Lincoln S-3ASR
As
filed
with the Securities and Exchange Commission on May 11, 2007.
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:
From
time to time after the effective date of this registration
statement.
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 interest
reinvestment, 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, please 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
number of the earlier effective registration statement for the same
offering. [ ] __________________
If
this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [X]
If
this
Form is a post-effective amendment to a registration statement filed pursuant
to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. [ ]
|
CALCULATION
OF REGISTRATION
FEE
|
|
Title
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)
|
5,500,000
(1), (3)
|
$73.01(2)
|
$401,555,000
|
$12,328
|
| |
|
|
|
|
(1)
Pursuant to Rule 416(a) 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 Long Term Stock Compensation Plan (the “Plan”), by
reason
of stock splits, stock dividends, recapitalizations or similar
transactions.
The
shares of common stock to which this Registration Statement relates are to
be
issued upon exercise of options and in connection with certain other
stock-related awards, all of which will be granted or awarded under the Plan
for
no consideration.
(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 10, 2007 as reported on the New
York Stock Exchange composite transactions tape.
(3)
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 Statements on Form S-3, Registration No. 333-32667 and 333-124976
(the “Prior Registration Statements”). This Registration Statement also
constitutes the first post-effective amendment to the Prior Registration
Statements. 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 and not previously sold under the Prior Registration
Statements 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.
PROSPECTUS
37,726,512
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 Lincoln
National Corporation Amended and Restated Incentive Compensation Plan, or 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 and the Chicago Stock
Exchange under the symbol “LNC.” The last reported sale price on May 9, 2007 was
$73.18 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 May 11, 2007.
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, which operates multiple insurance and investment management
businesses as well as broadcasting and sports programming business through
subsidiary companies. Through our business segments, we sell a wide range of
wealth protection, accumulation and retirement income products and solutions.
These products include institutional and/or retail fixed and indexed annuities,
variable annuities, universal life insurance, variable universal life insurance,
term life insurance, mutual funds and managed accounts. LNC was organized under
the laws of the state of Indiana in 1968, and maintains its principal executive
offices in Philadelphia, Pennsylvania. We expect to relocate our principal
executive offices to Radnor, Pennsylvania in the third quarter of 2007. “Lincoln
Financial Group” is the marketing name for LNC and its subsidiary companies. At
December 31, 2006, LNC had consolidated assets of $178.5 billion and
consolidated shareholders’ equity of $12.2 billion.
We
provide products and services in five operating businesses and report results
through seven business segments, as follows:
(1)
Individual Markets, which includes the Individual Annuities and Individual
Life
Insurance segments,
(2)
Employer Markets, which includes the Retirement Products and Group Protection
segments,
(3)
Investment Management, which is an operating business and segment,
(4)
Lincoln UK, which is an operating business and segment, and
(5)
Lincoln Financial Media, which is an operating business and segment.
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 in connection with a discussion of future
operating or financial performance. In particular, these include statements
relating to future actions, prospective services or products, future performance
or results of current and anticipated services or products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings, operations,
trends or financial results. LNC claims 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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·
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Problems
arising with the ability to successfully integrate our and
Jefferson-Pilot’s businesses, which may affect our ability to operate as
effectively and efficiently as expected or to achieve the expected
synergies from the merger or to achieve such synergies within our
expected
timeframe;
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·
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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 such as Actuarial Guideline VACARVM; restrictions on revenue
sharing and 12b-1 payments; and the potential for U.S. Federal tax
reform;
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·
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The
initiation 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
that result in changes in law; and (d) unexpected trial court
rulings;
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·
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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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·
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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”), value of business acquired (“VOBA”), deferred
sales inducements (“DSI”) and deferred front-end loads (“DFEL”) and an
increase in liabilities related to guaranteed benefit features of
LNC’s
variable annuity products;
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·
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Ineffectiveness
of LNC’s various hedging strategies used to offset the impact of declines
in and volatility of the equity
markets;
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·
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A
deviation in actual experience regarding future persistency, mortality,
morbidity, interest rates or 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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·
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Changes
in accounting principles generally accepted in the United States
that may
result in unanticipated changes to LNC’s net income, including the impact
of adopting Statements of Financial Accounting Standard 157 and
159;
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·
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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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·
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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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·
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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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·
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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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·
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The
adequacy and collectibility of reinsurance that LNC has
purchased;
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·
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Acts
of terrorism, war, or other man-made and natural catastrophes that
may
adversely affect LNC’s businesses and the cost and availability of
reinsurance;
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·
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Competitive
conditions, including pricing pressures, new product offerings and
the
emergence of new competitors, that may affect the level of premiums
and
fees that LNC can charge for its
products;
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·
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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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·
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Loss
of key management, portfolio managers in the Investment Management
segment, financial planners or wholesalers;
and
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·
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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.
Risk
Factors in connection with Our Business
Our
reserves for future policy benefits and claims related to our current and
future business as well as businesses we may acquire in the future may
prove to be inadequate.
Our
reserves for future policy benefits and claims may prove to be inadequate.
We
establish and carry, as a liability, reserves based on estimates 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 lapse
rate of the policies, 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, 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 and other factors impact the profitability and expected
profitability of many of our products, changes in equity markets and other
factors may significantly affect our business and
profitability.
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. Conversely, a weakening of the equity markets results
in
lower fee income and may have a material adverse effect on our results of
operations and capital resources.
The
increased fee revenue resulting from strong equity markets increases the
expected gross profits (“EGPs”) from variable insurance products as do better
than expected lapses, mortality rates and expenses. As a result, the higher
EGPs
may result in lower net amortized costs related to deferred acquisition costs
(“DAC”), deferred sales inducements (“DSI”), value of business acquired
(“VOBA”), and deferred front-end sales loads (“DFEL”). However, a decrease in
the equity market as well as increases in lapses, mortality rates and expenses
depending upon their significance, may result in higher net amortized costs
associated with DAC, DSI, VOBA and DFEL and may have a material adverse effect
on our results of operations and capital resources. For more information on
DAC,
DSI, VOBA and DFEL amortization, see “Item 7—Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Critical Accounting
Policies” of the Form 10-K for the year ended December 31, 2006.
Changes
in the equity markets, interest rates and/or volatility affects the
profitability of our products with guaranteed benefits, therefore, such changes
may have a material adverse effect on our business and
profitability.
The
amount of reserves related to the guaranteed minimum death benefits (“GMDB”) for
variable annuities is tied to the difference between the value of the underlying
accounts and the guaranteed death benefit, calculated using a benefit ratio
approach. The GMDB reserves take into account the present value of total
expected GMDB payments and the present value of total expected assessments
over
the life of the contract and claims and assessments to date. The amount of
reserves related to the guaranteed minimum withdrawal benefits (“GMWB”) and
guaranteed income benefits (“GIB”) for variable annuities is based on the fair
value of the underlying benefit. Both the level of expected GMDB payments and
expected total assessments used in calculating the benefit ratio are affected
by
the equity markets. The liabilities related to GMWB and GIB benefits valued
at
fair value are impacted by changes in equity markets, interest rates and
volatility. Accordingly, strong equity markets will decrease the amount of
GMDB
reserves that we must carry, and strong equity markets, increases in interest
rates and decreases in volatility will generally decrease the fair value of
the
liabilities underlying the GMWB and GIB benefits.
Conversely,
a decrease in the equity markets will increase the net amount at risk under
the
GMDB benefits we offer as part of our variable annuity products, which has
the
effect of increasing the amount of GMDB reserves that we must carry. Also,
a
decrease in the equity market along with a decrease in interest rates and an
increase in volatility will generally result in an increase in the fair value
of
the liabilities underlying GMWB and GIB benefits, which has the effect of
increasing the amount of GMWB and GIB reserves that we must carry. Such an
increase in reserves would result in a charge to our earnings in the quarter
in
which we increase our reserves. We maintain a customized dynamic hedge program
that is designed to mitigate the risks associated with income volatility around
the change in reserves on guaranteed benefits. However, the hedge positions
may
not be effective to exactly offset the changes in the carrying value of the
guarantees due to, among other things, the time lag between changes in their
values and corresponding changes in the hedge positions, extreme swings or
liquidity in the equity and derivatives markets, contractholder behavior
different than expected, and divergence between the performance of the
underlying funds and hedging indices. For more information on our hedging
program, see “Item 7—Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Critical Accounting Policies” of the Form 10-K for the
year ended December 31, 2006.
Changes
in interest rates may cause interest rate spreads to decrease and may result
in
increased contract withdrawals.
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,
have interest rate guarantees that 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 or instances where the returns
on
our general account investments are not enough to support the interest rate
guarantees on 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.
A
downgrade in our financial strength 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 rate our debt. Ratings are not recommendations to
buy
our securities. Each of the rating agencies reviews its ratings periodically,
and our current ratings may not be maintained in the future. Please see “Item 1.
Business--Ratings” of the Form 10-K for the year ended December 31,
2006.
Our
financial strength 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. 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
described above.
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:
·
standards
of minimum capital requirements and solvency, including risk-based capital
measurements;
·
restrictions
of certain transactions between our insurance subsidiaries and their
affiliates;
·
restrictions
on the nature, quality and concentration of investments;
·
restrictions
on the types of terms and conditions that we can include in the insurance
policies offered by our primary insurance operations;
·
limitations
on the amount of dividends that insurance subsidiaries can pay;
·
the
existence and licensing status of the company under circumstances where it
is
not writing new or renewal business;
·
certain
required methods of accounting;
·
reserves
for unearned premiums, losses and other purposes; and
·
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.
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 December 31, 2006, 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, LFN and LFD, 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 companies, is subject to regulation
and supervision by the SEC, NASD, the 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 UK
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. Finally, our television
and
radio operations require
a
license, subject to periodic renewal, from the FCC to operate. While management
considers the likelihood of a failure to renew remote, any station that fails
to
receive renewal would be
forced
to cease operations.
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.
For
further information on regulatory matters relating to us, see “Item 1.
Business--Regulatory” of the Form 10-K for the year ended December 31,
2006.
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, but not limited to, market
timing and late trading of mutual fund and variable and indexed insurance
products and broker-dealer access arrangements. Like others in the industry,
we
have received inquiries including requests for information and/or subpoenas
from
various authorities including the SEC, NASD and the New York Attorney General,
as well as notices of potential proceedings from the SEC and NASD. We are in
the
process of responding to, and in some cases have settled or are in the process
of settling, certain of these inquiries and potential proceedings. We 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 U.S. 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 have and will continue, near term, to significantly lower individual tax
rates. These may 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 2010, unless extended. The Bush Administration continues to propose
that many of the foregoing rate reductions, as well as elimination of the estate
tax, be made permanent, and continues to propose several tax-favored savings
initiatives, 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, such as the
risk
of pandemics causing a large number of deaths. 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.
We
are a
holding company, and we have no direct operations. Our principal asset is the
capital stock of our insurance, investment management and communication company
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 insurance
subsidiaries are restricted by the applicable laws of their respective
jurisdictions, including laws establishing minimum solvency and liquidity
thresholds. Changes in these laws 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 2006, we have ceded approximately
$334 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 December 31,
2006, we had $7.9 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, $4.1 billion 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 to support this business. The
balance in the trust changes as a result of ongoing reinsurance activity and
was
$1.9 billion at December 31, 2006. In addition, should Swiss Re’s 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 $2.1
billion of the Swiss Re treaties are funds-withheld structures where we have
a
right of offset on assets backing the reinsurance receivables.
During
the third quarter of 2006 one of LNL’s reinsurers, Scottish Re Group Ltd
(“Scottish Re”), received rating downgrades from various rating agencies. Of the
$1.2 billion of fixed annuity business that LNL reinsures with Scottish Re,
approximately 78% is reinsured through the use of modified coinsurance treaties,
in which LNL possesses the investments that support the reserves ceded to
Scottish Re. For its annuity business ceded on a coinsurance basis, Scottish
Re
had previously established an irrevocable investment trust for the benefit
of
LNL that supports the reserves. In addition to fixed annuities, LNL has
approximately $84 million of policy liabilities on the life insurance business
it reinsures with Scottish Re. Scottish Re continues to perform under its
contractual responsibilities to LNL.
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 a significant amount of the mortality risk on fully underwritten newly
issued, individual life insurance contracts. We regularly review retention
limits for continued appropriateness and they may be changed in the future.
If
we were to experience adverse mortality or morbidity experience, a significant
portion of that would be reimbursed by our reinsurers. Prolonged or severe
adverse mortality or morbidity experience could result in increased reinsurance
costs, and ultimately, reinsurers not willing to offer coverage. 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.
Catastrophes
may adversely impact liabilities for policyholder claims and the availability
of
reinsurance.
Our
insurance operations are exposed to the risk of catastrophic mortality, such
as
a pandemic, an act of terrorism or other event that causes a large number of
deaths or injuries. Significant influenza pandemics have occurred three times
in
the last century, but the likelihood, timing, or the severity of a future
pandemic cannot be predicted. In our group insurance operations, a localized
event that affects the workplace of one or more of our group insurance customers
could cause a significant loss due to mortality or morbidity claims. These
events could cause a material adverse effect on our results of operations in
any
period and, depending on their severity, could also materially and adversely
affect our financial condition.
The
extent of losses from a catastrophe is a function of both the total amount
of
insured exposure in the area affected by the event and the severity of the
event. Pandemics, hurricanes, earthquakes and man-made, including terrorism,
catastrophes may produce significant damage in larger areas, especially those
that are heavily populated. Claims resulting from natural or man-made
catastrophic events could cause substantial volatility in our financial results
for any fiscal quarter or year and could materially reduce our profitability
or
harm our financial condition. Also, catastrophic events could harm the financial
condition of our reinsurers and thereby increase the probability of default
on
reinsurance recoveries. Accordingly, our ability to write new business could
also be affected.
Consistent
with industry practice and accounting standards, we establish liabilities for
claims arising from a catastrophe only after assessing the probable losses
arising from the event. We cannot be certain that the liabilities we have
established will be adequate to cover actual claim liabilities, and a
catastrophic event or multiple catastrophic events could have a material adverse
effect on our business, results of operations and financial
condition.
We
may be unable to attract and retain sales representatives and other employees,
particularly financial advisors.
We
compete to attract and retain financial advisors, wholesalers, 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, wholesalers,
portfolio managers and other employees, as well as independent distributors
of
our products.
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 financial
strength 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 United States and other economies could result in
increased impairments.
We
may have difficulty integrating Jefferson-Pilot and may incur substantial
unexpected costs in connection with the integration.
We
may
experience material unanticipated difficulties or expenses in connection with
integrating Jefferson-Pilot, especially given the relatively large size of
the
merger. Integrating Jefferson-Pilot with us is a complex, time-consuming and
expensive process. Before the merger, we and Jefferson-Pilot operated
independently, each with its own business, products, customers, employees,
culture and systems.
We
may
seek to combine certain operations, functions and legal entities using common
information and communication systems, operating procedures, financial controls
and human resource practices, including training, professional development
and
benefit programs. We may be unsuccessful or delayed in implementing the
integration of these systems and processes, which may cause increased operating
costs, worse than anticipated financial performance or the loss of clients,
employees and agents. Many of these factors are outside our
control.
Anti-takeover
provisions could delay, deter or prevent our change in control even if the
change in control would be beneficial to LNC shareholders.
We
are an
Indiana corporation subject to Indiana state law. Certain provisions of Indiana
law could interfere with or restrict takeover bids or other change in control
events affecting us. Also, provisions in our articles of incorporation, bylaws
and other agreements to which we are a party could delay, deter or prevent
our
change in control, even if a change in control would be beneficial to
shareholders. In addition, under Indiana law, directors may, in considering
the
best interests of a corporation, consider the effects of any action on
stockholders, employees, suppliers and customers of the corporation and the
communities in which offices and other facilities are located, and other factors
the directors consider pertinent. One statutory provision prohibits, except
under specified circumstances, LNC from engaging in any business combination
with any shareholder who owns 10% or more of our common stock (which
shareholder, under the statute, would be considered an “interested shareholder”)
for a period of five years following the time that such shareholder became
an
interested shareholder, unless such business combination is approved by the
board of directors prior to such person becoming an interested shareholder.
In
addition, our articles of incorporation contain a provision requiring holders
of
at least three-fourths of our voting shares then outstanding and entitled to
vote at an election of directors, voting together, to approve a transaction
with
an interested shareholder rather than the simple majority required under Indiana
law.
In
addition to the anti-takeover provisions of Indiana law, there are other factors
that may delay, deter or prevent our change in control. As an insurance holding
company, we are regulated as an insurance holding company and are subject to
the
insurance holding company acts of the states in which our insurance company
subsidiaries are domiciled. The insurance holding company acts and regulations
restrict the ability of any person to obtain control of an insurance company
without prior regulatory approval. Under those statutes and regulations, without
such approval (or an exemption), no person may acquire any voting security
of a
domestic insurance company, or an insurance holding company which controls
an
insurance company, or merge with such a holding company, if as a result of
such
transaction such person
would
“control” the insurance holding company or insurance company. “Control” is
generally defined as the direct or indirect power to direct or cause the
direction of the management and policies of a person and is presumed to exist
if
a person directly or indirectly owns or controls 10% or more of the voting
securities of another person.
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, May 12, 2005 and May
10,
2007. 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
37,726,512 of which 28,736,362 shares were either issued or reserved for
issuance under outstanding Awards at March 5, 2007. 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 or outstanding Awards 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 (total
or
per
share);
(2)
revenues
or growth in
revenues; (3) cash flow or cash flow return on investment; (4) assets, return
on
assets, growth in assets, return on investment, capital or return on capital,
return on equity,
or
shareholder equity (total or per share);
(5)
economic value added or insurance-imbedded value added; (6) operating margin;
(7) net income
or
growth in net income (total or per share),
pretax
earnings
or
growth in pretax earnings (total or per share),
pretax
earnings before interest, depreciation and amortization, pretax operating
earnings after interest expense and before incentives,
and
extraordinary or special items; (8) operating earnings or income from
operations; (9) total shareholder return; (10)
profit margins; (11) sales, deposits, net flows, premiums and fees, or growth
in
premiums and fees, including service fees; (12) book value; (13) customer and
producer growth or retention; (14) market share or change in market share;
(15)
stock price or change in stock price; (16) market capitalization, change in
market capitalization, or return on market value; (17) fund, account or
investment performance; (18) cash flow or change in cash flow; (19) expense
ratios, product cost reduction through advanced technology, or other expense
management measures; (20) productivity ratios or other measures of operating
efficiency or effectiveness; (21) ratio of claims or loss costs to revenues;
(22) satisfaction measures: customer, provider, or employee; (23) implementation
or completion of critical projects or processes; (24) product development,
product release schedules, new product innovation, brand recognition/acceptance;
(25)
any of
the above goals as compared to Standard & Poor’s 500 Stock Index or a group
of comparator companies; and (26) any criteria comparable to those listed above,
including metrics designed to measure progress toward achieving the company’s
strategic intent of becoming the retirement income security company of choice
for its clients, 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:
Non-Qualified
Stock Options.
The
grant of a non-qualified stock option 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. Upon 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) will be
treated as long-term or short-term capital gain or loss, depending on the
holding period.
ISOs. The
tax
treatment of ISOs is complex. We have not granted any ISOs in over 10 years.
Should we grant ISOs, we will provide affected optionees with a summary of
the
federal tax implications.
SARs.
The
grant of a SAR 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
SAR,
we will be entitled to a corresponding deduction. Upon 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 date of exercise of
the
SAR will be treated as long-term or short-term capital gain or loss, depending
on the holding period.
Restricted
Stock.
The
grant of restricted stock 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 that date. 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 grant, 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 restricted stock, we will be entitled
to a corresponding deduction. Upon disposition of the shares after restrictions
lapse, the difference between the amount received and the fair market value
of
the shares on the vesting date (or on the date of grant 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.
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 we
will
be allowed a corresponding deduction 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 we will not be allowed
a corresponding deduction.
Unrestricted
Stock Grants including LTIP Payouts.
Generally, a participant will be subject to tax, and we will receive a
corresponding deduction, with respect to a distribution of an unrestricted
stock
grant or LTIP payout when the Common Stock and any cash are paid to the
participant. The amount of taxable income a participant recognizes and our
deduction will equal the amount of cash and the fair market value of the Common
Stock paid out.
Code
Section 409A.
To the
extent that any Award under the Plan is considered a deferral of compensation
subject to Code section 409A, the Plan shall be construed and administered
in
accordance with Code section 409A and in compliance with the applicable IRS
guidance, including good faith compliance with any proposed IRS
rules.
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.
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,
2006;
|
| · |
Our
Quarterly Report on Form 10-Q for the quarter ended March 31,
2007;
|
| · |
Our
Current Reports on Form 8-K filed with the SEC on January 12, February
28,
March 20, April 4, April 30, and May 10,
2007;
|
| · |
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
the Annual Report on Form 10-K for the year ended December 31, 2006 (including
schedules included therein) and Lincoln National Corporation management's
assessment of the effectiveness of internal control over financial reporting
as
of December 31, 2006 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
consolidated financial statements and management's assessment are incorporated
herein by reference in reliance upon such reports 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 112,156 shares of our Common Stock.
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 us in
connection with the issuance and distribution of our Common Stock to be
registered, other than underwriting discounts and commissions of which there
are
none.
|
Registration
fees
|
|
$
|
12,328
|
|
|
Photocopying
and Printing
|
|
|
5,000
|
|
|
Accounting
fees
|
|
|
10,000
|
|
|
State
blue sky fees and expenses
|
|
|
-0-
|
|
|
TOTAL
|
|
$
|
27,328
|
|
Item
15. Indemnification of Directors and Officers
Our
bylaws, pursuant to authority contained in the IBCL and the Indiana Insurance
Law, respectively, provide for the indemnification of our officers, directors
and employees against the following:
| · |
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.
|
| · |
reasonable
costs of judgments, settlements, penalties, fines and reasonable
expenses
(including attorneys’ fees) incurred with respect to, any action, suit or
proceeding, if the person’s conduct was in good faith and the person
reasonably believed that his/her conduct was in our best interest.
In the
case of a criminal proceeding, the person must also have reasonable
cause
to believe his/her conduct was
lawful.
|
Indiana
Law requires that a corporation, unless limited by its articles of
incorporation, indemnify its directors and officers against reasonable expenses
incurred in the successful defense of any proceeding arising out of their
serving as a director or officer of the corporation.
No
indemnification or reimbursement will be made to an individual judged liable
to
us, unless a court determines that in spite of a judgment of liability to the
corporation, the individual is reasonably entitled to indemnification, but
only
to the extent that the court deems proper. Additionally, if an officer, director
or employee does not meet the standards of conduct described above, such
individual will be required to repay us for any advancement of expenses it
had
previously made.
In
the
case of directors, a determination as to whether indemnification or
reimbursement is proper will be made by a majority of the disinterested
directors or, if it is not possible to obtain
a
quorum
of directors not party to or interested in the proceeding, then by a committee
thereof or by special legal counsel. In the case of individuals who are not
directors, such determination will be made by the chief executive officer of
the
respective corporation, or, if the chief executive officer so directs, in the
manner it would be made if the individual were a director of the
corporation.
Such
indemnification may apply to claims arising under the Securities Act of 1933,
as
amended. 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
SEC 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 one of our directors, officers or controlling persons 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 the issue by the court.
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.
The
indemnification and advancement of expenses provided for in our bylaws does
not
exclude or limit any other rights to indemnification and advancement of expenses
that a person may be entitled to other agreements, shareholders’ and board
resolutions and our articles of incorporation.
Item
16. Exhibits.
The
exhibits filed with this Registration Statement are listed in the Exhibit Index
beginning on page E-1, which is incorporated herein by reference.
Item
17. Undertakings.
The
undersigned Registrant hereby undertakes:
(a) 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
of 1933;
|
| (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, represent
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 was registered) and any deviation
from
the low or high end of the estimate maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to
Rule
424(b) if, in the aggregate, the changes in volume and price represent
no
more than 20 percent change in 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;
|
Provide,
however,
that
paragraphs (a)(i), (a)(ii) and (a)(iii) do not apply if the information required
to be included in a post-effective amendment by those paragraphs is contained
in
reports filed with or furnished to the SEC by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement, or is contained in a form of
prospectus filed pursuant to Rule 424(b) that is part of the registration
statement.
(b) That,
for
the purpose of determining any liability under the Securities Act of 1933,
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 be deemed to be the initial bona
fide
offering
thereof.
(c) 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.
(d) That,
for
the purpose of determining liability under the Securities Act of 1933 to any
purchaser each prospectus required to be filed pursuant to Rule 424(b) as part
of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other prospectuses filed in reliance on
Rule
430A shall be deemed to be part of and included in the registration statement
as
of the date it is first used after effectiveness. Provided,
however, that
no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of
the
registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made
in
the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of first
use.
(e) That,
for
the purpose of determining liability of a Registrant under the Securities Act
of
1933 to any purchaser in the initial distribution of the securities, each
undersigned Registrant undertakes that in a primary offering of securities
of an
undersigned Registrant pursuant to this registration statement, regardless
of
the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned Registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
| (i) |
Any
preliminary prospectus or prospectus of an undersigned Registrant
relating
to the offering required to be filed pursuant to Rule
424;
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| (ii) |
Any
free writing prospectus relating to the offering prepared by or on
behalf
o an undersigned Registrant or used or referred to by an undersigned
Registrant;
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| (iii) |
The
portion of any other free writing prospectus relating to the offering
containing material information about an undersigned Registrant or
its
securities provided by or on behalf of an undersigned Registrant;
and
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| (iv) |
Any
other communication that is an offer in the offering made by an
undersigned Registrant to the
purchaser.
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(f) That,
for
purposes of determining any liability under the Securities Act of 1933, each
filing of Registrant’s annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of and
employee benefit plan’s annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) 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.
(g) Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of each Registrant
pursuant to the foregoing provisions, or otherwise, each Registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by a Registrant of expenses incurred or
paid
by a director, officer or controlling person of a 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, that
Registrant will, unless in the opinion of its counsel that 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 of 1933 and will be governed by the final
jurisdiction 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 11th
day of
May, 2007.
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LINCOLN
NATIONAL CORPORATION
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By:
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/s/
Frederick J. Crawford
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Frederick
J. Crawford, Senior Vice
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President
and Chief Financial
Officer
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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.
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Signature
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Title
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Date
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Jon
A. Boscia*
Jon
A. Boscia
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Chairman
and Chief
Executive
Officer (Principal Executive Officer) and a Director
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May
11, 2007
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/s/
Frederick J. Crawford
Frederick
J. Crawford
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Senior
Vice President and
Chief
Financial Officer
(Principal
Financial Officer)
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May
11, 2007
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/s/Douglas
N. Miller
Douglas
N. Miller
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Vice
President and Chief Accounting
Officer
(Principal Accounting Officer)
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May
11, 2007
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William
J. Avery*
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Director
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May
11, 2007
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J.
Patrick Barrett*
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Director
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May
11, 2007
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William
H. Cunningham*
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Director
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May
11, 2007
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Dennis
R. Glass*
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Director
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May
11, 2007
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George
W. Henderson, III*
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Director
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May
11, 2007
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Eric
G. Johnson*
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Director
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May
11, 2007
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M.
Leanne Lachman*
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Director
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May
11, 2007
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Michael
F. Mee*
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Director
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May
11, 2007
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William
Porter Payne*
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Director
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May
11, 2007
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Patrick
S. Pittard*
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Director
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May
11, 2007
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David
A. Stonecipher*
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Director
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May
11, 2007
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Isaiah
Tidwell*
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Director
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May
11, 2007
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*By:
/s/
Dennis L. Schoff
Dennis
L.
Schoff, Attorney-in-Fact
(Pursuant
to Powers of Attorney)
INDEX
TO EXHIBITS
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2.1
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Agreement
and Plan of Merger, dated October 9, 2005, among LNC, Quartz Corporation
and Jefferson-Pilot Corporation is incorporated by reference to Exhibit
2.1 of LNC’s Form 8-K (File No 1-6028) filed with the SEC on October 11,
2005.
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2.2
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Amendment
No. 1 to the Agreement and Plan of Merger dated as of January 26,
2006
among LNC, Lincoln JP Holding, L.P., Quartz Corporation and Jefferson
Pilot Corporation filed as Exhibit 2.1 to LNC’s Form 8-K (file No. 1-6028)
filed with the SEC on January 31, 2006.
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4.1
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The
Restated Articles of Incorporation of LNC as last amended effective
May
11, 2007 are incorporated by reference to Exhibit 3.1 of LNC’s Form 8-K
(File No. 1-6028) filed with the SEC on May 10, 2007.
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4.2
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Amended
and Restated Bylaws of LNC are incorporated by reference to Exhibit
3.1 of
LNC’s Form 8-K (File No. 1-6028) filed with the SEC on June 12,
2006.
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4.3
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Indenture
of LNC dated as of January 15, 1987, between LNC and Morgan Guaranty
Trust
Company of New York is incorporated by reference to Exhibit 4(a)
of LNC’s
Form 10-K (File No. 1-6028) for the year ended December 31,
1994.
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4.4
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First
Supplemental Indenture dated as of July 1, 1992, to Indenture dated
as of
January 15, 1987 is incorporated by reference to Exhibit 4(b) of
LNC’s
Form 10-K (File No. 1-6028) for the year ended December 31,
2001.
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|
4.5
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Indenture
of LNC dated as of September 15, 1994, between LNC and The Bank of
New
York, as trustee, is incorporated by reference to Exhibit 4(c) of
LNC’s
Registration Statement on Form S-3/A (file No. 33-55379) filed with
the
SEC on September 15, 1994.
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4.6
|
First
Supplemental Indenture dated as of November 1, 2006, to Indenture
dated as
of September 15, 1994 is filed herewith.
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4.7
|
Junior
Subordinated Indenture dated as of May 1, 1996 between LNC and J.P.
Morgan
Trust Company, National Association (successor in interest to The
First
National Bank of Chicago) is incorporated by reference to Exhibit
4(j) of
LNC’s Form 10-K (File No. 1-6028) for the year ended December 31,
2001.
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4.8
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First
Supplemental Indenture dated as of August 14, 1998, to Junior Subordinated
Indenture dated as of May 1, 1996 is incorporated by reference to
Exhibit
4.3 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on August 27,
1998.
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4.9
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Second
Supplemental Junior Subordinated Indenture dated April 20, 2006 to
Junior
Subordinated Indenture dated as of May 1, 1996 is incorporated by
reference to Exhibit 4.1 of LNC’s Form 8-K (File No. 1-6028) filed with
the SEC on April 20, 2006.
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|
4.10
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Third
Supplemental Junior Subordinated Indenture, dated May 17, 2006 to
Junior
Subordinated Indenture dated as of May 1, 1996 is incorporated by
reference to Exhibit 4.1 of LNC’s Form 8-K (File No. 1-6028) filed with
the SEC on May 17, 2006.
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|
4.11
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Fourth
Supplemental Junior Subordinated Indenture, dated as of November
1, 2006
to Junior Subordinated Indenture dated May 1, 1996 is filed
herewith.
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4.12
|
Indenture,
dated as of November 21, 1995, between Jefferson-Pilot Corporation
and
Wachovia Bank, National Association (formerly known as First Union
National Bank of North Carolina), is incorporated by reference to
Exhibit
4.7 of LNC’s Form 10-Q (File No. 1-6028) for the quarter ended June 30,
2006.
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4.13
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Third
Supplemental Indenture, dated as of January 27, 2004, to Indenture
dated
as of November 21, 1995, is incorporated by reference to Exhibit
4.8 of
LNC’s Form 10-Q (File No. 1-6028) for the quarter ended June 30,
2006.
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4.14
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Fourth
Supplemental Indenture, dated as of January 27, 2004, to Indenture
dated
as of November 21, 1995, is incorporated by reference to Exhibit
4.9 of
LNC’s Form 10-Q (File No. 1-6028) for the quarter ended June 30,
2006.
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|
4.15
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Fifth
Supplemental Indenture, dated as of April 3, 2006 among Lincoln JP
Holdings, L.P. and Wachovia Bank, National Association, as trustee,
to
Indenture, dated as of November 21, 1995, incorporated by reference
to
Exhibit 10.1 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on
April 3, 2006.
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4.16
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Form
of 6 1/2% Notes due March 15, 2008 incorporated by reference to
Exhibit 4.1 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on
March 24, 1998.
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4.17
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Form
of 7% Notes due March 15, 2018 incorporated by reference to Exhibit
4.2 of
LNC’s Form 8-K (File No. 1-6028) filed with the SEC on March 24,
1998.
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4.18
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Form
of 6.20% Note dated December 7, 2001 is incorporated by reference
to
Exhibit 4.1 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on
December 11, 2001.
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4.19
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Form
of 5.25% Note dated June 3, 2002 is incorporated by reference to
Exhibit
4.1 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on June 6,
2002.
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4.20
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Form
of 6.75% Trust Preferred Security certificate is incorporated by
reference
to Exhibit 4.2 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on
September 16, 2003.
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4.21
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Form
of 6.75% Junior Subordinated Deferrable Interest Debentures, Series
F is
incorporated by reference to Exhibit 4.3 of LNC’s Form 8-K (File No.
1-6028) filed with the SEC on September 16, 2003.
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4.22
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Form
of 4.75% Note due February 15, 2014 is incorporated by reference
to
Exhibit 4.1 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on
February 4, 2004.
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4.23
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Form
of 7% Capital Securities due 2066 of Lincoln National Corporation
is
incorporated by reference to Exhibit 4.2 of LNC’s Form 8-K (File NO.
1-6028) filed with the SEC on May 17, 2006.
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4.24
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Form
of 6.75% Capital Securities due 2066 of Lincoln Financial Corporation
is
incorporated by reference to Exhibit 4.2 of LNC’s Form 8-K (File No.
1-6028) filed with the SEC on April 20, 2006.
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4.25
|
Form of
Floating Rate Senior Note due April 6, 2009 is incorporated by
reference to Exhibit 4.1 of LNC’s Form 8-K (File No. 1-6028) filed with
the SEC on April 7, 2006.
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4.26
|
Form of
6.15% Senior Note due April 6, 2036 is incorporated by reference to
Exhibit 4.2 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on
April 7, 2006.
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4.27
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Amended
and Restated Trust Agreement dated September 11, 2003, among LNC,
as
Depositor, Bank One Trust Company, National Association, as Property
Trustee, Bank One Delaware, Inc., as Delaware Trustee, and the
Administrative Trustees named therein is incorporated by reference
to
Exhibit 4.1 of Form 8-K (File No. 1-6028) filed with the SEC on September
16, 2003.
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4.28
|
Guarantee
Agreement dated September 11, 2003 between LNC, as Guarantor, and
Bank One
Trust Company, National Association, as Guarantee Trustee is incorporated
by reference to Exhibit 4.4 of LNC’s Form 8-K (File No. 1-6028) filed with
the SEC on September 16, 2003.
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5
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23.1
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|
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23.2
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Consent
of Dennis L Schoff, Esq., is contained in Exhibit 5 (included in
Exhibit
5).
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24
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