Lincoln National Corporation S-3
As
filed with the Securities and Exchange Commission on May 16, 2005.
File
No. 333-________
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________________
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
Lincoln
National Corporation
(Exact
Name of Registrant as Specified in Its Charter)
Indiana
(State
or Other Jurisdiction of Incorporation or Organization)
35-1140070
(I.R.S.
Employer Identification No.)
Centre
Square West Tower
1500
Market Street, Suite 3900
Philadelphia,
PA 19102
(215)
448-1400
(Address,
Including Zip Code, and Telephone Number, Including
Area
Code, of Registrant's Principal Executive Offices)
Lincoln
National Corporation
Amended
and Restated Incentive Compensation Plan
(Full
Title of Plan)
Dennis
L. Schoff
Senior
Vice President & General Counsel
Lincoln
National Corporation
Centre
Square West Tower
1500
Market Street, Suite 3900
Philadelphia,
PA 19102
(215)
448-1400
(Name,
Address, Including Zip Code, and Telephone Number, Including
Area
Code, of Agent for Service)
Approximate
date of commencement of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If
the only securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box [
].
If
any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, check the following box [ X ] .
If
this Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering [ ].
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering [ ].
If
delivery of a prospectus is expected to be made pursuant to Rule 434, please
check the following box [ ].
| |
|
CALCULATION
OF REGISTRATION FEE |
|
Title
of each class of
Securities
to be registered |
Amount
to be registered |
Proposed
maximum
offering
price
per share |
Proposed
maximum
aggregate
offering
price |
Amount
of
registration
fee |
|
Common
Stock
(no
par value) |
10,115,000 |
$
42.22 |
$427,055,300 |
$50,265 |
| |
|
|
|
|
(1)
Pursuant to Rule 416 under the Securities Act of 1933, as amended (the
“Securities Act”), there are being registered such additional shares as may be
issuable pursuant to the anti-dilution provisions of the Lincoln National
Corporation (“LNC”) Amended and Restated Incentive Compensation Plan (the
“Amended and Restated Plan”), by
reason of stock splits, stock dividends or similar transactions.
The shares of common stock to which this Registration Statement relates are to
be issued upon exercise of options or the lapsing of restrictions on restricted
stock, and in connection with certain other stock-related awards, all of which
will be granted or awarded for no consideration to certain of LNC’s employees
and non-employee agents.
(2)
Estimated
solely for purposes of calculating the registration fee pursuant to Rules 457(c)
and 457(h)(1) under the Securities Act based upon the average of the high and
low sale prices of LNC’s Common Stock on May 11, 2005 as reported on the New
York Stock Exchange.
(3)
Each share of Common Stock includes common share purchase rights. Prior to the
occurrence of certain events, the rights will not be exercisable or evidenced
separately from the Common Stock.
(4)
Pursuant
to Rule 429 under the Securities Act, the prospectus included in this
registration statement is a combined prospectus, which also relates to LNC's
Registration Statement on Form S-3, Registration No. 333-32667 (the "Prior
Registration Statement"). This Registration Statement also constitutes the first
post-effective amendment to the Prior Registration Statement. Such
post-effective amendment shall hereafter become effective concurrently with the
effectiveness of this Registration Statement in accordance with Section 8(a) of
the Securities Act of 1933. The aggregate amount of Common Stock eligible to be
sold (23,226,512 shares as adjusted for a 2-for-1 stock split) and not
previously sold under the Prior Registration Statement (13,672,673 shares) prior
to the effective date of this Registration Statement shall be carried forward to
this Registration Statement. LNC previously paid a registration fee to the SEC
in connection with those securities. The amount of securities being registered,
together with the remaining securities registered under the Prior Registration
Statement, represents the maximum amount of securities that are expected to be
offered for sale.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities, and is not soliciting an offer to buy these
securities, in any state where the offer or sale is not permitted.
Subject
to Completion, Dated May 16, 2005
PROSPECTUS
23,787,673
Shares
LINCOLN
NATIONAL CORPORATION
COMMON
STOCK
(No
Par Value)
Offered
as set forth in this Prospectus pursuant to the
LINCOLN
NATIONAL CORPORATION
AMENDED
AND RESTATED
INCENTIVE
COMPENSATION PLAN
This
Prospectus relates to shares of our Common Stock to be issued under the Plan to
high-quality executives, employees and other persons who provide services to us
or our subsidiaries or to eligible persons holding either agents' or brokers'
contracts with one of our subsidiaries.
Our
Common Stock is listed on The New York Stock Exchange, the Pacific Stock
Exchange and the Chicago Stock Exchange under the symbol “LNC.” The last
reported sale price on May 12, 2005 was $42.47 per share.
Investing
in our Common Stock involves risks. See “Risk Factors” beginning on page 3 of
this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus supplement and the accompanying prospectus. Any
representation to the contrary is a criminal offense.
You
should rely only on the information contained in or incorporated by reference in
this prospectus. We have not authorized anyone to provide you with information
that is different. We are not making an offer of these securities in any state
or jurisdiction where the offer is not permitted. The information contained or
incorporated by reference in this prospectus is accurate only as of the
respective dates of such information. Our business, financial condition, results
of operations and prospects may have changed since those dates.
The
date of this Prospectus is ___, 2005.
TABLE
OF CONTENTS
It
is important for you to read and consider all information contained in this
prospectus in making your investment decision. You should also read and consider
the additional information under the caption “Where You Can Find More
Information”.
Unless
otherwise indicated, all references in this prospectus to “LNC,” “we,” “our,”
“us,” or similar terms refer to Lincoln National Corporation together with its
subsidiaries.
REQUIRED
DISCLOSURE FOR NORTH CAROLINA RESIDENTS
THE
COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED OR
DISAPPROVED OF THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
We
are a holding company that operates multiple insurance and investment management
businesses through subsidiary companies. LNC was organized under the laws of the
State of Indiana in 1968. At March 31, 2005, we had consolidated assets of
$116.4 billion and consolidated shareholders’ equity of $6.0 billion. Our
principal executive office is located at 1500 Market Street, Suite 3900, Centre
Square West Tower, Philadelphia, PA 19102. Our telephone number is (215)
448-1400.
Except
for historical information contained or incorporated by reference in this
prospectus or any prospectus supplement, statements made in this prospectus or
incorporated by reference in this prospectus or any prospectus supplement are
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995 (“PSLRA”). A forward-looking statement is a
statement that is not a historical fact and, without limitation, includes any
statement that may predict, forecast, indicate or imply future results,
performance or achievements, and may contain words like: “believe”,
“anticipate”, “expect”, “estimate”, “project”, “will”, “shall” and other words
or phrases with similar meaning. We claim the protection afforded by the safe
harbor for forward-looking statements provided by the PSLRA.
Forward-looking
statements involve risks and uncertainties that may cause actual results to
differ materially from the results contained in the forward-looking statements.
Risks and uncertainties that may cause actual results to vary materially, some
of which are described within the forward-looking statements include, among
others:
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Legislative,
regulatory or tax changes, both domestic and foreign, that affect the cost
of, or demand for, LNC’s products, the required amount of reserves and/or
surplus, or otherwise affect our ability to conduct business, including
changes to statutory reserves and/or risk-based capital requirements
related to secondary guarantees under universal life and variable annuity
products; restrictions on revenue sharing and 12b-1 payments; and the
repeal of the federal estate tax; |
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• |
The
institution of legal or regulatory proceedings against LNC or its
subsidiaries and the outcome of any legal or regulatory proceedings, such
as: (a) adverse actions related to present or past business practices
common in businesses in which LNC and its subsidiaries compete; (b)
adverse decisions in significant actions including, but not limited to,
actions brought by federal and state authorities, and extra-contractual
and class action damage cases; (c) new decisions which change the law; and
(d) unexpected trial court rulings; |
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• |
Changes
in interest rates causing a reduction of investment income, the margins of
LNC’s fixed annuity and life insurance businesses and demand for LNC’s
products; |
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• |
A
decline in the equity markets causing a reduction in the sales of LNC’s
products, a reduction of asset fees that LNC charges on various investment
and insurance products, an
acceleration of amortization of deferred acquisition costs (“DAC”) and an
increase in liabilities related to guaranteed benefit features of LNC’s
variable annuity products; |
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• |
Ineffectiveness
of LNC’s various hedging strategies used to offset the impact of declines
in the equity markets; |
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• |
A
deviation in actual experience regarding future persistency, mortality,
morbidity, interest rates and equity market returns from LNC’s assumptions
used in pricing its products, in establishing related insurance reserves,
and in the amortization of intangibles that may result in an increase in
reserves and a decrease in net income; |
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• |
The
effect of life settlement business on persistency assumptions used in
pricing life insurance business, which may cause profitability of some
business to fall below expectations and could potentially result in
deficient reserves; |
•
Changes
in GAAP that may result in unanticipated changes to LNC’s net income;
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• |
Lowering
of one or more of LNC’s debt ratings issued by nationally recognized
statistical rating organizations, and the adverse impact such action may
have on LNC’s ability to raise capital and on its liquidity and financial
condition; |
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• |
Lowering
of one or more of the insurer financial strength ratings of LNC’s
insurance subsidiaries, and the adverse impact such action may have on the
premium writings, policy retention, and profitability of its insurance
subsidiaries; |
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• |
Significant
credit, accounting, fraud or corporate governance issues that may
adversely affect the value of certain investments in the portfolios of
LNC’s companies requiring that LNC realize losses on such investments;
|
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• |
The
impact of acquisitions and divestitures, restructurings, product
withdrawals and other unusual items, including LNC’s ability to integrate
acquisitions and to obtain the anticipated results and synergies from
acquisitions; |
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• |
The
adequacy and collectibility of reinsurance that LNC has purchased;
|
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• |
Acts
of terrorism or war that may adversely affect LNC’s businesses and the
cost and availability of reinsurance;
|
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• |
Competitive
conditions that may affect the level of premiums and fees that LNC can
charge for its products; |
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• |
The
unknown impact on LNC’s business resulting from changes in the
demographics of LNC’s client base, as aging baby-boomers move from the
asset-accumulation stage to the asset-distribution stage of life;
|
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• |
Loss
of key portfolio managers in the Investment Management segment, financial
planners in Lincoln Financial Advisors or wholesalers in Lincoln Financial
Distributors; and |
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• |
Changes
in general economic or business conditions, both domestic and foreign,
that may be less favorable than expected and may affect foreign exchange
rates, premium levels, claims experience, the level of pension benefit
costs and funding, and investment results. |
The
risks included here are not exhaustive. Our annual reports on Form 10-K, current
reports on Form 8-K and other documents filed with the Securities and Exchange
Commission include additional factors which could impact our business and
financial performance. Moreover, we operate in a rapidly changing and
competitive environment. New risk factors emerge from time to time and it is not
possible for management to predict all such risk factors.
Further,
it is not possible to assess the impact of all risk factors on our business or
the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking
statements. Given these risks and uncertainties, investors should not place undo
reliance on forward-looking statements as a prediction of actual results. In
addition, we disclaim any obligation to update any forward-looking statements to
reflect events or circumstances that occur after the date of this
prospectus.
You
should carefully consider the risks described below and those incorporated by
reference into this prospectus before making an investment decision. The risks
and uncertainties described below and incorporated by reference into this
prospectus are not the only ones facing our company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations. If any of these risks actually occur, our
business, financial condition and results of operations could be materially
affected. In that case, the value of our Common Stock could decline
substantially.
If
future policy benefits and claims exceed our insurance and annuity premiums and
reserves, our financial results would be adversely affected.
Our
reserves for future policy benefits and claims may prove to be inadequate. We
establish and carry, as a liability, reserves based on estimates by actuaries of
how much we will need to pay for future benefits and claims. For our life
insurance and annuity products, we calculate these reserves based on many
assumptions and estimates, including estimated premiums we will receive over the
assumed life of the policy, the timing of the event covered by the insurance
policy, the amount of benefits or claims to be paid and the investment returns
on the assets we purchase with the premiums we receive. The assumptions and
estimates we use in connection with establishing and carrying our reserves are
inherently uncertain. Accordingly, we cannot determine with precision the
ultimate amounts that we will pay for, or the timing of payment of, actual
benefits and claims or whether the assets supporting the policy liabilities will
grow to the level we assume prior to payment of benefits or claims. If our
actual experience is different from our assumptions or estimates, our reserves
may prove to be inadequate in relation to our estimated future benefits and
claims. As a result, we would incur a charge to our earnings in the quarter in
which we increase our reserves.
Because
the equity markets impact our profitability, equity market declines may also
negatively affect our business and profitability.
Our
profitability has benefited from strong equity markets in 2003 and 2004. The fee
revenue that we earn on equity-based variable annuities, unit-linked accounts,
variable universal life insurance policies and investment advisory business, is
based upon account values. Because strong equity markets result in higher
account values, strong equity markets positively affect our net income through
increased fee revenue. In addition, the increased fee revenue resulting from
strong equity markets increases the expected gross profits (“EGPs”) from
variable insurance products. As a result, the higher EGPs may result in lower
net amortized costs related to deferred acquisition costs (“DAC”), deferred
sales inducements (“DSI”), the present value of in-force business (“PVIF”)
acquired expenses and deferred front-end sales loads (“DFEL”) associated with
those products. For more information on DAC, DSI, PVIF and DFEL amortization,
see “Critical Accounting Policies” in the Management’s Discussion and Analysis
of Financial Condition and Results of Operations” portion of our Form 10-K for
the year ended December 31, 2004 and incorporated herein by reference. Finally,
the amount of reserves related to the guaranteed minimum death benefits for
variable annuities is tied to the difference between the value of the underlying
accounts and the guaranteed death benefit, which is affected by the equity
markets. Accordingly, strong equity markets will decrease the amount of GMDB
reserves that we carry.
Conversely,
a weakening of the equity markets results in lower fee income and, depending
upon the significance of the drop in the equity markets, may result in higher
net expenses associated with DAC, DSI, PVIF and DFEL. Both lower fee income and
higher net expenses may have a material adverse effect on our results of
operations and capital resources. Furthermore, a decrease in the equity markets
will increase the net amount at risk under the guaranteed minimum death benefit,
which has the effect of increasing the amount of GMDB reserves that we carry. As
a result, if such reserves are not reasonable in relation to our expected
liabilities for GMDBs, we may have to increase the level of the GMDB reserves.
Such an increase in reserves would result in a charge to our earnings in the
quarter in which we increase our reserves to bring them within a reasonable
range of our estimated future liabilities related to the GMDB guarantees.
Because
the profitability of our fixed annuity and interest-sensitive whole life,
universal life and fixed portion of variable universal life insurance business
depends in part on interest rate spreads, interest rate fluctuations could
negatively affect our profitability.
Changes
in interest rates may reduce both our profitability from spread businesses and
our return on invested capital. Some of our products, principally fixed
annuities and interest-sensitive whole life, universal life and the fixed
portion of variable universal life insurance, expose us to the risk that changes
in interest rates will reduce our “spread,” or the difference between the
amounts that we are required to pay under the contracts and the amounts we are
able to earn on our general account investments intended to support our
obligations under the contracts. Declines in our spread from these products
could have a material adverse effect on our businesses or results of
operations.
In
periods of increasing interest rates, we may not be able to replace the assets
in our general account with higher yielding assets needed to fund the higher
crediting rates necessary to keep our interest sensitive products competitive.
We therefore may have to accept a lower spread and thus lower profitability or
face a decline in sales and greater loss of existing contracts and related
assets. In periods of declining interest rates, we have to reinvest the cash we
receive as interest or return of principal on our investments in lower yielding
instruments then available. Moreover, borrowers may prepay fixed-income
securities, commercial mortgages and mortgage-backed securities in our general
account in order to borrow at lower market rates, which exacerbates this risk.
Because we are entitled to reset the interest rates on our fixed rate annuities
only at limited, pre-established intervals, and since many of our policies have
guaranteed minimum interest or crediting rates, our spreads could decrease and
potentially become negative.
Increases
in interest rates may cause increased surrenders and withdrawals of insurance
products. In periods of increasing interest rates, policy loans and surrenders
and withdrawals of life insurance policies and annuity contracts may increase as
policyholders seek to buy products with perceived higher returns. This process
may lead to a flow of cash out of our businesses. These outflows may require
investment assets to be sold at a time when the prices of those assets are lower
because of the increase in market interest rates, which may result in realized
investment losses. A sudden demand among consumers to change product types or
withdraw funds could lead us to sell assets at a loss to meet the demand for
funds. In addition, unanticipated withdrawals and terminations also may require
us to accelerate the amortization of DAC. This would increase our current
expenses.
A
downgrade in our claims-paying or credit ratings could limit our ability to
market products, increase the number or value of policies being surrendered
and/or hurt our relationships with creditors.
Nationally
recognized rating agencies rate the financial strength of our principal
insurance subsidiaries and the debt of LNC. Ratings are not recommendations to
buy our securities. Our ratings are provided in our Form 10-K for the year ended
December 31, 2004.
Our
claims-paying ratings, which are intended to measure our ability to meet
policyholder obligations, are an important factor affecting public confidence in
most of our products and, as a result, our competitiveness. The interest rates
we pay on our borrowings are largely dependent on our credit ratings. Each of
the rating agencies reviews its ratings periodically, and our current ratings
may not be maintained in the future. A downgrade of the financial strength
rating of one of our principal insurance subsidiaries could affect our
competitive position in the insurance industry and make it more difficult for us
to market our products as potential customers may select companies with higher
financial strength ratings. This could lead to a decrease in fees as outflows of
assets increase, and therefore, result in lower fee income. Furthermore, sales
of assets to meet customer withdrawal demands could also result in losses,
depending on market conditions.
A downgrade of our debt ratings could affect our ability to raise additional
debt with terms and conditions similar to our current debt, and accordingly,
likely increase our cost of capital. In addition, a downgrade of these ratings
could make it more difficult to raise capital to refinance any maturing debt
obligations, to support business growth at our insurance subsidiaries and to
maintain or improve the current financial strength ratings of our principal
insurance subsidiaries.
A
drop in the rankings of the mutual funds that we manage as well as a loss of key
portfolio managers could result in lower advisory fees.
While
mutual funds are not rated, per se, many industry periodicals and services, such
as Lipper, provide rankings of mutual fund performance. These rankings often
have an impact on the decisions of customers regarding which mutual funds to
invest in. If the rankings of the mutual funds for which we provide advisory
services decrease materially, the funds’ assets may decrease as customers leave
for funds with higher performance rankings. Similarly, a loss of our key
portfolio managers who manage mutual fund investments could result in poorer
fund performance, as well as customers leaving these mutual funds for new mutual
funds managed by the portfolio managers. Any loss of fund assets would decrease
the advisory fees that we earn from such mutual funds, which are generally tied
to the amount of fund assets and performance. This would have an adverse effect
on our results of operations.
Our
businesses are heavily regulated and changes in regulation may reduce our
profitability.
Our
insurance subsidiaries are subject to extensive supervision and regulation in
the states in which we do business. The supervision and regulation relate to
numerous aspects of our business and financial condition. The primary purpose of
the supervision and regulation is the protection of our insurance policyholders,
and not our investors. The extent of regulation varies, but generally is
governed by state statutes. These statutes delegate regulatory, supervisory and
administrative authority to state insurance departments. This system of
supervision and regulation covers, among other things:
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· |
standards
of minimum capital requirements and solvency, including risk-based capital
measurements; |
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· |
restrictions
of certain transactions between our insurance subsidiaries and their
affiliates; |
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· |
restrictions
on the nature, quality and concentration of investments;
|
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· |
restrictions
on the types of terms and conditions that we can include in the insurance
policies offered by our primary insurance operations;
|
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· |
limitations
on the amount of dividends that insurance subsidiaries can pay;
|
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· |
the
existence and licensing status of the company under circumstances where it
is not writing new or renewal business; |
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· |
certain
required methods of accounting; |
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· |
reserves
for unearned premiums, losses and other purposes; and
|
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· |
assignment
of residual market business and potential assessments for the provision of
funds necessary for the settlement of covered claims under certain
policies provided by impaired, insolvent or failed insurance companies.
|
The
regulations of the state insurance departments may affect the cost or demand for
our products and may impede us from taking actions we might wish to take to
increase our profitability. For example, on December 29, 2004, the New York
State Insurance Department promulgated, as an emergency measure, amendments to
its regulations governing the valuation of life insurance reserves for New York
authorized insurers issuing certain life insurance policies. Specifically, the
amendments apply to life insurance policies providing secondary guarantees, such
as policies with our lapse protection rider, that allow those policies to remain
in force at the original schedule of benefits, even if the policy’s cash value
is depleted, as long as the contractual requirements to maintain the secondary
guarantee are satisfied. The amendments apply retroactively to policies issued
on or after January 1, 2003. We do not currently expect these changes to affect
Lincoln National Life Insurance Company’s (“LNL”) ability to continue as an
accredited reinsurer in New York. However, although we continue to examine
various alternatives to mitigate the impact of New York’s statutory reserve
requirements, they may constrain LNL’s ability to pay dividends to LNC and may
result in an increase in the cost of lapse protection rider products.
Further,
we may be unable to maintain all required licenses and approvals and our
business may not fully comply with the wide variety of applicable laws and
regulations or the relevant authority’s interpretation of the laws and
regulations, which may change from time to time. Also, regulatory authorities
have relatively broad discretion to grant, renew or revoke licenses and
approvals. If we do not have the requisite licenses and approvals or do not
comply with applicable regulatory requirements, the insurance regulatory
authorities could preclude or temporarily suspend us from carrying on some or
all of our activities or impose substantial fines. Further, insurance regulatory
authorities have relatively broad discretion to issue orders of supervision,
which permit such authorities to supervise the business and operations of an
insurance company. As of March 31, 2005, no state insurance regulatory authority
had imposed on us any substantial fines or revoked or suspended any of our
licenses to conduct insurance business in any state or issued an order of
supervision with respect to our insurance subsidiaries, which would have a
material adverse effect on our results of operations or financial condition.
In
addition, Lincoln Financial Advisors and Lincoln Financial Distributors as well
as our variable annuities and variable life insurance products are subject to
regulation and supervision by the SEC and the National Association of Securities
Dealers (“NASD”). Our Investment Management segment, like other investment
management groups, is subject to regulation and supervision by the SEC, NASD,
Municipal Securities Rulemaking Board, the Pennsylvania Department of Banking
and jurisdictions of the states, territories and foreign countries in which they
are licensed to do business. Lincoln U.K. is subject to regulation by the
Financial Services Authority
in the U.K. These laws and regulations generally grant supervisory agencies and
self-regulatory organizations broad administrative powers, including the power
to limit or restrict the subsidiaries from carrying on their businesses in the
event that they fail to comply with such laws and regulations.
Many
of the foregoing regulatory or governmental bodies have the authority to review
our products and business practices and those of our agents and employees. In
recent years, there has been increased scrutiny of our businesses by these
bodies, which has included more extensive examinations, regular “sweep”
inquiries and more detailed review of disclosure documents. These regulatory or
governmental bodies may bring regulatory or other legal actions against
us
if,
in their view, our practices, or those of our agents or employees, are improper.
These actions can result in substantial fines, penalties or prohibitions or
restrictions on our business activities and could have a material adverse effect
on our business, results of operations or financial condition.
Legal
and regulatory actions are inherent in our businesses and could result in
financial losses or harm our businesses.
There
continues to be a significant amount of federal and state regulatory activity in
the industry relating to numerous issues including market timing and late
trading of mutual funds and variable annuity products and broker-dealer access
agreements. Like others in the industry, we have received related inquiries
including requests for information and/or subpoenas from various authorities
including the SEC, NASD, the New York Attorney General and other authorities. We
are in the process of responding to these inquiries and continue to cooperate
fully with such authorities. In addition, we are, and in the future may be,
subject to legal actions in the ordinary course of our insurance and investment
management operations, both domestically and internationally. Pending legal
actions include proceedings relating to aspects of our businesses and operations
that are specific to us, and proceedings that are typical of the businesses in
which we operate. Some of these proceedings have been brought on behalf of
various alleged classes of complainants. In certain of these matters, the
plaintiffs are seeking large and/or indeterminate amounts, including punitive or
exemplary damages. Substantial legal liability in these or future legal or
regulatory actions could have a material financial effect or cause significant
harm to our reputation, which in turn could materially harm our business
prospects.
Changes
in federal income tax law could make some of our products less attractive to
consumers and increase our tax costs.
The
Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) as well as
the Jobs and Growth Tax Relief Reconciliation Act of 2003 contain provisions
that will, over time, significantly lower individual tax rates. This will have
the effect of reducing the benefits of deferral on the build-up of value of
annuities and life insurance products. EGTRRA also includes provisions that will
eliminate, over time, the estate, gift and generation-skipping taxes and
partially eliminate the step-up in basis rule applicable to property held in a
decedent’s estate. Many of these provisions expire in 2008 and 2010, unless
extended. The Bush Administration has proposed that many of the foregoing rate
reductions be made permanent, as well as several tax-favored savings
initiatives, such as the elimination of the estate tax, that, if enacted by
Congress,
could also adversely affect the sale of our annuity, life and tax-qualified
retirement products and increase the surrender of such products. Although we
cannot predict the overall effect on the sales of our products of the tax law
changes included in these Acts, some of these changes might hinder our sales and
result in the increased surrender of insurance products.
Our
risk management policies and procedures may leave us exposed to unidentified or
unanticipated risk, which could negatively affect our businesses or result in
losses.
We
have devoted significant resources to develop our risk management policies and
procedures and expect to continue to do so in the future. Nonetheless, our
policies and procedures to identify, monitor and manage risks may not be fully
effective. Many of our methods of managing risk and exposures are based upon our
use of observed historical market
behavior
or statistics based on historical models. As a result, these methods may not
predict future exposures, which could be significantly greater than the
historical measures indicate. Other risk management methods depend upon the
evaluation of information regarding markets, clients, catastrophe occurrence or
other matters that is publicly available or otherwise accessible to us, which
may not always be accurate, complete, up-to-date or properly evaluated.
Management of operational, legal and regulatory risks requires, among other
things, policies and procedures to record properly and verify a large number of
transactions and events, and these policies and procedures may not be fully
effective.
Because
we are a holding company with no direct operations, the inability of our
subsidiaries to pay dividends to us in sufficient amounts would harm our ability
to meet our obligations and pay future dividends.
We
are a holding company, and we have no direct operations. Our principal asset is
the capital stock of our insurance and investment management subsidiaries. Our
ability to meet our obligations for payment of interest and principal on
outstanding debt obligations and to pay dividends to shareholders and corporate
expenses depends upon the surplus and earnings of our subsidiaries and the
ability of our subsidiaries to pay dividends or to advance or repay funds to us.
Payments of dividends and advances or repayment of funds to us by our
subsidiaries are restricted by the applicable laws of their respective
jurisdictions, including laws establishing minimum solvency and liquidity
thresholds. Changes in these laws, such as New York State amendments to its
statutory reserve requirements, can constrain the ability of our subsidiaries to
pay dividends or to advance or repay funds to us in sufficient amounts and at
times necessary to meet our debt obligations and corporate expenses.
We
face a risk of non-collectibility of reinsurance, which could materially affect
our results of operations.
We
follow the insurance practice of reinsuring with other insurance and reinsurance
companies a portion of the risks under the policies written by our insurance
subsidiaries (known as ceding). At the end of 2004, we had ceded approximately
$236.9 billion of life insurance in-force to reinsurers for reinsurance
protection. Although reinsurance does not discharge our subsidiaries from their
primary obligation to pay policyholders for losses insured under the policies we
issue, reinsurance does make the assuming reinsurer liable to the insurance
subsidiaries for the reinsured portion of the risk. As of March 31, 2005, we had
$7.3 billion of reinsurance receivables from reinsurers for paid and unpaid
losses, for which they are obligated to reimburse us under our reinsurance
contracts. Of this amount, $4.5 billion, at March 31, 2005, is due from Swiss Re
and relates to the sale of our reinsurance business to Swiss Re in 2001 through
an indemnity reinsurance agreement. During 2004, Swiss Re funded a trust for
$2.0 billion to support this business. In addition, should Swiss Re Life &
Health America Inc. financial strength ratings drop below either S&P AA- or
AM Best A or their NAIC risk based capital ratio fall below 250%, assets equal
to the reserves supporting business reinsured must be placed into a trust
according to pre-established asset quality guidelines. Furthermore,
approximately $1.9 billion of the Swiss Re treaties are funds-withheld
structures where we have a right of offset on assets backing the reinsurance
receivables. The balance of the reinsurance is due from a diverse group of
reinsurers. The collectibility of reinsurance is largely a function of the
solvency of the individual reinsurers. We perform annual credit reviews on our
reinsurers, focusing on, among other things, financial capacity, stability,
trends and commitment to the
reinsurance
business. We also require assets in trust, letters of credit or other acceptable
collateral to support balances due from reinsurers not authorized to transact
business in the applicable jurisdictions. Despite these measures, a reinsurer’s
insolvency, inability or unwillingness to make payments under the terms of a
reinsurance contract, especially Swiss Re, could have a material adverse effect
on our results of operations and financial condition.
Significant
adverse mortality experience may result in the loss of, or higher prices for,
reinsurance.
We
reinsure approximately 85% to 90% of the mortality risk on newly issued life
insurance contracts. Our current policy is to retain no more than $5.0 million
on a single insured life issued on fixed and variable universal life insurance
contracts. Additionally, the retention per single insured life for term life
insurance and for Corporate Owned Life Insurance (COLI) is $1 million and $2
million, respectively. These retention limits are reviewed regularly for
continued appropriateness and may be changed in the future. If we were to
experience significant adverse mortality experience, this would be passed to our
reinsurers. As a result, some or all of our reinsurers may not renew our
reinsurance or may significantly raise reinsurance premiums. If we are unable to
maintain our current level of reinsurance or purchase new reinsurance protection
in amounts that we consider sufficient, we would either have to be willing to
accept an increase in our net exposures or revise our pricing to reflect higher
reinsurance premiums. If this were to occur, we may be exposed to reduced
profitability and cash flow strain or we may not be able to price new business
at competitive rates.
We
may be unable to attract and retain sales representatives and other employees,
particularly financial advisors.
We
compete to attract and retain financial advisors, portfolio managers and other
employees, as well as independent distributors of our products. Intense
competition exists for persons and independent distributors with demonstrated
ability. We compete with other financial institutions primarily on the basis of
our products, compensation, support services and financial position. Sales in
our businesses and our results of operations and financial condition could be
materially adversely affected if we are unsuccessful in attracting and retaining
financial advisors, portfolio
managers and other employees, as well as independent distributors of our
products. For example, in 2005, we are changing the compensation structure for
LFA’s financial advisors. Although we believe the new compensation structure
will benefit us, our policyholders and our planners, if a significant number of
financial advisors terminate their affiliation with us, it could have a negative
impact on our sales and ability to retain existing in-force business.
Our
sales representatives are not captive and may sell products of our competitors.
We
sell our annuity and life insurance products through independent sales
representatives. These representatives are not captive, which means they may
also sell our competitors’ products. If our competitors offer products that are
more attractive than ours, or pay higher commission rates to the sales
representatives than we do, these representatives may concentrate their efforts
in selling our competitors’ products instead of ours.
Intense
competition could negatively affect our ability to maintain or increase our
profitability.
Our
businesses are intensely competitive. We compete based on a number of factors
including name recognition, service, the quality of investment advice,
investment performance, product features, price, perceived financial strength,
and claims-paying and credit ratings. Our competitors include insurers,
broker-dealers, financial advisors, asset managers and other financial
institutions. A number of our business units face competitors that have greater
market share, offer a broader range of products or have higher claims-paying or
credit ratings than we do.
In
recent years, there has been substantial consolidation and convergence among
companies in the financial services industry resulting in increased competition
from large, well-capitalized financial services firms. Many of these firms also
have been able to increase their distribution systems through mergers or
contractual arrangements. Furthermore, larger competitors may have lower
operating costs and an ability to absorb greater risk while maintaining their
financial strength ratings, thereby allowing them to price their products more
competitively. We expect consolidation to continue and perhaps accelerate in the
future, thereby increasing competitive pressure on us.
Losses
due to defaults by others could reduce our profitability or negatively affect
the value of our investments.
Third
parties that owe us money, securities or other assets may not pay or perform
their obligations. These parties include the issuers whose securities we hold,
borrowers under the mortgage loans we make, customers, trading counterparties,
counterparties under swaps and other derivative contracts, reinsurers and other
financial intermediaries. These parties may default on their obligations to us
due to bankruptcy, lack of liquidity, downturns in the economy or real estate
values, operational failure, corporate governance issues or other reasons. A
downturn in the U.S. and other economies could result in increased
impairments.
The
Lincoln National Corporation 1997 Incentive Compensation Plan (the "Plan") was
established by our Board of Directors on May 13, 1997, subject to shareholder
approval, and approved by our shareholders at their Annual Meeting held on May
15, 1997. The Plan was subsequently amended and restated as approved by
shareholders at their Annual Meetings on May 10, 2001 and May 12, 2005. The last
version of the Plan is referred to below as the Amended and Restated
Plan.
Described
below are the major features of the Amended and Restated Plan. The statements
contained in this prospectus concerning the Plan are brief summaries, qualified
in their entirety by reference to the terms of the Amended and Restated Plan
itself. Eligible participants and their beneficiaries may examine copies of the
Plan upon request at our principal executive offices.
1. Purpose of the Plan. Our
Board of Directors believes that attracting and retaining key employees is
essential to our growth and success. In addition, the Board believes that our
long-term success is enhanced by a competitive and comprehensive compensation
program, which may include tailored incentives designed to motivate and reward
such persons for outstanding service, including awards that link compensation to
applicable measures of our performance and the creation of shareholder value.
These awards will enable us to attract and retain key employees and enable such
persons to acquire and/or increase their proprietary interest in us and thereby
align their interests with the interests of our shareholders. In addition, the
Board has concluded that the Compensation Committee, or Committee, of the Board
should be given sufficient flexibility to provide for annual and long-term
incentive awards contingent on performance.
2. Types of Awards.
The terms of the Amended and Restated Plan provide for grants of stock options,
stock appreciation rights (“SARs”), restricted stock, deferred stock units,
other stock-related awards, and performance or annual incentive awards that may
be settled in cash, stock, or other property (“Awards”).
3. Shares Subject to the Amended and Restated Plan; Annual
Per-Person Limitations.
Under the
Amended and Restated Plan, the total number of shares of our Common Stock
reserved and available for delivery to participants in connection with Awards is
32,226,512. However, as of December 31, 2004, 8,138,300 of these shares remained
available for issuance (the “Remaining Limit”) assuming maximum payouts under
outstanding long-term incentive awards. Shares that may be issued in payment of
Awards, other than Options and SARs, granted on or after May 12, 2005
shall be counted against the Remaining Limit at a ratio of 3.25-to-1. The total
number of shares of Common Stock with respect to which incentive stock options
(“ISOs”), none of which are currently outstanding, may be granted shall not
exceed 2,000,000. The Remaining Limit will vary at any point in time due to new
Award grants and expirations, forfeitures and cancellations of outstanding
Awards as discussed in the following paragraph. Any shares of Common Stock
delivered under the Amended and Restated Plan shall consist of authorized and
unissued shares.
The
Amended and Restated Plan contains rules to permit all awards to be properly
counted and not counted twice. These rules will apply to shares previously
authorized under any other plan at the time they become subject to the Amended
and Restated Plan. Forfeited, terminated or expired awards of shares, as well as
awards settled in cash without issuing any shares, will become available for
future awards. With respect to stock settled SARS, the full issuance of shares
to settle such Awards will count against shares available under the Amended and
Restated Plan.
In
addition, the Amended and Restated Plan imposes individual limitations on the
amount of certain Awards in order to comply with Section 162(m) of the Code.
Under these limitations, during any fiscal year the number of options, SARs,
shares of restricted stock, units of deferred stock, shares of Common Stock
issued as a bonus or in lieu of other obligations, and other stock-based Awards
granted to any one participant shall not exceed 2,000,000 shares for each type
of such Award, subject to adjustment in certain circumstances. The maximum
amount that may be earned as an annual incentive award or other cash Award
(payable currently or on a deferred basis) in any fiscal year by any one
participant is $8,000,000, and the maximum amount that may be earned as a
performance award or other cash Award (payable currently or on a deferred basis)
in respect of a performance period by any one participant is
$8,000,000.
The
Committee is authorized to adjust the number and kind of shares subject to the
aggregate share limitations and annual limitations under the Amended and
Restated Plan and subject to outstanding Awards (including adjustments to
exercise prices and number of shares of options and other affected terms of
Awards) in the event that a dividend or other distribution (whether in cash,
shares, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event affects the
Common Stock so that an adjustment is appropriate. The Committee is also
authorized to adjust performance conditions and other terms of Awards in
response to these kinds of events or in response to changes in applicable laws,
regulations, or accounting principles.
Except
as described under “Restricted Stock Awards” below, the Amended and Restated
Plan does not impose any restriction on the resale of shares of our Common Stock
acquired pursuant to a grant under the Amended and Restated Plan. However, any
of our “affiliates” (defined in Rule 405 under the Securities Act of 1933, as
amended (the “1933 Act”) to include persons who directly or indirectly, through
one or more intermediaries, control, or are controlled by, or are under common
control with, us) may not use this Prospectus to offer and sell shares of Common
Stock they acquire under the Amended and Restated Plan. They may, however, sell
such shares:
| |
(1) |
pursuant
to an effective registration statement under the 1933
Act; |
| |
(2) |
in
compliance with Rule 144 under the 1933 Act;
or |
| |
(3) |
in
a transaction otherwise exempt from the registration requirements of that
1933 Act. |
Each
participant who is the beneficial owner of at least 10% of the outstanding
shares of the our Common Stock and each participant who is one of our directors
or policy-making officers subject to Section 16(b) of the Securities Exchange
Act of 1934,
as
amended (the “1934 Act”), which requires such persons to disgorge to us any
“profits” resulting from a certain non-exempt sales and purchases (or purchases
and sales) of shares of the Common Stock within a six-month period. For such
participants, sales of shares of Common Stock occurring within six months of the
grant of an option or the grant of a restricted stock award may result in such
Section 16(b) liability, unless one or both of those transactions are exempt, as
described below in more detail.
Pursuant
to Rule 16b-3 of the 1934 Act, provided the committee that administers the
Amended and Restated Plan consists solely of at least two “Non-Employee
Directors” (as defined in rules promulgated under Section 16), the grant of an
option, a stock appreciation right, a restricted stock award, or other award to
a participant subject to Section 16(b) will not be deemed, for purposes of
Section 16(b), to be a purchase of the shares that underlie the option, award or
right for purposes of determining whether a participant is liable to the us for
any profits derived from the purchase and sale of Common Stock.
In
addition, if at least six months have elapsed between the award of an option, a
stock appreciation right, a restricted stock award, or other award, and the
disposition of the underlying Common Stock, no purchase of Common Stock would be
deemed to have occurred under Section 16(b) for purposes of determining whether
a participant is liable to us for any profits derived from the purchase and sale
of Common Stock.
It
is our intent that the grant of any Awards to or other transaction by a
participant who is subject to Section 16 of the Exchange Act shall be exempt
under Rule 16b-3 (except for transactions acknowledged in writing to be
non-exempt by such participant). Accordingly, if any provision of the Amended
and Restated Plan or any Award agreement does not comply with the requirements
of Rule 16b-3 as then applicable to any such transaction, unless the participant
shall have acknowledged in writing that a transaction pursuant to such provision
is to be non-exempt, such provision shall be construed or deemed amended to the
extent necessary to conform to the applicable requirements of Rule 16b-3 so that
such participant shall avoid liability under Section 16(b) of the Exchange
Act.
However,
even if a transaction is exempt under Section 16(b), the general prohibition of
federal and state securities laws on trading securities while in possession of
material non-public information concerning the issuer continue to
apply.
4. Eligibility.
Our or our subsidiaries’ executive officers and other officers and employees,
agents and brokers, including any such person who may also be one of our
directors, are eligible to be granted Awards under the Amended and Restated
Plan. Certain United Kingdom directors and officers who are employed by any
corporate entity, including Lincoln National (UK) PLC, which is under our
control, may also be selected by the Committee to participate in the Amended and
Restated Plan. Stock options granted to and Common Stock issued to United
Kingdom officers and directors shall be granted or issued subject to applicable
United Kingdom laws and regulations. The terms and conditions of stock options
or Common Stock so granted or issued, and the tax consequences of such grant or
issuance, may vary from those relating to United States persons described below.
PARTICIPATING UNITED KINGDOM OFFICERS AND DIRECTORS ARE ESPECIALLY URGED TO
CONSULT THEIR OWN LEGAL AND TAX ADVISORS.
5. Administration. The
Amended and Restated Plan will be administered by the Committee. Subject to the
terms and conditions of the Amended and Restated Plan, the Committee is
authorized to interpret the provisions of the plan, select participants,
determine the type and number of Awards to be granted and the number of shares
of Common Stock to which Awards will relate, specify times at which Awards will
be exercisable or settleable (including performance conditions that may be
required as a condition thereof), set other terms and conditions of such Awards,
prescribe forms of Award agreements, adopt, amend and rescind rules and
regulations relating to the Amended and Restated Plan, and make all other
determinations that may be necessary or advisable for the administration of the
Amended and Restated Plan. The Committee may, in its discretion, convert any
Award or the value of any Award under the Amended and Restated Plan, subject to
applicable laws and regulations, into Deferred Stock Units which will be
administered under the Lincoln National Corporation Deferred Compensation Plan
for Employees (“Deferred Compensation Plan”). The Amended and Restated Plan
provides that Committee members shall not be personally liable, and shall be
fully indemnified, in connection with any action, determination, or
interpretation taken or made in good faith under the Amended and Restated Plan.
6. Stock Options and SARs.
The Committee is authorized to grant stock options, including both ISOs that can
result in potentially favorable tax treatment to the participant and
non-qualified stock options (i.e.,
options not qualifying as ISOs), and SARs entitling the participant to receive
the excess of the Fair Market Value of a share of Common Stock on the date of
exercise over the grant price of the SAR. The exercise price per share subject
to an option and the grant price of a SAR is determined by the Committee, but
must not be less than the Fair Market Value of a share of Common Stock on the
date of grant. Under the Amended and Restated Plan, unless otherwise determined
by the Committee, the Fair Market Value of the Common Stock is the average of
the highest and lowest prices of a share of Common Stock, as quoted on the
composite transactions table on the NYSE, on the last trading day prior to the
date on which the determination of Fair Market Value is being made.
Incentive
Stock Options or ISO means any option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the “Code”) or any successor provision thereto. The
terms of any ISO granted under the Amended and Restated Plan is intended to
comply in all respects with the provisions of Code Section 422. The aggregate
fair market value (determined at the time an incentive stock option is granted)
of the stock with respect to which incentive stock options are exercisable for
the first time by a participant during any calendar year may not exceed
$100,000. For purposes of this $100,000 limitation, all of our plans, including
our subsidiaries’ plans, will be taken into account. The maximum number of
options awarded to one individual cannot exceed 100,000 options per year. No
term of the Amended and Restated Plan relating to ISOs (including any SAR in
tandem therewith) may be interpreted, amended or altered, nor may any discretion
or authority granted under the Amended and Restated Plan be exercised, so as to
disqualify either the
Plan or any ISO under Code Section 422, unless the Participant has first
requested the change that will result in the disqualification.
The
maximum term of each option or SAR, the times at which each option or SAR will
be exercisable, and provisions requiring forfeiture of unexercised options or
SARs at or following termination of employment generally are fixed by the
Committee, except no option or SAR may have a term exceeding ten years. Options
may be exercised by payment of the exercise price in
cash,
Common Stock, outstanding Awards, or other property (possibly including notes or
obligations to make payment on a deferred basis) having a Fair Market Value
equal to the exercise price, as the Committee may determine from time to time.
Methods of exercise and settlement and other terms of the SARs are determined by
the Committee. To date, we have only granted SARs settleable exclusively in
cash. The Committee may include a provision in an option permitting the grant of
a new option when payment of the exercise price of an option is made in shares
of Common Stock. However, as discussed below, the exercise price of an option
may not be reduced (except as a result of a change in our capitalization)
without shareholder approval. See “Other Terms of Awards; No Repricing,”
below.
7. Restricted Stock and Deferred Stock Units. The
Committee is authorized to grant restricted stock and deferred stock units.
Restricted stock is a grant of Common Stock which may not be sold or disposed
of, and which may be forfeited in the event of certain terminations of
employment and/or failure to meet certain performance requirements, prior to the
end of a restricted period specified by the Committee. A participant granted
restricted stock generally has all of the rights of a shareholder, including the
right to vote the shares and to receive dividends thereon, unless otherwise
determined by the Committee. An Award of deferred stock units is credited to a
bookkeeping reserve account under the Deferred Compensation Plan. Once credited
to the account, deferred stock units are governed by the terms of the Deferred
Compensation Plan or any successor plan. Such an Award confers upon a
participant the right to receive shares at the end of a specified deferral
period, subject to possible forfeiture of the Award in the event of certain
terminations of employment and/or failure to meet certain performance
requirements prior to the end of a specified restricted period (which restricted
period need not extend for the entire duration of the deferral period). Prior to
settlement, an Award of deferred stock units carries no voting or dividend
rights or other rights associated with share ownership, although dividend
equivalents may be granted, as discussed below.
8. Bonus Stock and Awards in Lieu of Cash
Obligations.
The Committee is authorized to grant shares as a bonus free of restrictions, or
to grant shares or other Awards in lieu of obligations to pay cash under other
plans or compensatory arrangements, subject to such terms as the Committee may
specify.
9. Other
Stock-Based Awards.
The Amended and Restated Plan authorizes the Committee to grant Awards that are
denominated or payable in, valued by reference to, or otherwise based on or
related to shares. Such Awards might include convertible or exchangeable debt
securities, other rights convertible or exchangeable into shares, purchase
rights for shares, Awards with value and payment contingent upon our performance
or any other factors designated by the Committee, and Awards valued by reference
to the book value of shares or the value of securities of or the performance of
specified subsidiaries. The Committee determines the
terms and conditions of such Awards, including consideration to be paid to
exercise Awards in the nature of purchase rights, the period during which Awards
will be outstanding, and forfeiture conditions and restrictions on
Awards.
10. Performance
Awards, Including Annual Incentive Awards.
The right of a participant to exercise or receive a grant or settlement of an
Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Committee. In addition, the Amended and Restated Plan
authorizes specific annual incentive awards, which represent a conditional right
to receive cash, shares or other Awards upon achievement of
pre-established
performance
goals during a specified one-year period. Performance awards and annual
incentive awards granted to persons the Committee expects will, for the year in
which a deduction arises, be among our executive officers named in our proxy
statement, will, if so intended by the Committee, be subject to provisions that
should qualify such Awards as “performance-based compensation” not subject to
the limitation on tax deductibility by us under Code Section
162(m).
The
performance goals to be achieved as a condition of payment or settlement of a
performance award or annual incentive award will consist of (i) one or more
business criteria and (ii) a targeted level or levels of performance with
respect to each such business criterion. In the case of performance awards
intended to meet the requirements of Code Section 162(m), the business criteria
used must be one of those specified in the Amended and Restated Plan, although
for other participants the Committee may specify any other criteria. The
business criteria specified in the Amended and Restated Plan are, as defined by
the Committee: (1) earnings per share; (2) revenues; (3) cash flow; (4) cash
flow return on investment; (5) return on assets, return on investment, return on
capital, return on equity; (6) economic value added; (7) operating margin; (8)
net income; pretax earnings; pretax earnings before interest, depreciation and
amortization; pretax operating earnings after interest expense and before
incentives, service fees, and extraordinary or special items; operating
earnings; income from operations; (9) total shareholder return; (10) any of the
above goals as compared to the performance of a published or special index
deemed applicable by the Committee including, but not limited to, the Standard
& Poor’s 500 Stock Index or a group of comparable companies; and (11) any
criteria comparable to those listed above that shall be approved by the
Committee.
In
granting annual incentive or performance awards, the Committee may establish
unfunded award “pools,” the amounts of which will be based upon the achievement
of a performance goal or goals using one or more of the business criteria
described in the preceding paragraph. During the first 90 days of a fiscal year
or performance period, the Committee will determine who will potentially receive
annual incentive or performance awards for that fiscal year or performance
period, either out of the pool or otherwise. After the end of each fiscal year
or performance period, the Committee will determine the amount, if any, of the
pool, the maximum amount of potential annual incentive or performance awards
payable to each participant in the pool, and the amount of any potential annual
incentive or performance award otherwise payable to a participant. The Committee
may, in its discretion, determine that the amount payable as an annual incentive
or performance award will be increased or reduced from the amount of any
potential Award, but may not exercise discretion to increase any such amount
intended to qualify as performance-based compensation under Code Section
162(m).
Subject
to the requirements of the Amended and Restated Plan, the Committee will
determine other performance award and annual incentive award terms, including
the required levels of performance with respect to the business criteria, the
corresponding amounts payable upon achievement of such levels of performance,
termination and forfeiture provisions, and the form of settlement. However, the
Awards that may be made under the Amended and Restated Plan are subject to the
limitations discussed above under “Shares Subject to the Amended and Restated
Plan; Annual Per Person Limitations.”
11. Other
Terms of Awards; No Repricing.
In general, Awards may be settled in the form of cash, Common Stock, other
Awards, or other property, in the discretion of the Committee. The Committee may
require or permit participants to defer the settlement of all or part of an
Award in accordance with such terms and conditions as the Committee may
establish, including payment or crediting of interest or dividend equivalents on
deferred amounts, and the crediting of earnings, gains, and losses based on
deemed investment of deferred amounts in specified investment vehicles. The
Committee is authorized to place cash, shares, or other property in trusts or
make other arrangements to provide for payment of our obligations under the
Amended and Restated Plan. The Committee may condition any payment relating to
an Award on the withholding of taxes and may provide that a portion of any
shares or other property to be distributed will be withheld (or previously
acquired shares or other property surrendered by the participant) to satisfy
withholding and other tax obligations. Awards granted under the Amended and
Restated Plan generally may not be pledged or otherwise encumbered and are not
transferable except by will or by the laws of descent and distribution, or to a
designated beneficiary upon the participant’s death, except that the Committee
may, in its discretion, permit transfers for estate planning or other
purposes.
Awards
under the Amended and Restated Plan are generally granted without a requirement
that the participant pay consideration in the form of cash or property for the
grant (as distinguished from the exercise), except to the extent required by
law. The Committee may, however, grant Awards in exchange for other Awards under
the Amended and Restated Plan, awards under our other plans, or other rights to
payment from us, and may grant Awards in addition to and in tandem with such
other Awards, awards, or rights as well.
Unless
the Award agreement specifies otherwise, the Committee may cancel or rescind
Awards if the participant fails to comply with certain noncompetition,
confidentiality or intellectual property covenants. For instance, Awards may be
canceled or rescinded if the participant engages in competitive activity while
employed by us or within a specified period following termination of employment.
We may, in our discretion, in any individual case provide for waiver in whole or
in part of compliance with the noncompetition, confidentiality or intellectual
property covenants.
Notwithstanding
any other provision of the Amended and Restated Plan, no option that has been
granted under the Amended and Restated Plan may be repriced, replaced or
regranted through cancellation, or otherwise modified without shareholder
approval (except in connection with adjustments permitted under the Plan), if
the effect would be to reduce the exercise price for the shares underlying the
option.
12. Acceleration
of Vesting.
The Committee may, in its discretion, accelerate the exercisability, the lapsing
of restrictions, or the expiration of deferral or vesting periods of any Award.
In addition, the Committee may provide that the performance goals relating to
any performance-based award will be deemed to have been met upon the occurrence
of any change of control. Upon the occurrence of a change of control, except to
the extent set forth in the Award agreement, options will become fully vested
and exercisable and restrictions on restricted stock and deferred stock units
will lapse. “Change of Control” is defined to include a variety of events,
including the acquisition by certain individuals or entities of twenty percent
or more of our outstanding Common Stock, significant changes in our board of
directors, certain reorganizations, mergers and consolidations involving us, and
the sale or disposition of all or
substantially
all of our consolidated assets.
13. Amendment
and Termination of the Amended and Restated Plan.
The Board of Directors, or the Committee acting pursuant to authority delegated
to it by the Board, may amend, alter, suspend, discontinue, or terminate the
Amended and Restated Plan or the Committee’s authority to grant Awards without
further shareholder approval, except shareholder approval must be obtained for
any amendment or alteration if required by law or regulation or under the rules
of any stock exchange or automated quotation system on which the shares are then
listed or quoted. Shareholder approval will not be deemed to be required under
laws or regulations, such as those relating to ISOs, that condition favorable
treatment of participants on such approval, although the Board may, in its
discretion, seek shareholder approval in any circumstance in which it deems such
approval advisable. Thus, shareholder approval will not necessarily be required
for amendments that might increase the cost of the Amended and Restated Plan or
broaden eligibility. Unless earlier terminated by the Board, the Amended and
Restated Plan will terminate at such time as no shares remain available for
issuance under the Amended and Restated Plan, and we have no further rights or
obligations with respect to outstanding Awards under the Amended and Restated
Plan.
14. Federal
Income Tax Implications of the Amended and Restated Plan. The
following is a brief description of the federal income tax consequences
generally arising with respect to Awards under the Amended and Restated Plan. In
view of the individual nature of tax consequences, each participant should
consult his or her tax advisor for more specific information, including the
effect of applicable federal, state and other tax laws.
Under
present law the federal income tax consequences of grants and awards under the
Amended and Restated Plan are generally as follows:
Incentive
Stock Options.
ISOs may be awarded only to those participants who are "employees" (as that term
is defined in Section 3401(c) of the Code and the regulations promulgated
thereunder) of us or one of our subsidiaries at the time of the granting of the
option. In addition, an option that qualifies as an ISO at the time of grant
generally will not be treated as an ISO for income tax purposes if the optionee
is not an "employee" at the time of exercise (except when the optionee was an
employee within three months of his death or at the time of his disability or
termination of employment and the option is exercised within a specified period
of time
after his death, disability or termination of employment). Those persons who are
eligible to participate in the Plan because they hold either agents' or brokers'
licenses with one of our subsidiaries may or may not, depending on their
particular facts and circumstances, be "employees" for this purpose. For the tax
treatment of options granted to or exercised by non-employees, see Non-qualified
Stock Options below.
The Amended and Restated Plan is intended to comply with Code Section
409A and official guidance thereunder an order to preserve, where possible, the
favorable tax treatment of all Awards under the Amended and Restated Plan.
Any
ISOs granted are intended to comply with Code Section 409A and should not result
in taxable income to the participant at the time of grant. The exercise of the
ISO will also ordinarily have no federal income tax consequences to the
participant, although an ISO exercised more than three months after retirement
(or one year after retirement, when retirement was as a
result
of the participant's disability) will be treated as a non-qualified stock option
and taxed as described in Non-qualified Stock Options below, unless the option
is exercised by the heirs or the estate of the deceased participant who was
employed on the date of his death and throughout the three-month period ending
on the date of death. If, however, a participant tenders payment upon the
exercise of an ISO by surrendering shares obtained upon a prior exercise of an
ISO which shares were not held for the "required holding period" (as defined
below), that participant may recognize income upon the surrendering of the
previously acquired shares under those rules described below pertaining to the
disposition of shares acquired pursuant to an ISO.
If
the shares acquired pursuant to a timely exercise of an ISO are held for at
least one year after they were acquired by exercise of the ISO and two years
after the date on which the ISO was granted to the participant (the "required
period"), then any gain on disposition of the shares will generally be taxable
as long-term capital gain and no corresponding deduction will be allowed to us.
For a discussion of the federal income tax consequences of a long-term capital
gain, see Capital Gains Treatment below.
If
the shares acquired pursuant to a timely exercise of an ISO are disposed of
before the expiration of the required period, then the difference between the
participant's "basis" (as defined below) and the fair market value of the shares
at the date of exercise, will generally be taxable as ordinary income and a
contemporaneous deduction in the amount of such income will be allowed to us.
Any additional gain (or loss) realized on a disposition of such shares will
generally be taxable to the participant as long or short-term capital gain (or
loss) depending on the period for which the shares were deemed to have been
held. For a discussion of holding periods and the federal income tax treatment
of long-term capital gains,
see Capital Gains Treatment below.
For
purposes of determining whether shares acquired pursuant to the exercise of an
incentive stock option have been disposed of before the expiration of the
required period, the term "disposition" will include a sale, exchange, gift or
transfer of legal title of the shares, but does not include a transfer from a
decedent to an estate, a transfer by bequest or inheritance, a pledge or
hypothecation, or transfers pursuant to certain non-recognition transactions
such as like-kind exchanges (except as noted above with respect to the exchange
of shares acquired pursuant to an ISO that have not been held for the required
period and are surrendered to exercise an ISO) or exchanges pursuant to
reorganizations.
A
participant's "basis" in shares of Common Stock acquired pursuant to the
exercise of an ISO
will equal the amount of any cash paid for such shares plus the basis of any
shares surrendered, as determined immediately before the surrender, plus any
income recognized on the disposition of the surrendered shares. If a participant
uses shares of our Common Stock to exercise his ISO and such shares either were
not acquired by the prior exercise of an ISO, or were so acquired but were held
by him for the required period, it is expected that the basis and holding period
(for the purpose of determining whether amounts realized or lost upon the
subsequent disposition of the shares constitute short-term or long-term capital
gains or losses) of the shares that the participant surrenders carries over to
the same number of shares received upon the exercise of the option.
If
a participant uses shares of our Common Stock to exercise his ISO, and such
shares were acquired upon a prior exercise of an ISO and were not held for the
required period, the participant's basis in the shares acquired upon exercise of
his ISO will equal the sum of the basis
of
shares surrendered, as determined immediately before the surrender, and any
income recognized on the disposition of the surrendered shares. In addition, the
holding period of the newly acquired stock should begin on the date of the most
recent exercise of the ISO.
The
amount by which the fair market value, determined at the time of exercise, of a
share of our Common Stock acquired pursuant to the exercise of an ISO exceeds
the option price shall, along with other specified items, constitute an
adjustment for the purposes of calculating the alternative minimum taxable
income of the participant for the taxable year in which the option was
exercised. Such adjustment items are potentially subject to a 26% - 28%
alternative minimum tax as determined by a complex formula involving special
deductions, additions and exemptions. As a result, the exercise of an ISO may
subject a participant to an alternative minimum tax depending on that
participant's particular circumstances.
For
purposes of computing alternative minimum taxable income realized on a
subsequent disposition of shares acquired pursuant to the exercise of an ISO,
the participant's basis in the stock so acquired shall be increased by the
amount that alternative minimum taxable income realized was increased due to the
earlier exercise of the stock option.
Non-Qualified
Stock Options. Any
non-qualified stock options granted are intended to comply with Code
Section 409A and should not result in taxable income to the participant at
the time of grant. On exercise of a non-qualified stock option, the participant
will normally realize taxable ordinary income equal to any excess of the fair
market value of the shares at the time of exercise over the option price of the
shares. At the time this ordinary income is recognized by the participant, we
will be entitled to a corresponding deduction.
If
a participant exercises his non-qualified stock option with a cash payment, the
basis of the shares he acquires will generally equal the option price plus the
amount included in his income upon exercise. If the participant uses shares of
the Company's Common Stock to exercise his non-qualified stock option, the basis
and holding period of the shares he surrenders carries over to the same number
of the shares received upon the exercise of the option. The basis of the
remaining shares received is the fair market value of the shares on the date of
exercise.
To
the extent that the shares constitute a capital asset in the hands of a
participant, on the disposition
of the shares acquired upon exercise of a non-qualified stock option, the
difference between the amount received for the shares and the basis, i.e. fair
market value of the shares on exercise of the option, plus the amount included
in his income upon exercise, will be treated as long-term or short-term capital
gain or loss, depending on the holding period. For a discussion of holding
periods and the federal income tax treatment of a long-term capital gain, see
Capital Gains Treatment below.
SARS. Any
SARs granted are intended to comply with Code Section 409A and should not
result in taxable income to the participant at the time of grant. On exercise of
a SAR, the participant will realize taxable ordinary income equal to the cash
and fair market value of any shares received. At the time the participant
recognizes ordinary income on the exercise of a stock appreciation right, we
will be entitled to a corresponding deduction.
To the
extent that any such shares constitute a capital asset in the hands of a
participant, on the disposition of any shares acquired under a SAR, the
difference between the amount
received
for the shares and the fair market value of the shares as of the exercise of the
SAR will be treated as long-term or short-term capital gain or loss, depending
on the holding period. For a discussion of holding periods and the federal
income tax treatment of a long-term capital gain, see Capital Gains Treatment,
below.
Restricted
Stock Awards.
Because the Amended and Restated Plan is intended to comply with Code Section
409A, the grant of a restricted stock award should not automatically result in
taxable income to the participant. Instead, the participant will normally
realize taxable ordinary income when the restrictions on the shares lapse in an
amount equal to the fair market value of the shares on the date of lapse.
Notwithstanding the foregoing, a participant may elect (pursuant to Section
83(b) of the Code), within 30 days of the date of a restricted stock award, to
be taxed on the value of the shares as of the date of grant. If the participant
subsequently forfeits the shares, the participant will not be entitled to a
deduction. At the time the participant recognizes ordinary income with respect
to shares issued pursuant to a restricted stock award, we will be entitled to a
corresponding deduction.
To
the extent that the shares constitute a capital asset in the hands of a
participant, on disposition of the shares after restrictions lapse, the
difference between the amount received and the fair market value of the shares
on the date of lapse (or on the date of issuance if the participant made the
election described above) will be treated as long-term or short-term capital
gain or loss, depending on the holding period. For a discussion of holding
periods and the federal income tax treatment of capital gains, see Capital Gains
Treatment, below. A participant's holding period in the shares will begin when
the restrictions to which they are subject lapse unless he makes the election
provided for under Code Section 83(b) (as noted above), in which case the
holding period in his shares will begin on the day after our Common Stock is
transferred to him.
Amounts
equivalent to dividends received by the participant under the restricted stock
award and dividends paid on restricted stock received by the participant prior
to the lapse of restrictions will be taxable as ordinary income to the
participant and a corresponding and contemporaneous deduction will be allowed to
the participant's employer unless the participant made the Section 83(b)
election described above. If the election was made, dividends actually paid on
restricted stock will be taxable as dividends and no corresponding deduction
will be allowed to the employer. In addition, if the election was made and the
participant later forfeits the restricted stock, the participant will be allowed
no loss deduction.
Deferred
Stock Units.
Any Awards or referrals credited or deferred stock units are intended to comply
with Code Section 409A and should not result in taxable income to the
participant at the terms of grant or the terms of deferral. Generally, a
participant will be subject to tax, and we will receive a corresponding
deduction, with respect to a deferred stock unit when the unit is paid to the
participant from the Deferred Compensation Plan in accordance with the terms of
that plan or, if earlier, any date on which, by operation of the Deferred
Compensation Plan, the participant is deemed to have constructively received the
unit. If, however, the award is paid in shares of Common Stock that are subject
to restrictions or to forfeiture, the participant will be subject to tax, and we
will be entitled to a deduction, when the shares cease to be subject to the
restrictions or to the risk of forfeiture. The amount of taxable income a
participant will be required to recognize, and the amount of the deduction to
which we will be entitled, will equal the amount of cash and the fair market
value of the shares received on the date as of which the participant
is required to recognize income.
Bonus
Stock, Awards in Lieu of Cash Obligations and Other Stock-Based
Awards.
Generally, a participant will be subject to tax, and we will receive a
corresponding deduction, with respect to a bonus stock or similar award when the
stock is paid to the participant. If, however, the award is paid in shares of
Common Stock which are subject to restrictions or to forfeiture, the participant
will be subject to tax, and we will be entitled to a deduction, when the shares
cease to be subject to the restrictions or to the risk of forfeiture. The amount
of taxable income a participant will be required to recognize, and the amount of
the deduction to which we will be entitled, will equal the amount of cash and
the fair market value.
Performance
Awards and Annual Incentive Awards.
Generally, a participant will be subject to tax, and we will receive a
corresponding deduction, with respect to a performance award or an annual
incentive award when the award is paid to the participant. If, however, the
award is paid in shares of Common Stock which are subject to restrictions or to
forfeiture, the participant
will be subject to tax, and we will be entitled to a deduction, when the shares
cease to be subject to the restrictions or to the risk of forfeiture. The amount
of taxable income a participant will be required to recognize, and the amount of
the deduction to which we will be entitled, will equal the amount of cash and
the fair market value.
Capital
Gains Treatment.
Gain or loss from the sale or exchange of property will be treated as long-term
capital gain or loss if it was deemed to have been held for more than one year.
Any gain or loss other than long-term capital gain or loss will be treated as
short-term capital gain.
Except
in those situations expressly described above (relating to the "tacking" of
holding periods where our Common Stock is used to exercise a stock option and to
optionees subject to Section 16(b) of the Securities Exchange Act of 1934), it
is expected that the holding period of shares acquired pursuant to the exercise
of an incentive stock option, non-qualified stock option or stock appreciation
right will generally begin on the date following the date of acquisition through
such exercise. Similarly, the holding period of awarded shares acquired pursuant
to a restricted stock award is expected to begin on the date following the date
on which the restrictions lapse, subject to the exception relating to elections
under Code Section 83(b).
For
net capital gains recognized by individuals, the Code imposes a preferential
maximum tax rate of 15% (as compared with a 35% maximum tax rate on ordinary
income).
Payment
of Withholding Obligations Through Surrender of Shares.
The federal income tax treatment of the surrender of shares of our Common Stock
to satisfy a participant's federal income tax withholding obligation under the
Plan is complex and uncertain. To the extent that a participant surrenders
shares of our Common Stock for this purpose, the participant will be treated as
having sold such shares to us for their fair market value and may recognize
income as a result thereof. The nature and extent of this income will depend
upon the manner in which the surrendered shares were acquired, the basis of the
surrendered shares, the holding period of the surrendered shares and other
factors as described above. Depending upon the effect of the surrender upon the
participant's proportionate share ownership interest in us, the participant may
be treated as having received a dividend equal to the fair market value of the
shares surrendered.
A
participant who satisfies a withholding obligation by surrendering shares
acquired pursuant to an earlier exercise of an incentive stock option may also
be treated as having made a
disqualifying
disposition of such shares if the applicable holding period requirements have
not been satisfied. For a discussion of disqualifying dispositions of shares
acquired pursuant to the exercise of an incentive stock option and the tax
treatment thereof, see Incentive Stock Options, above. For a discussion of the
times when elections to surrender shares to satisfy withholding obligations must
be made, including specific requirements applicable to elections by "officers"
under Section 16 of the Securities Exchange Act of 1934, see Other Material
Provisions, above.
PARTICIPANTS
ELECTING TO SATISFY A WITHHOLDING OBLIGATION BY SURRENDERING SHARES OF COMPANY
COMMON STOCK ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS.
15. Miscellaneous.
The Amended and Restated Plan is not qualified under Section 401(a) of the
Internal Revenue Code and is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
WHERE YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and current reports, proxy statements and other
information and documents with the Securities and Exchange Commission, or SEC.
You may read and copy any document we file with the SEC at:
| |
· |
public
reference room maintained by the SEC in: Washington, D.C. (450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549). Copies of such materials
can be obtained from the SEC’s public reference section at prescribed
rates. You may obtain information on the operation of the public reference
rooms by calling the SEC at (800) SEC-0330,
or |
| |
· |
the
SEC website located at www.sec.gov. |
This
Prospectus is one part of a Registration Statement filed on Form S-3 with the
SEC under the Securities Act. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information concerning us
and the securities, you should read the entire Registration Statement and the
additional information described under “Documents Incorporated By Reference”
below. The registration statement has been filed electronically and may be
obtained in any manner listed above. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the SEC. Each such statement
is qualified in its entirety by such reference.
Information
about us is also available on our web site at www.lfg.com. This URL and the
SEC’s URL above are intended to be inactive textual references only. Such
information on our or the SEC’s web site is not a part of this Prospectus.
The
following documents have been filed with the SEC in accordance with the
provisions of the Securities and Exchange Act of 1934, as amended (the “Exchange
Act”), and are incorporated by reference in this prospectus:
| |
· |
Our
Annual Report on Form 10-K for the fiscal year ended December 31,
2004; |
| |
· |
Our
Quarterly Report on Form 10-Q for the quarter ended March 31,
2005; |
| |
· |
Our
Current Reports on Form 8-K filed with the SEC on January 20, February 16,
March 4, and May 12, 2005 (except Item 7.01 of such Form 8-K shall not be
deemed incorporated by reference herein); |
| |
· |
The
description of our Common Stock contained in Form 10 filed with the SEC on
April 28, 1969 (File No. 1-6028), including any amendments or reports
filed for the purpose of updating that description;
and |
| |
· |
The
description of our Common Stock purchase rights contained in our
Registration Statement on Form 8-A/A, Amendment No. 1, filed with the SEC
on December 2, 1996 (File No. 1-6028), including any amendments or reports
filed for the purpose of updating that
description. |
Each
document filed subsequent to the date of this Registration Statement pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
hereof from the date of the filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated herein by reference shall
be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein (or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein) modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of this Registration Statement.
We
will provide without charge to each person to whom this prospectus is delivered,
upon the written or oral request of such person, a copy of the documents
incorporated by reference as described above (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents), copies of all documents constituting part of the prospectus for
the Plan, and copies of the Plan. Please direct your oral or written request to:
C.
Suzanne Womack
2nd
Vice President & Secretary
1500
Market Street, Ste. 3900
Philadelphia,
PA 19102
215-448-1475
The
consolidated financial statements of Lincoln National Corporation appearing in
our Annual Report on Form 10-K for the year ended December 31, 2004 including
schedules included therein and Lincoln National Corporation managment's
assessment of the effectiveness of internal control over financial reporting as
of December 31, 2004 included therein, have been audited by Ernst & Young
LLP, independent registered public accounting firm, as set forth in their
reports thereon included therein, and incorporated herein by reference.
Such financial statements and management's assessment are incorporated herein in
reliance upon the reports of Ernst & Young LLP pertaining to such financial
statements and management's assessment given on the authority of such firm as
experts in accounting and auditing.
The
validity of the securities offered hereby will be passed upon for us by Dennis
L. Schoff, Esq., Senior Vice President and General Counsel of Lincoln National
Corporation. As of the date of this Registration Statement, Mr. Schoff
beneficially owns approximately 33,734 shares of our Common Stock including
options exercisable within sixty (60) days of the date of the Registration
Statement.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution
Set
forth below are estimates of all expenses incurred or to be incurred by the
Company in connection with the issuance and distribution of the Company to be
registered, other than underwriting discounts and commissions.
|
Registration
fees |
$
51,063 |
|
Photocopying
and Printing |
5,000 |
|
Legal
fees |
3,000 |
|
Accounting
fees |
3,500 |
|
State
blue sky fees and expenses |
-0- |
|
TOTAL |
$ 65,263 |
Item
15. Indemnification of Directors and Officers
Our
by-laws, pursuant to authority contained in the Indiana Business Corporation Law
(the "Law") and the Indiana Insurance Law Codes, respectively, provide for the
indemnification of our officers, directors and employees against reasonable
expenses (including attorneys’ fees) incurred by them in connection with the
defense of any action, suit, or proceeding to which they are made or threatened
to be made parties (including those brought
by, or on behalf of us) if they are successful on the merits or otherwise in the
defense of such proceeding except with respect to matters as to which they are
adjudged liable for negligence or misconduct in the performance of duties to
their respective corporations. We will also reimburse such officers, directors,
and employees for reasonable costs of judgment settlement, penalties, fines and
reasonable expenses (including attorneys’ fees) incurred with respect to, any
such action, suit, or proceeding where such person is not wholly successful on
the merits or otherwise in the defense of such proceeding, if such person’s
conduct was in good faith, and such person reasonably believed that his/her
conduct was in our best interest. In the case of a criminal proceeding, such
person must also have reasonable cause to believe his/her conduct was
lawful.
In
the case of directors, a determination as to whether indemnification or
reimbursement is proper shall be made by a majority of the disinterested
directors or a committee thereof or by special legal counsel. In the case of
individuals who are not directors, such determination shall be made by the chief
executive officer of the respective corporation, or, if he so directs, in the
manner it would be made if the individual were a director of the corporation.
The Law provides that we may indemnify our present and past directors, officers,
employees and agents, who serve, at our request, in such capacities of other
entities, including partnerships, trusts and employee benefit plans against
obligations to pay as the result of threatened, pending or completed actions,
suits or proceedings, whether criminal, civil, administrative or investigations
to which they are parties, if it is determined by a majority of disinterested
directors, a committee of the board of directors, or special counsel selected by
the board of directors, that they acted in good faith and they reasonably
believed their conduct in their official capacity was in our best
interests
or if such conduct was not in their official capacity, that the same was at
least not opposed to our best interests, and that in criminal proceedings they
had reasonable cause to believe their conduct was lawful or no reasonable cause
to believe that it was unlawful.
Such
indemnification may apply to claims arising under the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted for our directors, officers or controlling persons pursuant to the
foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by a director, officer or controlling
person of Lincoln National Corporation in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
We
maintain a program of insurance under which our directors and officers are
insured, subject to specified exclusions and deductible and maximum amounts,
against actual or alleged errors, misstatements, misleading statements, acts or
omissions, or neglect or breach of duty while acting in their respective
capacities for us.
Item
16. Exhibits.
Exhibit
No. Description
|
4(a) |
The
Lincoln National Corporation Amended and Restated Incentive Compensation
Plan |
|
5 |
Opinion
of Dennis L. Schoff, Esq., as to the legality of the securities being
registered. |
|
23(a) |
Consent
of Ernst & Young LLP, Independent Registered Public Accounting
Firm |
|
23(b) |
Consent
to use of Opinion of Dennis L Schoff, Esq., is contained in Exhibit
5. |
Item
17. Undertakings.
(a)
The
Registrant hereby undertakes:
| |
(1) |
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration
Statement: |
| |
(i) |
To
include any prospectus required by Section 10(a)(3) of the Securities
Act; |
| |
(ii) |
To
reflect in the prospectus any facts or events arising after the effective
date of |
| |
|
the
Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represents a fundamental
change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would
not exceed that which is registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
“Calculation of Registration Fee” table in the effective Registration
Statement; and |
| |
(iii) |
To
include any material information with respect to the Plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration
Statement. |
provided,
however,
that
paragraphs (a)(i) and (a)(ii) of this Item 17 do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
| |
(2) |
That,
for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona
fide offering
thereof. |
| |
(3) |
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering. |
|
(b) |
The
undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering
thereof. |
|
(c) |
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue. |
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3, and has duly caused this Registration Statement on Form S-3
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Philadelphia, Commonwealth of Pennsylvania, on the 16th day of May,
2005.
LINCOLN NATIONAL
CORPORATION
By:
/s/Frederick
J. Crawford
Frederick J. Crawford, Senior Vice
President and Chief
Financial Officer
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature |
Title |
Date |
|
Jon
A. Boscia * |
Chairman
and Chief
Executive
Officer (Principal Executive Officer) and a Director |
May
16, 2005 |
| |
|
|
|
/s/Frederick
J. Crawford
Frederick
J. Crawford |
Senior
Vice President and
Chief
Financial Officer
(Principal
Financial Officer) |
May
16, 2005 |
| |
|
|
/s/Douglas
N. Miller
Douglas
N. Miller |
Chief
Accounting Officer (Principal Accounting Officer) |
May
16, 2005 |
| |
|
|
Marcia
J. Avedon* |
Director |
May
16, 2005 |
|
William
J. Avery * |
Director |
May
16, 2005 |
|
J.
Patrick Barrett * |
Director |
May
16, 2005 |
|
Jenne
K. Britell, Ph.D.* |
Director |
May
16, 2005 |
|
Eric
G. Johnson * |
Director |
May
16, 2005 |
|
M.
Leanne Lachman * |
Director |
May
16, 2005 |
|
Michael
F. Mee * |
Director |
May
16, 2005 |
|
Ron
J. Ponder, Ph.D.* |
Director |
May
16, 2005 |
|
Jill
S. Ruckelshaus * |
Director |
May
16, 2005 |
|
Glenn
F. Tilton* |
Director |
May
16, 2005 |
*By:
/s/
Dennis L. Schoff
Dennis
L. Schoff, Attorney-in-Fact
(Pursuant
to Powers of Attorney)
INDEX
TO EXHIBITS
|
Exhibit
No. |
Description |
Method
of Filing |
|
|
|
|
| 4
(a) |
The
Lincoln National Corporation Amended and Restated Incentive Compensation
Plan |
Filed
as Exhibit 8 of LNC's Proxy Statement on Schedule 14A dated April 18, 2005
and incorporated herein by reference. |
| |
|
|
| 5 |
Opinion
of Dennis L. Schoff, Esq., as to the legality of the securities being
registered. |
Filed
herewith |
| |
|
|
| 23(a) |
Consent
of Ernst & Young LLP, Independent Registered Public Accounting
Firm |
Filed
herewith |
| |
|
|
| 23(b) |
Consent
to use of Opinion of Dennis L Schoff, Esq., is contained in Exhibit
5. |
Included
in Exhibit 5 |
| |
|
|
| 24 |
Powers
of Attorney. |
Filed
herewith |
| |
|
|
E-1