lincoln8k11-9.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
November
5,
2007
Date
of
Report (Date of earliest event reported)
Lincoln
National
Corporation
(Exact
name of registrant as specified in its charter)
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Indiana
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1-6028
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35-1140070
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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1500
Market Street, West Tower, Suite 3900, Philadelphia,
Pennsylvania 19102-2112
(Address
of principal executive offices) (Zip Code)
(215)
448-1400
(Registrant’s
telephone number)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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[
]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
5.02. Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
On
November 5, 2007, the Compensation Committee of our Board of Directors took
the
following actions:
(1) Approved
changes to our executive retirement program, converting it from a mixture of
“defined contribution” and “defined benefit” programs to an entirely “defined
contribution” retirement program. To accomplish this, the Committee
approved:
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·
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a
“freeze,” effective at December 31, 2007, of benefit accruals under the
Lincoln National Corporation Executives' Excess Compensation Pension
Benefit Plan, the Lincoln National Corporation Employees' Supplemental
Pension Benefit Plan, and the Jefferson-Pilot Corporation Supplemental
Benefit Plan (together, the “Non-Qualified Restoration
Plans”),
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·
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a
conversion to an actuarial equivalent lump sum amount of the accrued
benefits of former Jefferson-Pilot executives under the Jefferson
Pilot
Supplemental Retirement Plan, referred to as the “Executive Special
Supplemental Benefit” (the “ESSB”), who are actively employed on December
31, 2007,
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·
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a
conversion to an actuarial equivalent lump sum amount of the accrued
benefits of actively employed executives participating in the Salary
Continuation Plan for Executives of Lincoln National Corporation
and
Affiliates (the “SCP”) as of December 31, 2007,
and
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·
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an
amendment and restatement of the Lincoln National Corporation Executive
Deferred Compensation Plan for Employees (the “Current DCP”), renamed the
“Lincoln National Corporation Deferred Compensation &
Supplemental/Excess Retirement Plan,” will be effective January 1, 2008
(the “DC SERP”).
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The
converted actuarial equivalent lump sum amounts from the ESSB and SCP will
be
credited to a special opening account in the DC SERP. In both cases, the accrued
benefits
will be calculated as if the executives were to receive a distribution at age
62, reduced under the relevant age 62 early retirement reduction factors
provided under each plan (as if the executive had remained employed until age
62). Of the named executive officers named in the Summary
Compensation Table of our proxy statement in connection with the 2007 Annual
Meeting of Shareholders filed
with the Securities and Exchange Commission on April 4, 2007 (“Proxy
Statement”) who are currently employed by us (“NEOs”), only Dennis R. Glass,
President and
Chief Executive Officer, participated in the ESSB; Frederick J. Crawford, Senior
Vice President and Chief Financial Officer, and Westley V. Thompson, President,
Employer Markets, participated in the SCP. SCP opening balance
accounts will vest upon the executive’s attainment of age 55 or older with 5
years of service. The present value of the accumulated ESSB and SCP
benefits for Messrs. Glass, Crawford and Thompson under such plans at December
31, 2006 is set forth in the Pension Benefits table on page 53 of our Proxy
Statement. The ESSB and SCP are described on pages 55-56 of our Proxy
Statement.
In
addition to continuing to allow officers to defer salary and bonus, the DC
SERP
will also act as an excess 401(k) plan accepting employee and employer
contributions in excess of applicable Internal Revenue Service limits (“IRS
limits”) or otherwise required by operation of the Lincoln National Corporation
Employees’ Savings and Profit-Sharing Plan (renamed the Lincoln National
Corporation Savings & Retirement Plan effective January 1, 2008), our
tax-qualified 401(k) plan. In connection with freezing our
tax-qualified defined benefit pension plans, we are amending our 401(k) plan
for
all employees (except those employed by Delaware Management Holdings, Inc.,
or
“Delaware”) to add a 4% “core contribution” and a potential
“transition contribution” of 0.2% to 8% for certain employees and executives
based on age and years of service as of December 31, 2007 (both contributions
are based on annual salary and annual incentive bonus), as well as increasing
the basic matching contributions from 50% of eligible deferrals (capped at
6% of
eligible compensation) to 100% of eligible deferrals (capped at 6% of eligible
compensation). Accordingly, any core contributions or transition
contributions that cannot be contributed to the 401(k) plan due to the operation
of plan or IRS limits will be contributed to the DC SERP. In
addition, the 401(k) plan’s discretionary matching contribution will be
eliminated effective as of January 1, 2008, except for those employed by
Delaware.
For
all
current executive officers (except Patrick P. Coyne who is President of Lincoln
National Investment Company, Inc. and Delaware), a “special executive credit”
will be calculated as: 15% of total pay expressed as a percentage, offset by
the
total of: (a) the executive officer’s maximum basic matching contribution
opportunity (6%), plus (b) core contributions (4%), plus (c) transition
contribution, if any (0.2% -8%) as determined under the 401(k) Plan, each
expressed as a percentage. For Mr. Coyne, the amount of the “special
executive credit” will be calculated as: 15% of total pay expressed in dollars,
offset by the total of: (a) the amount of his maximum basic matching
contribution opportunity (3% of total pay), plus (b) the amount of any
discretionary matching contribution, plus (c) the employer contribution under
the Delaware Management Holdings, Inc. Retirement Plan (7.5% of annual base
pay
and annual bonus, but with bonus amounts over $100,000 capped at 50%), each
expressed in dollars. For the purpose of determining the special
executive credit, “total pay” is equal to annual base pay plus annual
bonus. The special executive credits for the NEOs will be Mr.
Glass--0%; Mr. Crawford--5%; and Mr. Thompson—1.4%. Mr. Coyne’s
special executive credit will vary from year to year depending on whether a
discretionary matching contribution is paid to Delaware employees, but in no
event, will his special executive credit exceed 5% of total pay in any
year. Effective 2018, the special executive credit will equal 5% for
each executive officer, except Delaware executive officers (whose special
executive credit will continue to vary), as a result of the expiration of the
transition contributions.
Special
executive credits will vest on the earlier of five years of receiving special
executive credits under the Plan, or attainment of age 62. However,
executive officers as of January 1, 2008 will be immediately vested in their
special executive credits.
For
executive officers on December 31, 2007 only, any “shortfall” between their
retirement benefits targeted as a percentage of final pay at age 62, and the
sum
of their (1) accrued benefits under the current defined benefit retirement
program (qualified and non-qualified), (2) hypothetical maximum employer
contributions (basic match and discretionary match) in both qualified and
non-qualified savings plans, (3) projected core contributions, transition
contributions, and any special executive credits projected to age 62 based
on
various assumptions (including but not limited to annual base salary increases,
investment earnings, lump sum conversion interest rate, annuitization rate,
and
future bonus amounts), and (4) ESSB and SCP opening account balances projected
to age 62 also based on various assumptions (including, but not limited to,
investment earnings and lump sum conversion rates) will be converted to a
present value lump sum and contributed to a special “shortfall balance account”
in the DC SERP. The shortfall balance accounts for the executive
officers, including for the NEOs, will be calculated based upon accrued benefits
at year-end. Each executive’s shortfall balance account, if any, will have an
individualized “phased vesting” schedule beginning on the later of: (i) January
1, 2008 or (ii) attainment of at least age 55 and five years of service and
ending on the first month after the executive reaches age 62.
The
DC
SERP will provide executives with benefit enhancements upon our change of
control, as defined under the Lincoln National Corporation Executive Severance
Benefit Plan. Any unvested SCP opening account balances and special
executive credits will immediately vest upon the change of
control. ESSB opening account balances are already 100% vested as a
result of the April 3, 2006 change of control of Jefferson-Pilot
Corporation. In addition, upon a separation from service within the
two-year period following a change of control, the following benefit
enhancements will be provided to the executive:
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an
additional two (2) (or three (3), in the case of the Chief Executive
Officer) years’ worth of core contributions, transition contributions,
basic matching contributions, and any special executive credits will
be
credited to the executive’s DC SERP Account;
and
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·
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an
additional two (2) (or three (3), in the case of the Chief Executive
Officer) years of service will be credited towards the individual
“phased
vesting” schedules for each executive’s shortfall balance account, if
any.
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(2) Approved
the 2008 annual incentive program (AIP) target and long-term incentive program
(LTI) target for the 2008-2010 performance cycle as a percentage of
salary. Both programs operate under our Amended and Restated
Incentive Compensation Program, and amounts will be paid or vest only if the
performance measures, which the Compensation Committee has not yet set, are
satisfied. Total targeted direct compensation, which comprises base
salary, AIP and LTI, was increased from 2007 by less than 3.5% in the aggregate
for the NEOs. In addition, for the NEOs as a group, target LTI
as a percentage of base salary did not change from 2007 and target AIP as a
percentage of base salary changed by less than 3.5%. The 2008 target
AIP and LTI, respectively, each expressed as a percentage of base salary for
the
NEOs are as follows: Mr. Glass—200%; 500%; Mr. Crawford—110%; 281%; Mr.
Coyne—370%; 337%; and Mr. Thompson—136%; 339%. Unless and until we
disclose changes to target AIP and LTI as a percentage of base salary, investors
should assume that these percentages have not materially changed in future
periods.
Awards,
if any, will be paid out or vest after the end of the applicable performance
period only upon the Compensation Committee’s determination that threshold
performance has been achieved. A maximum of AIP and LTI award of 200%
of target will be paid or vest when performance is superior, and a minimum
award
of 50% of target will be paid or vest when a threshold level of performance
is
met. One-half of the LTI award is expected to be paid out in stock
options.
The
Compensation Committee also approved changes to the base salaries for the NEOs
effective January 1, 2008, which do not differ materially from what we have
previously reported in our Proxy
Statement and subsequent Forms 8-K filed with the Securities and Exchange
Commission on February 28 and August 9, 2007.
(3) Approved
an amendment and restatement to the Delaware Investments U.S., Inc. (“DIUS”)
Stock Option Plan, which was renamed the DIUS Incentive Compensation Plan (the
“DIUS ICP”). Mr. Coyne is eligible to participate in the DIUS ICP as
an employee of Delaware and holds both vested and unvested options to purchase
DIUS shares. The DIUS ICP was amended and restated as an omnibus
equity compensation plan that permits the grant of equity awards other than
stock options, such as: stock appreciation rights, restricted stock, and
restricted stock units. However, because DIUS stock is not publicly
traded, an independent valuation firm performs periodic valuations of DIUS
to
determine the fair market value (“FMV”) of the DIUS stock underlying all forms
of equity granted pursuant to the DIUS ICP. The valuation guidelines
take a “market transaction” approach to valuation, considering three commonly
applied benchmarks in the asset management industry: (a) assets under
management, (b) price to revenues, and (c) earnings before interest, taxes,
depreciation and amortization as well as comparable market
transactions. Prior to the amendment and restatement, valuations were
performed bi-annually (June 30th and December
31st), but now
will be performed quarterly (March 31st, June 30th,
September 30th, and December
31st).
The
DIUS
ICP also decreases the length of time that a participant who has
received shares from an award may “put” those shares back to DIUS
following the release of valuations from 60 days to 15 days. Because
the DIUS stock is not publicly traded, its FMV can be affected positively or
negatively by intercompany transactions that add or remove earnings, revenues
or
assets under management from DIUS without a reciprocal
transaction. To avoid an inequitable impact to DIUS stockholders and
participants in the DIUS ICP due to such transactions, the DIUS ICP
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reduces
the put/call price for DIUS stock acquired as a result of the exercise
of
options under the DIUS ICP prior to November 8, 2006 by
$11.31;
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increases
the put/call price for DIUS stock acquired as a result of the exercise
of
options under the DIUS ICP between November 9, 2006 and November
5, 2007
by $7.57;
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adds
non-reciprocal intercompany transactions to the events that trigger
the
Compensation Committee’s discretion to make appropriate adjustments to the
(i) the number and kind of shares of DIUS stock held by a participant
or
stockholder, (ii) the number and kind of shares of DIUS stock which
may be
delivered in connection with awards granted thereafter, (iii) the
number
and kind of shares of DIUS stock by which annual per-person award
limitations are measured under the DIUS ICP, (iv) the number and
kind of
shares of DIUS stock subject to or deliverable in respect of outstanding
awards and (v) the exercise price, grant price or purchase price
relating
to any award and/or make provision for payment of cash or other property
in respect of any outstanding
award.
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As
a
result of several non-reciprocal intercompany transactions that occurred after
the December 31, 2006 valuation of the DIUS stock, the Compensation Committee
also approved a $7.57 reduction to the exercise price of all outstanding DIUS
options granted prior to November 5, 2007. As a result, the exercise
price of Mr. Coyne’s DIUS options are:
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Number
of DIUS shares
underlying
options
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Exercise
Price
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Expiration
Date
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23,500
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132.05
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3/14/12
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8,565
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122.90
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3/13/13
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30,000
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146.65
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5/13/14
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20,000
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152.98
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4/15/15
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7,000
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201.92
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11/08/16
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12,237
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201.92
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2/22/17
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The
above description of the DIUS ICP
does not purport to be complete and is qualified in its entirety by reference
to
the complete text of the DIUS ICP, which is attached as Exhibit 10.1 hereto
and
incorporated herein by reference.
Item
9.01. Financial Statements and Exhibits.
The
Exhibit Index set forth on page E-1 is incorporated herein by
reference.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
LINCOLN
NATIONAL CORPORATION
By /s/Frederick
J. Crawford
Name: Frederick
J. Crawford
Title: Senior
Vice President and
Chief
Financial Officer
Date: November
9, 2007
INDEX
TO EXHIBITS
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Exhibit
Number
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Description
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