinated Debt Securities will be in the principal amount equal to the
aggregate stated Liquidation Amount of the Related Preferred Securities and the
Common Securities of such Lincoln Trust and will rank pari passu with all other
series of Junior Subordinated Debt Securities. Holders of the Related Preferred
Securities for a series of Corresponding Junior Subordinated Debt Securities
will have the rights in connection with modifications to the Junior Subordinated
Indenture or upon occurrence of Junior Subordinated Debt Security Events of
Default described under "--Modification of Junior Subordinated Indenture" and
"--Junior Subordinated Debt Security Events of Default", unless provided
otherwise in the Prospectus Supplement for such Related Preferred Securities.
If a Special Event in respect of a Lincoln Trust of Related Preferred
Securities shall occur and be continuing, the Company may, at its option, redeem
the Corresponding Junior Subordinated Debt Securities at any time within 90 days
of the occurrence of such Special Event, in whole but not in part, subject to
the provisions of the Junior Subordinated Indenture. The redemption price for
any Corresponding Junior Subordinated Debt Securities shall be equal to 100% of
the principal amount of such Corresponding Junior Subordinated Debt Securities
then outstanding plus accrued and unpaid interest to the date fixed for
redemption. For so long as the applicable Lincoln Trust is the holder of all the
outstanding series of Corresponding Junior Subordinated Debt Securities, the
proceeds of any such redemption will be used by the Lincoln Trust to redeem the
corresponding Trust Securities in accordance with their terms. The Company may
not redeem a series of Corresponding Junior Subordinated Debt Securities in part
unless all accrued and unpaid interest has been paid in full on all outstanding
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Corresponding Junior Subordinated Debt Securities of such series for all
interest periods terminating on or prior to the Redemption Date.
The Company will covenant in the Junior Subordinated Indenture as to each
series of Corresponding Junior Subordinated Debt Securities, that if and so long
as (i) the Lincoln Trust of the related series of Trust Securities is the holder
of all such Corresponding Junior Subordinated Debt Securities, (ii) a Tax Event
in respect of such Lincoln Trust has occurred and is continuing and (iii) the
Company has elected, and has not revoked such election, to pay Additional Sums
(as defined under "Description of Preferred Securities--Redemption or Exchange")
in respect of such Trust Securities, the Company will pay to such Lincoln Trust
such Additional Sums. The Company will also covenant, as to each series of
Corresponding Junior Subordinated Debt Securities, (i) to maintain directly or
indirectly 100% ownership of the Common Securities of the Lincoln Trust to which
Corresponding Junior Subordinated Debt Securities have been issued, provided
that certain successors which are permitted pursuant to the Junior Subordinated
Indenture may succeed to the Company's ownership of the Common Securities, (ii)
not to voluntarily terminate, wind-up or liquidate any Lincoln Trust, except (a)
in connection with a distribution of Corresponding Junior Subordinated Debt
Securities to the holders of the Preferred Securities in liquidation of such
Lincoln Trust, or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the related Trust Agreement and (iii) to use its
reasonable efforts, consistent with the terms and provisions of the related
Trust Agreement, to cause such Lincoln Trust to remain classified as a grantor
trust and not as an association taxable as a corporation for United States
Federal income tax purposes.
DESCRIPTION OF PREFERRED STOCK AND COMMON STOCK
GENERAL
The Company may issue, separately or together with other Offered Securities,
shares of Common Stock or Preferred Stock, all as set forth in the Prospectus
Supplement relating to the Common Stock or Preferred Stock for which this
Prospectus is being delivered. In addition, if the Prospectus Supplement so
provides, the Debt Securities or Preferred Stock may be convertible into or
exchangeable for Common Stock.
The Company's Articles of Incorporation currently authorize the issuance of
800,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock
("Preferred Stock"). The Company's Preferred Stock may be issued from time to
time in one or more series by resolution of the Board of Directors. The Company
has outstanding one series of Preferred Stock, consisting of the Company's $3.00
Cumulative Convertible Preferred Stock, Series A (without par value) (the
"Series A Preferred Stock"). At December 31, 1997, the Company had issued and
outstanding 100,859,478 shares of Common Stock and 35,091 shares of Series A
Preferred Stock.
As described under "Description of Depositary Shares", the Company may, at
its option, elect to offer depositary shares ("Depositary Shares") evidenced by
depositary receipts ("Depositary Receipts"), each representing an interest (to
be specified in the Prospectus Supplement relating to the particular series of
the Preferred Stock) in a share of the particular series of the Preferred Stock
issued and deposited with a Preferred Stock Depositary (as defined herein).
The following descriptions of the classes of the Company's capital stock are
summaries, do not purport to be complete, and are subject, in all respects, to
the applicable provisions of the Indiana Business Corporation Law and the
Company's Articles of Incorporation (including the Certificate of Resolution by
the Board of Directors of the Company Designating the Rights and Preferences of
the Series A Preferred Stock), and the Rights Agreement, referred to below, with
The First National Bank of Boston, which, in each case, are included as exhibits
to the Registration Statement of which this Prospectus forms a part.
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COMMON STOCK
Holders of the Company's Common Stock are entitled to receive dividends
when, as and if declared
by the Board of Directors after all dividends accrued on all preferred or
special classes of shares entitled to preferential dividends have been paid or
declared and set apart for payment out of funds legally available therefor. Upon
liquidation, dissolution or winding up of the affairs of the Company, whether
voluntary or involuntary, holders of Common Stock are entitled to receive pro
rata any net assets of the Company remaining after the claims of creditors and
preferences of the Series A Preferred Stock, and any other series of Preferred
Stock at the time outstanding, have been paid in full. The Company's Articles of
Incorporation provide that holders of Common Stock and holders of any series of
Preferred Stock from time to time outstanding shall each have the right at every
meeting of shareholders to one vote for each share of Common Stock and/or
Preferred Stock so held, and holders of Common Stock and holders of Preferred
Stock shall so vote as one class. Under certain circumstances as provided by
law, the Company's Articles of Incorporation or the terms of the Preferred
Stock, certain series of Preferred Stock may vote as a separate class or
classes. The Company's Bylaws presently provide for three classes of directors,
with directors in each class serving staggered three-year terms. The holders of
Common Stock do not have any preemptive rights to subscribe for additional
shares, and the Common Stock does not have cumulative voting rights.
The Company's Common Stock is listed on the New York, Chicago, Pacific and
London Stock Exchanges. The outstanding shares of Common Stock are, and the
Common Stock offered hereby when issued will be, validly issued, fully paid and
non-assessable. The Company will take appropriate action to list the Common
Stock offered hereby as described in the Prospectus Supplement relating to any
issuance of Common Stock.
COMMON STOCK PURCHASE RIGHTS. On November 14, 1996, the Board of Directors
of the Company authorized the amendment and restatement of the Rights Agreement
dated November 7, 1986 between the Company and The First National Bank of Boston
as rights agent (the "Rights Agent"), relating to certain Common Share purchase
rights (the "Common Rights") issued on each outstanding share of Common Stock of
the Company ("Common Share"). After separation from the Common Stock, each
Common Right will entitle the holder thereof until the earlier of November 14,
2006 or the redemption of the Common Rights to buy one Common Share at an
exercise price of $200.00, subject to adjustment. The Common Rights will
continue to be represented by the certificates for Common Shares and will not be
exercisable, or transferable apart from the Common Shares, until the earlier of
the tenth calendar day after the announcement that a person or group has
acquired beneficial ownership of 15% or more of the Common Shares (an "Acquiring
Person") or the tenth business day after a person commences, or announces an
intention to commence, an offer the consummation of which would result in a
person beneficially owning 15% or more of the Common Shares. Separate
certificates for the Common Rights will be mailed to holders of the Common
Shares as of such date. The Common Rights will then begin trading separately
from the Common Shares. As long as the Common Rights are attached to the Common
Shares, the Company will issue one Common Right with each Common Share that
shall become outstanding so that all Common Shares will have attached Common
Rights.
In the event that (1) the Company is acquired in a merger or other business
combination transaction, or (2) any person consolidates or merges with the
Company and all or part of the Common Shares are exchanged for securities, cash
or property of any other person, or (3) 50% or more of the Company's
consolidated assets or earning power are sold, each Common Right will entitle
its holder to purchase, at the exercise price of the Common Right, that number
of shares of common stock of the surviving company which at the time of such
transaction would have a market value of two times the exercise price of the
Common Right. Alternatively, if a person acquires 15% or more of the outstanding
Common Shares, each Common Right not owned by the Acquiring Person would become
exercisable for the number of Common Shares which would then have a market value
of two times the exercise price of the Common Right. In addition, at any time
after a person becomes an Acquiring Person, and before its acquisition of 50% or
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more of the Common Shares, the Board of Directors of the Company may exchange
Common Rights, other than Common Rights owned by the Acquiring Person, in whole
or in part, at an exchange ratio of one Common Share per Common Right (subject
to adjustment).
The Common Rights are redeemable in whole, but not in part, at $.01 per
Common Right at any time prior to the expiration of 10 calendar days from the
date of the public announcement that a person or group has become an Acquiring
Person. The Common Rights will expire on November 14, 2006 (unless sooner
redeemed). Until a Common Right is exercised, the holder thereof, as such, will
have no rights as a shareholder of the Company, including, without limitation,
the right to vote or to receive dividends.
The purchase price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of the Common Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Shares, (ii) as a result of the grant to holders of the Common Shares of certain
rights or warrants to subscribe for Common Shares or convertible securities at
less than the current market price of the Common Shares or (iii) as a result of
the distribution to holders of the Common Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in the
Common Shares) or of subscription rights or warrants (other than those referred
to above). With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least 1% in
such purchase price.
The Common Rights have certain anti-takeover effects. The Common Rights may
cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Board of Directors of the Company, except
pursuant to an offer conditioned on a substantial number of Common Rights being
acquired. The Common Rights should not interfere with any merger or other
business combination approved by the Board of Directors since the Common Rights
may be redeemed in whole, but not in part, by the company at $.01 per Common
Right prior to the expiration of ten calendar days from the date of the public
announcement that a person or group has become an Acquiring Person.
CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION. The
Company's Articles of Incorporation provide that the affirmative vote of the
holders of three-fourths of the Company's voting stock is required to amend
Article VII, which deals with the number, classification, qualifications and
removal of directors. Article VII provides that the number of directors may be
fixed in the Bylaws, that qualifications for directors may be set in the Bylaws,
and that the Bylaws may provide for classification of the Board. The Bylaws can
be amended only by action of the Board. Article VII also provides that directors
can be removed, with or without cause, at a meeting of shareholders called
expressly for that purpose upon the affirmative vote of the holders of at least
three-fourths of the Company's voting stock.
The provisions of Article VII requiring the affirmative vote of
three-fourths of the Company's voting stock to amend Article VII could make it
difficult for the shareholders to change the existing provision of that Article,
which, in turn, could discourage proxy contests and tender offers and make it
more likely that incumbent directors will maintain their positions.
The Articles of Incorporation also contain a "fair price" provision which
requires, subject to certain exceptions, certain kinds of business combinations
involving the Company and any shareholder holding 10% or more of the Company's
voting stock (or certain affiliates of such shareholder) to be approved by the
holders of at least three-fourths of the Company's voting stock, unless (i) the
transaction is approved by a majority of the members of the Board of Directors
of the Company who are not affiliated with the 10% shareholder making the
proposal, or (ii) the transaction meets certain minimum price and procedural
requirements (in either of which cases, only the normal shareholder and director
approval requirements of the Indiana Business Corporation Law would govern the
transaction). The "fair price" provision may be amended or repealed only upon
the affirmative vote of the holders of at least three-fourths of the Company's
voting stock. The "fair price" provision is intended to increase the likelihood
that all shareholders of the Company will be treated similarly if certain kinds
of business combinations are
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effected. The "fair price" provision may have the effect of making a takeover of
the Company more expensive and may therefore discourage tender offers for less
than three-fourths of the Company's stock and acquisitions of substantial blocks
of the Company's stock with a view to acquiring control of the Company.
CERTAIN STATE LAW PROVISIONS. Chapter 43 of the Indiana Business
Corporation Law also restricts business combinations with interested
shareholders. It prohibits certain business combinations, including mergers,
sales of assets, recapitalizations, and reverse stock splits, between certain
corporations having 100 or more shareholders that also have a class of voting
shares registered with the Securities and Exchange Commission under Section 12
of the Exchange Act (which includes the Company) and an interested shareholder,
defined as the beneficial owner of 10% or more of the voting power of the
outstanding voting shares of that corporation, for five years following the date
the shareholder acquired such 10% beneficial ownership, unless the acquisition
or the business combination was approved by the board of directors in advance of
such date. Moreover, the acquisition or business combination must meet all
requirements of the corporation's articles of incorporation, as well as the
requirements specifically set out in the Indiana Business Corporation Law. After
the five-year period expires, a business combination with an interested
shareholder that did not receive board approval prior to the interested
shareholder's acquisition date may take place only if such combination is
approved by a majority vote of shares not held by the interested shareholder or
its affiliates or if the proposed combination meets certain minimum price
requirements based upon the highest price paid by the interested shareholder.
The aggregate amount of cash and the market value of non-cash consideration to
be received by holders of all outstanding stock other than common stock is to be
determined under criteria similar to those for common stock, except that the
minimum price to be received by such shareholders cannot be less than the
highest preferential amount per share to which holders of such class of stock
are entitled in the event of voluntary dissolution, plus dividends declared or
due. The consideration to be received by holders of a particular class must be
distributed promptly and paid in cash or in the same form as the interested
shareholder used to acquire the largest number of shares it owns in that class.
Finally, the interested shareholder must not have become the beneficial owner of
any more voting shares of stock since it became an interested shareholder, with
certain exceptions.
Chapter 42 of the Indiana Business Corporation Law includes provisions
designed to protect minority shareholders in the event that a person acquires,
pursuant to a tender offer or otherwise, shares giving it more than 20%, more
than 33 1/3%, or more than 50% of the outstanding voting power ("Control
Shares") of corporations having 100 or more shareholders. Unless the
corporation's articles of incorporation or bylaws provide that Chapter 42 does
not apply to control share acquisitions of shares of the corporation before the
control share acquisition, an acquirer who purchases Control Shares without
seeking and obtaining the prior approval of the board of directors cannot vote
the Control Shares until each class or series of shares entitled to vote
separately on the proposal, by a majority of all votes entitled to be cast by
that group (excluding the Control Shares and any shares held by officers of the
corporation and employees of the corporation who are directors thereof), approve
in a special or annual meeting the rights of the acquirer to vote the Control
Shares. An Indiana corporation otherwise subject to Chapter 42 may elect not to
be covered by the statute by so providing in its articles of incorporation or
bylaws. The Company is currently subject to the statute.
Indiana insurance laws and regulations provide that no person may acquire
voting securities of the Company if after such acquisition such person would
directly or indirectly be in control of the Company, unless such person has
provided certain required information to the Company and to the Indiana
Insurance Commissioner (the "Indiana Commissioner") and the Indiana Commissioner
has approved the acquisition. Control of the Company is presumed to exist if any
person beneficially owns 10% or more of the voting securities of the Company.
Furthermore, the Indiana Commissioner may determine, after notice and hearing,
that control exists notwithstanding the absence of a presumption to that effect.
Consequently, no person may acquire, directly or indirectly, 10% or more of the
voting securities of the Company to be
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outstanding after the Offerings, or otherwise acquire control of the Company,
unless such person has provided such required information to the Indiana
Commissioner and the Indiana Commissioner has approved such acquisition.
TRANSFER AGENT AND REGISTRAR. The First National Bank of Boston serves as
Transfer Agent and Registrar for shares of the Company's Common Stock.
PREFERRED STOCK
The Company's Preferred Stock has, upon issuance, preference over the Common
Stock with respect to the payment of dividends and the distribution of assets in
the event of liquidation, dissolution or winding up of the Company. Other
relative rights, preferences and limitations of each series of Preferred Stock,
including dividend, redemption, liquidation, sinking fund, conversion and other
provisions, are determined by the Board of Directors in the resolutions
establishing and designating such series and as described in the Prospectus
Supplement relating to the series of Preferred Stock. The Series A Preferred
Stock constitutes the only series of Preferred Stock currently authorized for
issuance by the Board of Directors.
The Company's Articles of Incorporation provide that each holder of
Preferred Stock of any series from time to time outstanding shall be entitled to
one vote per share upon all matters submitted to vote at every meeting of
shareholders of the Company. Further, in the event that six or more quarterly
dividends, whether or not consecutive, on any series of Preferred Stock shall be
in default, the holders of any outstanding series of Preferred Stock as to which
such default exists shall be entitled, at the next annual meeting of
shareholders, to vote as a class to elect two directors of the Company. Such
right shall continue with respect to shares of cumulative Preferred Stock,
including the Series A Preferred Stock, until all accumulated and unpaid
dividends on all such shares, the holders of which were entitled to vote at the
previous annual meeting of shareholders, have been paid or declared and set
aside for payment and, with respect to shares of non-cumulative Preferred Stock,
if any, until any non-cumulative dividends have been paid or declared and set
apart for payment for four consecutive quarterly dividend periods on all such
shares, the holders of which were entitled to vote at the previous annual
meeting of shareholders.
The approval of the holders of record of at least two-thirds of the
outstanding shares of all series of Preferred Stock of the Company, voting as a
class, will be required to (a) amend the Company's Articles of Incorporation to
create or authorize any stock ranking prior to or on a parity with such
Preferred Stock with respect to the payment of dividends or distributions upon
dissolution, liquidation or winding up, or to create or authorize any security
convertible into shares of any such stock; (b) amend, alter, change or repeal
any of the express terms of the Preferred Stock, or any series thereof, in any
prejudicial manner (provided only holders of two-thirds of the outstanding
shares of the series prejudiced by such change or repeal need consent to such
action); (c) merge or consolidate with another corporation whereby the Company
is not the surviving entity, if thereby the rights, preferences or powers of the
Preferred Stock would be adversely affected or Offered Securities would
thereupon be authorized or outstanding which could not otherwise have been
created without the approval of such Preferred Stockholders; or (d) authorize,
or revoke a previously authorized, voluntary dissolution of the Company, approve
any limitation of the term of the existence of the Company or authorize the
sale, lease, exchange or other disposition of all or substantially all of the
property of the Company.
In the event of voluntary or involuntary dissolution, liquidation or
winding-up of the Company, the holders of each series of the Preferred Stock
will be entitled to receive out of the assets of the Company available for
distribution to its shareholders, before distribution of assets is made to
holders of Common Stock or any other class of stock ranking junior to such
series of Preferred Stock upon liquidation, a liquidating distribution in an
amount per share as set forth in the Prospectus Supplement relating to such
series of Preferred Stock, plus accrued and unpaid dividends.
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The Preferred Stock, when issued, will be fully paid and non-assessable.
Unless otherwise specified in the Prospectus Supplement relating to the
particular series of a Preferred Stock, each series of Preferred Stock will be
on a parity in all respects with other series of Preferred Stock.
SERIES A PREFERRED STOCK
At December 31, 1997, the Company had issued and outstanding 35,091 shares
of Series A Preferred Stock. Cumulative dividends are payable quarterly, as
declared by the Board of Directors, on shares of Series A Preferred Stock at the
per annum rate of $3.00 per share. Upon the liquidation, dissolution or winding
up of the Company, the Series A Preferred Stock is entitled to a liquidation
preference of $80.00 per share, or $2,807,280 in the aggregate at December 31,
1997, plus accrued dividends, before any assets may be distributed to holders of
Common Stock or any other stock ranking junior to the Series A Preferred Stock.
The Series A Preferred Stock may be redeemed at any time at the option of the
Company, in whole or in part, at a redemption price of $80.00 per share plus
accrued dividends, and the Series A Preferred Stock is convertible into Common
Stock at the option of the holder at a rate of eight shares of Common Stock
(subject to adjustment) for each share of Series A Preferred Stock.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts summarizes the material terms of the Deposit
Agreement and of the Depositary Shares and Depositary Receipts, and is qualified
in its entirety by reference to, the form of Deposit Agreement and form of
Depositary Receipts relating to each series of the Preferred Stock.
GENERAL
The Company may, at its option, elect to have shares of Preferred Stock be
represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") between the Company and a bank or
trust company selected by the Company (the "Preferred Stock Depositary"). The
Prospectus Supplement relating to a series of Depositary Shares will set forth
the name and address of the Preferred Stock Depositary. Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled,
proportionately, to all the rights, preferences and privileges of the Preferred
Stock represented thereby (including dividend, voting, redemption, conversion,
exchange and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
A holder of Depositary Shares will be entitled to receive the shares of
Preferred Stock (but only in whole shares of Preferred Stock) underlying such
Depositary Shares. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the whole number of shares of Preferred
Stock to be withdrawn, the Depositary will deliver to such holder at the same
time a new Depositary Receipt evidencing such excess number of Depositary
Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions in respect to the Preferred Stock to the record holders of
Depositary Receipts in proportion, insofar as possible, to the number of
Depositary Shares owned by such holders.
In the event of a distribution other than in cash in respect to the
Preferred Stock, the Preferred Stock Depositary will distribute property
received by it to the record holders of Depositary Receipts in
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proportion, insofar as possible, to the number of Depositary Shares owned by
such holders, unless the Preferred Stock Depositary determines that it is not
feasible to make such distribution, in which case the Preferred Stock Depositary
may, with the approval of the Company, adopt such method as it deems equitable
and practicable for the purpose of effecting such distribution, including sale
(at public or private sale) of such property and distribution of the net
proceeds from such sale to such holders.
The amount so distributed in any of the foregoing cases will be reduced by
any amount required to be withheld by the Company or the Preferred Stock
Depositary on account of taxes.
CONVERSION AND EXCHANGE
If any Preferred Stock underlying the Depositary Shares is subject to
provisions relating to its conversion or exchange as set forth in the Prospectus
Supplement relating thereto, each record holder of Depositary Shares will have
the right or obligation to convert or exchange such Depositary Shares pursuant
to the terms thereof.
REDEMPTION OF DEPOSITARY SHARES
If Preferred Stock underlying the Depositary Shares is subject to
redemption, the Depositary Shares will be redeemed from the proceeds received by
the Preferred Stock Depositary resulting from the redemption, in whole or in
part, of the Preferred Stock held by the Preferred Stock Depositary. The
redemption price per Depositary Share will be equal to the aggregate redemption
price payable with respect to the number of shares of Preferred Stock underlying
the Depositary Shares. Whenever the Company redeems Preferred Stock from the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date a proportionate number of Depositary Shares representing
the shares of Preferred Stock that were redeemed. If less than all the
Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will
be selected by lot or pro rata as may be determined by the Company.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price upon such redemption. Any funds deposited by the Company with
the Preferred Stock Depositary for any Depositary Shares which the holders
thereof fail to redeem shall be returned to the Company after a period of two
years from the date such funds are so deposited.
VOTING
Upon receipt of notice of any meeting at which the holders of any shares of
Preferred Stock underlying the Depositary Shares are entitled to vote, the
Preferred Stock Depositary will mail the information contained in such notice to
the record holders of the Depositary Receipts. Each record holder of such
Depositary Receipts on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Preferred
Stock Depositary as to the exercise of the voting rights pertaining to the
number of shares of Preferred Stock underlying such holder's Depositary Shares.
The Preferred Stock Depositary will endeavor, insofar as practicable, to vote
the number of shares of Preferred Stock underlying such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the Preferred Stock to the
extent it does not receive specific written instructions from holders of
Depositary Receipts representing such Preferred Stock.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences or privileges shall be offered with respect to the
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Preferred Stock, or (ii) the Preferred Stock Depositary shall receive notice of
any meeting at which holders of Preferred Stock are entitled to vote or of which
holders of Preferred Stock are entitled to notice, or of the mandatory
conversion of or any election on the part of the Company to call for the
redemption of any Preferred Stock, the Preferred Stock Depositary shall in each
such instance fix a record date (which shall be the same as the record date for
the Preferred Stock) for the determination of the holders of Depositary Receipts
(x) who shall be entitled to receive such dividend, distribution, rights,
preferences or privileges or the net proceeds of the sale thereof or (y) who
shall be entitled to give instructions for the exercise of voting rights at any
such meeting or to receive notice of such meeting or of such redemption or
conversion, subject to the provisions of the Deposit Agreement.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt and any provision of the Deposit Agreement
may at any time be amended by agreement between the Company and the Preferred
Stock Depositary. However, any amendment which imposes or increases any fees,
taxes or other charges payable by the holders of Depositary Receipts (other than
taxes and other governmental charges, fees and other expenses payable by such
holders as stated under "Charges of Preferred Stock Depositary"), or which
otherwise prejudices any substantial existing right of holders of Depositary
Receipts, will not take effect as to outstanding Depositary Receipts until the
expiration of 90 days after notice of such amendment has been mailed to the
record holders of outstanding Depositary Receipts.
Whenever so directed by the Company, the Preferred Stock Depositary will
terminate the Deposit Agreement by mailing notice of such termination to the
record holders of all Depositary Receipts then outstanding at least 30 days
prior to the date fixed in such notice for such termination. The Preferred Stock
Depositary may likewise terminate the Deposit Agreement if at any time 45 days
shall have expired after the Preferred Stock Depositary shall have delivered to
the Company a written notice of its election to resign and a successor
depositary shall not have been appointed and accepted its appointment. If any
Depositary Receipts remain outstanding after the date of termination, the
Preferred Stock Depositary thereafter will discontinue the transfer of
Depositary Receipts, will suspend the distribution of dividends to the holders
thereof, and will not give any further notices (other than notice of such
termination) or perform any further acts under the Deposit Agreement except as
provided below and except that the Preferred Stock Depositary will continue (i)
to collect dividends on the Preferred Stock and any other distributions with
respect thereto and (ii) to deliver the Preferred Stock together with such
dividends and distributions and the net proceeds of any sales of rights,
preferences, privileges or other property, without liability for interest
thereon, in exchange for Depositary Receipts surrendered. At any time after the
expiration of two years from the date of termination, the Preferred Stock
Depositary may sell the Preferred Stock then held by it at public or private
sales, at such place or places and upon such terms as it deems proper and may
thereafter hold the net proceeds of any such sale, together with any money and
other property then held by it, without liability for interest thereon, for the
pro rata benefit of the holders of Depositary Receipts which have not been
surrendered.
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay all charges of the Preferred Stock Depositary including
charges in connection with the initial deposit of the Preferred Stock, the
initial issuance of the Depositary Receipts, the distribution of information to
the holders of Depositary Receipts with respect to matters on which Preferred
Stock is entitled to vote, withdrawals of the Preferred Stock by the holders of
Depositary Receipts or redemption or conversion of the Preferred Stock, except
for taxes (including transfer taxes, if any) and other governmental charges and
such other charges as are expressly provided in the Deposit Agreement to be at
the expense of holders of Depositary Receipts or persons depositing Preferred
Stock.
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MISCELLANEOUS
The Preferred Stock Depositary will make available for inspection by holders
of Depositary Receipts at its corporate office and its New York office, all
reports and communications from the Company which are delivered to the Preferred
Stock Depositary as the holder of Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
Preferred Stock Depositary under the Deposit Agreement are limited to performing
its duties thereunder without negligence or bad faith. The obligations of the
Company under the Deposit Agreement are limited to performing its duties
thereunder in good faith. Neither the Company nor the Preferred Stock Depositary
is obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
The Company and the Preferred Stock Depositary are entitled to rely upon advice
of or information from counsel, accountants or other persons believed to be
competent and on documents believed to be genuine.
The Preferred Stock Depositary may resign at any time or be removed by the
Company, effective upon the acceptance by its successor of its appointment;
provided, that if a successor Preferred Stock Depositary has not been appointed
or accepted such appointment within 45 days after the Preferred Stock Depositary
has delivered a notice of election to resign to the Company, the Preferred Stock
Depositary may terminate the Deposit Agreement. See "Amendment and Termination
of Deposit Agreement" above.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Debt Securities, Preferred Stock
(or Depositary Shares representing Preferred Stock) or Common Stock
(collectively, the "Underlying Warrant Securities"), and such Warrants may be
issued independently or together with any such Underlying Warrant Securities and
may be attached to or separate from such Underlying Warrant Securities. Each
series of Warrants will be issued under a separate warrant agreement (each a
"Warrant Agreement") to be entered into between the Company and a warrant agent
("Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency for or with holders or beneficial owners of
Warrants. The following sets forth certain general terms and provisions of the
Warrants offered hereby. Further terms of the Warrants and the applicable
Warrant Agreement are set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any Warrants
in respect of which this Prospectus is being delivered, including the following:
(i) the title of such Warrants; (ii) the aggregate number of such Warrants;
(iii) the price or prices at which such Warrants will be issued; (iv) the
currency or currencies, including composite currencies, in which the price of
such Warrants may be payable; (v) the designation and terms of the Underlying
Warrant Securities purchasable upon exercise of such Warrants; (vi) the price at
which and the currency or currencies, including composite currencies, in which
the Underlying Warrant Securities purchasable upon exercise of such Warrants may
be purchased; (vii) the date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire; (viii) whether such
Warrants will be issued in registered form or bearer form; (ix) if applicable,
the minimum or maximum amount of such Warrants which may be exercised at any one
time; (x) if applicable, the designation and terms of the Underlying Warrant
Securities with which such Warrants are issued and the number of such Warrants
issued with each such Underlying Warrant Security; (xi) if applicable, the date
on and after which such Warrants and the related Underlying Warrant Securities
will be separately transferable; (xii) information with respect to book-entry
procedures, if any; (xiii) if applicable, a discussion of certain United States
federal income tax considerations; and (xiv) any other terms of such Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Warrants.
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DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Lincoln Trust, the
Issuer Trustees on behalf of such Lincoln Trust will issue the Preferred
Securities and the Common Securities. The Preferred Securities of a particular
issue will represent preferred beneficial interests in the Lincoln Trust and the
holders thereof will be entitled to a preference in certain circumstances with
respect to Distributions and amounts payable on redemption or liquidation over
the Common Securities of such Lincoln Trust, as well as other benefits as
described in the corresponding Trust Agreement. This summary of certain
provisions of the Preferred Securities and each Trust Agreement does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of each Trust Agreement, including the definitions
therein of certain terms, and the Trust Indenture Act. Wherever particular
defined terms of a Trust Agreement (as amended or supplemented from time to
time) are referred to herein or in a Prospectus Supplement, such defined terms
are incorporated herein or therein by reference. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each of the Lincoln Trusts is a legally separate entity
and the assets of one are not available to satisfy the obligations of any of the
others.
GENERAL
The Preferred Securities of a Lincoln Trust will rank pari passu, and
payments will be made thereon PRO RATA, with the Common Securities of that
Lincoln Trust except as described under "--Subordination of Common Securities."
Legal title to the Corresponding Junior Subordinated Debt Securities will be
held by the Property Trustee in trust for the benefit of the holders of the
related Preferred Securities and Common Securities. Each Guarantee Agreement
executed by the Company for the benefit of the holders of a Lincoln Trust's
Preferred Securities (the "Guarantee" for such Preferred Securities) will be a
guarantee on a subordinated basis with respect to the related Preferred
Securities but will not guarantee payment of Distributions or amounts payable on
redemption or liquidation of such Preferred Securities when the related Lincoln
Trust does not have funds on hand available to make such payments. See
"Description of Guarantees."
DISTRIBUTIONS
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect to any such delay) except that, if such Business Day
is in the next succeeding calendar year, payment of such Distribution shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which Distributions are payable
in accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Property Trustee or the Junior Subordinated Indenture Trustee (as defined
herein) is closed for business.
Each Lincoln Trust's Preferred Securities represent preferred beneficial
interests in the applicable Lincoln Trust, and the Distributions on each
Preferred Security will be payable at a rate specified in the Prospectus
Supplement for such Preferred Securities. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months unless otherwise specified in the applicable Prospectus Supplement.
Distributions to which holders of Preferred Securities are entitled will
accumulate additional Distributions at the rate per annum if and as specified in
the applicable Prospectus Supplement. The term "Distributions" as used herein
includes any such additional Distributions unless otherwise stated.
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If provided in the applicable Prospectus Supplement, the Company has the
right under the Junior Subordinated Indenture, pursuant to which it will issue
the Corresponding Junior Subordinated Debt Securities, to defer the payment of
interest at any time or from time to time on any series of the Corresponding
Junior Subordinated Debt Securities for a period which will be specified in such
Prospectus Supplement relating to such series (each, an "Extension Period"),
PROVIDED that no Extension Period may extend beyond the Stated Maturity of the
Corresponding Junior Subordinated Debt Securities. As a consequence of any such
extension, Distributions on the corresponding Preferred Securities would be
deferred (but would continue to accumulate additional Distributions thereon at
the rate per annum set forth in the Prospectus Supplement for such Preferred
Securities) by the Lincoln Trust which issued such Preferred Securities during
any such Extension Period. During such Extension Period the Company may not, and
may not permit any subsidiary of the Company to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank PARI PASSU
with or junior in interest to the Corresponding Junior Subordinated Debt
Securities or make any guarantee payments with respect to any guarantee by the
Company of debt securities of any subsidiary of the Company if such guarantee
ranks PARI PASSU or junior in interest to the Corresponding Junior Subordinated
Debt Securities (other than (a) dividends or distributions in common stock of
the Company, (b) redemptions or purchases of any rights pursuant to the
Company's Rights Plan, or any successor to such Rights Plan, and the declaration
of a dividend of such rights or the issuance of stock under stock plans in the
future, (c) payments under any Guarantee and (d) purchasers of common stock
related to the issuance of common stock under any of the Company's benefit plans
for its directors, officers or employees).
The revenue of each Lincoln Trust available for distribution to holders of
its Preferred Securities will be limited to payments under the Corresponding
Junior Subordinated Debt Securities in which the Lincoln Trust will invest the
proceeds from the issuance and sale of its Trust Securities. See "Description of
Junior Subordinated Debt Securities--Corresponding Junior Subordinated Debt
Securities." If the Company does not make interest payments on such
Corresponding Junior Subordinated Debt Securities, the Property Trustee will not
have funds available to pay Distributions on the Related Preferred Securities.
The payment of Distributions (if and to the extent the Lincoln Trust has funds
legally available for the payment of such Distributions and cash sufficient to
make such payments) is guaranteed by the Company on a limited basis as set forth
herein under "Description of Guarantees."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Lincoln Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
form, will be one Business Day prior to the relevant Distribution Date. Subject
to any applicable laws and regulations and the provisions of the applicable
Trust Agreement, each such payment will be made as described under "Book-Entry
Issuance." In the event any Preferred Securities are not in book-entry form, the
relevant record date for such Preferred Securities shall be the date at least 15
days prior to the relevant Distribution Date, as specified in the applicable
Prospectus Supplement.
REDEMPTION OR EXCHANGE
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of any Corresponding Junior Subordinated Debt Securities, whether at
maturity or upon earlier redemption as provided in the Junior Subordinated
Indenture, the proceeds from such repayment or redemption shall be applied by
the Property Trustee to redeem a Like Amount (as defined below) of the Trust
Securities, upon not less than 30 nor more than 60 days notice, at a redemption
price (the "Redemption Price") equal to the aggregate Liquidation Amount of such
Trust Securities plus accumulated but unpaid Distributions thereon to the date
of redemption (the "Redemption Date") and the related amount of the premium, if
any, paid by the Company upon the concurrent redemption of such Corresponding
Junior Subordinated Debt Securities. See "Description of Junior Subordinated
Debt Securities--Redemption." If less than all of any
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series of Corresponding Junior Subordinated Debt Securities are to be repaid or
redeemed on a Redemption Date, then the proceeds from such repayment or
redemption shall be allocated to the redemption PRO RATA of the related
Preferred Securities and the Common Securities. The amount of premium, if any,
paid by the Company upon the redemption of all or any part of any series of any
Corresponding Junior Subordinated Debt Securities to be repaid or redeemed on a
Redemption Date shall be allocated to the redemption PRO RATA of the related
Preferred Securities and the Common Securities.
The Company will have the right to redeem any series of Corresponding Junior
Subordinated Debt Securities (i) in whole at any time or in part from time to
time, subject to the conditions described under "Description of Junior
Subordinated Debt Securities--Redemption", (ii) at any time, in whole (but not
in part), upon the occurrence of a Tax Event or an Investment Company Event
(each as defined below, a "Special Event") and subject to the further conditions
described under "Description of Junior Subordinated Debt Securities--
Redemption", or (iii) as may be otherwise specified in the applicable Prospectus
Supplement.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF CORRESPONDING JUNIOR
SUBORDINATED DEBT SECURITIES. If a Special Event in respect of a series of
Preferred Securities and Common Securities shall occur and be continuing, the
Company has the right to redeem the Corresponding Junior Subordinated Debt
Securities in whole (but not in part) and thereby cause a mandatory redemption
of such Preferred Securities and Common Securities in whole (but not in part) at
the Redemption Price within 90 days following the occurrence of such Special
Event. At any time, the Company has the right to terminate the related Lincoln
Trust and, after satisfaction of the liabilities of creditors of such Lincoln
Trust as provided by applicable law, cause such Corresponding Junior
Subordinated Debt Securities to be distributed to the holders of such Preferred
Securities and Common Securities in liquidation of the Lincoln Trust. If the
Company does not elect either option described above, the applicable series of
Preferred Securities will remain outstanding and, in the event a Tax Event has
occurred and is continuing, Additional Sums (as defined below) may be payable on
the Corresponding Junior Subordinated Debt Securities.
EXTENSION OF MATURITY OF CORRESPONDING JUNIOR SUBORDINATED DEBT
SECURITIES. If provided in the applicable Prospectus Supplement, the Company
shall have the right to extend or shorten the maturity of any series of
Corresponding Junior Subordinated Debt Securities at the time that the Company
exercises its right to elect to terminate the related Lincoln Trust and cause
such Corresponding Junior Subordinated Debt Securities to be distributed to the
holders of such Preferred Securities and Common Securities in liquidation of the
Lincoln Trust, provided that it can extend the maturity only if certain
conditions specified in the applicable Prospectus Supplement are met at the time
such election is made and at the time of such extension.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by a Lincoln Trust on the
outstanding Preferred Securities and Common Securities of the Lincoln Trust
shall not be reduced as a result of any additional taxes, duties and other
governmental charges to which such Lincoln Trust has become subject as a result
of a Tax Event.
"Investment Company Event" means the receipt by the applicable Lincoln Trust
of an opinion of counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
the applicable Lincoln Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which Change in 1940 Act Law becomes
effective on or after the date of original issuance of the series of Preferred
Securities issued by the Lincoln Trust.
"Like Amount" means (i) with respect to a redemption of any series of Trust
Securities, Trust Securities of such series having a Liquidation Amount (as
defined below) equal to that portion of the principal amount of Corresponding
Junior Subordinated Debt Securities to be contemporaneously
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redeemed in accordance with the Junior Subordinated Indenture, allocated to the
Common Securities and to the Preferred Securities based upon the relative
Liquidation Amounts of such classes and the proceeds of which will be used to
pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Corresponding Junior Subordinated Debt Securities to holders of
any series of Trust Securities in connection with a dissolution or liquidation
of the related Lincoln Trust, Corresponding Junior Subordinated Debt Securities
having a principal amount equal to the Liquidation Amount of the Trust
Securities of the holder to whom such Corresponding Junior Subordinated Debt
Securities are distributed. "Liquidation Amount" means the stated amount of $25
per Trust Security.
"Tax Event" means the receipt by the applicable Lincoln Trust of an opinion
of counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Lincoln Trust is, or will be within 90 days of
the date of such opinion, subject to United States Federal income tax with
respect to income received or accrued on the corresponding series of
Corresponding Junior Subordinated Debt Securities, (ii) interest payable by the
Company on such series of Corresponding Junior Subordinated Debt Securities is
not, or within 90 days of the date of such opinion, will not be, deductible by
the Company, in whole or in part, for United States Federal income tax purposes,
or (iii) the applicable Lincoln Trust is, or will be within 90 days of the date
of such opinion, subject to more than a DE MINIMIS amount of other taxes, duties
or other governmental charges.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debt Securities for any series of Preferred Securities (i)
such series of Preferred Securities will no longer be deemed to be outstanding,
(ii) The Depository Trust Company ("DTC") or its nominee, as the record holder
of such series of Preferred Securities, will receive a registered global
certificate or certificates representing the Corresponding Junior Subordinated
Debt Securities to be delivered upon such distribution and (iii) any
certificates representing such series of Preferred Securities not held by DTC or
its nominee will be deemed to represent the Corresponding Junior Subordinated
Debt Securities having a principal amount equal to the stated liquidation
preference of such series of Preferred Securities, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on
such series of Preferred Securities until such certificates are presented to the
Administrative Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debt Securities that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of a Lincoln Trust were to occur. Accordingly, the Preferred
Securities that an investor may purchase, or the Corresponding Junior
Subordinated Debt Securities that the investor may receive on dissolution and
liquidation of a Lincoln Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debt Securities. Redemptions
of the Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that the related Lincoln
Trust has funds on hand available for the payment of such Redemption Price. See
also "--Subordination of Common Securities."
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If a Lincoln Trust gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, the Property Trustee will deposit irrevocably
with DTC funds sufficient to pay the applicable Redemption Price and will give
DTC irrevocable instructions and authority to pay the Redemption Price to the
holders of such Preferred Securities. See "Book-Entry Issuance." If such
Preferred Securities are no longer in book-entry form, the Property Trustee, to
the extent funds are available, will irrevocably deposit with the paying agent
for such Preferred Securities funds sufficient to pay the applicable Redemption
Price and will give such paying agent irrevocable instructions and authority to
pay the Redemption Price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for any
Preferred Securities called for redemption shall be payable to the holders of
such Preferred Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of such Preferred Securities so called for redemption will cease, except
the right of the holders of such Preferred Securities to receive the Redemption
Price, but without interest on such Redemption Price, and such Preferred
Securities will cease to be outstanding. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by the Lincoln Trust or by the Company pursuant to the Guarantee as
described under "Description of Guarantees", Distributions on such Preferred
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by the Lincoln Trust for such Preferred
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debt Securities to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the relevant record
date, which shall be one Business Day prior to the relevant Redemption Date or
liquidation date, as applicable; PROVIDED, HOWEVER, that in the event that any
Preferred Securities are not in book-entry form, the relevant record date for
such Preferred Securities shall be a date at least 15 days prior to the
Redemption Date or liquidation date, as applicable, as specified in the
applicable Prospectus Supplement.
If less than all of the Preferred Securities and Common Securities issued by
an issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated PRO RATA to the Preferred Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Preferred Securities to be redeemed shall be selected on a PRO RATA
basis not more than 60 days prior to the Redemption Date by the Property Trustee
from the outstanding Preferred Securities not previously called for redemption,
by such method as the Property Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of portions (equal to $25 or an
integral multiple of $25 in excess thereof) of the Liquidation Amount of
Preferred Securities of a denomination larger than $25. The Property Trustee
shall promptly notify the trust registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of each Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any
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Preferred Securities redeemed or to be redeemed only in part, to the portion of
the aggregate Liquidation Amount of Preferred Securities which has been or is to
be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the Redemption Price on the Corresponding Junior Subordinated Debt Securities,
on and after the Redemption Date interest ceases to accrue on such Junior
Subordinated Debt Securities or portions thereof (and distributions cease to
accrue on the Related Preferred Securities or portions thereof) called for
redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Lincoln
Trust's Preferred Securities and Common Securities, as applicable, shall be made
PRO RATA based on the Liquidation Amount of such Preferred Securities and Common
Securities; PROVIDED, HOWEVER, that if on any Distribution Date or Redemption
Date a Junior Subordinated Debt Security Event of Default shall have occurred
and be continuing, no payment of any Distribution on, or Redemption Price of,
any of the Lincoln Trust's Common Securities, and no other payment on account of
the redemption, liquidation or other acquisition of such Common Securities,
shall be made unless payment in full in cash of all accumulated and unpaid
Distributions on all of the Lincoln Trust's outstanding Preferred Securities for
all Distribution periods terminating on or prior thereto, or in the case of
payment of the Redemption Price the full amount of such Redemption Price on all
of the Lincoln Trust's outstanding Preferred Securities then called for
redemption, shall have been made or provided for, and all funds available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Lincoln Trust's Preferred
Securities then due and payable.
In the case of any Event of Default resulting from a Junior Subordinated
Debt Security Event of Default, the Company as holder of such Lincoln Trust's
Common Securities will be deemed to have waived any right to act with respect to
any such Event of Default under the applicable Trust Agreement until the effect
of all such Events of Default with respect to such Preferred Securities have
been cured, waived or otherwise eliminated. Until any such Events of Default
under the applicable Trust Agreement with respect to the Preferred Securities
have been so cured, waived or otherwise eliminated, the Property Trustee shall
act solely on behalf of the holders of such Preferred Securities and not on
behalf of the Company as holder of the Lincoln Trust's Common Securities, and
only the holders of such Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Lincoln Trust shall automatically
terminate upon expiration of its term and shall terminate on the first to occur
of: (i) certain events of bankruptcy, dissolution or liquidation of the Company;
(ii) the distribution of a Like Amount of the Corresponding Junior Subordinated
Debt Securities to the holders of its Trust Securities, if the Company, as
Depositor, has given written direction to the Property Trustee to terminate such
Lincoln Trust (which direction is optional and wholly within the discretion of
the Company, as Depositor); (iii) the redemption of all of the Lincoln Trust's
Trust Securities following a Special Event; (iv) redemption of all of the
Lincoln Trust's Preferred Securities as described under "Description of
Preferred Securities--Redemption or Exchange--Mandatory Redemption"; and (v) the
entry of an order for the dissolution of the Lincoln Trust by a court of
competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (v)
above, the Lincoln Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of such Lincoln Trust as provided
by applicable law, to the holders of such Trust Securities a Like Amount of the
Corresponding Junior Subordinated Debt Securities, unless such distribution is
determined by the Property Trustee not to be practical, in which event
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such holders will be entitled to receive out of the assets of the Lincoln Trust
available for distribution to holders, after satisfaction of liabilities to
creditors of such Lincoln Trust as provided by applicable law, an amount equal
to, in the case of holders of Preferred Securities, the aggregate of the
Liquidation Amount plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If such Liquidation
Distribution can be paid only in part because such Lincoln Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by such Lincoln Trust on its
Preferred Securities shall be paid on a PRO RATA basis. The holder(s) of such
Lincoln Trust's Common Securities will be entitled to receive distributions upon
any such liquidation PRO RATA with the holders of its Preferred Securities,
except that if a Junior Subordinated Debt Security Event of Default has occurred
and is continuing, the Preferred Securities shall have a priority over the
Common Securities. A supplemental Indenture may provide that if an early
termination occurs as described in clause (v) above, the Corresponding Junior
Subordinated Debt Securities may be subject to optional redemption in whole (but
not in part).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement (an "Event of Default") with respect to the Preferred Securities
issued thereunder (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) the occurrence of a Junior Subordinated Debt Security Event of Default under
the Junior Subordinated Indenture (see "Description of Junior Subordinated
Debt Securities--Junior Subordinated Debt Security Events of Default"); or
(ii) default by the Property Trustee in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(iii) default by the Property Trustee in the payment of any Redemption Price of
any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Issuer Trustees in such Trust Agreement (other
than a covenant or warranty a default in the performance of which or the
breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25% in aggregate liquidation
preference of the outstanding Preferred Securities of the applicable Lincoln
Trust, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" under
such Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with respect to
the Property Trustee and the failure by the Company to appoint a successor
Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Lincoln Trust's Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Event of Default shall have been cured or waived. The Company, as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under each Trust
Agreement.
If a Junior Subordinated Debt Security Event of Default has occurred and is
continuing, the Preferred Securities shall have a preference over the Common
Securities upon termination of each Lincoln Trust as described above. See "--
Liquidation Distribution Upon Termination." The existence of an Event of Default
does not entitle the holders of Preferred Securities to accelerate the maturity
thereof.
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REMOVAL OF ISSUER TRUSTEES
Unless a Junior Subordinated Debt Security Event of Default shall have
occurred and be continuing, any Issuer Trustee may be removed at any time by the
holder of the Common Securities. If a Junior Subordinated Debt Security Event of
Default has occurred and is continuing, the Property Trustee and the Delaware
Trustee may be removed at such time by the holders of a majority in Liquidation
Amount of the outstanding Preferred Securities. In no event will the holders of
the Preferred Securities have the right to vote to appoint, remove or replace
the Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of an
Issuer Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Company, as the holder of the Common Securities, and
the Administrative Trustees shall have power to appoint one or more persons
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to act as separate trustee of any such property,
in either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the applicable Trust Agreement. In case a Junior Subordinated Debt
Security Event of Default has occurred and is continuing, the Property Trustee
alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Trustee, shall be the successor of such Trustee under each
Trust Agreement, provided such corporation shall be otherwise qualified and
eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE LINCOLN TRUSTS
A Lincoln Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. A Lincoln Trust may, at the request of the Company, with the
consent of the Administrative Trustees and without the consent of the holders of
the Preferred Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to a trust organized as such under the laws of any State;
provided, that (i) such successor entity either (a) expressly assumes all of the
obligations of such Lincoln Trust with respect to the Preferred Securities or
(b) substitutes for the Preferred Securities other securities having
substantially the same terms as the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Preferred
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Corresponding Junior Subordinated Debt
Securities, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then listed, if any, (iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Preferred Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such
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merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Lincoln Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Company has received an opinion
from independent counsel to the Lincoln Trust experienced in such matters to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Lincoln Trust nor such successor entity will be required to register as an
investment company under the Investment Company Act and (viii) the Company or
any permitted successor or assignee owns all of the Common Securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, a Lincoln Trust shall not, except with the
consent of holders of 100% in Liquidation Amount of the Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Lincoln Trust or the successor
entity to be classified as other than a grantor trust for United States Federal
income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees--Amendments
and Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under such Trust Agreement, which shall not be inconsistent
with the other provisions of such Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of such Trust Agreement to such extent as shall be
necessary to ensure that the Lincoln Trust will be classified for United States
Federal income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that the Lincoln Trust will not be
required to register as an "investment company" under the Investment Company
Act; PROVIDED, HOWEVER, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of Trust
Securities, and any amendments of such Trust Agreement shall become effective
when notice thereof is given to the holders of Trust Securities. Each Trust
Agreement may be amended by the Issuer Trustees and the Company with (i) the
consent of holders representing not less than a majority (based upon Liquidation
Amounts) of the outstanding Trust Securities, and (ii) receipt by the Issuer
Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Issuer Trustees in accordance with such
amendment will not affect the Lincoln Trust's status as a grantor trust for
United States Federal income tax purposes or the Lincoln Trust's exemption from
status as an "investment company" under the Investment Company Act, provided
that without the consent of each holder of Trust Securities, such Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Corresponding Junior Subordinated Debt Securities are held by
the Property Trustee, the Issuer Trustees shall not (i) direct the time, method
and place of conducting any proceeding for any
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remedy available to the Junior Subordinated Indenture Trustee, or executing any
trust or power conferred on the Property Trustee with respect to such
Corresponding Junior Subordinated Debt Securities, (ii) waive any past default
that is waivable under Section 513 of the Junior Subordinated Indenture, (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Junior Subordinated Debt Securities shall be due and payable or (iv) consent
to any amendment, modification or termination of the Junior Subordinated
Indenture or such Corresponding Junior Subordinated Debt Securities, where such
consent shall be required, without, in each case, obtaining the prior approval
of the holders of a majority in aggregate Liquidation Amount of all outstanding
Preferred Securities; PROVIDED, HOWEVER, that where a consent under the Junior
Subordinated Indenture would require the consent of each holder of Corresponding
Junior Subordinated Debt Securities affected thereby, no such consent shall be
given by the Property Trustee without the prior consent of each holder of the
corresponding Preferred Securities. The Issuer Trustees shall not revoke any
action previously authorized or approved by a vote of the holders of the
Preferred Securities except by subsequent vote of the holders of the Preferred
Securities. The Property Trustee shall notify each holder of Preferred
Securities of any notice of default with respect to the Corresponding Junior
Subordinated Debt Securities. In addition to obtaining the foregoing approvals
of the holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Issuer Trustees shall obtain an opinion of counsel experienced in
such matters to the effect that the Lincoln Trust will not be classified as a
corporation for United States Federal income tax purposes on account of such
action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Preferred Securities in the manner set forth in each
Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for a Lincoln Trust to redeem and cancel its Preferred Securities in accordance
with the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in
the form of one or more Global Preferred Securities that will be deposited with,
or on behalf of, the Depositary identified in the Prospectus Supplement relating
to such series. Unless otherwise indicated in the applicable Prospectus
Supplement for such series, the Depositary will be DTC. Global Preferred
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, a Global Preferred Security
may not be transferred except as a whole by the Depositary for such Global
Preferred Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a series of
Preferred Securities will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depositary, the Depositary
for such Global Preferred Security or its nominee will credit, on its book-entry
registration and transfer system, the respective aggregate Liquidation Amounts
of the individual Preferred Securities represented by such Global Preferred
Securities to the accounts of Participants. Such accounts shall be designated by
the dealers, underwriters or agents with respect to such
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Preferred Securities or by the Company if such Preferred Securities are offered
and sold directly by the Company. Ownership of beneficial interests in a Global
Preferred Security will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Preferred Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Preferred Security.
So long as the Depositary for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Preferred Securities represented by such Global Preferred Security for all
purposes under the Indenture governing such Preferred Securities. Except as
provided below, owners of beneficial interests in a Global Preferred Security
will not be entitled to have any of the individual Preferred Securities of the
series represented by such Global Preferred Security registered in their names,
will not receive or be entitled to receive physical delivery of any such
Preferred Securities of such series in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Preferred Securities represented by a Global Preferred Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Preferred
Security representing such Preferred Securities. None of the Company, the
Property Trustee, any Paying Agent, or the Securities Registrar for such
Preferred Securities will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the Depositary for a series of Preferred Securities
or its nominee, upon receipt of any payment of Liquidation Amount, premium or
Distributions in respect of a permanent Global Preferred Security representing
any of such Preferred Securities, immediately will credit Participants' accounts
with payments in amounts proportionate to their respective beneficial interest
in the aggregate Liquidation Amount of such Global Preferred Security for such
Preferred Securities as shown on the records of such Depositary or its nominee.
The Company also expects that payments by Participants to owners of beneficial
interests in such Global Preferred Security held through such Participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name." Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling, unable
or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual
Preferred Securities of such series in exchange for the Global Preferred
Security representing such series of Preferred Securities. In addition, the
Company may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities,
determine not to have any Preferred Securities of such series represented by one
or more Global Preferred Securities and, in such event, will issue individual
Preferred Securities of such series in exchange for the Global Preferred
Security or Securities representing such series of Preferred Securities.
Further, if the Company so specifies with respect to the Preferred Securities of
a series, an owner of a beneficial interest in a Global Preferred Security
representing Preferred Securities of such series may, on terms acceptable to the
Company, the Property Trustee and the Depositary for such Global Preferred
Security, receive individual Preferred Securities of such series in exchange for
such beneficial interests, subject to any limitations described in the
Prospectus Supplement relating to such Preferred Securities. In any such
instance, an owner of a beneficial
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interest in a Global Preferred Security will be entitled to physical delivery of
individual Preferred Securities of the series represented by such Global
Preferred Security equal in principal amount to such beneficial interest and to
have such Preferred Securities registered in its name. Individual Preferred
Securities of such series so issued will be issued in denominations, unless
otherwise specified by the Company, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Lincoln Trust's Preferred Securities
are not held by the Depositary, such payments shall be made by check mailed to
the address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. The Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Property Trustee and
the Company. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and the
Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Lincoln Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Lincoln Trusts will not be required to register or cause to be
registered the transfer of their Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically set
forth in each Trust Agreement and, after such Event of Default, must exercise
the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
applicable Trust Agreement at the request of any holder of Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby. If no Event of Default has occurred
and is continuing and the Property Trustee is required to decide between
alternative causes of action, construe ambiguous provisions in the applicable
Trust Agreement or is unsure of the application of any provision of the
applicable Trust Agreement, and the matter is not one on which holders of
Preferred Securities are entitled under such Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by the Company and if not
so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Lincoln Trusts in such a way that no Lincoln Trust
will be deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States Federal income tax purposes and so that the Corresponding
Junior Subordinated Debt
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Securities will be treated as indebtedness of the Company for United States
Federal income tax purposes. In this connection, the Company and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of each Lincoln Trust or each Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
related Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Lincoln Trust may borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Company concurrently with
the issuance by each Lincoln Trust of its Preferred Securities for the benefit
of the holders from time to time of such Preferred Securities. The First
National Bank of Chicago will act as indenture trustee ("Guarantee Trustee")
under each Guarantee for the purposes of compliance with the Trust Indenture Act
and each Guarantee will be qualified as an indenture under the Trust Indenture
Act. This summary of certain provisions of the Guarantees does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of each Guarantee Agreement, including the definitions therein
of certain terms, and the Trust Indenture Act. The form of the Guarantee has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. Reference in this summary to Preferred Securities means that
Lincoln Trust's Preferred Securities to which a Guarantee relates. The Guarantee
Trustee will hold each Guarantee for the benefit of the holders of the related
Lincoln Trust's Preferred Securities.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Preferred Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that such Lincoln Trust may have or assert
other than the defense of payment. The following payments with respect to the
Preferred Securities, to the extent not paid by or on behalf of the related
Lincoln Trust (the "Guarantee Payments"), will be subject to the Guarantee: (i)
any accumulated and unpaid Distributions required to be paid on such Preferred
Securities, to the extent that such Lincoln Trust has funds on hand available
therefor at such time, (ii) the Redemption Price with respect to any Preferred
Securities called for redemption to the extent that such Lincoln Trust has funds
on hand available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of such Lincoln Trust (unless
the Corresponding Junior Subordinated Debt Securities are distributed to holders
of such Preferred Securities), the lesser of (a) the Liquidation Distribution
and (b) the amount of assets of such Lincoln Trust remaining available for
distribution to holders of Preferred Securities. The Company's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of the applicable Preferred Securities or
by causing the Lincoln Trust to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Lincoln Trust's obligations under the Preferred Securities, but will
apply only to the extent that such related Lincoln Trust has funds sufficient to
make such payments, and is not a guarantee of collection.
If the Company does not make interest payments on the Corresponding Junior
Subordinated Debt Securities held by the Lincoln Trust, the Lincoln Trust will
not be able to pay Distributions on the Preferred Securities and will not have
funds legally available therefor. Each Guarantee will rank subordinate and
junior in right of payment to all Senior Debt of the Company. See "--Status of
the Guarantees." The Company is a non-operating holding company and almost all
of the operating assets of the Company and its consolidated subsidiaries are
owned by such subsidiaries. The Company relies primarily on dividends from such
subsidiaries to meet its obligations for payment of principal and interest on
its outstanding debt
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obligations and corporate expenses. Accordingly, the Company's obligations under
the Guarantees will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, and claimants should look only to the
assets of the Company for payments thereunder. The payment of dividends by the
Company's insurance company subsidiaries is limited under the insurance holding
company laws in which such subsidiaries are domiciled. See "Lincoln National
Corporation." Except as otherwise provided in the applicable Prospectus
Supplement, the Guarantees do not limit the incurrence or issuance of other
secured or unsecured debt of the Company, whether under the Indenture, any other
indenture that the Company may enter into in the future or otherwise. See the
Prospectus Supplement relating to any offering of Preferred Securities.
The Company's obligations described herein and in any accompanying
Prospectus Supplement, through the applicable Guarantee, the applicable Trust
Agreement, the Junior Subordinated Debt Securities, the Junior Subordinated
Indenture and any supplemental indentures thereto, and the Expense Agreement,
taken together, constitute a full, irrevocable and unconditional guarantee by
the Company of payments due on the Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the Lincoln Trust's obligations under the Preferred Securities. See
"The Lincoln Trusts," "Description of Preferred Securities," and "Description of
Junior Subordinated Debt Securities."
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt.
Each Guarantee will rank PARI PASSU with all other Guarantees issued by the
Company. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). Each
Guarantee will be held for the benefit of the holders of the related Preferred
Securities. Each Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Lincoln Trust or upon
distribution to the holders of the Preferred Securities of the Corresponding
Junior Subordinated Debt Securities. None of the Guarantees places a limitation
on the amount of additional Senior Debt that may be incurred by the Company. The
Company expects from time to time to incur additional indebtedness constituting
Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no vote
will be required), no Guarantee may be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of the Preferred Securities--Voting Rights;
Amendment of Each Trust Agreement." All guarantees and agreements contained in
each Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the related Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
related Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of such
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Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under such Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under such Guarantee without
first instituting a legal proceeding against the Lincoln Trust, the Guarantee
Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Company in performance of any Guarantee, undertakes to perform
only such duties as are specifically set forth in each Guarantee and, after
default with respect to any Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Guarantee Trustee is under no obligation
to exercise any of the powers vested in it by any Guarantee at the request of
any holder of any Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Lincoln
Trust or upon distribution of Corresponding Junior Subordinated Debt Securities
to the holders of the related Preferred Securities. Each Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of the related Preferred Securities must restore payment of any sums paid
under such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Company under each
Trust Agreement (the "Expense Agreement"), the Company will irrevocably and
unconditionally guarantee to each person or entity to whom the Lincoln Trust
becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the Lincoln Trust, other than obligations of the Lincoln Trust to
pay to the holders of any Preferred Securities or other similar interests in the
Lincoln Trust of the amounts due such holders pursuant to the terms of the
Preferred Securities or such other similar interests, as the case may be.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, representing contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock at a future date or dates.
The price per share of Common Stock may be fixed at the time the Stock Purchase
Contracts are issued or may be determined by reference to a specific formula set
forth in the Stock Purchase Contracts. The Stock Purchase Contracts may be
issued separately or as a part of units ("Stock Purchase Units") consisting of a
Stock Purchase Contract and either (x) Senior Debt Securities, Subordinated Debt
Securities or Junior Subordinated Debt Securities, (y) debt obligations of
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third parties, including U.S. Treasury securities, or (z) Preferred Securities
of a Lincoln Trust, securing the holder's obligations to purchase the Common
Stock under the Stock Purchase Contracts. The Stock Purchase Contracts may
require the Company to make periodic payments to the holders of the Stock
Purchase Units or vice versa, and such payments may be unsecured or prefunded on
some basis. The Stock Purchase Contracts may require holders to secure their
obligations thereunder in a specified manner and in certain circumstances the
Company may deliver newly issued prepaid stock purchase contracts ("Prepaid
Securities") upon release to a holder of any collateral securing such holder's
obligations under the original Stock Purchase Contract.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units and, if applicable, Prepaid
Securities. The description in the Prospectus Supplement will not purport to be
complete and will be qualified in its entirety by reference to the Stock
Purchase Contracts, the collateral arrangements and depositary arrangements, if
applicable, relating to such Stock Purchase Contracts or Stock Purchase Units
and, if applicable, the Prepaid Securities and the document pursuant to which
such Prepaid Securities will be issued.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities
and the Junior Subordinated Debt Securities, unless otherwise referred to in the
Prospectus Supplement relating to an offering of Preferred Securities or Junior
Subordinated Debt Securities. The Preferred Securities and the Junior
Subordinated Debt Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global certificates will be issued for the Preferred Securities
of each Lincoln Trust and the Junior Subordinated Debt Securities, representing
in the aggregate the total number of such Lincoln Trust's Preferred Securities
or aggregate principal balance of Junior Subordinated Debt Securities,
respectively, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debt Securities
within the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated Debt
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security and each Junior Subordinated Debt Security ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchases, but Beneficial Owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Preferred Securities or Junior
Subordinated Debt Securities. Transfers of ownership interests in the Preferred
Securities or Junior Subordinated Debt Securities are to be accomplished by
entries made on the books of Participants acting
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on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Preferred Securities or Junior
Subordinated Debt Securities, except in the event that use of the book-entry
system for the Preferred Securities of such Lincoln Trust or Junior Subordinated
Debt Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debt Securities; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Preferred
Securities or Junior Subordinated Debt Securities are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications buy DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities or Junior Subordinated Debt Securities. If less than
all of a Lincoln Trust's Preferred Securities or the Junior Subordinated Debt
Securities are being redeemed, DTC's current practice is to determine by lot the
amount of the interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debt Securities is limited to the holders of record of the
Preferred Securities or Junior Subordinated Debt Securities, in those instances
in which a vote is required, neither DTC nor Cede & Co. will itself consent or
vote with respect to Preferred Securities or Junior Subordinated Debt
Securities. Under its usual procedures, DTC would mail an omnibus proxy (the
"Omnibus Proxy") to the relevant Trustee as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts such Preferred Securities or Junior
Subordinated Debt Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities or the Junior Subordinated
Debt Securities will be made by the relevant Trustee to DTC. DTC's practice is
to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the Lincoln Trust thereof or
the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the responsibility
of the relevant Trustee, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursements of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities or the Junior Subordinated Debt
Securities at any time by giving reasonable notice to the relevant Trustee and
the Company. In the event that a successor securities depositary is not
obtained, definitive Preferred Security or Junior Subordinated Debt Security
certificates representing such Preferred Securities or Junior Subordinated Debt
Securities are required to be printed and delivered. The Company, at its option,
may decide to discontinue use of the system of book-entry transfers through DTC
(or a successor depositary). After a Junior Subordinated Debt Security Event of
Default, the holders of a majority in liquidation preference of Preferred
Securities or aggregate principal amount of Junior Subordinated Debt Securities
may determine to discontinue the system of book-entry transfers through DTC. In
any such event, definitive certificates for such Preferred Securities or Junior
Subordinated Debt Securities will be printed and delivered.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Lincoln Trusts and the Company believe
to be accurate, but the Lincoln Trusts and the Company assume no responsibility
for the accuracy thereof. Neither the Lincoln Trusts nor the Company has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBT SECURITIES
AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Lincoln Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of Guarantees." Taken together, the Company's
obligations under each series of Junior Subordinated Debt Securities, the Junior
Subordinated Indenture, the related Trust Agreement, the related Expense
Agreement, and the related Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of distributions and other
amounts due on the related series of Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the Lincoln Trust's obligations under the Preferred Securities. If
and to the extent that the Company does not make payments on any series of
Corresponding Junior Subordinated Debt Securities, such Lincoln Trust will not
pay Distributions or other amounts due on its Preferred Securities. The
Guarantees do not cover payment of Distributions when the related Lincoln Trust
does not have sufficient funds to pay such Distributions. In such event, the
remedy of a holder of a series of Preferred Securities is to institute a legal
proceeding directly against the Company for enforcement of payment of such
Distributions to such holder. The obligations of the Company under each
Guarantee are subordinate and junior in right of payment to all Senior Debt of
the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on each
series of Corresponding Junior Subordinated Debt Securities, such payments will
be sufficient to cover Distributions and other payments due on the related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debt Securities will be equal
to the sum of the aggregate stated Liquidation Amount of the Related Preferred
Securities and related Common Securities; (ii) the interest rate and interest
and other payment dates on each series of Corresponding Junior Subordinated Debt
Securities will match the Distribution rate and Distribution and other payment
dates for the related Preferred Securities; (iii) the Company shall pay for all
and any costs, expenses and liabilities of such Lincoln Trust except the Lincoln
Trust's obligations to holders of its Preferred Securities under such Preferred
Securities; and (iv) each Trust Agreement further provides that the Lincoln
Trust will not engage in any activity that is not consistent with the limited
purposes of such Lincoln Trust.
Notwithstanding anything to the contrary in the Junior Subordinated
Indenture, the Company has the right to set-off any payment it is otherwise
required to make thereunder with and to the extent the Company has theretofore
made, or is concurrently on the date of such payment making, a payment under the
related Guarantee.
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ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any related Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the related Guarantee
without first instituting a legal proceeding against the Guarantee Trustee, the
related Lincoln Trust or any other person or entity.
A default or event of default under any Senior Debt of the Company would not
constitute a default or Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior Debt of the Company, the
subordination provisions of the Junior Subordinated Indenture provide that no
payments may be made in respect of the Corresponding Junior Subordinated Debt
Securities until such Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on any
series of Corresponding Junior Subordinated Debt Securities would constitute an
Event of Default.
LIMITED PURPOSE OF LINCOLN TRUSTS
Each Lincoln Trust's Preferred Securities evidence a beneficial interest in
such Lincoln Trust, and each Lincoln Trust exists for the sole purpose of
issuing its Preferred Securities and Common Securities and investing the
proceeds thereof in Corresponding Junior Subordinated Debt Securities. A
principal difference between the rights of a holder of a Preferred Security and
a holder of a Corresponding Junior Subordinated Debt Security is that a holder
of a Corresponding Junior Subordinated Debt Security is entitled to receive from
the Company the principal amount of and interest accrued on Corresponding Junior
Subordinated Debt Securities held, while a holder of Preferred Securities is
entitled to receive Distributions from such Lincoln Trust (or from the Company
under the applicable Guarantee) if and to the extent such Lincoln Trust has
funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Lincoln Trust involving the liquidation of the Corresponding Junior
Subordinated Debt Securities, the holders of the related Preferred Securities
will be entitled to receive, out of assets held by such Lincoln Trust, the
Liquidation Distribution in cash. See "Description of Preferred
Securities--Liquidation Distribution Upon Termination." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Corresponding Junior Subordinated Debt Securities, would be a
subordinated creditor of the Company, subordinated in right of payment to all
Senior Debt, but entitled to receive payment in full of principal and interest,
before any stockholders of the Company receive payments or distributions. Since
the Company is the guarantor under each Guarantee and has agreed to pay for all
costs, expenses and liabilities of each Lincoln Trust (other than the Lincoln
Trust's obligations to the holders of its Preferred Securities), the positions
of a holder of such Preferred Securities and a holder of such Corresponding
Junior Subordinated Debt Securities relative to other creditors and to
stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
PLAN OF DISTRIBUTION
The Company and/or any Lincoln Trust may sell any of the Offered Securities
in any one or more of the following ways from time to time: (i) through agents;
(ii) to or through underwriters; (iii) through dealers; or (iv) directly to
purchasers.
The Prospectus Supplement with respect to the Offered Securities will set
forth the terms of the offering of the Offered Securities, including the name or
names of any underwriters, dealers or agents; the purchase price of the Offered
Securities and the proceeds to the Company and/or a Lincoln Trust from such
sale; any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation; any initial public offering
price and any discounts or concessions
53
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allowed or reallowed or paid to dealers and any securities exchange on which
such Offered Securities may be listed. Any initial public offering price,
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
The distribution of the Offered Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Offers to purchase Offered Securities may be solicited by agents designated
by the Company from time to time. Any such agent involved in the offer or sale
of the Offered Securities in respect of which this Prospectus is delivered will
be named, and any commissions payable by the Company and/or the applicable
Lincoln Trust to such agent will be set forth, in the applicable Prospectus
Supplement. Unless otherwise indicated in such Prospectus Supplement, any such
agent will be acting on a reasonable best efforts basis for the period of its
appointment. Any such agent may be deemed to be an underwriter, as that term is
defined in the Securities Act, of the Offered Securities so offered and sold.
If Offered Securities are sold by means of an underwritten offering, the
Company and/or the applicable Lincoln Trust will execute an underwriting
agreement with an underwriter or underwriters at the time an agreement for such
sale is reached, and the names of the specific managing underwriter or
underwriters, as well as any other underwriters, and the terms of the
transaction, including commissions, discounts and any other compensation of the
underwriters and dealers, if any, will be set forth in the Prospectus Supplement
which will be used by the underwriters to make resales of the Offered Securities
in respect of which this Prospectus is delivered to the public. If underwriters
are utilized in the sale of the Offered Securities in respect of which this
Prospectus is delivered, the Offered Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at fixed public offering
prices or at varying prices determined by the underwriter at the time of sale.
Offered Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by the managing
underwriters. If any underwriter or underwriters are utilized in the sale of the
Offered Securities, unless otherwise indicated in the Prospectus Supplement, the
underwriting agreement will provide that the obligations of the underwriters are
subject to certain conditions precedent and that the underwriters with respect
to a sale of Offered Securities will be obligated to purchase all such Offered
Securities of a series if any are purchased.
If a dealer is utilized in the sales of the Offered Securities in respect of
which this Prospectus is delivered, the Company and/or the applicable Lincoln
Trust will sell such Offered Securities to the dealer as principal. The dealer
may then resell such Offered Securities to the public at varying prices to be
determined by such dealer at the time of resale. Any such dealer may be deemed
to be an underwriter, as such term is defined in the Securities Act, of the
Offered Securities so offered and sold. The name of the dealer and the terms of
the transaction will be set forth in the Prospectus Supplement relating thereto.
Offers to purchase Offered Securities may be solicited directly by the
Company and/or the applicable Lincoln Trust and the sale thereof may be made by
the Company and/or the applicable Lincoln Trust directly to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto.
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by the Company and/or the applicable Lincoln
Trust against certain liabilities, including liabilities under the Securities
Act.
Agents, underwriters and dealers may be customers of, engage in transactions
with, or perform services for, the Company and its subsidiaries in the ordinary
course of business.
54
<PAGE>
Offered Securities may also be offered and sold, if so indicated in the
applicable Prospectus Supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more firms ("remarketing firms"), acting as principals
for their own accounts or as agents for the Company and/or the applicable
Lincoln Trust. Any remarketing firm will be identified and the terms of its
agreement, if any, with its compensation will be described in the applicable
Prospectus Supplement. Remarketing firms may be deemed to be underwriters, as
such term is defined in the Securities Act, in connection with the Offered
Securities remarketed thereby. Remarketing firms may be entitled under
agreements which may be entered into with the Company and/or the applicable
Lincoln Trust to indemnification or contribution by the Company and/or the
applicable Lincoln Trust against certain civil liabilities, including
liabilities under the Securities Act, and may be customers of, engage in
transactions with or perform services for the Company and its subsidiaries in
the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company and/or
the applicable Lincoln Trust may authorize agents, underwriters or dealers to
solicit offers by certain types of institutions to purchase Offered Securities
from the Company and/or the applicable Lincoln Trust at the public offering
prices set forth in the applicable Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date or
dates in the future. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters, dealers and agents soliciting purchases
of Offered Securities pursuant to any such delayed delivery contracts accepted
by the Company and/or the applicable Lincoln Trust.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, certain
legal matters will be passed upon for the Company and the Lincoln Trusts by
Sonnenschein Nath & Rosenthal, Chicago, Illinois, counsel to the Company, and
for the Lincoln Trusts by Richards, Layton & Finger, special Delaware counsel to
the Lincoln Trusts. Sonnenschein Nath & Rosenthal will rely on (i) the opinion
of Richards, Layton & Finger as to matters of Delaware law and (ii) the opinion
of Jack D. Hunter, Esq., Executive Vice President and General Counsel of the
Company, as to matters of Indiana law. As of February 27, 1998, Mr. Hunter
beneficially owned 103,476 shares of Common Stock of the Company, including
49,125 shares of Common Stock which Mr. Hunter has the right to acquire pursuant
to options exercisable within 60 days of such date.
EXPERTS
The consolidated financial statements and schedules of Lincoln National
Corporation and subsidiaries appearing in the Company's Annual Report on Form
10-K for the year ended December 31, 1997 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements and
schedules are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
55
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NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY LINCOLN NATIONAL CORPORATION OR BY THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF LINCOLN NATIONAL CORPORATION SINCE THE DATE HEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Incorporation of Certain Documents by
Reference.................................... S-4
Risk Factors................................... S-5
Forward-Looking Statements..................... S-9
Lincoln National Capital III................... S-9
Lincoln National Corporation................... S-10
Selected Consolidated Financial Data........... S-13
Capitalization................................. S-14
Use of Proceeds................................ S-15
Accounting Treatment........................... S-15
Certain Terms of Series C TOPrS................ S-15
Certain Terms of Series C Subordinated
Debentures................................... S-18
Certain Federal Income Tax Consequences........ S-21
Underwriting................................... S-25
Validity of Securities......................... S-26
PROSPECTUS
Available Information.......................... 3
Incorporation of Certain Documents by
Reference.................................... 4
Lincoln National Corporation................... 5
The Lincoln Trusts............................. 5
Use of Proceeds................................ 6
Consolidated Ratios of Earnings to Fixed
Charges and Earnings to Combined Fixed
Charges and Preferred Stock Dividends........ 6
Description of the Senior Debt Securities...... 7
Description of Junior Subordinated Debt
Securities................................... 14
Description of Preferred Stock and Common
Stock........................................ 26
Description of Depositary Shares............... 31
Description of Warrants........................ 34
Description of Preferred Securities............ 35
Description of Guarantees...................... 47
Description of Stock Purchase Contracts and
Stock Purchase Units......................... 49
Book-Entry Issuance............................ 50
Relationship Among the Preferred Securities,
the Corresponding Junior Subordinated Debt
Securities and the Guarantees................ 52
Plan of Distribution........................... 53
Validity of Securities......................... 55
Experts........................................ 55
</TABLE>
8,000,000 PREFERRED SECURITIES
LINCOLN NATIONAL CAPITAL III
% TRUST ORIGINATED
PREFERRED SECURITIES-SM-,
SERIES C ("TOPRS-SM-")
(LIQUIDATION AMOUNT $25
PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
[LOGO]
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
CHASE SECURITIES INC.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
JULY , 1998
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