SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
Lincoln National Corporation
(Name of Registrant as Specified in Its Charter)
______________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.
3) Filing Party:
4) Date Filed:
April 8, 1999
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Lincoln National Corporation ("LNC") scheduled for Thursday, May 13,1999, at the
Four Seasons Hotel, One Logan Square, Philadelphia, Pennsylvania, at 10:00 a.m.,
local time. LNC's Board of Directors and Management look forward to greeting you
if you can attend.
The enclosed Notice of Meeting and Proxy Statement describe the matters to be
acted upon at the Meeting. Please review these documents carefully.
It is important that you vote your shares of LNC stock, either in person or
through a proxy. To assist you in voting your shares, LNC now offers, in
addition to voting through the use of a proxy card, voting via telephone and
over the Internet. If you are unable to attend, please sign, date and mail the
enclosed proxy card in the envelope provided, or vote your shares in any other
manner described in the enclosed proxy statement.
On behalf of the Board of Directors, thank you for your continued support.
Sincerely,
Jon A. Boscia
President and Chief Executive Officer
<PAGE>
LINCOLN NATIONAL CORPORATION
FORT WAYNE, INDIANA
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
April 8, 1999
The Annual Meeting of Shareholders of LINCOLN NATIONAL CORPORATION will be held
on Thursday, May 13, 1999, at 10:00 a.m., local time, at the Four Seasons Hotel,
One Logan Square, Philadelphia, Pennsylvania.
The items of business are:
1. to elect four directors for three-year terms expiring in 2002;
2. to vote on a shareholder proposal; and
3. to consider an act upon such other matters as may properly
come before the meeting.
You have the right to receive this notice and vote at the Annual Meeting if you
were a shareholder of record at the close of business on March 19, 1999. Please
remember that your shares cannot be voted unless you cast your votes by one of
the following methods: (1) sign and return a proxy card; (2) call the 800
toll-free number listed on the proxy card and vote your shares; (3) vote via the
Internet as indicated on the proxy card; (4) vote in person at the Annual
Meeting; or (5) make other arrangements to vote your shares.
For the Board of Directors,
C. Suzanne Womack
Secretary
<PAGE>-1-
LINCOLN NATIONAL CORPORATION
200 East Berry Street
FORT WAYNE, INDIANA 46802
PROXY STATEMENT
Annual Meeting of Shareholders
May 13, 1999
The Board of Directors (the "Board") of Lincoln National Corporation ("LNC" or
the "Corporation") is soliciting proxies in connection with the proposals to be
voted on at the annual meeting of LNC shareholders scheduled for May 13, 1999
(the "Annual Meeting"). The matters to be voted upon are set forth in the
enclosed Notice of Annual Meeting of Shareholders (the "Notice").
We encourage you to vote your shares, either by voting in person at the Annual
Meeting or by granting a proxy (i.e., authorizing someone to vote your shares).
If you execute the attached proxy card, the individuals designated on that card
(Jon A. Boscia, Jill S. Ruckelshaus, and C. Suzanne Womack) will vote your
shares according to your instructions. If any matter other than Item 1 or Item 2
listed in the Notice is presented at the Annual Meeting, the designated
individuals will, to the extent permissible, vote all proxies in the manner they
perceive to be in the best interests of the Corporation.
To assist you in deciding how to vote, this Proxy Statement includes narrative
information about the Corporation, its officers and directors, nominees for
director, and related matters. In addition, a Performance Graph showing the
Corporation's performance over a five year period is included on page 22. We
have supplemented the narrative disclosure in this Proxy Statement with the
following information, all of which is set forth in Tables A through G
(beginning on page 27):
Table Name of Table or Graph
A Security Ownership of Directors, Nominees And
Executive Officers
B Security Ownership of Certain Beneficial Owners
C Summary Compensation Table
D Long-Term Incentive Plans -- Awards In Last Fiscal
Year
E Option/SAR Grants in Last Fiscal Year
F Aggregated Option/SAR Exercises In Last Fiscal Year
and Fiscal Year-End Option/SAR Values
G Pension Table
Whenever we refer in this Proxy Statement to the "Annual Meeting," we are also
referring to any meeting that results from an adjournment of the Annual Meeting.
We are first mailing this Proxy Statement to our shareholders on or about April
8, 1999.
<PAGE>-2-
SOLICITATION OF PROXIES
INTRODUCTION
The attached proxy card allows you to instruct the designated individuals how to
vote your shares. You may vote in favor of, against, or abstain from voting on
any proposal. In addition, with respect to Item 1 (the election of directors),
you may, if you desire, indicate on the proxy card that you are not authorizing
the designated individuals to vote your shares for one or more particular
nominees.
If you sign a proxy card and deliver it to us, but then want to change your
vote, you may revoke your proxy at any time prior to the Annual Meeting by
sending us a written revocation or a new proxy, or by attending the Annual
Meeting and voting your shares in person.
WHO MAY SOLICIT PROXIES
Directors, officers and employees of the Corporation may solicit proxies on
behalf of the Board via mail, telephone, fax, and personal contact. The
Corporation has retained Corporate Investor Communications, Inc. ("CIC") to
assist it in the solicitation process. The costs of retaining CIC are expected
to be approximately $5,500, plus reimbursement of out-of-pocket expenses.
COSTS OF SOLICITING PROXIES
The Corporation will pay the cost of soliciting proxies. Directors, officers and
employees of the Corporation will receive no additional compensation for
soliciting proxies. If the Corporation retains a proxy solicitation firm, the
Corporation will incur additional expenses relating to the solicitation of
proxies, the amount of which will depend upon the services to be provided. The
Corporation will reimburse certain brokerage firms, banks, custodians and other
fiduciaries for the reasonable mailing and other expenses they incur in
forwarding proxy materials to the beneficial owners of stock that those
brokerage firms, banks, custodians and fiduciaries hold of record.
VOTING
SHAREHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING
You may vote your shares at the Annual Meeting only if you were a shareholder of
record at the close of business on March 19, 1999 (the "Record Date"). As of the
Record Date, 101,203,728 shares of capital stock of the Corporation were issued,
outstanding, and entitled to vote as follows: 101,171,677 shares of Common Stock
and 32,051 shares of $3.00 Cumulative Convertible Preferred Stock, Series A (the
"Preferred Stock"). You are entitled to one vote for each share of Common Stock
and each share of Preferred Stock you own.
The number of shares you own (and may vote) is listed on the proxy card.
HOW TO SUBMIT YOUR PROXY BY TELEPHONE OR THROUGH THE INTERNET
As an alternative to submitting your proxy by mail, you may submit your proxy
with voting instructions, by telephone or through the Internet by following the
instructions that are set forth on the enclosed proxy card and the accompanying
information sheet. If you are a shareholder of record on the Record Date, you
may call 1-800-652-8683 (1-201-324-0377, outside the U.S. and Canada) or visit
the Web site listed on the enclosed proxy card and accompanying information
sheet. If you hold your shares through a broker, nominee, fiduciary or other
custodian, you should use the different toll-free telephone number and Web site
address provided on the accompanying information sheet for such beneficial
owners. If you choose to submit your proxy with voting instructions by telephone
or through the Internet, you will be required to provide your
<PAGE>-3-
assigned control number noted on the enclosed proxy card before your proxy will
be accepted. In addition to the instructions that appear on the enclosed proxy
card and information sheet, step-by-step instructions will be provided by
recorded telephone message or at the designated Web site on the Internet.
INFORMATION FOR PARTICIPANTS IN CERTAIN PLANS
If you participate in the Lincoln National Corporation Employees' Savings and
Profit-Sharing Plan or The Lincoln National Life Insurance Company Agents'
Savings and Profit-Sharing Plan, the enclosed proxy card, when executed and
returned by you, will instruct the trustees of your plan how to vote the shares
of LNC Common Stock allocated to your account. If the Corporation's stock books
contain identical account information regarding Common Stock that you own
directly and Common Stock that you own through one or more of those plans, you
will receive a single proxy card representing all shares owned by you. If you
participate in an LNC plan and do not return a proxy card to the Corporation,
the trustees of your plan will vote the shares in your account in proportion to
shares held by your plan for which voting directions have been received.
If you own shares of the Corporation through an employee benefit plan other than
those plans mentioned above, you should contact the administrator of your plan
if you have questions regarding how to vote your shares.
QUORUM
A majority of all outstanding shares entitled to vote at the Annual Meeting
constitutes a quorum (i.e., the minimum number of shares that must be present or
represented by proxy at the Annual Meeting in order to transact business).
Abstentions and broker non-votes will be counted for purposes of determining
whether a quorum is present. ("Broker non-votes" are proxies returned by
brokerage firms for which no voting instructions have been received from their
principals.) Once a share is represented for any purpose at the Annual Meeting,
it will be deemed present for quorum purposes for the remainder of the meeting
(including any meeting resulting from an adjournment of the Annual Meeting,
unless a new record date is set).
VOTES NECESSARY TO ADOPT PROPOSALS
A plurality of the votes cast is required for the election of directors (Item
1), which means that the four open director seats will be filled by the four
director nominees receiving the highest number of votes. With respect to Item 2,
and if any other matters are properly presented at the meeting (assuming a
quorum exists with respect to such matter), a particular proposal will be
approved if the number of votes cast in favor of the proposal exceeds the number
of votes cast against the proposal. Abstentions, broker non-votes and, with
respect to the election of directors, instructions on a proxy card to withhold
authority to vote for one or more of the director nominees will have no effect
on the outcome of the relevant vote.
CERTAIN SHAREHOLDER-RELATED MATTERS
One shareholder proposal is included in this Proxy Statement. See "Item 2 - 1999
Shareholder Proposal" on page 23. For information regarding inclusion of
shareholder proposals in future proxy statements, see "Shareholder Proposals" on
page 25. If shareholders at the Annual Meeting approve the minutes of the 1998
annual meeting of shareholders, that approval will not constitute approval of
the matters referred to in those minutes.
<PAGE>-4-
ITEM 1 - ELECTION OF DIRECTORS
There are currently no vacancies on the Board. Ian Rolland retired from the
position of President and Chief Executive Officer of the Corporation on June 30,
1998, and from the position of Chairman of the Board on November 30, 1998. He
will not stand for re-election. It has been decided that a second vacancy on the
Board of Directors will not be filled. Accordingly, effective as of May 13,
1999, the size of the Board will be eleven members. If you sign the enclosed
proxy card and return it to the Corporation, your proxy will be voted for J.
Patrick Barrett, Thomas D. Bell, Jr., Daniel R. Efroymson and Roel Pieper (in
each case for a term expiring in the year 2002), unless you specifically
indicate on the proxy card that you are withholding authority to vote for one or
more of those nominees.
All nominees are current directors of the Corporation and all have agreed to
serve on the Board if they are elected. If any nominee is unable (or for
whatever reason declines) to serve as a director at the time of the Annual
Meeting, proxies will be voted for the election of a qualified substitute
nominee or else the size of the Board will be reduced.
More information concerning security ownership, compensation of officers and
directors, performance of the Corporation, and other important matters are set
forth below under "Additional Information" starting on page 9.
NOMINEES FOR TERMS EXPIRING IN 2002
Nominated for a Term Expiring in May 2002
PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS HISTORY:
President of Telergy Inc.
(a facilities based integrated communications provider)
[April 1998 - present]
[Picture] Chairman and Chief Executive Officer of CARPAT Investments
(a private investment company) [1987 - present]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Coyne International Enterprises Corporation [July 1998 -
present]
J. Patrick Barrett
Director since 1990
Age 62
<PAGE>-5-
Nominated for a Term Expiring in May 2002
PRINCIPAL OCCUPATION:
Chairman and Chief Executive Officer of Young & Rubicam
Advertising
(an advertising agency) [October 1998 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
President and Chief Executive Officer,
Burson-Marsteller (a perception management firm)
[May 1995 - October 1998]
Chairman and Chief Executive Officer, Diversified
Communications Group [November
1997 - October 1998]
Vice-Chairman, Gulfstream Aerospace Corporation (a
manufacturer of business aircraft) [March 1994 -
May 1995]
Vice-Chairman, Chief Operating Officer and Director, Burson-
Marsteller [June 1989 - March 1994]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Young & Rubicam, Inc. [May 1998 - present]
Gulfstream Aerospace Corporation [October 1996 - present]
Thomas D. Bell, Jr.
Director since 1988
Age 49
Nominated for a Term Expiring in May 2002
PRINCIPAL OCCUPATION:
President and Treasurer of Real Silk Investments, Inc.
(a closed-end investment company) [January 1989 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
First Vice President and Director, Moriah Fund, Inc.
(a private foundation) [1993 - June 1998]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Real Silk Investments, Inc. [January 1989 - present]
Daniel R. Efroymson
Director since 1993
Age 57
<PAGE>-6-
Nominated for a Term Expiring in May 2002
PRINCIPAL OCCUPATION:
Executive Vice President of Royal Philips Electronics N.V.
(a manufacturer and media company of varied consumer and
business electronics products and services)[February 1998 -
[Picture] present]
FIVE YEAR BUSINESS HISTORY:
Senior Vice President and General Manager, Worldwide Sales,
Marketing, Service and Support, Compaq Computer Corporation
(a manufacturer of computers)[September 1997 - January 1998]
President, Chief Executive Officer and Director, Tandem
Computers, Inc.(a manufacturer of computer hardware, servers
and networks) [January 1996 - September 1997]
President and Chief Executive Officer, UB Networks, Inc.
(a computer networking company)[September 1993-January 1996]
President and Chief Executive Officer, AT&T Unix Systems
Laboratories (a communications company) [January 1991 -
September 1993]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
General Magic, Inc. [February 1996 - present]
Veritas Software Corporation [April 1992 - present]
UNIFY [February 1997 - present]
Roel Pieper
Director since 1996
Age 42
OTHER DIRECTORS OF THE CORPORATION
The identity of, and certain biographical information relating to, the directors
of the Corporation who will continue in office after the Annual Meeting are set
forth below. Ian M. Rolland has decided not to stand for re-election as a
director when his term expires on May 13, 1999; accordingly, no biographical
information regarding Mr. Rolland is required to be set forth below.
Continuing in Office for a Term Expiring in May 2001
PRINCIPAL OCCUPATION : Chief Executive Officer
of the Corporation [July 1998 - present] President of the
Corporation [January 1998 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
President and Chief Executive Officer, The Lincoln National Life
Insurance Company [October 1996 - January 1998]
President and Chief Operating Officer, The Lincoln National Life
Insurance Company [May 1994 - October 1996]
President, Lincoln Investment Management, Inc. [July 1991 -
May 1994]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
None
Jon A. Boscia
Director since 1998
Age 46
<PAGE>-7-
Continuing in Office for a Term Expiring in May 2001
PRINCIPAL OCCUPATION : President and Chief
Executive Officer of Baldwin Richardson Foods Company
(a manufacturer of dessert products and liquid condiments for
retail and the food service industry)[December 1997 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
President and Chief Executive Officer, Tristar Industries, Inc.
[March 1992 - December 1997]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
None
Eric G. Johnson
Director since 1998
Age 48
Continuing in Office for a Term Expiring in May 2001
PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS HISTORY:
Chairman of Texas Biotechnology Corporation (a research and
development company) [May 1990 - present]
[Picture]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Hershey Foods Corporation [April 1987 - present]
GPU, Inc. [January 1989 - present]
Professional Detailing, Inc. [1998 - present]
John M. Pietruski
Director since 1989
Age 66
Continuing in Office for a Term Expiring in May 2001
PRINCIPAL OCCUPATION:
Dean and Professor of Business Economics, Jesse H. Jones Graduate
School of Management, Rice University [July 1997 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
Professor of Business Economics, School of Business
Administration, University of Michigan [January 1979 - July 1997]
Provost and Executive Vice President of Academic Affairs,
University of Michigan [September 1990 - August 1995]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Handleman Company [June 1990 - present]
Structural Dynamics Research Corporation [July 1988 - present]
Johnson Controls, Inc. [January 1986 - present]
Gilbert R.
Whitaker, Jr.
Director since 1986
Age 67
<PAGE>-8-
Continuing in Office for a Term Expiring in May 2000
PRINCIPAL OCCUPATION: Chief Financial Officer and Executive
Vice President of Eastman Kodak Company (a global imaging
products and services company) [February 1994 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
Vice President, International Business Machines Corporation
(an information/handling systems, equipment and services
company) [1989 - December 1993]
President, IBM Credit Corporation (a finance company which
finances IBM products and services for IBM customers) [1986 -
October 1993]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Eastman Kodak Company [May 1997 - present]
Harry L. Kavetas
Director since 1990
Age 61
Continuing in Office for a Term Expiring in May 2000
PRINCIPAL OCCUPATION: Managing Director of Boston Financial (a
national real estate investment management firm) [January 1999
- present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
Managing Director, Schroder Real Estate Associates (a national
real estate investment management firm) [April 1987 - January
1999]
Managing Director, Schroder Mortgage Associates (a national
commercial mortgage investment firm)[April 1993 - August 1998]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Liberty Property Trust [June 1994 - present]
Chicago Title Corporation [July 1998 - present]
M. Leanne Lachman
Director since 1985
Age 56
Continuing in Office for a Term Expiring in May 2000
PRINCIPAL OCCUPATION:
Director of Costco, Inc.(a membership warehouse retailer)
[January 1996 - present]
[Picture] FIVE YEAR BUSINESS HISTORY:
Director, Seattle First Bank Corporation [September 1977 -
present]
Consultant, William D. Ruckelshaus Associates (environmental
consultants)[concluded January 1, 1997]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
None
Jill S. Ruckelshaus
Director since 1975
Age 62
<PAGE>-9-
ADDITIONAL INFORMATION
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The Corporation has two classes of equity securities: Common Stock and Preferred
Stock. Table A on page 27 shows the number of shares of Common Stock and stock
units (i.e., non-transferable accounting-entry "units," the value of which is
the same as the value of the corresponding number of shares of Common Stock)
beneficially owned by each director, nominee for director, and "Named Executive
Officer," individually, and by all directors and executive officers as a group
(in each case as of March 19, 1999). As of that date, none of the persons listed
in that table owned more than 1% of the Corporation's issued and outstanding
Common Stock, nor did any of those persons own any Preferred Stock.
Whenever we refer in this Proxy Statement to the "Named Executive Officers," we
are referring to those executive officers of the Corporation that the
Corporation is required to identify in the Summary Compensation Table (Table C)
on page 29. Those individuals are: Jon A. Boscia, Ian M. Rolland, Gabriel L.
Shaheen, Richard C. Vaughan, Jeffrey J. Nick, and Jack D. Hunter. For more
information regarding those officers and their compensation, see Table C and
"Summary Annual and Long-Term Compensation" below.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Table B on page 28 sets forth the names of persons known by the Corporation to
own beneficially more than 5% of its Common Stock. Those stockholders include
Capital Research and Management Company (7.8%), The Dai-ichi Mutual Life
Insurance Company (6.7%), and Massachusetts Financial Services Company (5.1%).
The Corporation knows of no one who beneficially owns more than 5% of its
Preferred Stock.
THE BOARD OF DIRECTORS
COMPOSITION OF THE BOARD OF DIRECTORS; COMPENSATION OF DIRECTORS
The members of the Board, their relevant term of office, and certain
biographical information are set forth above under "Item 1 -- Election of
Directors." Compensation of the Corporation's directors is discussed below under
"Executive Compensation."
COMMITTEES
The Board currently has four standing committees (i.e., committees composed
entirely of Board members): the Audit Committee, the Compensation Committee, the
Development Committee and the Nominating and Governance Committee. A brief
description of each committee is set forth below.
Audit Committee
The members of the Audit Committee are:
J. Patrick Barrett (Chairperson) Daniel R. Efroymson
Thomas D. Bell, Jr. Eric G. Johnson
Each of the foregoing individuals is a "Non-Employee Director" (i.e., not an
officer or employee of the Corporation or its subsidiaries). The principal
functions of the Audit Committee are to:
<PAGE>-10-
o recommend to the Board the selection, retention or termination of the
independent auditors
o review audits performed by the independent auditors of the
Corporation's consolidated financial statements, along with the related
auditors' reports
o confer with the Corporation's management and independent auditors
regarding accounting and financial statement matters, regulatory
filings, the adequacy of internal controls, communication with the
audit committee, independence, and disagreements with management, if
any
o review the annual audit plan of the independent and internal auditors
to ensure the adequacy of the audit, to eliminate unnecessary
duplication of effort, and to advise them of their respective reporting
obligations regarding certain matters
o confer with the Corporation's General Counsel regarding regulatory
matters, litigation, and significant internal investigations, if any
o perform such other functions as the Audit Committee or the Board deems
necessary or desirable
Compensation Committee
The members of the Compensation Committee are:
John M. Pietruski (Chairperson) Thomas D. Bell, Jr.
J. Patrick Barrett Jill S. Ruckelshaus
Each of the foregoing individuals is a Non-Employee Director. The principal
functions of the Compensation Committee are to:
o review and confer on the selection and development of officers and key
personnel
o select and recommend to the Board for approval candidates for chairman
of the board and chief executive officer
o establish salaries for executive officers and approve salaries for
other officers and key personnel o approve the payment of bonuses (both
discretionary and contractual) for officers and key personnel
o approve employment contracts and agreements for officers and key
personnel
o recommend to the Board the establishment of employee and officer
retirement, group insurance and other benefit plans
o approve certain modifications to employee benefit plans if the present
value of all such modifications over the five calendar years after
their effectiveness is not, according to actuarial estimates, greater
than $10 million
o administer benefit plans of the Corporation that are designed to comply
with the provisions of Rule 16b-3(d) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")
o perform such other related functions as are necessary or desirable
Development Committee
The members of the Development Committee are:
M. Leanne Lachman (Chairperson) Eric G. Johnson
Jon A. Boscia John M. Pietruski
Daniel R. Efroymson Gilbert R. Whitaker, Jr.
The Development Committee generally may authorize the following transactions and
expenditures having a value greater than $10 million but not more than $20
million:
o acquisitions or divestitures of assets, blocks of business (excluding
indemnity and financial reinsurance), and equity interests in
corporations, partnerships and other legal entities
o mergers, strategic investments and joint ventures
o capital commitments or expenditures for leases and asset purchases
<PAGE>-11-
o purchases by the Corporation or its affiliates of securities issued by
the Corporation or any of its affiliates
o issuance of securities by the Corporation or any of its affiliates
o acquisitions or dispositions of information systems development
projects
o other transactions referred to the Development Committee by the chief
executive officer
The Development Committee also may authorize capital transactions between
affiliates (excluding dividends) having a value greater than $100 million but
not more than $200 million.
Nominating and Governance Committee
The members of the Nominating and Governance Committee are:
Gilbert R. Whitaker, Jr. (Chairperson)
M. Leanne Lachman
Jill S. Ruckelshaus
The principal functions of the Nominating and Governance Committee are to:
o nominate directors for election by shareholders
o nominate directors to fill vacancies on the Board
o compensate and reimburse directors
o establish the retirement policy and benefit plans for directors
o determine the size of the Board
o review committee appointments
o develop Board governance principles
Although the Nominating and Governance Committee does not solicit shareholder
recommendations regarding director nominees to be proposed by the Board, it will
consider such recommendations if they are made. Recommendations regarding
director nominees to be proposed by the Board, along with relevant
qualifications and biographical material, should be sent to the Secretary of the
Corporation.
Director nominees to be proposed by a shareholder at a shareholders' meeting
must comply with the provisions of the Corporation's Bylaws (see "Shareholder
Proposals" on page 25).
ATTENDANCE AT MEETINGS
During 1998, the Board held 5 regularly scheduled meetings and 3 special
meetings. In addition, the Audit Committee and the Nominating and Governance
Committee each met 5 times; the Compensation Committee met 7 times; and the
Development Committee met 6 times. All directors, except Roel Pieper and Harry
L. Kavetas, attended 75% or more of the aggregate meetings of the Board and
Board committees which he or she was eligible to attend. The Corporation
believes attendance at meetings is only one criterion for judging the
contribution of individual directors, and all directors have made substantial
and valuable contributions to the management of the Corporation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Corporation's Compensation
Committee during the 1998 fiscal year: J. Patrick Barrett, Thomas D. Bell, Jr.,
John M. Pietruski, and Jill S. Ruckelshaus. No member of the Compensation
Committee had an "interlock" reportable under Section 402(j) of Regulation S-K,
and no member was an employee, officer or former officer of the Corporation or
its subsidiaries.
<PAGE>-12-
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Corporation's directors, its
executive officers (including all Named Executive Officers), and any persons
beneficially owning more than ten percent of any class of the Corporation's
equity securities (collectively, "Reporting Persons") are required to report
their initial ownership of such securities (on Form 3) and any subsequent
changes in that ownership (on Form 4 or 5) to the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange. Those reports must be filed
within a certain time period, and a copy of each report must be sent to the
Corporation. Based solely on written representations of the Reporting Persons,
and copies of the reports that were filed with the SEC, the Corporation is not
aware of any failure by a Reporting Person to timely file a Section 16(a)
report.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
Responsibilities and Composition of the Compensation Committee
The Corporation's executive compensation programs are administered by the
Compensation Committee (the "Committee"), a committee of the Board of Directors
comprised exclusively of Non-Employee Directors. The Committee approves all
compensation plans and awards for the Corporation's executive officers. No
Committee member has an interlocking or other relationship that would call into
question his or her independence as a Committee member, nor has any Committee
member ever served as an officer of the Corporation.
Compensation Philosophy
Compensation of the Company's executive officers is set at levels intended to:
o Attract and retain the most talented individuals in the financial
services industry.
o Make base pay competitive with selected companies within the
Corporation's market. To achieve this end, the Committee strives to
ensure that total direct compensation will be average or below average
for average or below average financial performance but will be in the
top quartile for top quartile financial performance. The market to
which the Committee compares compensation of the Company's executive
officers includes the Peer Group companies set out in the Performance
Graph on page 22, as well as other companies in the Corporation's
industry.
The forms of compensation provided and the mix of those forms are designed to:
o Maximize the creation of long-term shareholder value. To accomplish
this objective, the Committee develops executive compensation policies
which are consistent with and linked to the Corporation's strategic
business objectives.
o Provide a direct link between executive compensation and the
Corporation's financial performance, appropriately balancing the
rewards for short-term and long-term performance. Immediate linkage
currently takes the form of annual incentive awards that are
conditioned on the Corporation's Income From Operations in the year
just ended.
<PAGE>-13-
o Focus management on the long-term interests of the Corporation and its
shareholders. Thus for example, by utilizing similar measures both for
one-year annual incentive compensation awards and for a three-year
1998-2000 Performance Cycle applicable to restricted stock awards that
will vest only if the specified corporate financial targets are
achieved over the three-year period, the Committee seeks to ensure that
short-term gains do not come at the expense of long-term performance.
These restricted stock grants, stock options that become exercisable in
installments, and similar awards assure that a significant portion of
compensation for executive officers is long-term and at-risk.
o Align the continuing financial interests of executive officers with
those of shareholders. To achieve this goal, the Corporation requires
officers to meet specific share ownership requirements based upon a
multiple of their base salary, as set forth below:
Title of Officer Multiple of Base Salary
Chief Executive Officer 8 times
President 7 times
Executive Vice President 6 times
Senior Vice President 4 times
Vice President 2 times
Below Vice President 1 time
These guidelines were established in 1993, and officers currently holding the
same positions as in 1993 were to meet them no later than the end of 1998. Newly
appointed officers have five years to achieve the applicable multiple. All of
the Named Executive Officers have exceeded their share ownership guideline.
Compensation Methodology
Each year the Committee reviews market data and assesses the Corporation's
competitive position in each component of executive compensation, including base
salary and incentive compensation. The primary market comparison used by the
Committee is a broad-based survey, conducted by a well-known and respected
compensation consulting firm, of thirty-nine (39) companies in the financial
services industry. Target compensation is based on the average of actual
compensation, adjusted to reflect differences in size among these companies.
The survey used by the Committee was selected primarily because the companies
covered by it operate in businesses similar to the Corporation's and compete for
executives with experience and skills similar to those the Corporation requires.
The Committee also considered the technical competence of the survey firm. The
Committee consults several additional broad-based surveys for purposes of
verifying the findings of the primary survey and for a broader analysis of
trends in executive compensation.
Compensation decisions regarding individual executives are also based on factors
such as individual performance, level of responsibility and unique skills.
Compensation Components and Process
The primary components of executive compensation used by the Committee are:
o Base Pay
o Incentive Compensation
o Benefits
These components are discussed below.
<PAGE>-14-
Base Pay
The Corporation has established executive base pay "bands" and assigned
each executive to a band of compensation based on his or her job
responsibilities. The Chief Executive Officer provides compensation
recommendations for each executive officer (except the Chief Executive
Officer) to the Committee.
Annual base salary is designed to compensate executives for their
sustained performance. Salary is based on: (1) market compensation
data; (2) individual performance; and (3) increase guidelines approved
by the Committee. The Committee approves in advance all salary
increases for executive officers. Salaries for executive officers for
1998 were projected to be slightly below the median of the compensation
peer group.
Incentive Compensation
Incentive awards comprise the largest portion of total compensation for
executive officers. Currently, incentive awards are made to the
Corporation's executive officers under the Lincoln National Corporation
1997 Incentive Compensation Plan (the "ICP"), which was approved by the
Corporation's shareholders on May 15, 1997. The ICP provides the
Committee with the authority to grant annual incentive awards, which
represent a conditional right to receive cash, shares or other awards
upon achievement of preestablished performance goals during the
specified one-year period or "Performance Cycle." Long-term performance
awards under the ICP are based upon multiple-year Performance Cycles
established by the Committee.
Prior to effective date of the ICP, awards were made under the Lincoln
National Corporation 1986 Stock Option Incentive Plan ("Stock Option
Plan") and the 1994 Amended and Restated Lincoln National Corporation
Executive Value Sharing Plan (the "EVSP"). Although those plans have
been terminated, awards granted prior to the termination of those plans
remain outstanding in accordance with their terms. In addition, EVSP
Performance Cycles remained in effect for comparative purposes when
determining the applicable maximum award payable for the ICP
Performance Cycles ending in 1997 and 1998. (Regardless of the
applicable maximum awards, however, the Committee has discretion to
award a lower amount than the maximum.)
Under the ICP, the primary forms of incentives utilized for key
executives include stock options, restricted stock or restricted stock
units, and cash awards. The Committee also has the flexibility to grant
other equity-based awards under the ICP. In any given year, an
executive may receive a combination of all or some of these incentives,
depending on circumstances such as individual and corporate
performance. For 1998, approximately 65% of the value of the Named
Executive Officers' total compensation was variable (i.e., was tied to
the performance of the Corporation and/or its common stock).
Awards under the ICP for 1997 performance (based on the EVSP
Performance Cycles in effect during 1997) were not available at the
time of mailing last year's proxy statement. Those awards were made in
May 1998 and are set forth in the Summary Compensation Table (Table C)
on page 29. Awards under the one-year ICP Performance Cycle ending in
1998 were made by the Committee in March 1999 and are reflected in the
Summary Compensation Table (Table C).
For awards under a three-year (1998-2000) ICP Performance Cycle, the
Committee designated in March 1998 maximum numbers of shares of
restricted stock for which its executive officers, including the Named
Executive Officers, would be eligible. These awards are set forth in
Table D ("Long-Term Incentive Plans -- Awards in Last Fiscal Year").
However, the awards are subject to forfeiture and will vest only if the
Corporation satisfies certain "Corporate Performance" criteria (based
upon increases in the Corporation's Income From Operations per share
during the three years) and the
<PAGE>-15-
relevant executive also satisfies certain "continued service" criteria.
Even if the Corporate Performance threshold is achieved, the Committee
retains discretion to reduce any award at the end of the Performance
Cycle, and the restricted shares awarded will still be subject to
continued service requirements that generally lapse three years after
completion of the Performance Cycle, i.e. on January 1, 2004.
Stock Options: Stock option grants provide the opportunity to purchase
shares of the Corporation's Common Stock at Fair Market Value (the
average of the high and low trading prices on the day preceding the
date of the grant). The objective of these grants is to increase
executive officers' equity interest in the Corporation and to allow
them to share in the appreciation of the Corporation's Common Stock.
Stock options have value for the executive officers only if the stock
price appreciates in value from the date the options are granted. Stock
options become exercisable in four equal annual installments beginning
on the first anniversary of the grant and have a ten-year term. The
Committee has typically granted stock options each year to executive
officers at its May meeting. Option grants are for shares of Common
Stock authorized under shareholder-approved plans.
Executives are encouraged to hold shares received upon the exercise of
the options, linking their interests to those of shareholders.
Executives who sell shares prior to reaching the share ownership
guidelines (discussed above) may have future stock option awards
reduced or eliminated.
In granting stock options to executive officers, including the Named
Executive Officers, the Committee takes into account the executive's
level of responsibility, individual contribution and appropriate total
compensation relative to the market. In addition, the Committee takes
into account the Chief Executive Officer's award recommendation for the
Named Executive Officers. The Committee considers the amounts and terms
of option grants as an important component in designing a competitive
total compensation package.
Restricted Stock: Shares of restricted stock typically are restricted
from sale or trade for three years after the end of the Performance
Cycle for which they were granted, except in certain situations
relating to retirement (with Committee consent), death, disability,
termination without cause, or change of control of the Corporation.
Executives may vote the shares during the period that the shares are
issued but restricted and are compensated (when the restrictions lapse)
for dividends that would have been paid if the shares had not been
restricted. The Committee may impose additional restrictions (in
addition to lapse of time) on the vesting of restricted stock awards.
Stock Units: Stock units are a form of deferred compensation, the value
of which mirrors the value of a corresponding number of shares of
Common Stock. Stock Units may be awarded as "restricted" stock units,
similar to restricted stock awards. The "restrictions" on restricted
stock units typically lapse three years from the date of grant. Stock
units and restricted stock units have no voting rights and dividend
equivalents are converted to additional stock units. As with restricted
stock awards, the Committee may impose restrictions in addition to
lapse of time on the vesting of restricted stock units.
Other Awards: The Committee also has the flexibility to grant other
awards under the ICP, including bonus stock, stock appreciation rights
(or "SARs"), convertible securities and cash awards.
Benefits
Benefits offered to key executives are largely those that are offered
to the general employee population (with some variation, largely to
promote tax efficiency and replacement of benefit opportunities lost
due to regulatory limits).
In general, these benefits provide a safety net for protection against
the financial catastrophes that can result from illness, disability or
death.
<PAGE>-16-
1998 Compensation for the Chief Executive Officer
Ian M. Rolland retired from his position as Chief Executive Officer of the
Corporation on June 30, 1998, and Jon A. Boscia became the Chief Executive
Officer as of that date. Mr. Boscia's total salary for 1998 was $655,769. He
received an EVSP award of $726,000 for the 1995-1997 Performance Cycle in
April 1998. During 1998, the Committee also awarded Mr. Boscia a
discretionary bonus of $124,000. In March of 1999, Mr. Boscia received an award
of $3,500,000 with respect to the one-year ICP Performance Cycle ended in 1998.
In making decisions with respect to 1998 compensation for Mr. Boscia and his
1999 ICP award, the Committee considered the Corporation's 1998 financial
results, his role in achieving an effective transition after Mr. Rolland's many
years of leadership of the Corporation, and the strategic direction Mr. Boscia
set for the Corporation. The Committee placed particular emphasis on Mr.
Boscia's Accelerating the Pace strategic initiative, through which the
Corporation has sharpened its focus on improving growth and results in the
Corporation's life and annuity businesses, capital management improvement and
control over expenses.
1998 Compensation for the Former Chief Executive Officer
Mr. Rolland received a salary of $537,308 from January 1998 until his retirement
as Chief Executive Officer on June 30, 1998. He also received an EVSP award of
$1,593,000 for the 1995-1997 Performance Cycle in April 1998. In addition, in
1998 the Committee approved a discretionary bonus of $907,000 in recognition of
Mr. Rolland's role in planning the transition to a new Chief Executive Officer
and a cash award of $3,750,000. The latter amount was the Committee's estimate
of the pro-rated amounts due Mr. Rolland with respect to Performance Cycles that
had previously commenced, but were not completed, under the Corporation's 1997
ICP and the predecessor EVSP prior to his retirement. In connection with Mr.
Rolland's retirement, the Committee also authorized the payout of all vested
deferred compensation obligations owed to Mr. Rolland as well as the payout of
previously awarded restricted stock units once the units vested on January 1,
1999. In determining the foregoing awards, the Committee recognized Mr.
Rolland's significant contributions in developing and implementing the steps
necessary for the future strategic direction of the Corporation, including the
sale of American States Financial Corporation in 1997 and the acquisition of the
life and annuity businesses of CIGNA and Aetna in 1998, and the outstanding
leadership he provided to the Corporation during his 21 years as its Chief
Executive Officer.
After his retirement as Chief Executive Officer, Mr. Rolland continued as
Chairman of the Board until November 30, 1998. Compensation for his services as
Chairman is discussed on page 20.
Impact of Tax Deduction Limitations on Executive Compensation
The Committee is responsible for addressing tax deduction limitations which make
"non-performance-based" compensation to certain executives of the Corporation in
excess of $1,000,000 nondeductible to the Corporation. To qualify as
"performance-based" compensation, payments must be based on achieving objective
performance goals established under an employee benefit plan that is
administered by a committee of "outside directors." In addition, the material
terms of the plan must be disclosed to and approved by shareholders and the
Committee must certify that the performance goals were achieved before payments
may be made.
The Committee has taken several steps to minimize the effect of these tax
deduction limits on the Corporation's deduction for compensation to be paid to
the Named Executive Officers listed on the Summary Compensation Table. The Stock
Option Plan was amended to place maximums on the number of stock options awarded
to any officer, the EVSP was approved by shareholders in 1994, and the successor
ICP was approved by shareholders in 1997. Stock options awarded under the Stock
Option Plan, awards paid under the amended EVSP, and amounts awarded pursuant to
the ICP have generally been designed as performance-based compensation not
subject to the $1,000,000 limit. In addition, for EVSP Performance Cycles that
began before 1994, certain officers received awards in the form of restricted
stock units under a deferred compensation arrangement designed to assure
deductibility by the Corporation.
<PAGE>-17-
Although the plans referenced above satisfy the requirements for payments to be
deductible, the Committee may make payments of compensation to executives that
are not deductible in order to recognize exceptional service or to correct below
market compensation. Should compliance with the $1,000,000 limit conflict with
the Committee's compensation philosophy, the Committee will act in the manner it
perceives to be in the best interests of shareholders. The Committee continues
to monitor the level of compensation paid to executive officers in order to take
any steps which may be appropriate to comply with applicable tax deduction
limitations relating to executive compensation.
Conclusion
Executive compensation is designed to be linked to, and commensurate with, the
Corporation's corporate performance. The Committee believes that the
Corporation's performance validates the success of its compensation philosophy
and that its executive compensation policies and programs serve the best
interests of the Corporation and its shareholders. 1
John M. Pietruski, Chairperson
J. Patrick Barrett
Thomas D. Bell, Jr.
Jill S. Ruckelshaus
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SUMMARY ANNUAL AND LONG-TERM COMPENSATION
The Corporation's compensation program for executive officers for the fiscal
year ended December 31, 1998 consisted primarily of salaries, bonuses, and other
compensation. Table C on page 29 includes information concerning the annual
compensation for services in all capacities to the Corporation and its
subsidiaries for the fiscal years ended December 31, 1998, 1997, and 1996 of the
Corporation's Named Executive Officers.
Under SEC rules, the "Named Executive Officers" include:
o any person who acted as the Corporation's chief executive officer at
any time during 1998,
o the four other most highly compensated executive officers employed by
the Corporation on December 31, 1998, and
o up to two additional executive officers who would have been required to
be listed in the Summary Compensation Table had they been employed by
the Corporation (or its subsidiaries) on December 31, 1998.
LONG-TERM INCENTIVE PLANS
Set forth in Table D on page 31 is information regarding awards made for 1998
under long-term incentive compensation plans.
STOCK OPTION PLANS
Set forth in Table E on page 32 is information on grants of stock options
pursuant to the Stock Option Plan during fiscal year 1998 to the Named Executive
Officers. No stock appreciation rights were granted under those Plans during
fiscal 1998.
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1. Pursuant to item 402(a)(9) of Regulation S-K promulgated by the
Securities and Exchange Commission ("SEC"), the "Compensation Committee Report"
shall not be deemed to be filed with the SEC for purposes of the Securities
Exchange Act nor shall such report or such material be deemed to be incorporated
by reference in any past or future filing by the Corporation under the
Securities Exchange Act or the Securities Act of 1933, as amended.
<PAGE>-18-
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Table F on page 33 includes information with respect to option exercises in
fiscal year 1998 and unexercised
options to purchase the Corporation's Common Stock granted to the Named
Executive Officers in fiscal year 1998 under the ICP and in prior years under
the Stock Option Plan.
RETIREMENT PLANS
Table G on page 34 shows the estimated annual retirement benefits payable on a
straight life annuity basis to participating employees, including the Named
Executive Officers, under the Corporation's retirement plans which cover most
officers and other employees on a non-contributory basis. Such benefits reflect
a reduction to recognize in part the Corporation's cost of Social Security
Benefits related to service for the Corporation.
SUPPLEMENTAL RETIREMENT ARRANGEMENTS
Certain officers of the Corporation and its subsidiaries, including all the
Named Executive Officers, have entered into salary continuation agreements under
the terms of the Salary Continuation Plan for Executives of Lincoln National
Corporation and Affiliates ("Salary Continuation Plans"). Under the Salary
Continuation Plans, the amount each officer is entitled to receive upon
retirement is 2% of his or her final monthly compensation multiplied by the
number of years the agreement has been in effect (up to a maximum of 10% of
final monthly salary), so long as the officer agrees to an exclusive consulting
arrangement with the Corporation until the earlier of the waiver of such
arrangement or attainment of age 65. This amount will be paid in the form of a
120-month certain and life annuity. In the event of death prior to retirement, a
designated beneficiary of executives who were participating in the Salary
Continuation Plans on December 31, 1991, will instead receive annual payments
each equal to 25% of the employee's final annual salary until the later of the
date on which the employee would have attained age 65 or the date on which a
minimum of ten payments have been made. These agreements automatically terminate
upon the officer's termination of service for reasons other than death,
disability or retirement; except that in the event of a change in control of the
Corporation, as defined in the Severance Plan (discussed below), and a
subsequent voluntary or involuntary termination of the employee's employment
within 2 years of the change in control, such employee shall be treated as
continuing employment with the Corporation and its affiliates until age 65 at
which time benefits shall begin. The Salary Continuation Plan caps compensation
used to determine benefits at the greater of $200,000 or the annual base
compensation in effect on December 31, 1991 for executives participating on that
date. Effective December 31, 1993, the exclusive consulting arrangement was
waived for Mr. Rolland.
CHANGE-IN-CONTROL ARRANGEMENTS
Recognizing that an unforeseen change of control is unsettling to the
Corporation's key executives, the Board adopted the Lincoln National Corporation
Executives' Severance Benefit Plan (the "Severance Plan"). The objectives of the
Severance Plan are to:
o attract certain qualified executives and encourage their continued
employment in the face of an actual or threatened change of control
o enable such executives to help the Board assess any proposed change of
control of the Corporation and advise the Board regarding whether such
proposal is in the best interests of the Corporation, its shareholders,
and the policyholders and customers of its affiliates without being
unduly influenced by the uncertainty of continued employment
o demonstrate to those executives the Corporation's desire to treat them
fairly
o provide those executives with compensation and benefits upon a change
of control which are designed to ensure that expectations of the
executives will be satisfied
<PAGE>-19-
Executives eligible for participation in the Severance Plan ("Eligible
Executives") are the members of the Corporation's Senior Management Committee
and other employees as determined by the Compensation Committee. All Named
Executive Officers were Eligible Executives during 1998. Pursuant to the
Severance Plan, the Corporation may enter into agreements (which are not
employment agreements) with Eligible Executives to provide severance benefits in
the event that, within three years after a change of control of the Corporation
has occurred (i) the Corporation terminates their employment for any reason
other than cause, death or disability, or (ii) the Eligible Executive terminates
employment for good reason, such as a change in the Eligible Executive's
responsibilities, a reduction in salary or benefits, or relocation. Any
termination of employment by the chief executive officer or the chief operating
officer during such three-year period is deemed to be for good reason under the
Severance Plan.
The benefit to which an Eligible Executive would be entitled under the terms of
the Severance Plan is the greater of (1) 299.9% of the Eligible Executive's
average annual compensation for the period consisting of the five most recent
taxable years ending before the change in control and (2) 200% of the Eligible
Executive's annual compensation (including all forms of compensation reportable
on a Form W-2) based on the highest amount of consideration paid during (a) the
calendar year preceding termination or (b) either of the two calendar years
immediately preceding the year in which the change of control occurred. In
addition, an Eligible Executive would be entitled to benefits such as the
continuation of certain benefits under the welfare benefit plans in which he or
she participates, immediate and 100% vesting in all retirement benefits, the
value of certain unexercisable stock options and restricted stock, relocation
benefits, outplacement services and a lump sum payment equal to 40.6% of any
amount paid which is deemed an "excess parachute payment" under the Code. The
Corporation must reimburse an Eligible Executive any and all legal fees and
expenses incurred by the Eligible Executive relating to enforcing the
Corporation's obligations under the Severance Plan. The Severance Plan
supplements and does not supersede other plans, contracts of employment, or
other arrangements which Eligible Executives may have with the Corporation or
its affiliates.
EMPLOYMENT CONTRACTS
The Corporation has no employment agreement with any Named Executive Officer.
Mr. Vaughan has a severance agreement which provides that from June 18, 1996
until the first month following his 55th birthday, if his employment is
involuntarily terminated by the Corporation, he will be entitled to one year of
severance pay at his then base salary. This arrangement does not apply to
voluntary termination or if termination is for cause.
COMPENSATION OF DIRECTORS
Compensation Philosophy
The Board considers a variety of outside sources (e.g., comparisons with peer
companies and third party studies on director compensation) when determining the
levels and types of compensation to be paid to directors. Of particular
relevance, the Board endorses each of the six "Best Practices" recommended in
the Report of the Blue Ribbon Commission on Director Compensation of the
National Association of Corporate Directors. Consistent with those practices,
the Board adheres to the following guidelines in establishing director
compensation:
o a substantial portion of each director's compensation is paid in LNC
Common Stock or stock units
o in order to avoid the appearance of employee-like tenure or compromised
independence, directors are not eligible for defined benefit pensions
o directors are expected to achieve stock ownership of 5 times their
annual retainer within 5 years of election to the Board
<PAGE>-20-
LNC pays retainer and meeting fees to Non-Employee Directors. Non-Employee
Directors are also eligible to receive bonus awards and service awards or
certain other retirement benefits. The Board believes that the fees of
Non-Employee Directors are comparable to the fees paid to directors of similar
companies.
Retainer and Meeting Fees
The Corporation pays retainer fees under the 1993 Stock Plan for Non-Employee
Directors (the "Stock Plan"). Under the Stock Plan, the Corporation pays each
Non-Employee Director an annual retainer of $55,000 ($18,000 in cash and $37,000
in LNC restricted stock). If a Non-Employee Director is elected to a new
three-year term, the Corporation pays that director an additional $10,000 in
restricted stock (rounded up to the nearest whole share). The restrictions on
shares awarded under the Stock Plan will lapse on the earliest of the
Non-Employee Director's death, disability, retirement from the Board at age 70
or, if specifically approved by the Board, other events of resignation or
retirement from the Board. Under the Stock Plan, the Corporation also has the
authority to grant stock options as part of the retainer fees, although it has
not done so.
In addition to the retainer fee, the Corporation paid each Non-Employee Director
$1,100 for each Board and Board committee meeting he or she attended during
1998. Committee chairpersons received an additional fee of $5,000 for their
services. The Corporation also reimburses directors (and sometimes their
spouses) for the reasonable travel expenses they incur when attending Board and
Board committee meetings. In January 1999, John M. Pietruski was designated the
"lead director" of the independent directors and will be paid an additional
$25,000 for his services in that regard.
After his retirement as Chief Executive Officer, Mr. Rolland continued as
Chairman of the Board until November 30, 1998. For his services as Chairman as
well as serving as the Corporation's representative on the Board of the American
Council of Life Insurance, and in lieu of all other amounts directors are
eligible to receive, Mr. Rolland was paid $100,000 for the period from July 1,
1998 through November 30, 1998. Subsequently, Mr. Rolland was compensated as a
regular non-employee director.
Non-Employee Directors may defer the cash portion of their annual retainer and
fees in stock units, as provided in the Stock Plan. When the director retires,
he or she can receive the value of those units in LNC Common Stock or in cash,
either in a lump sum payment or in annual installments over a period of up to
fifteen years.
Bonus Awards, Service Awards and Other Benefits
Non-Employee Directors are eligible to receive Bonus Awards, Service Awards, and
certain other benefits under the Directors' Value Sharing Plan (the "DVSP").
Bonus Awards. The Corporation may award Bonus Awards if the total
shareholder return of LNC Common Stock over a three-year period exceeds
the median shareholder return of the companies in a particular peer
group over the same period. Bonus Awards range from $0 (if the
Corporation's total shareholder return is not above the median) to
$41,000 (if the Corporation outperforms the relevant Peer Group), and
are awarded as LNC stock units and credited to a non-qualified deferred
compensation account established for each Non-Employee Director. There
was no award for the 1996--1998 cycle.
Service Awards. Except as discussed below under "Retirement Benefits,"
each Non-Employee Director receives a quarterly Service Award in the
form of LNC stock units (up to a maximum of 40 Service Awards). As with
Bonus Awards, Service Awards are credited to a non-qualified deferred
compensation account established for each Non-Employee Director.
Service Awards are based upon a formula that takes into account the
Non-Employee Director's age upon election to the Board, the annual
retainer and an assumed minimum return on LNC Common Stock.
<PAGE>-21-
Certain Death Benefits. If a Non-Employee Director was a director on
January 1, 1996, he or she could choose either to receive Service
Awards under the DVSP or to continue participating in the Retirement
Plan (described below). However, if a Non-Employee Director has
elected to receive Service Awards, but dies prior to retirement from
the Board, the value of his or her Service Award account will not be
less than the lump sum death benefit that would have been payable under
the Retirement Plan.
Retirement Benefits
Non-Employee Directors who were directors on January 1, 1996 and did not elect
to receive Service Awards under the DVSP continue to be eligible for retirement
benefits under the Retirement Plan. The annual benefit payable to a Non-Employee
Director under the Retirement Plan is 0.833% of the director's retainer during
the last year he or she was a director, multiplied by the number of months he or
she served on the Board (up to a maximum of 120 months). A director may receive
his or her retirement benefit under the Retirement Plan either in a single lump
sum or in monthly payments beginning at the later of retirement or age 65.
If the director dies prior to the date retirement benefits start, the death
benefit will be paid to his or her beneficiary. Only two directors participate
in the Retirement Plan. Non-Employee Directors who were first elected to the
Board after January 1, 1996 have no right to retirement benefits other than
Service Awards, as discussed above.
<PAGE>-22-
COMPARISON OF FIVE-YEAR
CUMULATIVE TOTAL RETURN
The graph set forth below shows a five-year comparison of the yearly performance
of the Corporation's cumulative total shareholder return (change in the year-end
stock price plus reinvested dividends), based on a hypothetical investment of
$100, with the S&P 500 Composite Index and an index of peer companies selected
by the Corporation.
[GRAPHIC OMITTED]
Companies in the Peer Group are as follows:
American General Corporation Liberty Financial Companies, Inc.
AmerUS Life Holdings, Inc. Nationwide Financial Services, Inc.
Conseco, Inc. Reinsurance Group of America
Equitable Companies, Inc. Reliastar Financial Corporation
Hartford Life, Inc. Torchmark Corporation
Jefferson-Pilot Corporation Transamerica Corporation
<PAGE>-23-
Companies in the Peer Group are publicly traded companies with business units
which are considered to be significant competitors of major business units of
the Corporation, and their returns have been weighted for stock market
capitalization.
On October 1, 1997, the Corporation exited the property casualty line of
business when it sold American States Financial Corporation to SAFECO
Corporation. Accordingly, the following companies were removed from the
Performance Graph Peer Group in order to more accurately reflect that the
Corporation no longer competes in that industry: CIGNA Corporation, SAFECO
Corporation, The Allstate Corporation, Travelers Group, Inc., and USF&G
Corporation. Those companies were replaced with the following companies: AmerUS
Life Holdings, Inc., Conseco, Inc., Hartford Life, Inc., Jefferson-Pilot
Corporation, Liberty Financial Companies, Inc. and Nationwide Financial
Services, Inc. Life Re Corporation, which was originally intended as a
replacement, was acquired by Swiss Re, and Reinsurance Group of America was
selected to replace Life Re Corporation. Finally, Provident Companies, Inc.,
which was listed as a member of the Corporation's Peer Group last year, is no
longer a member of the Peer Group because the Corporation no longer markets
individual disability income business.
The Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Corporation specifically incorporates this
graph by reference, and shall not otherwise be deemed filed under such Acts.
There can be no assurance that the Corporation's stock performance will continue
into the future with the same or similar trends depicted in the preceding graph.
The Corporation will not make or endorse any predictions as to future stock
performance.
ITEM 2 - 1999 SHAREHOLDER PROPOSAL
SHAREHOLDER PROPOSAL RELATING TO TOBACCO INVESTMENTS
Catholic Healthcare West of 1700 Montgomery Street, Suite 300, San Francisco,
California, is the holder of 39,100 shares of Common Stock and has caused the
following proposal to be included in this Proxy Statement. The Corporation is
not responsible for any of the contents of the language of the shareholder's
proposal which is set out below between the quotation marks. The Board of
Directors unanimously opposes this proposal for the reasons set forth in
Management's Statement in Opposition of the Shareholder Proposal which follows
the shareholder's proposal.
"WHEREAS a July 7-9, 1995 editorial in USA Today declared:
Here's a grubby little health-care new [sic] item: According to a
commentary in the upcoming edition of the British medical journal Lancet,
major U.S. health insurers are large investors in major U.S. tobacco
companies. In other words, the nation's merchants of care are partners
with the nation's merchants of death. . . . These investments grate and
gall. Every year, tobacco use is fatal for thousands of Americans. For
insurers to provide health care for those suffering smokers on the one
hand while investing in the source of their misery on the other is
unconscionable. And hypocritical.
- As shareholders, we are concerned about the ethical
implications of investments in the tobacco industry by companies
that sell life insurance, especially when they
<PAGE>-24-
are paying out hundreds of millions of dollars to patients who
are sick and dying as a result of tobacco use. - In 1994, the
Centers of Disease Control and Prevention released an article
entitled, `Medical-Care Expenditures Attributable to Cigarette
Smoking, United States - 1993.' The study found that
smoking-related disease in the U.S.A. has an enormous economic
impact. In 1993, it is estimated that the direct medical costs
associated with smoking totaled $30 billion. Such findings have
led the State of Louisiana to add insurers to its Medicaid
reimbursement litigation against the tobacco industry. - In 1996
the AMA called for mutual funds and health-conscious investors to
refuse to own stock in tobacco companies, and for those same
investors to divest from stocks and bonds in tobacco companies.
-We believe it is inconsistent for an insurance company that
sells life insurance to invest in tobacco equities and yet give
preferential rates to non-smokers. Therefore we believe that the
company should seriously review its stand related to these
apparently contradictory positions on tobacco.
RESOLVED: that shareholders request the Board to initiate a
policy mandating no further purchases of tobacco equities in any
of our portfolios unless it can be proven that tobacco use does
not cause the illnesses and deaths that have been attributed to
it. Furthermore, the company shall divest itself of all tobacco
stocks by January 1, 2000.
Supporting Statement
Our Company exists to help people keep healthy. We support people
not using tobacco, yet have no policy against investing in
companies producing its products. Allstate, Chubb, UNUM, and
other companies that sell life insurance have policies and/or
practices that have resulted in prohibitions or limitations on
their various investments in tobacco companies. Institutions like
Harvard and Johns Hopkins, as well as The Maryland Retirement and
Pension Systems have divested from all tobacco stocks. As the
editorial noted above concludes: `Insurers have a responsibility
to maximize returns. But they have a responsibility to hold down
costs too.' Investing in tobacco while charging premiums based in
part on the cost of treating tobacco-related illness mocks that
obligation. If you agree that our Company should not contribute
to peoples' illness and death by investing in tobacco, please
vote YES for this resolution."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "AGAINST" THE
SHAREHOLDER PROPOSAL RELATING TO TOBACCO INVESTMENTS.
MANAGEMENT'S STATEMENT IN OPPOSITION TO THE SHAREHOLDER PROPOSAL
The Corporation's investment operations and policies are fundamental to the
Corporation's business and subject to the supervision of the Board of Directors
of the relevant subsidiary and various investment committees. The Corporation's
investment operations are focused upon providing customers with competitive
products and shareholders with an attractive investment. In managing the
Corporation's investments, management considers many factors that may affect the
current and future values of portfolio investments. Social policy considerations
are one of the many considerations that are taken into account in managing the
portfolios.
<PAGE>-25-
The shareholder proposal suggests that certain social policies should be the
principal factors considered in the Corporation's investment policies, limiting
the role that other investment and social factors play in the Corporation's
policies. The Board of Directors believes that such an approach is inconsistent
with sound investment practices. In that regard, the Corporation believes that
the shareholder proposal is inconsistent with the interests of the Corporation's
shareholders and customers.
For these reasons, the Board recommends a vote AGAINST the Proposal and your
proxy will be so voted unless you indicate otherwise on the proxy.
GENERAL
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP has been selected by the Board to be the independent auditors
to audit the consolidated financial statements of the Corporation for fiscal
year 1999. This firm has been employed by the Corporation in that capacity
continuously since January 17, 1968. Representatives of Ernst & Young LLP will
be present at the annual meeting of shareholders, will be given an opportunity
to make a statement if they so desire, and will be available to respond to
appropriate questions relating to the audit of the Corporation's 1998
consolidated financial statements.
SHAREHOLDER PROPOSALS
To Be Included in the Corporation's Proxy Materials
Any shareholder proposals intended to be considered for inclusion in the proxy
materials for the Corporation's 2000 annual meeting of shareholders must be
received by the Corporation no later than December 11, 1999.
All such proposals should be sent to the Secretary of the Corporation.
To Be Presented In-Person at Shareholder Meetings
Shareholders wishing to propose matters for consideration at a meeting of
shareholders or to propose nominees for election as directors must follow the
procedures contained in the Corporation's Bylaws. Such procedures include giving
notice to the Secretary of the Corporation at least 90 and not more than 120
days prior to the meeting. However, in the event that less than 60 days' notice
of the date of the meeting is given to shareholders, notice by the shareholder
to be timely must be received not later than the close of business on the 10th
day following the day on which notice of the date of the meeting was given. That
notice must include:
o the name and address of the proposing shareholder (as it appears on the
Corporation's stock records)
o a brief description of the business desired to be brought before the
meeting
o the class and number of shares of the Corporation which are
beneficially owned by the proposing shareholder
o a description of any interest of such proposing shareholder in the
business proposed
In the case of a shareholder-proposed nominee for director, the required notice
must also contain as to each person whom the shareholder proposes to nominate
for election or re-election as a director:
o the name, age, business address and residence address of such person
o the principal occupation or employment of such person
o the class and number of shares of the Corporation which are
beneficially owned by such person
<PAGE>-26-
o any other information relating to such person that is required to be
disclosed in solicitation of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act (including without limitation such person's written
consent to being named in the proxy statement as a nominee and to
serving as a director if elected)
o the qualifications of the nominee to serve as a director of the
Corporation
In the event any such matter is not timely received, the individuals identified
on the proxy card may vote the shares represented by proxies in their discretion
in the manner they perceive to be in the best interests of the Corporation. The
person presiding at a meeting of shareholders is authorized by the Bylaws, if
the facts warrant, to determine that the proposed business was not properly
brought before the meeting, or was not lawful or appropriate for consideration
at the meeting or that a nomination for director was not properly made. Upon a
declaration of such determination by the chairman, the proposed business shall
not be transacted or the defective nomination shall be disregarded, as the case
may be.
1999 Shareholder Proposals
Other than the shareholder proposal discussed in this Proxy Statement (see Item
2), no shareholder has raised an issue which is proper for consideration at the
Annual Meeting. To the extent permissible, your proxy will be voted in the
discretion of the proxy holders with respect to each matter properly brought
before the meeting that has not been enumerated in this Proxy Statement or for
which no specific direction was given on the proxy card.
ANNUAL REPORT
The Corporation's Annual Report to Shareholders, together with its Annual Report
on Form 10-K filed with the SEC, for the fiscal year 1998 have previously been
mailed to shareholders of record to the relevant addresses appearing on the
Corporation's stock books. An additional copy of the Annual Report on Form 10-K
will be provided on written request and without charge to each shareholder.
Write to Corporate Secretary, Lincoln National Corporation, 200 East Berry
Street, Fort Wayne, Indiana, 46802-2706.
For the Board of Directors,
C. Suzanne Womack
Secretary
April 8, 1999
<PAGE>-27-
<TABLE>
<CAPTION>
TABLE A
SECURITY OWNERSHIP OF
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
NAME AMOUNT OF LNC LNC STOCK TOTAL OF LNC
COMMON STOCK UNITS COMMON
AND NATURE OF STOCK AND
BENEFICIAL STOCK UNITS
OWNERSHIP1,2
============================= ======================= =============================================
<S> <C> <C> <C>
J. Patrick Barrett 6,798 4,742 11,540
Thomas D. Bell, Jr. 1,798 1,473 3,271
Jon A. Boscia 171,417 14,585 186,002
Daniel R. Efroymson 272,177 3,596 275,773
Jack D. Hunter 124,457 1,261 125,718
Eric G. Johnson 515 104 619
Harry L. Kavetas 2,336 3,879 6,215
M. Leanne Lachman 2,736 5,822 8,558
Jeffrey J. Nick 24,090 28,441 52,531
Roel Pieper 1,147 305 5,510
John M. Pietruski 3,918 4,363 8,281
Ian M. Rolland 270,179 0 270,179
Jill S. Ruckelshaus 3,736 153 3,889
Gabriel L. Shaheen 60,433 7,125 67,558
Richard C. Vaughan 72,801 14,257 87,058
Gilbert R. Whitaker, Jr. 3,918 5,892 9,810
Directors and Executive 1,231,787 118,483 1,350,270
Officers as a group - 22
persons
</TABLE>
- --------------------
1. Each of these amounts represents less than 1% of the outstanding shares of
the Corporation's Common Stock as of March 1, 1999. As to shares beneficially
owned, each person has sole voting and investment power except that the
following persons each share voting and investment power with another person as
to the number of shares indicated: Mr. Boscia, 14,651 shares, Mr. Efroymson,
270,379 shares (held in trust), Mr. Rolland, 55,329 shares (55,150 of which are
held in trust); Ms. Ruckelshaus, 200 shares; Mr. Shaheen, 18,240 shares; and Mr.
Vaughan, 6,600 shares (held in trust). In addition, the following persons have
sole voting power (and no investment power) as to the number of shares
indicated: Mr. Barrett, 1,798 shares; Mr. Bell, 1,798 shares; Mr. Boscia, 50,000
shares; Mr. Efroymson, 1,798 shares; Mr. Hunter, 12,500 shares; Mr. Kavetas,
1,736 shares; Mr. Johnson, 515 shares; Ms. Lachman, 1,736 shares; Mr. Nick,
22,586 shares; Mr. Pieper, 1,147 shares; Mr. Pietruski, 1,918 shares; Ms.
Ruckelshaus, 1,736 shares; Mr. Shaheen, 25,000 shares; Mr. Vaughan, 23,045
shares; and Dr. Whitaker, 1,918 shares. Mr. Efroymson disclaims beneficial
ownership of all but 136,541 of the shares reported for him. Mr. Efroymson no
longer acts as trustee for certain of the various trusts, or in the positions
with Moriah Fund, Inc., reflected in last year's proxy statement; therefore, the
amounts set forth above do not reflect shares held by those trusts or Moriah
Fund, Inc. for which he may not properly be considered a beneficial owner.
2. This table includes the following shares which are subject to acquisition
within 60 days of March 1, 1999 by the exercise of outstanding stock options:
Mr. Boscia, 85,649 shares; Mr. Hunter, 54,750 shares; Mr. Rolland, 212,675
shares; Mr. Shaheen, 10,813 shares; and Mr. Vaughan, 42,500 shares.
<PAGE>-28-
TABLE B
<TABLE>
<CAPTION>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
TITLE OF CLASS Name and Address of Beneficial Amount and Nature of Percent
Owner Beneficial Ownership of Class
<S> <C> <C> <C>
Common Capital Research and Management 7,925,000 shares 7.8%
Company [sole dispositive power - 7,925,000 shares;
333 South Hope Street sole voting power - 0 shares]
Los Angeles, California 90071
Common The Dai-ichi Mutual Life Insurance 6,754,311 shares 6.7%
Company [sole voting and sole dispositive power of all
1-13-1-Yuraku-Cho shares]
Chiyoda-ku
Tokyo, Japan 100-84-11
Common Massachusetts Financial Services 5,136,732 shares 5.1%
Company [sole dispositive power - 5,136,732 shares;
500 Boylston Street sole voting power - 5,114,812 shares]
Boston, MA 02116
</TABLE>
The information set forth in this Table is based solely on a review by the
Corporation of the filings of Schedules 13G and D filed with the Securities and
Exchange Commission and provided to the Corporation by the above named
beneficial owners. Information regarding the amount and nature of beneficial
ownership is to the best of the Corporation's knowledge as of December 31, 1998;
the percentages, however, have been calculated by the Corporation as of the
record date, March 19, 1999.
<PAGE>-29-
<TABLE>
<CAPTION>
TABLE C
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUT
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL YEAR SALARY BONUS1 SATION2 AWARDS3 SARs PAYOUT(S) SATION7
POSITION ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JON A. BOSCIA 1998 655,769 3,624,000 -0- -0- 110,000 -0-4 69,427
President and CEO of 1997 434,094 -0- -0- -0- 26,000 787,0535 50,0608
LNC 1996 384,768 -0- -0- 257,019 18,000 796,4306 63,576
IAN M. ROLLAND 1998 537,308 907,000 -0- -0- -0- -0-4 3,966,0899
Former Chairman and 1997 1,062,308 -0- -0- -0- 88,425 1,750,3285 187,7738
CEO of LNC 1996 1,003,077 -0- -0- -0- 75,000 1,739,0786 148,597
GABRIEL L.
SHAHEEN 1998 448,116 1,150,000 -0- -0- 37,781 25,4434 30,070
President and CEO of 1997 350,192 -0- 411,243 -0- 26,000 660,9885 46,3218
The Lincoln National 1996 338,019 -0- -0- -0- 17,250 680,1276 28,787
Life Insurance Co.
RICHARD C. 1998 430,000 1,040,000 -0- -0- 26,000 -0-4 22,185
VAUGHAN 1997 394,076 -0- -0- -0- 26,074 594,4095 47,8228
Executive Vice 1996 343,653 -0- -0- 275,053 14,500 550,053 6 59,303
President and CFO of
LNC
JEFFREY J. NICK
CEO of Lincoln 1998 400,000 1,125,000 -0- -0- 26,000 -0-4 19,023
National Investment 1997 341,038 -0- -0- -0- 26,000 480,0005 38,088
Companies, Inc. and 1996 282,308 -0- 36,307 -0- 15,000 500,000 6 34,624
Delaware Management
Holdings, Inc.
JACK D. HUNTER 1998 387,000 880,000 -0- -0- 28,920 28,3374 19,139
Executive Vice 1997 367,692 -0- -0- -0- 28,464 624,3135 45,6238
President and General 1996 351,443 -0- -0- -0- 14,500 591,3016 36,953
Counsel of LNC
</TABLE>
- --------------------
1. Includes annual incentive awards for 1998 awarded under the 1997 Incentive
Compensation Plan ("ICP"), as follows: Mr. Boscia, $3,500,000; Mr.Shaheen,
$1,150,000; Mr. Vaughan, $1,015,000, Mr. Nick, $1,125,000; and Mr. Hunter,
$865,000. The remaining amounts reflect discretionary bonuses awarded for 1998
as follows: Mr. Boscia, $124,000; Mr. Rolland, $907,000; Mr. Vaughan, $25,000;
and Mr. Hunter, $15,000.
2. Perquisites and other personal benefits of the Named Executive Officers,
other than Mr. Shaheen (in 1997) and Mr. Nick (in 1996), did not exceed the
lesser of $50,000 or 10% of the total of base salary and annual bonus for the
Named Executive Officers during the years reported in the table and, therefore,
are not included in the table. Amounts in this column for Mr. Shaheen for 1997
represent compensation related to Mr. Shaheen's overseas assignment, including
United Kingdom taxes ($238,750) and tax "gross-ups" ($117,058); the remaining
$55,436 is attributable to related matters, including automobile reimbursement,
tuition and a one-time general expense allowance relating to overseas service.
Amounts in this column for Mr. Nick for 1996 represent moving expenses paid to
Mr. Nick in connection with completion of overseas service.
3. During 1998, the Compensation Committee awarded to the Named Executive
Officers shares of restricted stock under the ICP, which shares are subject to
performance-based conditions to vesting, in addition to lapse of time and/or
continued service with the Corporation. Accordingly, those awards are reflected
in Table D (Long-Term Incentive Plans -- Awards in Last Fiscal Year). If the
performance criteria related to those awards are satisfied and the shares vest,
the amounts paid thereunder will be reflected in the LTIP Payout(s) column
(column h). The amounts shown for 1996 represent the Fair Market Value on the
date of grant of the award of restricted shares of Common Stock awarded under
the Executive Value Sharing Plan ("EVSP") for the period ending in 1996. No
dividends are payable on the restricted shares; however, when the restrictions
lapse, a "dividend equivalency" bonus is paid and reported in the "LTIP
Payout(s)" column. The restrictions on the shares awarded under both the ICP and
the EVSP lapse on the third anniversary of January 1 of the year next succeeding
the applicable performance cycle. The number and aggregate value of restricted
stock holdings, including restricted stock units, of the Named Executive
Officers as of December 31, 1998, are as follows: Mr. Boscia, 55,065 shares
($4,505,005); Mr. Rolland, 13,166 shares ($1,077,143); Mr. Shaheen, 35,892
shares ($2,936,414); Mr. Vaughan, 27,097 shares ($2,216,873); Mr. Nick, 46,287
shares ($3,786,855);
<PAGE>-30-
and Mr. Hunter, 16,252 shares ($1,329,617). As of December
31, 1998, the number and value of the aggregate restricted stock holdings
(including restricted stock units) of all employees of the Corporation were
653,015 shares representing a total value of $53,424,790.
4. Under the ICP, the Compensation Committee has the authority to make awards
based on satisfaction of certain performance criteria during specified
"Performance Cycles," typically one or three years. The awards made under the
ICP for the one-year Performance Cycle that ended in 1998 are reflected in the
"Bonus" column (column b). See Note 3 for a discussion of awards made in 1998
under the ICP for the 1998-2000 Performance Cycle that are subject to the
satisfaction of performance-based criteria. The amounts shown in this column for
Mr. Hunter and Mr. Shaheen for 1998 include dividend equivalencies paid in cash
(or credited to the Corporation's deferred compensation plan) during 1998 with
respect to restricted stock or restricted stock units which vested in 1998.
5. The amounts reported for 1997 were awarded by the Board at its May 1998
meeting and were not available for inclusion in last year's proxy statement.
Such amounts include awards made under the ICP for 1997 as follows: Mr. Boscia,
$726,000; Mr. Rolland, $1,593,000; Mr. Shaheen, $650,000; Mr. Vaughan, $575,000;
Mr. Nick, $480,000; and Mr. Hunter, $575,000. The remaining amounts represent
the dividend equivalencies paid in cash (or credited to the Corporation's
deferred compensation plan) during 1997 with respect to restricted stock or
restricted stock units which vested in 1997.
6. Includes the cash portion of the 1996 EVSP: Mr. Boscia, $725,000; Mr.
Rolland, $1,450,000; Mr. Shaheen, $337,500; Mr. Vaughan, $275,000; Mr. Nick,
$250,000; and Mr. Hunter, $550,000. An additional $337,533 of the amount
reported for Mr. Shaheen and $250,000 of the amount reported for Mr. Nick is
comprised of the portion of his EVSP that was made in restricted stock units.
The remaining amounts are attributable to dividend equivalencies paid in cash
during 1996 with respect to restricted stock or restricted stock units that
vested in 1996.
7. Amounts included in the All Other Compensation column are amounts
contributed or accrued for the Named Executive Officers under the Corporation's
Employees' Savings and Profit-Sharing Plan, the related supplemental savings
plans and the dollar value of insurance premiums paid by the Corporation.
The amounts contributed to the Profit-Sharing Plan and accrued supplements for
fiscal 1998 are as follows: Mr. Boscia, $4,594; Mr. Rolland, $4,594; Mr. Vaughan
$4,817; Mr. Hunter, $4,594; Mr. Nick, $4,594; and Mr. Shaheen, $4,594.
The amounts of insurance premiums for fiscal 1998 are as follows: Mr. Boscia,
$63,244; Mr. Rolland, $110,650; Mr. Shaheen, $23,969; Mr. Vaughan, $15,779;
Mr. Nick, $12,922; and Mr. Hunter, $12,815. Amounts for Mr. Nick for 1997 and
1996 include insurance premiums of $11,411 for each year.
8. The additional profit-sharing amounts for 1997 which were not available for
last year's proxy statement and which were awarded by the Board at its May 1998
meeting were as follows: Mr. Boscia, $28,018; Mr. Rolland, $97,250; Mr. Shaheen,
$10,414; Mr. Vaughan, $14,132; and Mr. Hunter, $12,528.
9. Includes a one-time payment of $3,750,000 made in connection with Mr.
Rolland's retirement during 1998, representing payment of a pro rata portion of
the amounts to which the Compensation Committee estimated Mr. Rolland would have
been entitled under the various EVSP/ICP Performance Cycles commenced, but not
completed, prior to his retirement had he continued in his role as Chief
Executive Officer; also includes $100,000 paid to Mr. Rolland during 1998 for
his service as Chairman of the Board and for serving as the Corporation's
representative on the Board of the American Council of Life Insurance.
<PAGE>-31-
TABLE D
Set forth below are awards of restricted stock of the Corporation made to the
Named Executive Officers in 1998 for a long-term 1998-2000 Performance Cycle
under the 1997 Incentive Compensation Plan (the "ICP"). Executives who received
restricted stock awards will also be credited with restricted stock units
representing amounts equivalent to dividends on the restricted stock. These
restricted stock and restricted stock unit awards are subject to a substantial
risk of forfeiture. They will vest, and executives will become entitled to
unrestricted shares, only if both certain "Corporate Performance" criteria are
satisfied during 1998 through 20001 and the executive continues in employment
(subject to limited exceptions) with the Corporation through 2003.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
Performance Estimated future payouts under
Number of or other non-stock price-based plans
shares, period until
units or other maturation or
Name rights1# payout Threshold2 Target2 Maximum2
<S> <C> <C> <C> <C> <C>
Jon A. Boscia 50,000 1998-2000 0 25,000 50,000
Ian M. Rolland 0 1998-2000 0 0 0
Gabriel L. Shaheen 25,000 1998-2000 0 12,500 25,000
Richard C. Vaughan 18,000 1998-2000 0 9,000 18,000
Jeffrey J. Nick 18,000 1998-2000 0 9,000 18,000
Jack D. Hunter 12,500 1998-2000 0 6,250 12,500
</TABLE>
- --------------------
1. The Compensation Committee generally contemplates that (i) a 15 percent
average for annual increases in the Corporation's income during 1998 through
2000 will be required for 50 percent vesting in these awards, (ii) a 17 percent
average increase in this amount will be required for 100% vesting of these
awards, and (iii) vesting of these awards would also require that average
adjusted return on equity during this period at least equal 13.6 percent. The
Committee has the discretion to pay less, and to some extent to adjust these
targets for unforeseen circumstances. In no event, however, will the restricted
shares (or the associated restricted stock units representing dividend
equivalent amounts) vest unless the arithmetic average of increases in Income
From Operations Per Share (diluted and after the exclusion of any restructuring
charges) as reported by the Corporation for the years 1998, 1999 and 2000 equals
or exceeds 10 percent per year, measured from a 1997 base number of $4.17 per
share.
2. Estimated future payouts are expressed in terms of the number of shares of
restricted stock that in fact become vested. They do not include any shares that
may become payable with respect to restricted stock units representing dividend
equivalents, since the number of such shares depends on dividend levels and
stock price at the time the dividend equivalents are credited. The Compensation
Committee in all cases retains the discretion to require forfeiture of all
awards as of December 31, 2000, and the "Threshold" award is thus zero. The
"Target" award column assumes vesting based on Corporate Performance at the 50
percent level as well as satisfaction of the continued service requirements. The
"Maximum" award column assumes Corporate Performance warranting 100% vesting as
well as satisfaction of the continued service requirements, as discussed in note
1 above.
<PAGE>-32-
<TABLE>
<CAPTION>
TABLE E
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE APPRECIATION
FOR OPTION TERM
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR
GRANTED 1,2 FISCAL YEAR 3 BASE PRICE 4 EXPIRATION
NAME (#) ($/SHARES) DATE 5 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Jon A. 110,000 4.1756 89.85 05/13/08 6,214,560.18 15,749,970.41
Boscia
Ian M. 0 0 0 0 0 0
Rolland
Gabriel L. 30,000 1.1388 89.85 05/13/08 1,694,880.05 4,295,446.47
Shaheen 943 0.0357 94.07 05/11/04 28,895.36 65,182.54
4,758 0.1806 94.07 05/10/05 175,296.84 406,086.03
2,080 0.0789 94.07 05/08/06 90,170.98 214,628.57
------- ------ ------------- -------------
total 37,781 total 1.4340 1,989,243.23 4,981,343.61
Richard C. 26,000 0.9869 89.85 05/13/08 1,468,896.04 3,722,720.28
Vaughan
Jeffrey J. 26,000 0.9869 89.85 05/13/08 1,468,896.04 3,722,720.28
Nick
Jack D. 2,920 0.1108 85.60 05/08/01 40,812.08 85,939.44
Hunter 26,000 0.9869 89.85 05/13/08 1,468,896.04 3,722,720.28
--------- --------- ------------- -------------
total 28,920 1.0977 1,509,708.12 3,808,659.72
</TABLE>
- --------------------
1. Options granted on May 13, 1998 are exercisable starting 12 months after the
grant date with respect to 25% of the shares granted and with an additional 25%
of the option shares granted becoming exercisable on each successive
anniversary, with full vesting occurring on the date of the first to occur of
death, disability, retirement or a change of control of the Corporation.
2. On July 31, 1998, Mr. Shaheen received a reload grant of 943 options in
connection with his exercise of 2,250 options granted on May 11, 1994, a reload
grant of 4,758 options in connection with his exercise of 10,500 options granted
on May 10, 1995, and a reload grant of 2,080 options in connection with his
exercise of 4,313 options granted on May 8, 1996. Mr. Hunter received a reload
grant of 2,920 options on April 1, 1998, in connection with his exercise of
10,000 options granted on May 8, 1991. Reload options are exercisable two years
from the date of grant of the reload option if the fair market value of LNC
stock is 125% or more of the reload option price, with earlier exercise
permitted on the date of the first to occur of death, disability, retirement,
one month prior to the end of the ten-year term of the initial option or a
change of control of the Corporation.
3. The Corporation granted options representing 2,634,300 shares to employees
in fiscal year 1998.
4. The exercise price and tax withholding obligations related to exercise may
be paid by delivery of mature shares or by offset of the underlying shares,
subject to certain conditions.
5. The options granted May 13,1998 were granted for a term of 10 years, subject
to earlier forfeiture in certain events related to termination of employment.
The reload options discussed in footnote 2 above were granted for the term of
the initial options, subject to earlier forfeiture in certain events related to
termination of employment.
<PAGE>-33-
<TABLE>
<CAPTION>
TABLE F
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS HELD AT DECEMBER 31, MONEY OPTIONS HELD AT
1998 DECEMBER 31, 1998 1
SHARES
NAME ACQUIRED VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
ON ($)
EXERCISE
<S> <C> <C> <C> <C> <C> <C>
Jon A. 0 0 88,500 142,500 3,946,866.25 930,636.25
Boscia
Ian M. 60,000 3,845,700.00 212,675 105,750 8,475,923.19 3,086,289.38
Rolland
Gabriel L. 23,913 1,235,028.87 10,813 69,405 305,804.62 897,346.38
Shaheen
Richard C. 5,200 270,581 42,500 56,074 1,643,201.25 820,844.85
Vaughan
Jeffrey J. 26,500 1,297,171.25 0 54,500 0 778,031.25
Nick
Jack D. 10,000 605,937.50 54,750 61,134 2,242,426.88 849,875.06
Hunter
</TABLE>
- --------------------
1. Based on the closing price on the New York Stock Exchange Composite
Transactions ("NYSE") of the Corporation's Common Stock on December 31, 1998
($81.8125).
<PAGE>-34-
<TABLE>
<CAPTION>
TABLE G
PENSION TABLE
ESTIMATED ANNUAL RETIREMENT BENEFIT FOR CREDITED YEARS OF SERVICE 1,3
Final
Average 10 15 20 25 30 35 40 45
Salary 2 Years Years Years Years Years Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 300,000 $49,678 $74,516 $99,355 $124,194 $149,033 $173,872 $181,372 $188,872
350,000 58,178 87,266 116,355 145,444 174,533 203,622 212,372 221,122
400,000 66,678 100,016 133,355 166,694 200,033 233,372 243,372 253,372
450,000 75,178 112,766 150,355 187,944 225,533 263,122 274,372 285,622
500,000 83,678 125,516 167,355 209,194 251,033 292,872 305,372 317,872
550,000 92,178 138,266 184,355 230,444 276,533 322,622 336,372 350,122
600,000 100,678 151,016 201,355 251,694 302,033 352,372 367,372 382,372
650,000 109,178 163,766 218,355 272,944 327,533 382,122 398,372 414,622
700,000 117,678 176,516 235,355 294,194 353,033 411,872 429,372 446,872
750,000 126,178 189,266 252,355 315,444 378,533 441,622 460,372 479,122
800,000 134,678 202,016 269,355 336,694 404,033 471,372 491,372 511,372
850,000 143,178 214,766 286,355 357,944 429,533 501,122 522,372 543,622
900,000 151,678 227,516 303,355 379,194 455,033 530,872 553,372 575,872
950,000 160,178 240,266 320,355 400,444 480,533 560,622 584,372 608,122
1,000,000 168,678 253,016 337,355 421,694 506,033 590,372 615,372 640,372
1,050,000 177,178 265,766 354,355 442,944 531,533 620,122 646,372 672,622
1,100,000 185,678 278,516 371,355 464,194 557,033 649,872 677,372 704,872
1,150,000 194,178 291,266 388,355 485,444 582,533 679,622 708,372 737,122
</TABLE>
- --------------------
1. Amounts shown reflect estimated annual retirement benefits payable on a
straight life annuity basis to participating employees, including the Named
Executive Officers, under the Corporation's retirement plans, which cover most
officers and other employees on a non-contributory basis. Such benefits reflect
a reduction to recognize in part the Corporation's cost of Social Security
Benefits related to service for the Corporation. This table assumes retirement
at age 65 (current normal retirement date), and at age 65, the following
individuals will have the number of years credited service indicated: Mr.
Boscia, 34; Mr. Rolland, 42; Mr. Vaughan, 24; Mr. Hunter, 40; Mr. Nick, 27; and
Mr. Shaheen, 41.
2. Final average salary is the average of an employee's base salary paid in any
consecutive 60-month period during an employee's last ten years of active
employment which produces the highest average salary. The base salary for the
Named Executive Officers is reflected in Column (c) of the Summary Compensation
Table on page 29.
3. As a result of limitations under the Internal Revenue Code, a portion of
these amounts will be paid under supplemental benefit plans established by the
Corporation to provide benefits (included in this table) which would exceed
these limits.
<PAGE>
[Front of Proxy Card]
LINCOLN NATIONAL CORPORATION
FORT WAYNE, INDIANA
The undersigned shareholder in LINCOLN NATIONAL CORPORATION (the
"Corporation"), an Indiana corporation, hereby constitutes and appoints JON A.
BOSCIA, JILL S. RUCKELSHAUS and C. SUZANNE WOMACK or any one or more of them,
the true and lawful attorney in fact and proxy of the undersigned, with full
power of substitution to all or any one or more of them, to vote as proxy for
and in the name, place and stead of the undersigned at the Four Seasons Hotel,
One Logan Square, Philadelphia, PA, 10:00 a.m., local time, Thursday, May 13,
1999, or at any adjournment thereof, all the shares of stock in the corporation
shown on the other side (whether Common Stock or $3.00 Cumulative Convertible
Preferred Stock, Series A) which the undersigned would be entitled to vote if
then personally present, hereby revoking any proxy heretofore given.
A majority of such attorneys and proxies who shall be present and shall act
as such at the meeting or any adjournment thereof, or if only one such attorney
and proxy be present and act, then that one, shall have and may exercise all the
powers hereby conferred.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND AUTHORIZATION WILL BE
GIVEN TO THE NAMED PROXIES, OR ANY ONE OR MORE OF THEM, IN THEIR DISCRETION TO
ACT OR VOTE UPON OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
[SEE REVERSE
(Continued, and to be Signed, on reverse side) SIDE]
- -----------------------------------------------------------------------------
FOLD AND DETACH HERE
LINCOLN NATIONAL CORPORATION
Company Highlights During 1998
o Income from operations for 1998 was a record $530.4 million or $5.22 per
diluted share, with all business segments achieving record income for the
year.
o The quarterly dividend on LNC's Common Stock was increased 5.8 percent to
$.55 cents, representing the 14th consecutive year of increased dividends.
o Lincoln completed its two largest acquisitions ever - purchasing the
individual life and annuity business from CIGNA for $1.4 billion and the
domestic individual life insurance business from Aetna for $1 billion.
<PAGE>
[Back of Proxy Card]
[X] Please mark your
votes as in this
example.
The Board of Directors recommends a vote FOR the following:
FOR WITHHELD
1. To elect directors [ ] [ ] Nominees for three year terms
expiring 2002:
For all nominees except 1. J. Patrick Barret,
as noted below: 2. Thomas D. Bell, Jr.
3. Daniel R. Efroymson and
------------------------ 4. Roel Pieper
The Board of Directors recommends a vote AGAINST proposal 2.
2. Shareholder proposal. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, to act or vote upon other matters which may properly
come before the meeting or any adjournment thereof.
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT ANNUAL MEETING
All of the above in accordance with the Notice of
Annual Meeting of Shareholders and Proxy Statement
for the meeting, receipt of which is hereby
acknowledged.
Signature must be that of the shareholder. If shares
are held jointly, each shareholder named should sign.
If the signer is a corporation, please sign full
corporate name by duly authorized officer. If the
signer is a partnership, please sign partnership name
by authorized person. Executors, administrators,
trustees, guardians, attorneys in fact, etc. should
so indicate when signing.
-------------------------------------------------
-------------------------------------------------
SIGNATURE DATE
FOLD AND DETACH HERE
LINCOLN NATIONAL CORPORATION
Now Offering Telephone or Internet Voting Services - Fast and Convenient!
VOTE BY TELEPHONE (1-800-652-8683)
o Shareholders from the United States, Canada, Puerto Rico, and the U.S.
Virgin Islands may call toll-free 1-800-652-8683 (1-800-OK2-VOTE).
o Shareholders from other locations may dial 201-324-0377; these
shareholders must bear the normal cost of international telephone
charges to use the telephone voting service.
o Follow the simple recorded instructions.
o When prompted for your "Voter Control Number," enter the series of
numbers printed in the box above using your touch-tone telephone.
VOTE BY INTERNET (www.vote-by-net.com)
o Shareholders with Internet access may got to http://www.vote-by-net.com.
o Follow the simple on-line instructions.
o When prompted for your "Voter Control Number," enter the series of
numbers printed in the box above using your touch-tone telephone.
[Telephone or Internet voting authorizes the named proxies to represent you at
the meeting in the same manner as if you completed, signed, dated and mailed
your proxy card. IF YOU VOTE BY TELEPH0NE OR INTERNET, DO NOT MAIL YOUR PROXY
CARD.]
