CALCULATION
OF REGISTRATION FEE
|
Title of Each Class of
Securities Offered
|
|
Maximum Aggregate
Offering
Price
|
|
Amount
of
Registration
Fee(1)
|
|
Debt Securities
|
|
$375,000,000
|
|
$11,512.50
|
|
|
|
|
|
|
___________________
|
(1)
|
|
Calculated
in accordance with Rule 457(r) of the Securities Act of 1933,
as amended.
The filing fee of $11,512.50 is being paid in connection with
the
registration of these debt
securities.
|
|
PROSPECTUS
SUPPLEMENT
(To
prospectus dated March 14, 2006)
|
Filed
Pursuant to Rule 424(b)(4)
File
No. 333-132416
|
 |
$375,000,000
Lincoln
National Corporation
6.30% Senior
Notes Due
2037
This
is
an offering by Lincoln National Corporation of $375,000,000 aggregate principal
amount of its 6.30% Senior Notes due 2037 (the “notes”).
The
notes
will bear interest at a rate of 6.30% per year. The notes will mature on
October 9, 2037.
We
will
pay interest on the notes on each April 9 and October 9 commencing on April
9,
2008.
The
notes
will be issued in denominations of $2,000, and integral multiples of $1,000,
will be our unsecured obligations and will rank equally in right of payment
with
all existing and future unsecured unsubordinated indebtedness.
We
may
redeem the notes in whole or in part prior to their maturity at any time
at the
redemption price described in “Description of the Notes – Optional
Redemption.”
The
notes
will not be subject to redemption at the option of the holder or to any sinking
fund payments.
Investing
in the notes involves risks. See “Risk Factors” beginning on page S-3 of this
prospectus supplement.
|
Price to the Public
|
Underwriting
Discounts and
Commissions
|
Proceeds to LNC
(before expenses)
|
|
|
Per
note
|
99.479%
|
0.875%
|
98.604%
|
|
Total
|
$373,046,250
|
$3,281,250
|
$369,765,000
|
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
supplement or the accompanying base prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The
notes
will not be listed on any securities exchange. Currently, there is no public
market for the notes.
Goldman,
Sachs & Co. expects to deliver the notes in book-entry form only through the
facilities of The Depository Trust Company, Clearstream, Luxembourg or
Euroclear, as the case may be, on or about October 9, 2007 against payment
therefor in immediately available funds.
____________________________________
|
Sole
Book-Running Manager
|
|
|
Goldman,
Sachs & Co.
|
|
October
3, 2007
TABLE
OF CONTENTS
Prospectus
Supplement
|
|
Page
|
|
About
this Prospectus Supplement
|
S-ii
|
|
Forward-Looking
Statements—Cautionary Language
|
S-iii
|
|
Summary
|
S-1
|
|
Risk
Factors
|
S-3
|
|
Use
of Proceeds
|
S-12
|
|
Capitalization
|
S-13
|
|
Selected
Consolidated Historical Financial Data of LNC
|
S-14
|
|
Description
of the Notes
|
S-15
|
|
Material
U.S. Federal Income Tax Consequences
|
S-20
|
|
Underwriting
|
S-23
|
|
Validity
of the Notes
|
S-24
|
|
Experts
|
S-24
|
|
Prospectus
|
|
|
About
this Prospectus
|
1
|
|
Where
You Can Find More Information
|
1
|
|
Documents
Incorporated by Reference
|
1
|
|
Description
of Securities We May Sell
|
3
|
|
Debt
Securities
|
3
|
|
Common
Stock and Preferred Stock
|
22
|
|
Depositary
Shares
|
27
|
|
Warrants
|
31
|
|
Stock
Purchase Contracts and Stock Purchase Units
|
32
|
|
Trust
Preferred Securities
|
32
|
|
Guarantees
of Trust Preferred Securities
|
44
|
|
Relationship
among the Trust Preferred Securities, the Corresponding Subordinated
Debt
Securities
and
the
Guarantees
|
47
|
|
Use
of Proceeds
|
48
|
|
Validity
of the Securities
|
48
|
|
Experts
|
48
|
No
dealer, salesperson or other person is authorized to give any information
or to
represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This
prospectus is an offer to sell only the notes offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its
date.
S-i
ABOUT
THIS PROSPECTUS SUPPLEMENT
You
should rely only on information contained in this prospectus supplement and
the
accompanying base prospectus or information to which we have referred you.
We
have not, and the underwriter has not, authorized anyone to provide you with
information that is different. You should not assume that information appearing
in this prospectus supplement or any document incorporated by reference is
accurate as of any date other than the date of the applicable
document.
This
document is in two parts. The first part is this prospectus supplement, which
describes the specific terms of this offering of notes and also adds to and
updates information contained in the accompanying base prospectus and the
documents incorporated by reference into this prospectus supplement and the
accompanying base prospectus. The second part, the accompanying base prospectus,
gives more general information, some of which may not apply to this offering.
If
the description of the offering varies between this prospectus supplement
and
the accompanying base prospectus, you should rely on the information contained
in this prospectus supplement.
Unless
otherwise indicated, or the context otherwise requires, references in this
prospectus supplement and the accompanying base prospectus to “LNC,” “we,” “us”
and “our” or similar terms are to Lincoln National Corporation and its
subsidiaries.
S-ii
FORWARD-LOOKING
STATEMENTS—CAUTIONARY LANGUAGE
Except
for historical information contained or incorporated by reference in this
prospectus supplement and the accompanying base prospectus, statements made,
or
incorporated by reference, in this prospectus supplement and the accompanying
base prospectus, 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:
|
|
•
|
Problems
arising with the ability to successfully integrate our and Jefferson-Pilot
Corporation’s (“Jefferson-Pilot”) 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;
|
|
|
•
|
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;
|
|
|
•
|
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;
|
|
|
•
|
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;
|
|
|
•
|
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 sales loads (“DFEL”) and
an increase in liabilities related to guaranteed benefit features
of LNC’s
variable annuity products;
|
|
|
•
|
Ineffectiveness
of LNC’s various hedging strategies used to offset the impact of declines
in and volatility of the equity
markets;
|
|
|
•
|
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 including as a result of
investor-owned life insurance
business;
|
|
|
•
|
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 the applications of Statement of Position 07-1 and Statements
of
Financial Accounting Standard 157 and
159;
|
|
|
•
|
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;
|
|
|
•
|
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;
|
|
|
•
|
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;
|
S-iii
|
|
•
|
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;
|
|
|
•
|
The
adequacy and collectibility of reinsurance that LNC has
purchased;
|
|
|
•
|
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;
|
|
|
•
|
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;
|
|
|
•
|
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;
|
|
|
•
|
Loss
of key management, portfolio managers in the Investment Management
segment, financial planners or wholesalers;
and
|
|
|
•
|
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. Other sections of this prospectus supplement,
including “Risk Factors” beginning on page S-3, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and other documents
filed with the Securities and Exchange Commission (the “SEC”) 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
undue 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
supplement.
S-iv
SUMMARY
This
summary contains basic information about LNC and this offering. Because it
is a
summary, it does not contain all of the information that you should consider
before investing in the notes. You should read this entire prospectus supplement
carefully, including the section entitled “Risk Factors,” our financial
statements and the notes thereto incorporated by reference into this prospectus
supplement, and the accompanying base prospectus, before making an investment
decision.
LNC
For
a
detailed description of LNC’s business, the latest financial statements of LNC,
management’s discussion and analysis of LNC’s financial condition and results of
operations, and other important information concerning LNC, please refer
to
LNC’s Annual Report on Form 10-K for the year ended December 31, 2006,
LNC’s Quarterly Report for the quarter ended June 30, 2007 and other
documents filed with the SEC, which are incorporated by reference into this
prospectus supplement. For more information, see “Documents Incorporated by
Reference” in the accompanying base prospectus.
LNC
is 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. “Lincoln Financial Group” is the
marketing name for LNC and its subsidiary companies. Our principal executive
office is located at Centre Square West Tower, 1500 Market Street, Suite
3900,
Philadelphia, Pennsylvania 19102. Our telephone number is (215) 448-1400.
At June 30, 2007, LNC had consolidated assets of $187.7 billion and
consolidated shareholders’ equity of $11.8 billion. For the six months ended
June 30, 2007, LNC had total revenue of $5.4 billion and net income of $0.8
billion. For the year ended December 31, 2006, LNC had total revenue of
$9.1 billion and net income of $1.3 billion.
On
April 3, 2006, Jefferson-Pilot, a financial services and broadcasting
holding company, merged with and into one of our wholly owned subsidiaries.
As a
result of the merger with Jefferson-Pilot, 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.
On
June 7, 2007, we announced plans to explore strategic options for Lincoln
Financial Media. We are evaluating a range of options including, but not
limited
to, divestiture strategies. At this time, there should be no assumption that
this strategic review will result in any type of transaction.
We
also
have “Other Operations,” which includes the financial data for operations that
are not directly related to the business segments, unallocated corporate
items
(such as investment income on investments related to the amount of statutory
surplus in our insurance subsidiaries that is not allocated to our business
units and other corporate investments, interest expense on short-term and
long-term borrowings, and certain expenses, including restructuring and
merger-related expenses) and the historical results of the former reinsurance
segment, which was sold to Swiss Re Life & Health America Inc. (“Swiss
Re”) in the fourth quarter of 2001, along with the ongoing amortization of
deferred gain on the indemnity reinsurance portion of the transaction with
Swiss
Re.
S-1
The
Offering
|
Issuer
|
Lincoln
National Corporation.
|
|
Securities
|
$375,000,000
aggregate principal amount of 6.30% Senior Notes due
2037.
|
|
|
The
notes will be issued in denominations of $2,000 principal amount
and
integral multiples of $1,000.
|
|
Aggregate
Principal Amount
|
$375,000,000
|
|
Maturity
Date
|
The
notes will mature on October
9, 2037.
|
|
Interest
|
Interest
on the notes will accrue from the issue date until maturity at
6.30% per
year calculated using a 360-day year comprised of twelve 30-day
months.
|
|
|
We
will pay interest on the notes on each April 9 and October 9 commencing
on
April 9, 2008.
|
|
Use
of Proceeds
|
We
expect to contribute all of the net proceeds from this offering
to one of
our insurance subsidiaries. See “Use of
Proceeds.”
|
|
Indenture
|
We
will issue the notes under an indenture between us and The Bank
of New
York, as indenture trustee.
|
|
Ranking
|
The
notes will be our senior unsecured debt obligations and will rank
equally
among themselves and with all of our other present and future senior
unsecured indebtedness.
|
|
|
As
of June 30, 2007, our consolidated indebtedness aggregated
approximately $4.3 billion. After giving pro forma effect to our
offering
in August 2007 of $300,000,000 aggregate principal amount of our
5.65%
senior notes due 2012 and this offering, our outstanding indebtedness
would have been approximately $5.0 billion. See
“Capitalization.”
|
|
|
The
indenture places no limitation on the amount of additional senior
indebtedness that may be incurred by us, which will rank equally
to the
notes. We expect from time to time to incur additional indebtedness
constituting senior indebtedness.
|
|
Optional
Redemption
|
We
may redeem the notes in whole or in part prior to their maturity
at any
time at the redemption price described in “Description of the
Notes—Optional Redemption.”
|
|
Form
|
The
notes will be represented by one or more global securities registered
in
the name of Cede & Co., as nominee for The Depository Trust
Company (“DTC”). Beneficial interests in the notes will be evidenced by,
and transfers thereof will be effected only through, records maintained
by
the participants in DTC.
|
|
Trustee
and Principal Paying Agent
|
The
Bank of New York
|
|
Delivery
and Clearance
|
We
will deposit the global securities representing the notes with
DTC in New
York. You may hold an interest in the notes through DTC, Clearstream,
Luxembourg or Euroclear Bank, as operator of the Euroclear System,
directly as a participant of any such system or indirectly through
organizations that are participants in such
systems.
|
|
Governing
Law
|
New
York
|
S-2
RISK
FACTORS
You
should carefully consider the risks described below and those incorporated
by
reference into this prospectus supplement and the accompanying base prospectus
before making an investment decision. The risks and uncertainties described
below and incorporated by reference into this prospectus supplement and the
accompanying base 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 the notes
could decline substantially.
Risk
Factors in Connection With the Ownership of the Notes
We
operate through our subsidiaries and, as a result, the notes will effectively
be
subordinated to the liabilities of our subsidiaries.
Because
we operate primarily through our insurance subsidiaries and our primary assets
are our equity interests in those subsidiaries, our obligations, including
the
notes, are effectively subordinated to all existing and future indebtedness
and
other liabilities, including insurance policy-related liabilities, of our
subsidiaries. As of June 30, 2007, our subsidiaries had approximately $172
billion of outstanding liabilities that effectively ranks and would rank
senior
to our current and future senior debt securities, unless the senior debt
securities are guaranteed on a senior basis by these subsidiaries. Our
subsidiaries may incur further indebtedness in the future. The notes are
exclusively obligations of LNC. Our subsidiaries have no obligation to pay
any
amounts due on the notes. Our subsidiaries are not required to provide us
with
funds for our payment obligations, whether by dividends, distributions, loans
or
other payments. In addition, any payment of dividends, distributions, loans
or
advances by our subsidiaries to us could be subject to statutory or contractual
restrictions. Payments to us by our subsidiaries will also be contingent
upon
our subsidiaries’ earnings and business considerations. The notes are
unsecured.
We
and our subsidiaries may incur additional indebtedness that may adversely
affect
our ability to meet our financial obligations under the
notes.
The
terms
of the indenture and the notes do not limit the incurrence by us or our
subsidiaries of indebtedness. We and our subsidiaries may incur additional
indebtedness in the future, which could have important consequences to holders
of the notes. For example, we may have insufficient cash to meet our financial
obligations, including our obligations under the notes. Furthermore, our
ability
to obtain additional financing for working capital, capital expenditures
or
general corporate purposes could be impaired. Additional debt could make
us more
vulnerable to changes in general economic conditions and also could affect
the
financial strength ratings of our insurance subsidiaries and the ratings
of our
notes.
We
may be unable to repay the notes if our subsidiaries are unable to pay dividends
or make advances to us.
At
maturity, the entire outstanding principal amount of the notes will become
due
and payable by us. We may not have sufficient funds to pay the principal
amount
due. If we do not have sufficient funds on hand or available through existing
borrowing facilities or through the declaration and payment of dividends
by our
subsidiaries, we will need to seek additional financing. Additional financing
may not be available to us in the amounts necessary. We, as a holding company,
are dependent upon dividends from our subsidiaries to enable us to service
our
outstanding debt, including the notes. See “—Risk Factors in Connection with Our
Business—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.”
An
active trading market for the notes may not develop.
The
notes
are new issues of securities for which there is currently no public market.
Any
trading of the notes may be at a discount from their initial offering price,
depending on prevailing interest rates, the market for similar securities,
our
performance and other factors. In addition, we do not know whether an active
trading market will develop for the notes. To the extent that an active trading
market does not develop, the liquidity and trading prices for the notes may
be
harmed.
We
do not
intend to apply for the notes to be listed on any securities exchange or
to
arrange for the notes to be quoted on any quotation system. The underwriter
has
advised us that it currently intends to make a market in the notes. However,
it
is not obligated to do so, and may discontinue any market making with respect
to
the notes at any time, for any reason or for no reason, without notice. If
the
underwriter ceases to act as a market maker for the notes, we cannot assure
you
another firm or person will make a market in the notes.
The
liquidity of any market for the notes will depend upon the number of holders
of
the notes, our results of operations and financial condition, the market
for
similar securities, the interest of securities dealers in making a market
in the
notes and other factors. An active or liquid trading market for the notes
may
not develop.
S-3
A
downgrade, suspension or withdrawal of the rating assigned by a rating agency
to
the notes, if any, could cause the liquidity or market value of the notes
to
decline significantly.
The
notes
will be rated by Standard & Poor’s, Moody’s Investors Service and Fitch
Investor Services. There can be no assurance that these ratings will remain
for
any given period of time or that these ratings will not be lowered or withdrawn
entirely by a rating agency if in that rating agency’s judgment future
circumstances relating to the basis of the rating, such as adverse changes
in
our company, so warrant. For more information about our ratings, see “—Risk
Factors in Connection with Our Business—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.”
We
have made only limited covenants in the indenture, which may not protect
your
investment if we experience significant adverse changes in our financial
condition or results of operations.
The
indenture governing the notes does not:
|
|
•
|
require
us to maintain any financial ratios or specified levels of net
worth,
revenues, income, cash flow or liquidity, and therefore, does not
protect
holders of the notes in the event that we experience significant
adverse
changes in our financial condition, results of operations or
liquidity;
|
|
|
•
|
limit
our ability or the ability of any of our subsidiaries to incur
additional
indebtedness, including indebtedness that is equal in right of
payment to
the notes or, subject to certain exceptions, indebtedness that
is secured
by liens on capital stock of certain subsidiaries;
or
|
|
|
•
|
limit
the aggregate principal amount of senior debt securities that may
be
issued.
|
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 DAC, DSI, VOBA, and 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.
S-4
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.
S-5
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:
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standards
of minimum capital requirements and solvency, including risk-based
capital
measurements;
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restrictions
of certain transactions between our insurance subsidiaries and
their
affiliates;
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restrictions
on the nature, quality and concentration of
investments;
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restrictions
on the types of terms and conditions that we can include in the
insurance
policies offered by our primary insurance
operations;
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limitations
on the amount of dividends that insurance subsidiaries can
pay;
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the
existence and licensing status of the company under circumstances
where it
is not writing new or renewal
business;
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certain
required methods of accounting;
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reserves
for unearned premiums, losses and other purposes;
and
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assignment
of residual market business and potential assessments for the provision
of
funds necessary for the settlement of covered claims under certain
policies provided by impaired, insolvent or failed insurance
companies.
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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,
S-6
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 June 30, 2007, no state insurance
regulatory authority had imposed on us any substantial fines or revoked or
suspended any of our licenses to conduct insurance business in any state
or
issued an order of supervision with respect to our insurance subsidiaries,
which
would have a material adverse effect on our results of operations or financial
condition.
In
addition, Lincoln Financial Network and Lincoln Financial Distributors, as
well
as our variable annuities and variable life insurance products, are subject
to
regulation and supervision by the SEC and the National Association of Securities
Dealers (“NASD”). Our Investment Management segment, like other investment
management 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 (in the absence of any further legislation) 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.
S-7
In
addition, changes to the Internal Revenue Code, administrative rulings or
court
decisions could increase our effective tax rate. In this regard, on August
16,
2007, the Internal Revenue Service issued a revenue ruling which purports,
among
other things, to modify the calculation of separate account deduction for
dividends received by life insurance companies. Subsequently, the IRS issued
another revenue ruling that suspended the August 16 ruling and announced
a new
regulation project on the issue.
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 June 30, 2007, we
had $8.2 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, $4.2 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 $1.8 billion
at
June 30, 2007. 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 $2.2 billion of the Swiss Re treaties
are
funds-withheld structures where we have a right of offset on assets backing
the
reinsurance receivables.
Included
in the business sold to Swiss Re through indemnity reinsurance in 2001 was
disability income business. Swiss Re is disputing its obligation to pay
approximately $80 million of reinsurance recoverables on certain of this
income
disability business. We have agreed to arbitrate this dispute with Swiss
Re. Although the outcome of the arbitration is uncertain, we
currently believe that it is probable that we will ultimately collect the
full
amount of the reinsurance recoverable from Swiss Re and that Swiss Re will
ultimately remain at risk on all of its obligations on the disability income
business that it acquired from us in 2001.
During
the third quarter of 2006 one of The Lincoln National Life Insurance Company’s
(“LNL”) reinsurers, Scottish Re Group Ltd (“Scottish Re”), received rating
downgrades from various rating agencies. At June 30, 2007, of the $1.0 billion
of fixed annuity business that LNL reinsures with Scottish Re, approximately
73%
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
S-8
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 $93 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.
S-9
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.
Changes
in accounting standards issued by the Financial Accounting Standards Board
or
other standard-setting bodies may adversely affect our financial
statements.
Our
financial statements are subject to the application of U.S. GAAP, which is
periodically revised and/or expanded. Accordingly, from time to time we are
required to adopt new or revised accounting standards or guidance issued
by
recognized authoritative bodies, including the Financial Accounting Standards
Board. It is possible that future accounting standards we are required to
adopt
could change the current accounting treatment that we apply to our consolidated
financial statements and that such changes could have a material adverse
effect
on our financial condition and results of operations. For example, we are
currently examining the impact of Statements of Financial Accounting Standards
No. 157 "Fair Value Measurements" and No. 159 "The Fair Value Option for
Financial Assets and Financial Liabilities" For more information on Statements
of Financial Accounting Standards No. 157 and No. 159 and other accounting
pronouncements, see Note 2 to the Consolidated Financial Statements contained
in
our Form 10-Q for the quarter ended June 30, 2007.
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
S-10
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.
S-11
USE
OF PROCEEDS
We
estimate that, after deducting expenses and underwriting discounts and
commissions, our net proceeds from this offering will be approximately
$368,665,000. We expect to contribute all of the net proceeds from
this offering to a new wholly-owned insurance subsidiary. This new
subsidiary was created for the purpose of reinsuring the policy liabilities
of
our existing insurance affiliates, primarily related to statutory reserves
on
universal life products with secondary guarantees. These reserves are
calculated under prevailing statutory reserving requirements as promulgated
under Actuarial Guideline 38 (also known as “AXXX”). We expect the transaction
will release approximately $300 million of capital currently supporting our
universal life products with secondary guarantees. We intend to use
the released capital for general corporate purposes, including for share
repurchase and to support future business growth.
S-12
CAPITALIZATION
The
following table sets forth our consolidated capitalization as of June 30,
2007 and includes adjustments resulting from the offering in August 2007 of
$300,000,000 aggregate principal amount of our 5.65% senior notes due 2012
and
this offering. The “Actual” column reflects our capitalization as of
June 30, 2007 on a historical basis, without any adjustments to reflect
subsequent or anticipated events. The “Adjusted for Offerings” column reflects
pro forma adjustments to reflect our August 2007 offering and this offering.
The
following data is qualified in its entirety by, and should be read in
conjunction with, our consolidated financial statements and notes thereto
incorporated in this prospectus supplement and the accompanying base prospectus
by reference.
|
|
June 30,
2007
|
|||||||
|
|
Actual
|
Adjusted
for
Offerings
|
||||||
|
|
(In
millions)
|
|||||||
|
Short-term
debt
|
|
|
||||||
|
Commercial
paper
|
$ |
30
|
$ |
30
|
||||
|
Current
maturities of long-term debt
|
200
|
200
|
||||||
|
|
||||||||
|
Total
short-term debt
|
230
|
230
|
||||||
|
|
||||||||
|
Long-term
debt
|
||||||||
|
Senior
Notes:
|
||||||||
|
Notes
offered
|
—
|
375
|
||||||
|
5.65%
notes, due 2012(1)
|
—
|
300
|
||||||
|
LIBOR
+ 11 bps notes, due 2009
|
500
|
500
|
||||||
|
6.20%
notes, due 2011
|
250
|
250
|
||||||
|
LIBOR
+ 6.435 bps EXtendible Liquidity Securities®
, due
2011
|
200
|
200
|
||||||
|
4.75%
notes, due 2014
|
285
|
285
|
||||||
|
4.75%
notes, due 2014
|
200
|
200
|
||||||
|
7%
notes, due 2018
|
200
|
200
|
||||||
|
6.15%
notes, due 2036
|
497
|
497
|
||||||
|
LIBOR
+ 8 bps notes, due 2010
|
250
|
250
|
||||||
|
|
||||||||
|
Total
senior notes
|
2,382
|
3,057
|
||||||
|
|
||||||||
|
Junior
subordinated debentures issued to affiliated trusts:
|
||||||||
|
6.75%
notes, due 2052
|
155
|
155
|
||||||
|
|
||||||||
|
Total
junior subordinated debentures issued to affiliated trusts
|
155
|
155
|
||||||
|
|
||||||||
|
Capital
securities:
|
||||||||
|
6.75%
due 2066
|
275
|
275
|
||||||
|
7%
due 2066
|
796
|
796
|
||||||
|
6.05%
due 2067
|
500
|
500
|
||||||
|
|
||||||||
|
Total
capital securities
|
1,571
|
1,571
|
||||||
|
|
||||||||
|
Total
long-term debt
|
4,108
|
4,783
|
||||||
|
|
||||||||
|
Total
debt
|
$ |
4,338
|
$ |
5,013
|
||||
|
|
||||||||
|
Shareholders’
equity
|
||||||||
|
Series
A preferred stock
|
$ |
1
|
$ |
1
|
||||
|
Common
stock and additional paid-in capital
|
7,363
|
7,363
|
||||||
|
Retained
earnings
|
4,323
|
4,323
|
||||||
|
Accumulated
other comprehensive income
|
149
|
149
|
||||||
|
|
||||||||
|
Total
shareholders’ equity
|
$ |
11,836
|
$ |
11,836
|
||||
|
|
||||||||
|
Total
capitalization
|
$ |
16,174
|
$ |
16,849
|
||||
_________________
|
(1)
|
Our
5.65% senior notes due 2012 were issued in an offering in August
2007.
|
S-13
SELECTED
CONSOLIDATED HISTORICAL FINANCIAL DATA OF LNC
The
following table presents our selected historical consolidated financial data
at
June 30, 2007 and 2006 and at December 31, 2006, 2005, 2004, 2003 and
2002, respectively. The selected financial data at June 30, 2007 and 2006
and for the six months ended June 30, 2007 and 2006, respectively, is
derived from our unaudited financial statements. The selected financial data
for
the years ended December 31, 2006, 2005, 2004, 2003 and 2002, respectively,
is derived from our audited financial statements for those years. On
April 3, 2006, we completed our merger with Jefferson-Pilot and have
included the results of operations and financial condition of Jefferson-Pilot
in
our selected financial data beginning on April 3, 2006. Our selected
financial data for the years ended December 31, 2005, 2004, 2003 and 2002,
respectively, exclude the results of operations and financial condition of
Jefferson-Pilot. The following data should be read in conjunction with the
financial statements and the related notes thereto incorporated by reference
in
this prospectus supplement and the accompanying base prospectus.
|
|
Six
Months Ended
June 30,
|
Year
Ended
December 31,
|
||||||||||||||||||||||||||
|
|
2007
|
2006
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||||||||||||
|
|
(millions
of dollars, except per share data)
|
|||||||||||||||||||||||||||
|
Consolidated
Summaries of Income
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total
revenue
|
$ |
5,411
|
$ |
3,917
|
$ |
9,063
|
$ |
5,475
|
$ |
5,351
|
$ |
5,284
|
$ |
4,636
|
||||||||||||||
|
Income
before cumulative effect of accounting changes
|
772
|
570
|
1,316
|
831
|
732
|
767
|
49
|
|||||||||||||||||||||
|
Cumulative
effect of accounting changes
|
—
|
—
|
—
|
—
|
(25 | ) | (255 | ) |
—
|
|||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Net
Income
|
$ |
772
|
$ |
570
|
$ |
1,316
|
$ |
831
|
$ |
707
|
$ |
512
|
$ |
49
|
||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Per
Share Data(1)
|
||||||||||||||||||||||||||||
|
Net
Income-diluted
|
$ |
2.79
|
$ |
2.47
|
$ |
5.13
|
$ |
4.72
|
$ |
3.95
|
$ |
2.85
|
$ |
0.26
|
||||||||||||||
|
Net
Income-basic
|
2.83
|
2.51
|
5.21
|
4.80
|
4.01
|
2.89
|
0.27
|
|||||||||||||||||||||
|
Common
stock dividends
|
0.79
|
0.76
|
1.535
|
1.475
|
1.415
|
1.355
|
1.295
|
|||||||||||||||||||||
|
|
At
June
30,
|
At
December
31,
|
||||||||||||||||||||||||||
|
|
2007
|
2006
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||||||||||||
|
|
(millions
of dollars, except per share data)
|
|||||||||||||||||||||||||||
|
Consolidated
Period-End Balance Sheet Items
|
||||||||||||||||||||||||||||
|
Assets
|
$ |
187,650
|
$ |
167,380
|
$ |
178,494
|
$ |
124,860
|
$ |
116,219
|
$ |
106,745
|
$ |
93,185
|
||||||||||||||
|
Senior
notes
|
2,382
|
2,330
|
2,231
|
999
|
1,049
|
1,118
|
1,119
|
|||||||||||||||||||||
|
Junior
subordinated debentures issued to affiliated trusts
|
155
|
330
|
155
|
334
|
340
|
341
|
393
|
|||||||||||||||||||||
|
Capital
securities
|
1,571
|
1,072
|
1,072
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
|
Shareholders’
equity
|
11,836
|
11,404
|
12,201
|
6,384
|
6,176
|
5,812
|
5,348
|
|||||||||||||||||||||
|
Period-End
Per Share Data(1)
|
||||||||||||||||||||||||||||
|
Shareholders’
equity (including accumulated other
comprehensive
income)
|
$ |
43.57
|
$ |
40.48
|
$ |
44.21
|
$ |
36.69
|
$ |
35.53
|
$ |
32.56
|
$ |
30.10
|
||||||||||||||
|
Shareholders’
equity (excluding accumulated other
comprehensive
income)
|
43.02
|
40.60
|
41.99
|
33.66
|
30.17
|
27.69
|
25.97
|
|||||||||||||||||||||
|
Market
value of common stock
|
70.95
|
56.44
|
66.40
|
53.03
|
46.68
|
40.37
|
31.58
|
|||||||||||||||||||||
______________________
|
(1)
|
Per
share amounts were affected by the issuance of 112.3 million shares
for the acquisition of Jefferson-Pilot and the retirement of
16.9 million, 2.3 million, 7.6 million and
12.1 million shares of common stock in 2006, 2005, 2004 and 2002,
respectively, and 7.2 million shares of common stock in the six
months ended June 30, 2007. Per share amounts assume the conversion
of our outstanding Series A preferred stock. Each share of Series
A
preferred stock is convertible into 16 shares of common
stock.
|
S-14
DESCRIPTION
OF THE NOTES
The
following description of the particular terms of the notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions described under the captions “Description of
Securities We May Sell—Debt Securities—Senior Debt Securities” in the
accompanying base prospectus.
General
The
6.30%
Senior Notes due 2037 will be issued under an indenture dated as of
September 15, 1994, as supplemented and amended by the First Supplemental
Indenture dated as of November 1, 2006, between us and The Bank of New
York, as trustee (the “indenture”). The notes will mature on October 9,
2037.
The
notes
will initially be limited to $375,000,000 in aggregate
principal amount. We may, however, without the consent of any then-existing
holders of notes, “reopen” the notes and issue an unlimited principal amount of
additional notes of this series in the future. These additional notes will
be
deemed part of the same series as the notes offered hereby.
Unless
previously redeemed or purchased and cancelled, we will repay the notes in
cash
at 100% of their principal amount together with accrued and unpaid interest
thereon at maturity. We will pay principal and interest on the notes in U.S.
dollars.
The
notes
will be our senior unsecured debt obligations and will rank equally among
themselves and with all of our other present and future senior unsecured
indebtedness. The indenture does not limit the aggregate principal amount
of
senior debt securities that may be issued.
The
notes
will be redeemable by us at any time prior to maturity as described below
under
“—Optional Redemption.”
The
notes
will not be subject to a sinking fund. The notes will be issued in fully
registered book-entry form only in minimum denominations of $2,000 and integral
multiples of $1,000. The notes will be issued in the form of global securities.
The global securities will be deposited with, or on behalf of, DTC, and
registered in the name of DTC or a nominee, as further described
below.
The
provisions of the indenture relating to defeasance, which are described under
the caption “Description of the Securities We May Sell—Debt Securities—Senior
Debt Securities—Defeasance” in the accompanying base prospectus, will apply to
the notes.
If
the
scheduled maturity date for the notes falls on a day that is not a business
day,
the payment of interest and principal will be made on the next succeeding
business day, and no interest on such payment shall accrue for the period
from
and after the scheduled maturity date.
Interest
The
notes
will bear interest at a rate of 6.30%. Interest on the notes will accrue
from
October 9, 2007 or from the most recent interest payment date to which interest
has been paid or provided for, to but excluding the relevant interest payment
date. We will make interest payments on the notes semi-annually in arrears
on
April 9 and October 9 of each year, beginning on April 9, 2008, to the person
in
whose name such notes are registered at the close of business on the immediately
preceding March 25 or September 25, as applicable. Interest on
the notes will be computed on the basis of a 360-day year of twelve 30-day
months.
If
an
interest payment date for the fixed rate notes falls on a day that is not
a
business day, the interest payment shall be postponed to the next succeeding
business day, and no interest on such payment shall accrue for the period
from
and after such interest payment date.
Optional
Redemption
The
notes
are redeemable, in whole or in part, at our option, at any time or from time
to
time, upon mailed notice to the registered address of each holder of notes
at
least 30 days but not more than 60 days prior to the redemption. The redemption
price will be the greater of (i) 100% of the principal amount of the notes
to be redeemed and (ii) the make-whole amount, plus in each case accrued
and unpaid interest to the date of redemption.
“Make-whole
amount” means the sum of the present values of the remaining scheduled payments
(as defined below) on the fixed rate notes, discounted to the date of redemption
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months), at a rate equal to the sum of the applicable treasury rate (as defined
below) plus 25 basis points.
S-15
“Comparable
treasury issue” means the U.S. Treasury security selected by a reference
treasury dealer as having an actual or interpolated maturity comparable to
the
remaining term of the notes called for redemption, that would be utilized,
at
the time of selection and in accordance with customary financial practice,
in
pricing new issues of corporate debt securities with a term comparable to
such
period.
“Comparable
treasury price” means, with respect to a redemption date (1) the average of
five reference treasury dealer quotations for such redemption date, after
excluding the highest and lowest reference treasury dealer quotations, or
(2) if the quotation agent obtains fewer than five such reference treasury
dealer quotations, the average of all such quotations.
“Quotation
agent” means the entity appointed by us to determine the make-whole
amount.
“Reference
treasury dealer” means (1) Goldman, Sachs & Co. and (2) any
additional primary U.S. government securities dealers in New York City (each,
a
“primary treasury dealer”) selected by us and their successors, provided,
however, that if any of them ceases to be a primary treasury dealer we will
substitute another primary treasury dealer.
“Reference
treasury dealer quotations” means, with respect to each reference treasury
dealer and any redemption date, the average, as determined by the quotation
agent, of the bid and asked prices for the comparable treasury issue (expressed
in each case as a percentage of its principal amount) quoted in writing to
the
quotation agent at 5:00 p.m., New York City time, on the third business day
preceding such redemption date.
“Remaining
scheduled payments” means the remaining scheduled payments of principal and
interest on the notes called for redemption that would be due after the related
redemption date but for that redemption. If that redemption date is not an
interest payment date with respect to the notes called for redemption, the
amount of the next succeeding scheduled interest payment on such notes will
be
reduced by the amount of interest accrued to such redemption date.
“Treasury
rate” means, with respect to any redemption date, the rate per annum equal to
the semi-annual equivalent yield to maturity (computed as of the third business
day immediately preceding that redemption date) of the comparable treasury
issue, assuming a price for the comparable treasury issue (expressed as a
percentage of its principal amount) equal to the comparable treasury price
for
that redemption date.
We
will
prepare and mail a notice of redemption to each holder of notes to be redeemed
by first-class mail at least 30 and not more than 60 days prior to the date
fixed for redemption. On and after a redemption date, interest will cease
to
accrue on the notes called for redemption (unless we default in the payment
of
the redemption price and accrued interest). On or before a redemption date,
we
will deposit with a paying agent (or the trustee) money sufficient to pay
the
redemption price of and accrued interest on the notes to be redeemed on that
date. If less than all of the notes are to be redeemed, the notes to be redeemed
shall be selected by the trustee pro rata or by lot or by a method the trustee
deems to be fair and appropriate.
Regarding
the Trustee
We
and
our affiliates maintain various commercial and service relationships with
the
trustee and its affiliates in the ordinary course of business.
Book-Entry
System
Upon
issuance, the notes will be represented by one or more fully registered global
certificates, each of which we refer to as a global security. Each such global
security will be deposited with, or on behalf of, DTC, and registered in
the
name of DTC or a nominee thereof. Unless and until it is exchanged in whole
or
in part for notes in definitive form, no global security may be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC
or
another nominee of DTC or by DTC or any such nominee to a successor of DTC
or a
nominee of such successor.
Beneficial
interests in the notes will be represented through book-entry accounts of
financial institutions acting on behalf of beneficial owners as direct and
indirect participants in DTC. Investors may elect to hold interest in the
notes
held by DTC through Clearstream Bank, société anonyme (“Clearstream,
Luxembourg”), or Euroclear Bank S.A./N.V. as operator of the Euroclear System
(the “Euroclear operator”), if they are participants in such systems, or
indirectly through organizations that are participants in such systems.
Clearstream, Luxembourg and the Euroclear operator will hold interests on
behalf
of their participants through customers’ securities accounts in Clearstream,
Luxembourg’s and the Euroclear operator’s names on the books of their respective
depositaries, which in turn will hold such interests in customers’ securities
accounts in the depositaries’ names on the books of DTC.
So
long
as DTC, or its nominee, is a registered owner of a note, DTC or its nominee,
as
the case may be, will be considered the sole owner or holder of the notes
represented by such note for all purposes under the indenture or other governing
documents. Except as provided below, the actual owners of the notes represented
by a note (the “beneficial
S-16
owner”)
will not be entitled to have the notes represented by such note registered
in
their names, will not receive or be entitled to receive physical delivery
of the
notes in definitive form and will not be considered the owners or holders
thereof under the indenture.
Accordingly,
each person owning a beneficial interest in a note must rely on the procedures
of DTC and, if such person is not a participant of DTC (a “participant”), on the
procedures of the participant through which such person owns its interest,
to
exercise any rights of a holder under the indenture. We understand that under
existing industry practices, in the event that LNC requests any action of
holders or that an owner of a beneficial interest that a holder is entitled
to
give or take under the indenture, DTC would authorize the participants holding
the relevant beneficial interests to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instructions
of
beneficial owners. Conveyance of notices and other communications by DTC
to
participants, by participants to indirect participants, as defined below,
and by
participants and indirect participants to beneficial owners will be governed
by
arrangements among them, subject to any statutory or regulatory requirements
as
may be in effect from time to time.
The
following is based on information furnished by DTC:
DTC
will
act as securities depositary for the notes. Offered securities will be issued
as
fully registered securities registered in the name of Cede & Co. (DTC’s
partnership nominee). One or more fully registered global securities will
be
issued for the notes in the aggregate principal amount of such issue, and
will
be deposited with DTC.
DTC
is a
limited-purpose trust company organized under the New York Banking Law, a
“banking organization” within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a “clearing corporation” within the meaning of
the New York Uniform Commercial Code, and a “clearing agency” registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. DTC holds securities that its participants deposit with
DTC.
DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants’ accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants of DTC (“direct participants”) include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its direct participants and by
The
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
NASD.
Access to DTC’s system is also available to others such as securities brokers
and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a direct participant, either directly or indirectly
(“indirect participants”). The rules applicable to DTC and its participants are
on file with the SEC.
Purchases
of the notes under DTC’s system must be made by or through direct participants,
which will receive a credit for the notes on DTC’s records. The ownership
interest of each beneficial owner is in turn to be recorded on the records
of
direct participants and indirect participants. Beneficial owners will not
receive written confirmation from DTC of their purchase, but beneficial owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
participants or indirect participants through which such beneficial owner
entered into the transaction. Transfers of ownership interests in the notes
are
to be accomplished by entries made on the books of participants acting on
behalf
of beneficial owners. Beneficial owners will not receive certificates
representing their ownership interests in the notes, except in the limited
circumstances that may be provided in the indenture.
To
facilitate subsequent transfers, all notes deposited with DTC are registered
in
the name of DTC’s partnership nominee, Cede & Co. The deposit of the
notes with DTC and their registration in the name of Cede & Co. effect
no change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the notes. DTC’s records reflect only the identity of the direct
participants to whose accounts such securities are credited, which may or
may
not be the beneficial owners. The participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance
of notices and other communications by DTC to direct participants, by direct
participants to indirect participants, and by direct participants and indirect
participants to beneficial owners will be governed by arrangements among
them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Neither
DTC nor Cede & Co. will consent or vote with respect to the notes.
Under its usual procedures, DTC mails an Omnibus Proxy to LNC as soon as
possible after the applicable record date. The Omnibus Proxy assigns
Cede & Co.’s consenting or voting rights to those direct participants
to whose accounts securities are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Payments
on the notes will be made in immediately available funds to DTC. DTC’s practice
is to credit direct participants’ accounts on the applicable payment date in
accordance with their respective holdings shown on DTC’s records unless DTC has
reason to believe that it will not receive payment on such date. Payments
by
participants to beneficial owners
S-17
will
be
governed by standing instructions and customary practices, as is the case
with
securities held for the accounts of customers in bearer form or registered
in
“street name,” and will be the responsibility of such participant and not of
DTC, the trustee or the LNC, subject to any statutory or regulatory requirements
as may be in effect from time to time. Any payment due to DTC on behalf of
beneficial owners is the responsibility of LNC or the applicable agent,
disbursement of such payments to direct participants shall be the responsibility
of DTC, and disbursement of such payments to the beneficial owners shall
be the
responsibility of direct participants and indirect participants.
DTC
may
discontinue providing its services as securities depositary with respect
to the
notes at any time by giving reasonable notice to LNC or the applicable agent.
Under such circumstances, in the event that a successor securities depositary
is
not obtained, offered security certificates are required to be printed and
delivered. LNC may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
offered security certificates will be printed and delivered.
Clearstream,
Luxembourg advises that it is incorporated under the laws of Luxembourg as
a
professional depositary. Clearstream, Luxembourg holds securities for its
participating organizations (“Clearstream participants”) and facilitates the
clearance and settlement of securities transactions between Clearstream
participants through electronic book-entry changes in accounts of Clearstream
participants, thereby eliminating the need for physical movement of
certificates. Clearstream, Luxembourg provides to Clearstream participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Clearstream, Luxembourg interfaces with domestic markets in several
countries. As a professional depositary, Clearstream, Luxembourg is subject
to
regulation by the Luxembourg Monetary Institute.
Clearstream
participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, trust companies, clearing
corporations and certain other organizations and may include the underwriter.
Indirect access to Clearstream, Luxembourg is also available to others, such
as
banks, brokers, dealers and trust companies that clear through or maintain
a
custodial relationship with a Clearstream participant either directly or
indirectly.
Distributions
with respect to the notes held beneficially through Clearstream, Luxembourg
will
be credited to cash accounts of Clearstream participants in accordance with
its
rules and procedures, to the extent received by the U.S. depositary for
Clearstream, Luxembourg.
Euroclear
advises that it was created in 1968 to hold securities for its participants
(“Euroclear participants”) and to clear and settle transactions between
Euroclear participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities
and
cash. Euroclear includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries.
Euroclear is owned by Euroclear Clearance System Public Limited Company and
operated through a license agreement by the Euroclear operator.
Euroclear
participants include banks (including central banks), securities brokers
and
dealers and other professional financial intermediaries and may include the
underwriter or agents for the notes. Indirect access to Euroclear is also
available to others that clear through or maintain a custodial relationship
with
a Euroclear participant, either directly or indirectly.
The
Euroclear operator is regulated and examined by the Belgian Banking and Finance
Commission and the National Bank of Belgium. Securities clearance accounts
and
cash accounts with the Euroclear operator are governed by the Terms and
Conditions Governing Use of Euroclear and the related Operating Procedures
of
Euroclear, and applicable Belgian law (collectively, the “Terms and
Conditions”). The Terms and Conditions govern transfers of securities and cash
within Euroclear, withdrawals of securities and cash from Euroclear, and
receipts of payments with respect to securities in Euroclear. All securities
in
Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear operator
acts under the Terms and Conditions only on behalf of Euroclear participants,
and has no record of or relationship with persons holding through Euroclear
participants.
Distributions
with respect to the notes held beneficially through Euroclear will be credited
to the cash accounts of Euroclear participants in accordance with the Terms
and
Conditions, to the extent received by the U.S. depositary for
Euroclear.
Global
Clearance and Settlement Procedures
Initial
settlement for the notes will be made in immediately available funds. Secondary
market trading between DTC participants will occur in the ordinary way in
accordance with DTC’s rules and will be settled in immediately available funds
using DTC’s Same-Day Funds Settlement System. If and to the extent this
prospectus supplement with respect to any of the notes indicates that investors
may elect to hold interests in the notes through Clearstream, Luxembourg
or
Euroclear,
S-18
secondary
market trading between Clearstream participants and/or Euroclear participants
will occur in the ordinary way in accordance with the applicable rules and
operating procedures of Clearstream, Luxembourg and Euroclear and will be
settled using the procedures applicable to conventional eurobonds in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the
notes.
Cross-market
transfers between persons holding directly or indirectly through DTC on the
one
hand, and directly or indirectly through Clearstream or Euroclear participants,
on the other, will be effected in DTC in accordance with DTC rules on behalf
of
the relevant European international clearing system by its U.S. depositary;
however, such cross-market transactions will require delivery of instructions
to
the relevant European international clearing system by the counterparty in
such
system in accordance with its rules and procedures and within its established
deadlines (European time). The relevant European international clearing system
will, if the transaction meets its settlement requirements, deliver instructions
to its U.S. depositary to take action to effect final settlement on its behalf
by delivering or receiving the notes in DTC, and making or receiving payment
in
accordance with normal procedures for same-day funds settlement applicable
to
DTC. Clearstream participants and Euroclear participants may not deliver
instructions directly to DTC.
Because
of time-zone differences, credits of the notes received in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC participant
will
be made during subsequent securities settlement processing and will be credited
the business day following DTC settlement date. Such credits or any transactions
in the notes settled during such processing will be reported to the relevant
Euroclear or Clearstream participants on such business day. Cash received
in
Clearstream, Luxembourg or Euroclear as a result of sales of the notes by
or
through a Clearstream participant or a Euroclear participant to a DTC
participant will be received with value on DTC settlement date but will be
available in the relevant Clearstream, Luxembourg or Euroclear cash account
only
as of the business day following settlement in DTC.
Although
DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of the notes among participants
of
DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation
to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
S-19
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
The
following is a general summary of the material U.S. federal income tax
consequences of the acquisition, ownership and disposition of the notes by
beneficial owners of the notes. This summary is based on the Internal Revenue
Code of 1986, as amended (the “Code”), and Treasury regulations, rulings and
judicial decisions as of the date hereof, all of which are subject to change,
possibly on a retroactive basis. The discussion applies only to beneficial
owners that acquire the notes pursuant to the offering at the initial offering
price and who will hold the notes as capital assets within the meaning of
Section 1221 of the Code. This summary is for general information only and
does not address all aspects of U.S. federal income taxation that may be
relevant to holders of the notes in light of their particular circumstances
or
to holders subject to special rules (such as broker-dealers, banks or other
financial institutions, insurance companies, partnerships or other pass-through
entities, tax-exempt organizations, persons that have a functional currency
other than the U.S. dollar, and persons who hold the notes as part of a hedge,
straddle or other integrated transaction). This summary does not address
the
effects of any state, local or non-U.S. tax laws or any U.S. federal estate,
gift or alternative minimum tax considerations.
For
purposes of the following discussion, a “U.S. holder” means a beneficial owner
of a note that is for U.S. federal income tax purposes:
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an
individual citizen or resident of the United
States;
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a
corporation (or other entity treated as a corporation for U.S.
federal
income tax purposes) created or organized in or under the laws
of the
United States, any state thereof or the District of
Columbia;
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an
estate, the income of which is subject to U.S. federal income taxation
regardless of its source; or
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a
trust, if (a) a court within the United States is able to exercise
primary supervision over administration of the trust and one or
more U.S.
persons have authority to control all substantial decisions of
the trust
or (b) it has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S.
person.
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For
purposes of the following discussion, a “non-U.S. holder” means a beneficial
owner of a note that is a nonresident alien individual or a corporation,
estate
or trust that is not a U.S. person for U.S. federal income tax
purposes.
If
a
partnership or an entity treated as a partnership for U.S. federal income
tax
purposes owns any of the notes, the tax treatment of a partner or an equity
interest owner of such other entity will generally depend upon the status
of the
person and the activities of the partnership or other entity treated as a
partnership. If you are a partner of a partnership or an equity interest
owner
of another entity treated as a partnership holding any of the notes, you
should
consult your tax advisors.
Persons
considering the purchase of the notes should consult their own tax advisors
regarding the U.S. federal income tax considerations relating to the purchase,
ownership and disposition of the notes in light of their particular
circumstances, as well as the effect of any state, local, foreign or other
tax
laws.
U.S.
Holders
Interest
on the Notes. It is expected, and this discussion assumes, that the notes
will be issued with no more than a de minimis amount of original issue discount
for U.S. federal tax purposes. Accordingly, you will generally be required
to
recognize as ordinary income any interest paid or accrued on the notes in
accordance with your regular method of accounting for U.S. federal income
tax
purposes.
In
certain circumstances, we may pay amounts on the notes that are in excess
of the
stated interest on or principal of the notes. We intend to take the position
that the possibility that any such payment will be made is remote so that
such
possibility will not affect the timing or amount of interest income that
you
recognize, as discussed above, unless and until any such excess payment is
made.
Our determination that these contingencies are remote is binding on you unless
you disclose your contrary position to the IRS in the manner that is required
by
applicable U.S. Treasury regulations. Our determination is not, however,
binding
on the IRS. It is possible that the IRS might take the position that the
possibility of an excess payment is not remote, in which case the character
and
amount of taxable income in respect of the notes may be different from that
described above. If we do pay amounts on the notes that are in excess of
the
stated interest on or principal of the notes, you should consult your own
tax
advisor about the tax treatment of such amounts.
Disposition
of Notes. Upon the sale, exchange, redemption, retirement or other
disposition of a note, a U.S. holder generally will recognize taxable gain
or
loss equal to the difference between the amount realized on the sale, exchange,
redemption, retirement or other disposition (except to the extent of accrued
but
unpaid interest, which will be taxable as ordinary income) and such holder’s
adjusted tax basis in the notes. Any such gain or loss will be capital gain
or
loss, and will be long-term capital gain or loss if a U.S. holder has held
the
note for more than one year. Long-term capital gains of
S-20
noncorporate
U.S. holders that are recognized in taxable years beginning before
January 1, 2011 are generally taxed at a maximum rate of 15%. The
deductibility of capital losses is subject to limitations.
Information
Reporting and Backup Withholding. Information reporting requirements
generally apply in connection with payments on the notes to, and the proceeds
from a sale or other disposition of the notes by, non-corporate U.S. holders.
A
U.S. holder will be subject to backup withholding tax (currently at a rate
of
28%) on these payments if the U.S. holder fails to provide its taxpayer
identification number to the paying agent and comply with certain certification
procedures or otherwise establish an exemption from backup withholding. Any
backup withholding from a payment to a U.S. holder will be allowed as a credit
against such U.S. holder’s U.S. federal income tax liability and may entitle
such U.S. holder to a refund, provided that the required information is timely
furnished to the Internal Revenue Service (the “IRS”).
Non-U.S.
Holders
Interest
on the Notes. Subject to the discussion of backup withholding below,
U.S. federal withholding tax will not apply to any payment of interest on
a note
to a non-U.S. holder if the interest qualifies for the “portfolio interest
exemption.” This will be the case provided that the non-U.S.
holder:
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does
not actually or constructively own 10 percent or more of the total
combined voting power of all classes of our stock entitled to
vote;
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is
not a controlled foreign corporation that is related directly or
constructively to us through stock
ownership;
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is
not a bank that acquired the notes in consideration for an extension
of
credit made pursuant to a loan agreement entered into in the ordinary
course of its trade or business;
and
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either
(a) provides its name and address, and certifies, under penalties of
perjury, that it is not a U.S. person, which certification may
be made on
an IRS Form W-8BEN or successor form, or (b) holds its notes through
various foreign intermediaries and satisfies the certification
requirements of applicable Treasury
regulations.
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Special
certification and other rules apply to certain non-U.S. holders that are
entities rather than individuals, particularly entities treated as partnerships
for U.S. federal income tax purposes and certain other flow through entities,
and to non-U.S. holders acting as (or holding notes through)
intermediaries.
If
the
portfolio interest exemption does not apply, payments of interest will be
subject to U.S. federal withholding tax at a 30% tax rate, unless the non-U.S.
holder provides us with a properly executed: (1) IRS Form W-8BEN, or
successor form, claiming an exemption from or reduction in withholding under
the
benefit of a tax treaty or (2) IRS Form W-8ECI, or successor form, stating
that interest paid on the note is not subject to withholding tax because
it is
effectively connected with its conduct of a trade or business in the United
States.
If
a
non-U.S. holder is engaged in a trade or business in the United States and
interest on a note is effectively connected with the conduct of that trade
or
business (and, if an income tax treaty applies, is attributable to a U.S.
permanent establishment maintained by the non-U.S. holder), such holder
(although exempt from U.S. federal withholding tax at the 30% tax rate) will
be
subject to U.S. federal income tax on that interest on a net income basis
in the
same manner as if the holder were a U.S. holder. In addition, if such holder
is
a foreign corporation, it may be subject to a branch profits tax equal to
30% of
its earnings and profits for the taxable year, subject to adjustments, that
are
effectively connected with its conduct of a trade or business in the United
States. However, any branch profits tax that would otherwise apply may not
apply, or may apply at a reduced rate, under an applicable income tax
treaty.
Disposition
of Notes. Subject to the discussion of backup withholding below, any
gain realized on the disposition of a note by a non-U.S. holder generally
will
not be subject to U.S. federal income tax unless: (i) that gain is
effectively connected with the conduct of a trade or business in the United
States by the holder (and, if an income tax treaty applies, is attributable
to a
U.S. permanent establishment maintained by the non-U.S. holder), or
(ii) the holder is an individual who is present in the United States for
183 days or more in the taxable year of that disposition and other conditions
are met in which case such holder will generally be subject to a United States
federal income tax of 30% (or, if applicable, a lower treaty rate) on such
gain.
If (i) applies and the non-U.S. holder is a corporation, such holder may be
subject to the branch profits tax referred to above, unless the holder qualifies
for a lower rate or an exemption from such branch profits tax under an
applicable income tax treaty.
Information
Reporting and Backup Withholding. In general, information reporting
and backup withholding will not apply to a payment of interest on a note
to a
non-U.S. holder, or to proceeds from the disposition of a note by a non-U.S.
holder, in each case, if the holder certifies under penalties of perjury
that it
is a non-U.S. holder and neither we nor our paying agent has actual knowledge
to
the contrary. Any amounts withheld under the backup withholding rules will
be
allowed as a credit against the non-U.S. holder’s U.S. federal income tax
liability and may entitle the non-U.S. holder to a refund,
S-21
provided
the required information is timely furnished to the IRS. In general, if a
note
is not held through a qualified intermediary, the amount of payments made
on
that note, the name and address of the beneficial owner and the amount, if
any,
of tax withheld may be reported to the IRS.
THE
U.S.
FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER’S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
S-22
UNDERWRITING
Under
the
terms and subject to the conditions contained in an underwriting agreement
dated
October 3, 2007, the underwriter has agreed to purchase, and we have agreed
to sell to it all of the $375,000,000 aggregate principal amount of the notes
offered hereby.
Under
the
terms and conditions of the underwriting agreement, if the underwriter takes
any
of the notes, then the underwriter is obligated to take and pay for all of
the
notes.
The
underwriter initially proposes to offer part of the notes directly to the
public
at the public offering price set forth on the cover page of this prospectus
supplement and part to certain dealers at a price that represents a selling
concession not in excess of 0.50% of the principal amount of the notes. The
underwriter may allow, and dealers may reallow, a selling concession not
in
excess of 0.25% of the principal amount of the notes to certain other
dealers. After the initial offering of the notes, the offering price and
other
selling terms may from time to time be varied by the representatives. The
offering of the notes by the underwriter is subject to receipt and acceptance
and subject to the underwriter’s right to reject any order in whole or in
part.
The
aggregate proceeds to us are set forth on the cover page hereof before deducting
our expenses in offering the notes. We estimate that we will spend approximately
$1,100,000 for printing, rating agency, trustees and legal fees and other
expenses allocable to the offering.
We
have
agreed to indemnify the underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or to contribute
to
payments the underwriter may be required to make in respect
thereof.
The
notes
are offered for sale only in those jurisdictions in the United States where
it
is legal to make such offers. The notes are a new issue of securities
with no established trading market. We have been advised by the
underwriter that it intends to make a market in the notes but it is not
obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading
market for the notes.
In
connection with the offering, the underwriter may purchase and sell notes
in the
open market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriter of a greater
number of notes than it is required to purchase in the
offering. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or retarding a decline in the
market price of the notes while the offering is in progress.
These
activities, as well as other purchases by the underwriter for its own account,
may stabilize, maintain or otherwise affect the market price of the
notes. As a result, the price of the notes may be higher than the
price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriter at
any
time. These transactions may be effected in the over-the-counter
market or otherwise.
From
time
to time, Goldman, Sachs & Co. has provided, and may provide, various
financial advisory or investment banking services to us and our affiliates,
for
which it has received and may continue to receive customary fees and
commissions. Affiliates of Goldman, Sachs & Co. acted as lenders in a $1.0
billion line capacity and a $1.6 billion line of credit facility. The
underwriter may, from time to time, engage in transactions with or perform
services for us in the ordinary course of business, including acting as a
distributor of various life, annuity and investment products of our
subsidiaries.
S-23
VALIDITY
OF THE NOTES
The
validity of the notes offered in this offering will be passed upon for us
by
Blank Rome LLP and for the underwriter by Sullivan & Cromwell
LLP.
EXPERTS
The
consolidated financial statements of LNC appearing in LNC’s Annual Report on
Form 10-K for the year ended December 31, 2006 (including schedules
appearing therein), and LNC 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
consolidated financial statements of Jefferson-Pilot Corporation appearing
in
Jefferson-Pilot Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2005 (including schedules appearing therein), and
Jefferson-Pilot management’s assessment of the effectiveness of internal control
over financial reporting as of December 31, 2005 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.
S-24
PROSPECTUS
LINCOLN
NATIONAL CORPORATION
Debt
Securities
Common
Stock
Preferred
Stock
Warrants
Stock
Purchase Contracts
Depositary
Shares
Stock
Purchase Units
Lincoln
National Capital VII
Lincoln
National Capital VIII
Lincoln
National Capital IX
Trust
Preferred Securities
fully
and unconditionally guaranteed, as described herein,
by
Lincoln National Corporation
We
will
provide you with more specific terms of these securities in supplements to
this
prospectus.
Lincoln
National Capital VII, Lincoln National Capital VIII and Lincoln National Capital
IX are Delaware statutory trusts which may offer from time to time trust
preferred securities representing preferred undivided beneficial interests
in
the assets of the applicable trust.
We
may
offer and sell these securities to or through one or more underwriters, dealers
and agents, or directly to purchasers, on a continuous or delayed basis, at
prices and on other terms to be determined at the time of offering.
Our
common stock is listed on the New York, Chicago and Pacific Stock Exchanges,
under the symbol “LNC.”
Before
you invest, you should carefully read this prospectus, any applicable prospectus
supplement and information described under the headings “Where You Can Find More
Information” and “Documents Incorporated by Reference.”
Neither
the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
Prospectus
dated March 14, 2006.
Table
of Contents
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Page
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About
this
Prospectus
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1
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Where
You Can Find More
Information
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1
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Documents
Incorporated by
Reference
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1
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Description
of Securities We May
Sell
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3
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Debt
Securities
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3
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Common
Stock and Preferred Stock
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Depositary
Shares
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27
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Warrants
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31
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Stock
Purchase Contracts and Stock Purchase Units
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32
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Trust
Preferred Securities
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32
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Guarantees
of Trust Preferred Securities
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44
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Relationship
among the Trust Preferred Securities, the Corresponding
Subordinated
Debt
Securities and the Guarantees
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47
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Use
of
Proceeds
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48
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Validity
of
Securities
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48
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Experts
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48
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You
should rely only on the information contained or incorporated by reference
in
this prospectus. We have not, and the underwriters have not, authorized any
person to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on
the
front cover. Our business, financial condition, results of operations and
prospects may have changed since that date.
For
North Carolina Residents: The Commissioner of Insurance for the State of North
Carolina has not approved or disapproved these securities nor has the
Commissioner ruled upon the accuracy or adequacy of this
prospectus.
i
ABOUT
THIS PROSPECTUS
This
prospectus is one part of a “shelf” registration statement that we have filed on
Form S-3 with the SEC under the Securities Act. By using a shelf
registration statement, we may sell, from time to time, in one or more
offerings, any combination of the securities described in this
prospectus.
This
prospectus does not contain all of the information set forth in the registration
statement and the exhibits 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. Whenever a reference is made in this
prospectus to a contract or other document of the Company, the reference is
only
a summary and you should refer to the exhibits that are a part of the
registration statement for a copy of the contract or other
document.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and current reports, proxy statements and other information
and documents with the Securities and Exchange Commission, or SEC. You may
read
and copy any document we file with the SEC at:
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the
public reference room maintained by the SEC in Washington, D.C. (100
F
Street, N.E., Room 1580, 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
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the
SEC website located at www.sec.gov.
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Information
about us is also available on our website at http://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 website is not a part of this
prospectus.
DOCUMENTS
INCORPORATED BY REFERENCE
The
SEC’s
rules allow us to incorporate by reference information into this
prospectus. This means that we can disclose important information to you by
referring you to another document. Any information referred to in this way
is
considered part of this prospectus from the date we file that document. Any
reports filed by us with the SEC after the date of this prospectus and before
the date that the offering of the securities by means of this prospectus is
terminated will automatically update and, where applicable, supersede any
information contained in this prospectus or incorporated by reference in this
prospectus.
We
incorporate by reference into this prospectus the following documents or
information filed (File No. 1-6028) with the SEC (other than, in each case,
information deemed to have been furnished or not filed in accordance with the
SEC rules):
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Our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2004;
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Our
Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30, and September 30,
2005;
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Our
Current Reports on Form 8-K filed with the SEC on January 20,
February 16, March 4, May 12 (except Item 7.01 on such
Form 8-K shall not be deemed incorporated by reference herein),
October 11 and December 27, 2005 and January 13,
January 20, January 31, February 13, February 14 (one
report), and February 28,
2006;
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The
description of our Common Stock contained in Form 10 filed with the
SEC on April 28, 1969, including any amendments or reports filed for
the purpose of updating that description;
and
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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, including any amendments or reports
filed for the purpose of updating that
description.
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Each
document filed subsequent to the date of this Registration Statement pursuant
to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934,
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
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DESCRIPTION
OF SECURITIES WE MAY SELL
Debt
Securities
Senior
Debt Securities
We
may
issue the senior debt securities in one or more series under an indenture dated
as of September 15, 1994 between LNC and The Bank of New York, as trustee.
For purposes of this section, we refer to the indenture, as supplemented from
time to time, as the “indenture” and to The Bank of New York or any successor or
additional trustee, in its capacity as trustee under the indenture, as the
“trustee.” The indenture and the form of the senior debt securities are filed as
exhibits to the registration statement that includes this prospectus. The
indenture has been qualified under the Trust Indenture Act of 1939, as amended,
which we refer to as the Trust Indenture Act.
This
summary of the indenture and the senior debt securities relates to terms and
conditions applicable to the senior debt securities generally. We will summarize
the particular terms of any series of senior debt securities in the applicable
prospectus supplement. If indicated in the prospectus supplement, the terms
of
any series may differ from the terms summarized below. Because the summary of
the material provisions of the indenture and the senior debt securities set
forth below and the summary of the material terms of a particular series of
senior debt securities set forth in the applicable prospectus supplement are
not
complete, you should refer to the forms of the indenture and the senior debt
securities for complete information regarding the terms and provisions of the
indenture (including defined terms) and the senior debt securities. Wherever
we
refer to particular articles, sections or defined terms of the indenture in
this
prospectus or in a prospectus supplement, those articles, sections or defined
terms are incorporated in this prospectus and the prospectus supplement by
reference, and the statement with respect to which such reference is made is
qualified in its entirety by such reference.
General
The
senior debt securities will be unsecured and will rank on parity with all of
our
other unsecured and unsubordinated indebtedness. The indenture does not limit
the amount of senior debt securities which we may issue under it, and it
provides that senior debt securities may be issued up to the aggregate principal
amount that we authorize from time to time.
Please
refer to the applicable prospectus supplement for the following terms of a
particular series of senior debt securities being offered:
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the
title, aggregate principal amount and authorized denominations of
the
senior debt securities;
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the
percentage of their principal amount at which the senior debt securities
will be issued;
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the
date or dates on which the senior debt securities will
mature;
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the
rate or rates per annum (which may be fixed or variable), if any,
at which
the senior debt securities will bear interest or the method of determining
or calculating such rate or rates;
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the
times at which any such interest will be
payable;
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the
currency or units of two or more currencies in which the senior debt
securities are denominated and in which principal and any premium,
interest and additional amounts (described below) will or may be
payable;
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the
dates, if any, on which and the price or prices at which we may redeem
the
senior debt securities pursuant to any optional or mandatory sinking
fund
provisions, and other terms and provisions of any sinking
fund;
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any
redemption terms or any terms for repayment of principal amount at
the
option of the holder;
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whether
and under what circumstances we will pay additional amounts in respect
of
certain taxes imposed on certain holders or as otherwise
provided;
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the
terms and conditions upon which such senior debt securities may be
convertible into shares of our common stock or our other securities,
including the conversion price, conversion period and other conversion
provisions;
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the
defeasance provisions, if any, that are applicable to the senior
debt
securities (other than those described in this
prospectus);
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whether
the senior debt securities are to be issuable in global form and,
if so,
the terms and conditions, if any, upon which interests in senior
debt
securities issued in global form may be exchanged, in whole or in
part,
for the individual senior debt securities represented by the global
senior
debt security and the initial depository for the global senior debt
security;
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the
person to whom any interest on a registered security is payable,
if other
than the registered holder, or the manner in which any interest is
payable
on a bearer security if other than upon presentation of the related
coupons; or
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any
other specific terms of the senior debt
securities.
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Principal,
interest and premium and additional amounts, if any, will be payable in the
manner, at the places and subject to the restrictions set forth in the
indenture, the senior debt securities and the prospectus supplement relating
thereto.
Unless
we
specify otherwise in the applicable prospectus supplement, we will issue the
senior debt securities in fully registered form without coupons. When we issue
senior debt securities of any series in bearer form, we will describe in the
applicable prospectus supplement the special restrictions and considerations,
including special offering restrictions and special federal income tax
considerations, applicable to the senior debt securities and to payment on
and
transfer and exchange of the senior debt securities.
We
may
issue senior debt securities as discounted senior debt securities that bear
no
interest or that bear interest at a below market rate at the time of issuance
to
be sold at a substantial discount below their stated principal amount. We will
describe the U.S. federal income tax consequences and other special
considerations applicable to any discounted senior debt securities in the
applicable prospectus supplement.
If
the
purchase price of any senior debt securities is payable in one or more foreign
currencies or currency units or if any senior debt securities are denominated
in
one or more foreign currencies or currency units or if the principal of, or
premium, or interest, if any, on, any senior debt securities is payable in
one
or more foreign currencies or currency units, we will describe the restrictions,
elections, certain U.S. federal income tax considerations, specific terms and
other information with respect to the senior debt securities and foreign
currency or currency units in the applicable prospectus supplement.
Holders
may present senior debt securities for exchange, and holders may present
registered senior debt securities for transfer, in the manner, at the places
and
subject to the restrictions set forth in the indenture, the senior debt
securities and the applicable prospectus supplement. Holders of senior debt
securities in bearer form and the related coupons may transfer them by delivery.
No service charge will be made for any transfer or exchange of senior debt
securities, but we may require payment of a sum sufficient to cover any tax
or
other governmental charge payable in connection with the transfer or exchange.
(Section 2.06)
If
the
senior debt securities are convertible into shares of common stock, the
conversion price payable and the number of shares purchasable upon conversion
may be subject to adjustment in certain events as set forth in the applicable
prospectus supplement.
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Form,
Registration, Transfer and Exchange
We
may
issue senior debt securities of a series solely as registered securities, solely
as bearer securities (with or without coupons attached) or as both registered
securities and bearer securities. We may issue senior debt securities of a
series in whole or part in the form of one or more global senior debt
securities, which we refer to in this prospectus as “global securities”, as
described below under “Global Senior Debt Securities.”
Registered
securities of any series will be exchangeable for other registered securities
of
the same series and of a like aggregate principal amount and tenor in different
authorized denominations. In addition, if senior debt securities of any series
are issuable as both registered securities and bearer securities, the holder
may
choose, subject to the terms of the indenture, to exchange bearer securities
and
the appropriate related coupons of that series for registered securities of
the
same series of any authorized denominations and of a like aggregate principal
amount and tenor. Unless otherwise indicated in the applicable prospectus
supplement, any bearer security surrendered in exchange for a registered
security between a record date or a special record date for defaulted interest
and the relevant date for payment of interest will be surrendered without the
coupon relating to the interest payment date. Interest will not be payable
with
respect to the registered security issued in exchange for the bearer security.
Instead, that interest will be payable only to the holder of the coupon when
due
in accordance with the terms of the indenture. Bearer securities will not be
issued in exchange for registered securities. (Sections 2.06,
2.12 and 4.01)
Holders
may present senior debt securities for exchange as provided above, and unless
otherwise indicated in the applicable prospectus supplement, holders may present
registered securities for registration of transfer (duly endorsed, or
accompanied by a duly executed written instrument of transfer), at the office
of
any transfer agent that we designate for that purpose with respect to any series
of senior debt securities and referred to in the applicable prospectus
supplement. This may be done without service charge upon payment of any taxes
and other governmental charges as described in the indenture. The transfer
agent
will effect the transfer or exchange upon being satisfied with the documents
of
title and identity of the person making the request. We may at any time rescind
the designation of any transfer agent. However, no such designation or
rescission will in any manner relieve us of our obligation to maintain an office
or agency in each place of payment for senior debt securities of a series.
We
may at any time designate additional transfer agents with respect to any series
of senior debt securities. (Sections 2.06 and 4.02)
If
senior
debt securities of any series are redeemed, we will not be required
to:
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register
the transfer or exchange of senior debt securities of that series
during a
15-day period before the selection of the securities of that series
to be
redeemed;
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register
the transfer of or exchange any registered security, or portion thereof,
selected for redemption, except the unredeemed portion of any registered
security being redeemed in part; or
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exchange
any bearer security called for redemption except, to the extent provided
with respect to any series of senior debt securities and referred
to in
the applicable prospectus supplement, to exchange such bearer security
for
a registered security of that series of like tenor and principal
amount
that is immediately surrendered for redemption.
(Section 2.06)
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Payment
and Paying Agents
Unless
otherwise indicated in the applicable prospectus supplement, payment of
principal and premium, interest and additional amounts, if any, on registered
securities will be made at the office of the paying agent or paying agents
that
we may designate from time to time. However, at our option, we may make payment
of interest and any additional amounts by check or draft mailed to the address,
as it appears in the senior debt security register, of the person or entity
entitled to the payment. Unless otherwise indicated in an applicable prospectus
supplement, we will make payment of any installment of interest on registered
securities to the person or entity in whose name the registered security is
registered at the close of business on the record date for such interest.
(Section 4.01)
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Unless
otherwise indicated in the applicable prospectus supplement, payment of
principal and premium, interest and additional amounts, if any, on bearer
securities will be payable in accordance with applicable laws and regulations
at
the offices of those paying agents outside the U.S. as we may designate from
time to time, or by check or by transfer to an account maintained by the payee
outside the U.S. Unless otherwise indicated in the applicable prospectus
supplement, we will make interest payments on bearer securities only against
surrender of the coupon relating to that interest installment.
(Sections 2.06, 4.01, and 4.02)
We
will
initially designate paying agents in or outside the U.S. for the senior debt
securities in the applicable prospectus supplement. If the senior debt
securities of a series are listed on a stock exchange located outside the U.S.
and if the stock exchange requires it, we will maintain a paying agent for
that
series in London, Luxembourg or any other required city located outside the
U.S.
so long as the senior debt securities of that series are listed on that
exchange. We may at any time designate additional paying agents or rescind
the
designation of any paying agent. However, no such designation or rescission
shall in any manner relieve us of our obligation to maintain an office or agency
in each place of payment. (Section 4.02)
All
monies that we pay to a paying agent for the payment of principal of or interest
or additional amounts, if any, on any senior debt security which remain
unclaimed at the end of one year after becoming due and payable will be repaid
to us. After that time, the holder of the senior debt security or coupon will
look only to us for payment of those amounts. (Section 4.03)
Global
Senior Debt Securities
We
may
issue the senior debt securities of a series in the form of one or more global
securities that we will deposit with a depository or its nominee identified
in
the applicable prospectus supplement. In such a case, we will issue one or
more
global securities in a denomination or aggregate denominations equal to the
portion of the aggregate principal amount of outstanding senior debt securities
of the series to be represented by such global security or global securities.
Unless and until it is exchanged in whole or in part for senior debt securities
in registered form, a global security may not, subject to certain exceptions,
be
registered for transfer or exchange except to the depository for the global
security or a nominee of the depository. (Sections 2.01 and
2.06)
Unless
otherwise specified in the applicable prospectus supplement, a global security
representing a series of senior debt securities will be exchangeable for
individual senior debt securities of that series in the following
circumstances:
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if
a depository is at any time unwilling, unable or ineligible to continue
as
depository and we do not appoint a successor depository within 90
days;
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at
any time in our sole discretion if we determine not to have any senior
debt securities of that series represented by a global
security;
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if
we so specify with respect to a series of senior debt securities,
at any
time upon the request of an owner of a beneficial interest in a global
security representing senior debt securities of that series if the
exchange is made on terms acceptable to us, the trustee and the
depository; or
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a
senior debt security event of default has occurred and is continuing
with
respect to that series of senior debt securities.
(Section 2.01)
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To
the
extent not described under the heading “Book-Entry Issuance,” we will describe
the terms of the depository arrangement for any portion of a series of senior
debt securities to be represented by a global security in the applicable
prospectus supplement.
Limitation
on Liens on Stock of Restricted Subsidiaries
We
will
not, nor will we permit any Restricted Subsidiary to, issue, assume or guarantee
any indebtedness for borrowed money (which we refer to in this prospectus as
“Debt”) secured by a mortgage, security interest,
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pledge,
lien or other encumbrance upon any shares of stock of any Restricted Subsidiary
without effectively providing that the senior debt securities (together with,
if
we shall so determine, any other indebtedness of or guarantee by us ranking
equally with the senior debt securities and then existing or thereafter created)
will be secured equally and ratably with that Debt.
(Section 4.06)
For
purposes of the indenture, “Restricted Subsidiary” means The Lincoln National
Life Insurance Company so long as it remains a subsidiary, as well as any
successor to all or a principal part of the business of that subsidiary and
any
other subsidiary which our board of directors designates as a Restricted
Subsidiary. (Section 1.01)
Limitation
on Issuance or Disposition of Stock of Restricted Subsidiaries
We
will
not, nor will we permit any Restricted Subsidiary to, issue, sell, assign,
transfer or otherwise dispose of, directly or indirectly, any capital stock,
other than nonvoting preferred stock, of any Restricted Subsidiary, except
for:
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the
purpose of qualifying directors;
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sales
or other dispositions to us or one or more Restricted
Subsidiaries;
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the
disposition of all or any part of the capital stock of any Restricted
Subsidiary for consideration which is at least equal to the fair
value of
that capital stock as determined by our board of directors acting
in good
faith; or
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an
issuance, sale, assignment, transfer or other disposition required
to
comply with an order of a court or regulatory authority of competent
jurisdiction, other than an order issued at our request or the request
of
any Restricted Subsidiary.
(Section 4.07)
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For
the
purposes of the indenture, “capital stock” means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents
of or
interests in corporate stock. (Section 1.01)
Defaults
and Remedies
A
“senior
debt security event of default” with respect to senior debt securities of any
series is defined in the indenture as being any one of the following
events:
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(a)
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default
for 30 days in payment of any interest or additional amounts on the
senior
debt securities of that series;
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(b)
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default
in payment of principal or premium, if any, on the senior debt securities
of that series when due either at maturity, upon redemption, by
declaration or otherwise, other than a failure to make payment resulting
from mistake, oversight or transfer difficulties not continuing for
more
than three business days beyond the payment due
date;
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(c)
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default
in payment of any sinking fund installment when due and payable,
other
than a failure to make payment resulting from mistake, oversight
or
transfer difficulties not continuing for more than three business
days
beyond the payment due date;
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(d)
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our
default in the performance or breach of any of our other covenants
or
warranties relating to the senior debt securities of that series
for a
period of 60 days after written notice has been provided to us by
the
trustee or to us and the trustee by the registered holders of at
least 25%
in principal amount of the outstanding debt securities of that
series;
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(e)
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certain
events involving our bankruptcy or insolvency;
or
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(f)
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other
events of default as specified in the supplemental indenture or board
resolution under which that series of senior debt securities was
issued.
(Section 6.01)
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The
indenture provides that if a senior debt security event of default described
in
clauses (a), (b), (c) or, in the event of a default with respect to less
than all outstanding series under the indenture, (d) above has occurred and
is continuing with respect to one or more series, either the trustee or the
holders of 25% in principal amount of the outstanding senior debt securities
of
that series (each series voting as a separate class) may declare the principal
(or in the case of original issue discount senior debt securities, the portion
of the principal amount specified in the terms of the senior debt securities),
accrued interest and any additional amounts payable with respect to the senior
debt securities of that series to be due and payable immediately.
(Section 6.01)
The
indenture also provides that if a senior debt security event of default
described in clause (d) (in the event of a default with respect to all
outstanding series) or (e) above has occurred and is continuing, either the
trustee or the holders of 25% in principal amount of all senior debt securities
then outstanding (voting as one class) may declare the principal (or in the
case
of original issue discount senior debt securities, the portion of the principal
amount specified in the terms of the senior debt securities), accrued interest
and any additional amounts payable with respect to all outstanding senior debt
securities to be due and payable immediately. (Section 6.01)
Upon
certain conditions, the holders of a majority in principal amount of the
outstanding senior debt securities of that series (or of all series, as the
case
may be) may annul declarations of acceleration and waive past defaults, other
than defaults in the payment of principal of, or premium, interest or additional
amounts, if any, on the senior debt securities. (Sections 6.01 and
6.10)
Holders
may not enforce the indenture or the senior debt securities except as provided
in the indenture. The trustee may refuse to enforce the indenture or the senior
debt securities unless it receives indemnity satisfactory to it. Subject to
certain limitations, holders of a majority in principal amount of the senior
debt securities of any series may direct the trustee in its exercise of any
trust or power. We must deliver annually to the trustee an officer’s statement
indicating whether the signer knows of any default by us in performing any
of
our obligations under the indenture. Except a default in payment of principal
or
any premium, interest or additional amounts, or any sinking or purchase fund
installment, the trustee may withhold notice of any continuing default from
holders, if it determines that withholding notice is in their interest.
(Sections 4.05, 6.06, 6.09, 6.11, 7.01 and 7.05)
Defeasance
Unless
otherwise described in a prospectus supplement with respect to any series of
senior debt securities, if we deposit with the trustee, in trust,
money, government obligations or a combination thereof which will in the
written opinion of independent public accountants selected by us, provide money
in an amount sufficient to pay all the principal (including any mandatory
sinking fund payments) of, and interest and additional amounts and premium,
if
any, on, a series of senior debt securities on the dates such payments are
due
in accordance with the terms of that series, we, at our option:
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will
be discharged from any and all obligations in respect of that series
of
senior debt securities on the 91st day after satisfaction of all
conditions to the discharge, other than certain obligations to register
the transfer or exchange of the senior debt securities, replace stolen,
lost or mutilated senior debt securities, maintain paying agencies
and
hold moneys for payment in trust;
or
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effective
upon the satisfaction of all applicable conditions, need not comply
with
certain restrictive covenants under the indenture or otherwise applicable
to that series of senior debt securities and will not be limited
by any
restrictions with respect to merger, consolidation or sales of assets.
(Section 8.02)
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In
order
to exercise either of the options described above, no senior debt security
event
of default shall have occurred and be continuing under the indenture, and we
must provide to the trustee:
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an
opinion of counsel to the effect that holders of the applicable series
of
senior debt securities:
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will
not recognize income, gain or loss for federal income tax purposes
as a
result of our exercise of its
option;
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will
be subject to federal income tax on the same amount, in the same
manner
and at the same time as would have been the case if such option had
not
been exercised;
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if
senior debt securities are being discharged, a private letter ruling
to
the same effect as the opinion of counsel received from the U.S.
Internal
Revenue Service or a revenue ruling pertaining to a comparable form
of
transaction to that effect published by the
IRS;
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an
officers’ certificate to the effect that no senior debt security event of
default or event which with the giving of notice or lapse of time,
or
both, would become a senior debt security event of default, with
respect
to the applicable series of senior debt securities shall have occurred
and
be continuing on the date of the deposit;
and
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if
the senior debt securities are listed on the New York Stock Exchange,
an
opinion of counsel to the effect that the exercise of the option
will not
cause the senior debt securities to be delisted.
(Section 8.02)
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For
purposes of the indenture, the term “government obligations” means
generally:
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direct
noncallable obligations of the government which issued the currency
in
which the senior debt securities of the applicable series are
denominated;
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noncallable
obligations which are fully guaranteed by that government with respect
to
the payment of principal and interest;
or
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noncallable
obligations on which the full faith and credit of that government
is
pledged with respect to the payment of principal and interest.
(Section 1.01)
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In
addition, we may obtain a discharge under the indenture with respect to all
the
senior debt securities of a series by depositing with the trustee, in trust,
moneys or government obligations sufficient to pay at maturity or upon
redemption all of the principal, premium, interest and additional amounts
payable with respect to the senior debt securities of that series if all of
those senior debt securities are by their terms to become due and payable within
one year or are to be called for redemption within one year. We are not required
to deliver an opinion of counsel or ruling relating to the tax consequences
to
holders for this discharge. (Section 8.01) After any discharge of senior
debt securities pursuant to the terms of the indenture described above, the
holders of those senior debt securities will be able to look solely to the
trust
fund, and not to us, for payments of principal and any premium, interest or
additional amounts. (Sections 8.01 and 8.02)
Consolidation,
Merger and Sale of Assets
We
may
not consolidate with or merge into, or sell, lease or convey all or
substantially all of its assets to, another corporation unless:
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the
successor or transferee corporation is a corporation organized and
existing under the laws of the U.S. or a state
thereof;
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the
successor or transferee corporation assumes by supplemental indenture
all
of our obligations under the senior debt securities and the indenture;
and
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we
or the successor corporation, as the case may be, will not, immediately
after such consolidation or merger or sale, lease or conveyance,
be in
default in the performance of any covenant or condition with respect
to
the senior debt securities or the
indenture.
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We
will
deliver to the trustee an officers’ certificate and an opinion of counsel, each
stating that the consolidation, merger or transfer and the supplemental
indenture comply with the terms of the indenture. Upon any consolidation or
merger or any sale, lease or conveyance of all or substantially all of our
assets, the successor or transferee corporation shall succeed to, and be
substituted for us, under the indenture, and may exercise all rights and powers.
(Sections 5.01 and 5.02) Thereafter, all obligations of the predecessor
corporation will terminate. (Section 5.01)
9
Modification
of the Indenture
The
indenture permits us and the trustee to amend or supplement the indenture or
the
senior debt securities without notice to or the consent of any holder of a
senior debt security for certain purposes, including to:
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cure
any ambiguity, defect or
inconsistency;
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comply
with Section 5.01 (relating to when we may consolidate, merge or sell
all or substantially all of its
assets);
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provide
for uncertificated senior debt
securities;
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establish
the form or terms of senior debt securities of any series;
or
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make
any change that does not adversely affect the rights of any holder
of a
senior debt security.
(Section 9.01)
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We
and
the trustee may modify or amend certain other provisions of the indenture only
with the consent of the holders of at least a majority in aggregate principal
amount of the outstanding senior debt securities of each series issued under
the
indenture which is affected by the modification or amendment (voting as one
class). However, no such modification or amendment may, without the consent
of
the holder of each senior debt security affected thereby:
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reduce
the percentage of senior debt securities whose holders must consent
to an
amendment, supplement or waiver;
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reduce
the rate or rates or extend the time for payment of interest or additional
amounts, if any, on any senior debt
security;
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reduce
the principal of or premium, if any, on or extend the fixed maturity
of
any senior debt security;
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modify
or effect in any manner adverse to the holders of senior debt securities
the terms and conditions of our obligations in respect of its obligations
under the indenture;
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waive
a default in the payment of principal of or premium or interest or
additional amounts, if any, on any senior debt
security;
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impair
the right to institute a suit for the enforcement of any payment
with
respect to any series of senior debt
securities;
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change
a place of payment; or
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make
any senior debt security payable in currency other than that stated
in the
senior debt security.
(Section 9.02)
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Regarding
the Trustee
The
trustee is a participant in certain of our credit agreements, and we have
maintained other banking relationships with the trustee in the normal course
of
business. The trustee also acts as trustee and paying agent for our 6 ½% Notes
due March 15, 2008, 6.20% Notes due December 15, 2011, 7% Notes due
March 15, 2018, and 4.75% Notes due February 15, 2014 and may act as
trustee under other of our indentures, trusts and guarantees and those of our
affiliates in the ordinary course of business.
Junior
Subordinated Debt Securities
We
may
issue junior subordinated debt securities in one or more series under a junior
subordinated indenture, dated May 1, 1996, as supplemented by the first
supplement of indenture, dated August 14, 1998, and as may be further
supplemented from time to time, between LNC and J.P. Morgan Trust Company,
National Association (successor in interest to Bank One Trust Company, National
Association and The First National Bank of Chicago), as trustee. For purposes
of
this prospectus, we refer to the junior subordinated indenture, as
10
supplemented
from time to time, as the “subordinated indenture”, to the junior subordinated
debt securities as “subordinated debt securities” and to J.P. Morgan Trust
Company, National Association or any successor or additional trustee, in its
capacity as trustee under the subordinated indenture, as the “subordinated
indenture trustee.” The subordinated indenture (including the form of the
subordinated debt securities) is filed as an exhibit to the registration
statement that includes this prospectus. The subordinated indenture has been
qualified under the Trust Indenture Act.
This
summary of the subordinated indenture and the subordinated debt securities
relates to terms and conditions applicable to the subordinated debt securities
generally. We will summarize the particular terms of any series of subordinated
debt securities in the applicable prospectus supplement. If indicated in the
prospectus supplement, the terms of any series may differ from the terms
summarized below. Because the summary of the material provisions of the
subordinated indenture and the subordinated debt securities set forth below
and
the summary of the material terms of a particular series of subordinated debt
securities set forth in the applicable prospectus supplement are not complete,
you should refer to the forms of the subordinated indenture and the subordinated
debt securities for complete information regarding the terms and provisions
of
the subordinated indenture (including defined terms) and the subordinated debt
securities. Wherever we refer to particular articles, sections or defined terms
of the subordinated indenture in this prospectus or in a prospectus supplement,
those articles, sections or defined terms are incorporated in this prospectus
and the prospectus supplement by reference, and the statement with respect
to
which such reference is made is qualified in its entirety by such
reference.
General
Each
series of subordinated debt securities will rank equally with all other series
of subordinated debt securities, unless otherwise provided in the supplemental
indenture, and will be unsecured and subordinate and junior in right of payment
to the extent and in the manner set forth in the subordinated indenture to
all
of our Senior Debt (as defined below). See “—Subordination.”
We
are a
non-operating holding company and our consolidated subsidiaries own almost
all
of our operating assets. We rely primarily on dividends from our subsidiaries
to
meet our obligations. The payment of dividends by our insurance company
subsidiaries is limited under the insurance company holding company laws of
the
states in which those subsidiaries are domiciled. Accordingly, the subordinated
debt securities will be effectively subordinated to all existing and future
liabilities of our subsidiaries, and holders of subordinated debt securities
should look only to our assets for payments on the subordinated debt securities.
Except as otherwise provided in the applicable prospectus supplement, the
subordinated indenture does not limit our incurrence or issuance of other
secured or unsecured debt, whether under the subordinated indenture, the
indenture or any other indenture that we may enter into in the future or
otherwise. See “—Subordination” and the prospectus supplement relating to any
offering of subordinated debt securities.
We
will
issue the subordinated debt securities in one or more series pursuant to an
indenture supplemental to the subordinated indenture or a resolution of our
board of directors or a committee thereof.
The
applicable prospectus supplement will describe the following terms of the
subordinated debt securities:
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the
title of the subordinated debt
securities;
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any
limit upon the aggregate principal amount of the subordinated debt
securities;
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the
date or dates on which the principal of the subordinated debt securities
is payable (which we refer to as the “stated maturity”) or the method of
determination of the stated
maturity;
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the
rate or rates, if any, at which the subordinated debt securities
will bear
interest, the interest payment dates on which interest will be payable,
our right, if any, to defer or extend an interest payment date and
the
regular record date for interest payable on any interest payment
date or
the method by which any of these items will be
determined;
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the
place or places where the principal of and premium, if any, and interest
on the subordinated debt securities will be payable and where the
subordinated debt securities may be presented for registration of
transfer
or exchange and the place or places where notices and demands to
or upon
us regarding the subordinated debt securities and the subordinated
indenture may be made;
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the
terms and conditions upon which subordinated debt securities may
be
redeemed, in whole or in part, at our option or a holder of subordinated
debt securities;
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our
obligation or right, if any, or the obligation or right of, if any,
a
holder to redeem, purchase or repay the subordinated debt securities
and
the terms and conditions upon which the subordinated debt securities
shall
be redeemed, repaid or purchased, in whole or in part, pursuant to
such
obligation;
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the
denominations in which any subordinated debt securities shall be
issuable
if other than denominations of $25 and any integral multiple
thereof;
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if
other than in U.S. dollars, the currency or currencies (including
currency
unit or units) in which the principal of and premium and interest,
if any,
on the subordinated debt securities shall be payable, or in which
the
subordinated debt securities shall be
denominated;
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any
additions, modifications or deletions in the events of default or
covenants specified in the subordinated indenture with respect to
the
subordinated debt securities;
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if
other than the principal amount, the portion of the principal amount
of
subordinated debt securities that shall be payable upon declaration
of
acceleration of the maturity
thereof;
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any
additions or changes to the subordinated indenture with respect to
a
series of subordinated debt securities as shall be necessary to permit
or
facilitate the issuance of the series in bearer form, registrable
or not
registrable as to principal, and with or without interest
coupons;
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any
index or indices used to determine the amount of payments of principal
of
and premium, if any, on the subordinated debt securities and the
manner in
which these amounts will be
determined;
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the
terms and conditions relating to the issuance of a temporary global
security representing all of the subordinated debt securities of
the
series and the exchange of the temporary global security for definitive
subordinated debt securities of the
series;
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whether
the subordinated debt securities of the series will be issued in
whole or
in part in the form of one or more global securities and the depositary
for the global securities, which depositary will be a clearing agency
registered under the Securities Exchange Act of
1934;
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the
appointment of any paying agent or
agents;
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the
terms and conditions of any obligation or right of us or a holder
to
convert or exchange the subordinated debt securities into trust preferred
securities;
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the
form of trust agreement and guarantee agreement, if
applicable;
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the
relative degree, if any, to which subordinated debt securities of
the
series shall be senior or subordinated to other series of our subordinated
debt securities or other indebtedness in right of payment, whether
other
series of subordinated debt securities or other indebtedness are
outstanding or not; and
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any
other terms of the subordinated debt securities not inconsistent
with the
provisions of the subordinated
indenture.
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We
may
sell subordinated debt securities at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which is below
market rates at the time of issuance. We will describe certain U.S. federal
income tax consequences and special considerations applicable to any
subordinated debt securities in the applicable prospectus
supplement.
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If
the
purchase price of any subordinated debt securities is payable in one or more
foreign currencies or currency units or if any subordinated debt securities
are
denominated in one or more foreign currencies or currency units or if the
principal of, or premium or interest, if any, on, any subordinated debt
securities is payable in one or more foreign currencies or currency units,
we
will describe the restrictions, elections, certain U.S. federal income tax
consequences, specific terms and other information with respect to the
subordinated debt securities and foreign currency or currency units in the
applicable prospectus supplement.
If
any
index is used to determine the amount of any principal, premium or interest
payable with respect to any series of subordinated debt securities, we will
describe the special U.S. federal income tax, accounting and other
considerations in the applicable prospectus supplement.
Denominations,
Registration and Transfer
Unless
otherwise specified in the applicable prospectus supplement, we will issue
the
subordinated debt securities only in registered form without coupons in
denominations of $25 and any integral multiple of $25. Subordinated debt
securities of any series will be exchangeable for other subordinated debt
securities of the same series and of a like aggregate principal amount and
tenor
in different authorized denominations. (Section 3.02)
Holders
may present subordinated debt securities for exchange as provided above, and
holders may present subordinated debt securities for registration of transfer
(duly endorsed or accompanied by a duly executed written instrument of
transfer), at the office of the appropriate securities registrar or at the
office of any transfer agent designated by us for such purpose with respect
to
any series of subordinated debt securities and referred to in the applicable
prospectus supplement. This may be done without service charge upon payment
of
any taxes and other governmental charges as described in the subordinated
indenture. We have appointed the subordinated indenture trustee as securities
registrar under the subordinated indenture. If the applicable prospectus
supplement refers to any transfer agents initially designated by us with respect
to any series of subordinated debt securities in addition to the securities
registrar, we may at any time rescind the designation of any of those transfer
agents or approve a change in the location through which any of those transfer
agents acts. However, we will be required to maintain a transfer agent in each
place of payment for that series. We may at any time designate additional
transfer agents with respect to any series of subordinated debt
securities.
In
the
event of any redemption, neither we nor the subordinated indenture trustee
will
be required to:
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issue,
register the transfer of or exchange subordinated debt securities
of any
series during a period beginning at the opening of business 15 days
before
any selection of subordinated debt securities of that series to be
redeemed and ending at the close of business on the day of mailing
of the
relevant notice of redemption; or
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transfer
or exchange any subordinated debt securities selected for redemption,
except the unredeemed portion of any subordinated debt securities
being
redeemed in part.
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Global
Subordinated Debt Securities
We
may
issue the subordinated debt securities of a series in whole or in part in the
form of one or more global securities that we will deposit with, or on behalf
of, a depository or its nominee identified in the prospectus supplement relating
to that series. We will issue global securities only in fully registered form
and in either temporary or permanent form. Unless and until it is exchanged
in
whole or in part for the individual subordinated debt securities it represents,
a global security may not be transferred except as a whole:
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by
the depository for the global security to a nominee of the
depository;
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by
a nominee of the depository to the depository or another nominee
of the
depository; or
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by
the depository or any nominee to a successor depository or any nominee
of
the successor.
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Unless
otherwise specified in the applicable prospectus supplement, a global security
representing a series of subordinated debt securities will be exchangeable
for
individual subordinated debt securities of that series in the following
circumstances:
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if
a depository is unwilling or unable to continue as depository or
if the
depository ceases to be a clearing agency registered under the Securities
Exchange Act of 1934;
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at
any time in our sole discretion if we determine not to have any
subordinated debt securities of that series represented by a global
security;
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if
we so specify with respect to a series of subordinated debt securities,
at
any time upon the request of an owner of a beneficial interest in
a global
security representing subordinated debt securities of that series
if the
exchange is made on terms acceptable to us, the subordinated indenture
trustee and the depository; or
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a
subordinated debt security event of default has occurred and is continuing
with respect to that series of subordinated debt
securities.
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To
the
extent not described under the heading “Book-Entry Issuance,” we will describe
the terms of the depository arrangement for a series of subordinated debt
securities to be represented by a global security in the applicable prospectus
supplement.
Payment
and Paying Agents
Unless
otherwise indicated in the applicable prospectus supplement, payment of
principal and any premium and interest on subordinated debt securities will
be
made at 55 Water Street, 1st Floor, Jeanette Park Entrance, New York, New
York 10041, or at the office of any paying agent or paying agents as we may
designate from time to time in the applicable prospectus supplement. However,
at
our option, we may make payment of any interest:
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except
in the case of global subordinated debt securities, by check mailed
to the
address, as it appears in the securities register, of the person
or entity
entitled to the payment; or
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by
transfer to an account maintained by the person or entity entitled
to the
payment as specified in the securities register, if we have received
proper transfer instructions by the regular record
date.
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Unless
otherwise indicated in the applicable prospectus supplement, we will make
payments of interest on subordinated debt securities to the person or entity
in
whose name the subordinated debt security is registered at the close of business
on the regular record date for such interest, except in the case of defaulted
interest. We may at any time designate additional paying agents or rescind
the
designation of any paying agent. However, we will be required to maintain at
all
times a paying agent in each place of payment for each series of subordinated
debt securities.
Any
moneys that we deposit with the subordinated indenture trustee or any paying
agent, or then held by us in trust, for the payment of the principal of and
any
premium or interest on any subordinated debt security that remains unclaimed
for
two years after becoming due and payable will be repaid to us at our request.
After that time, the holder of the subordinated debt security will look, as
a
general unsecured creditor, only to us for payment of those
amounts.
Option
to Extend Interest Payment Date
If
provided in the applicable prospectus supplement and subject to any terms,
conditions and covenants contained in the prospectus supplement, we will have
the right at any time and from time to time during the term of any series of
subordinated debt securities to defer payment of interest for that number of
consecutive interest payment periods as may be specified in the applicable
prospectus supplement (each of which we refer to as an
14
“extension
period”). However, no extension period may extend beyond the stated maturity of
the applicable series of subordinated debt securities. We will describe certain
U.S. federal income tax consequences and special considerations applicable
to
the subordinated debt securities in the applicable prospectus
supplement.
Redemption
Unless
otherwise indicated in the applicable prospectus supplement:
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subordinated
debt securities will not be subject to any sinking
fund;
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we
may, at our option, redeem the subordinated debt securities of any
series
in whole at any time or in part from time to time. We may redeem
subordinated debt securities in denominations larger than $25 in
part but
only in integral multiples of $25;
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the
redemption price for any subordinated debt security shall equal the
principal amount of the security, plus any accrued and unpaid interest
to
the redemption date; and
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if
a Subordinated Debt Security Tax Event described below has occurred
and is
continuing with respect to a series of subordinated debt securities,
we
may, at our option, redeem that series of subordinated debt securities
in
whole, but not in part, at any time within 90 days of the occurrence
of
the Subordinated Debt Security Tax Event, at a redemption price equal
to
100% of the principal amount of the subordinated debt securities
of that
series then outstanding plus accrued and unpaid interest to the redemption
date.
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“Subordinated
Debt Security Tax Event” means the receipt by us of an opinion of counsel
experienced in such matters to the effect that:
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as
a result of any amendment to, or change or announced prospective
change
in, the laws or regulations of the U.S. or any political subdivision
or
taxing authority in the U.S., or
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as
a result of any official administrative pronouncement or judicial
decision
interpreting or applying those laws or
regulations,
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which
amendment or change is effective or which pronouncement or decision
is
announced on or after the date of issuance of the applicable series
of
subordinated debt securities under the subordinated
indenture,
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there
is more than an insubstantial risk that interest payable by us on
the
series of subordinated debt securities is not, or within 90 days
of the
date of the opinion will not be, deductible by us, in whole or in
part,
for U.S. federal income tax
purposes.
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We
will
mail notice of any redemption at least 30 days but not more than 60 days before
the redemption date to each holder of subordinated debt securities to be
redeemed at its registered address. Unless we default in payment of the
redemption price, interest will cease to accrue on those subordinated debt
securities called for redemption on and after the redemption date.
Restrictions
on Certain Payments
We
will
also covenant, as to each series of subordinated debt securities, that we will
not, and will not permit any of our subsidiaries to:
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declare
or pay any dividends or distributions on, or redeem, purchase, acquire
or
make a liquidation payment with respect to, any of our capital
stock;
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make
any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any of our debt securities (including other
subordinated debt securities) that rank equally with or junior in
interest
to the subordinated debt securities;
or
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make
any guarantee payments with respect to any guarantee by us of the
debt
securities of any of our subsidiaries if that guarantee ranks equally
or
junior in interest to the subordinated debt
securities;
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if
at
such time, any event has occurred of which we have actual knowledge
that:
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with
the giving of notice or the lapse of time, or both, would constitute
a
subordinated debt security event of default with respect to the
subordinated debt securities of that
series;
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which
default we have not taken reasonable steps to
cure;
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if
the subordinated debt securities are held by a trust of a series
of
related trust preferred securities, we are in default with respect
to its
payment of any obligations under the guarantee relating to those
trust
preferred securities; or
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we
have given notice of our selection of an extension period as provided
in
the subordinated indenture with respect to the subordinated debt
securities of that series and has not rescinded such notice, or that
extension period, or any extension of that extension period, shall
be
continuing.
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The
following actions are not subject to the restrictions described
above:
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dividends
or distributions in our common
stock;
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redemptions
or purchases of any rights pursuant to our rights plan, or any successor
to our rights plan, and the declaration of a dividend of rights or
the
issuance of stock under those plans in the
future;
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payments
under any guarantee; and
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purchases
of common stock related to the issuance of common stock under any
of our
benefit plans for its directors, officers or
employees.
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Modification
of Subordinated Indenture
From
time
to time, we and the subordinated indenture trustee may, without the consent
of
the holders of any series of subordinated debt securities, amend, waive or
supplement the subordinated indenture for specified purposes, including, among
other things:
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curing
ambiguities, defects or inconsistencies, as long as the cure does
not
materially adversely affect the interest of the holders of any series
of
subordinated debt securities or, in the case of corresponding subordinated
debt securities, the holders of the related trust preferred securities
so
long as they remain outstanding;
and
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qualifying,
or maintaining the qualification of, the subordinated indenture under
the
Trust Indenture Act.
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We
and
the subordinated indenture trustee may generally modify the subordinated
indenture in a manner affecting the rights of the holders of one or more series
of the subordinated debt securities with the consent of the holders of not
less
than a majority in principal amount of each outstanding series of subordinated
debt securities affected. However, no modification may, without the consent
of
the holder of each outstanding subordinated debt security affected:
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change
the stated maturity or reduce the principal amount of any series
of
subordinated debt securities, or reduce the rate or extend the time
of
payment of interest on those securities, other than an extension
as
contemplated by the subordinated indenture;
or
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reduce
the percentage of principal amount of subordinated debt securities
of any
series, the holders of which are required to consent to a modification
of
the subordinated indenture.
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In
the
case of subordinated debt securities that correspond to a series of trust
preferred securities, so long as any of the related trust preferred securities
remain outstanding:
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no
modification described in the previous paragraph may be made that
adversely affects the holders of such trust preferred securities
in any
material respect,
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no
termination of the subordinated indenture may occur,
and
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no
waiver of any subordinated debt security event of default or compliance
with any covenant under the subordinated indenture may be
effective,
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in
each
case without the prior consent of the holders of at least a majority of the
aggregate liquidation preference of the related trust preferred securities
unless and until the principal of and all accrued and unpaid interest on the
corresponding subordinated debt securities has been paid in full and certain
other conditions are satisfied.
In
addition, we and the subordinated indenture trustee may execute a supplemental
subordinated indenture for the purpose of creating any new series of
subordinated debt securities without the consent of any holder of subordinated
debt securities.
Subordinated
Debt Security Events of Default
The
subordinated indenture provides that any one or more of the following events
with respect to a series of subordinated debt securities that has occurred
and
is continuing constitutes a “subordinated debt security event of default” with
respect to that series of subordinated debt securities:
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failure
for 30 days to pay any interest on the series of the subordinated
debt
securities when due, other than the deferral of any due date in the
case
of an extension period;
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failure
to pay any principal or premium, if any, on the series of subordinated
debt securities when due whether at maturity, upon redemption by
declaration or otherwise;
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failure
to observe or perform in any material respect certain other covenants
contained in the subordinated indenture for 90 days after written
notice
has been provided to us by the subordinated indenture trustee or
to us and
the subordinated trustee by the holders of at least 25% in aggregate
principal amount of the outstanding subordinated debt securities
of that
series; or
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certain
events relating to our bankruptcy, insolvency or reorganization.
(Section 5.1)
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The
holders of a majority in aggregate outstanding principal amount of an applicable
series of subordinated debt securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
subordinated indenture trustee. The subordinated indenture trustee or the
holders of not less than 25% in aggregate outstanding principal amount of an
applicable series of subordinated debt securities may declare the principal
due
and payable immediately upon a subordinated debt security event of default. In
the case of subordinated debt securities that correspond to a series of trust
preferred securities, if the subordinated indenture trustee or the holders
of
the corresponding subordinated debt securities fail to declare the principal
due
and payable immediately upon a subordinated debt security event of default,
then
the holders of at least 25% in aggregate liquidation preference of the related
trust preferred securities may exercise that right. The holders of a majority
in
aggregate outstanding principal amount of a series of subordinated debt
securities may annul the declaration and its consequences if the default (other
than the non-payment of the principal of the series of subordinated debt
securities which has become due solely by such acceleration) has been cured
or
waived and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration and the fees and expenses of the
subordinated indenture trustee has been deposited with the subordinated
indenture trustee. In the case of subordinated debt securities that correspond
to a series of trust preferred securities, if the holders of the corresponding
subordinated debt securities fail to annul the declaration and waive the
default, the holders of a majority in aggregate liquidation preference of the
related trust preferred securities may exercise that right.
(Section 5.2)
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The
holders of a majority in aggregate outstanding principal amount of a series
of
subordinated debt securities may, on behalf of the holders of all the affected
subordinated debt securities of that series, waive any past default,
except:
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a
default in the payment of principal or interest, unless the default
has
been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration has been
deposited with the subordinated indenture trustee;
or
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a
default with respect to a covenant which cannot be modified or amended
pursuant to the terms of the subordinated indenture without the consent
of
the holder of each outstanding subordinated debt
security.
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In
the
case of subordinated debt securities that correspond to a series of trust
preferred securities, if the holders of the corresponding subordinated debt
securities fail to annul the declaration and waive the default, the holders
of a
majority in aggregate liquidation preference of the related trust preferred
securities may exercise that right. We must file annually with the subordinated
indenture trustee a certificate as to whether or not we are in compliance with
all the conditions and covenants applicable to it under the subordinated
indenture. (Section 5.2)
If
a
subordinated debt security event of default has occurred and is continuing
as to
a series of subordinated debt securities that correspond to a series of trust
preferred securities, the property trustee will have the right to declare the
principal of and the interest on the corresponding subordinated debt securities,
and any other amounts payable under the subordinated indenture, to be
immediately due and payable and to enforce its other rights as a creditor with
respect to the corresponding subordinated debt securities.
Enforcement
of Certain Rights by Holders of Trust Preferred Securities
If
a
subordinated debt security event of default has occurred and is continuing
and
the default is attributable to our failure to pay interest or principal on
the
related subordinated debt securities on the date such interest or principal
is
otherwise payable, a holder of trust preferred securities may, subject to the
terms of the subordinated indenture, institute a legal proceeding directly
against us for enforcement of payment to the holder of the principal of or
interest on related subordinated debt securities having a principal amount
equal
to the aggregate liquidation amount of the related trust preferred securities
held by the holder (which we refer to as a “direct action”). (Section 5.8)
We may not amend the subordinated indenture to remove this right to bring a
direct action without the prior written consent of the holders of all of the
trust preferred securities. If we remove the right to bring a direct action,
the
applicable trust may become subject to the reporting obligations under the
Securities Exchange Act of 1934. (Section 9.2) We will have the right under
the subordinated indenture to set-off any payment made to the holder of trust
preferred securities by us in connection with a direct action.
The
holders of the trust preferred securities will not be able to exercise directly
any remedies, other than those set forth in the preceding paragraph, available
to the holders of the related subordinated debt securities unless a trust
agreement event of default has occurred and is continuing under the applicable
trust agreement. See “Description of Securities We May Sell—Trust Preferred
Securities—Events of Default; Notice.”
Consolidation,
Merger, Sale of Assets and Other Transactions
We
may
not consolidate with or merge into any other person or entity or convey,
transfer or lease its properties and assets substantially as an entirety to
any
person or entity, and no person or entity may consolidate with or merge into
us
or convey, transfer or lease its properties and assets substantially as an
entirety to us, unless:
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if
we consolidate with or merge into another person or entity or convey
or
transfer our properties and assets substantially as an entirety to
any
person or entity, the successor person or entity is organized under
the
laws of the U.S. or any state or the District of Columbia and expressly
assumes our obligations under the subordinated debt securities and
the
subordinated indenture;
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immediately
after giving effect to the transaction, no subordinated debt security
event of default, and no event which, after notice or lapse of time
or
both, would become a subordinated debt security event of default,
shall
have occurred and be continuing;
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in
the case of subordinated debt securities that correspond to a series
of
trust preferred securities, the transaction is permitted under the
related
trust agreement or guarantee and does not give rise to any breach
or
violation of the related trust agreement and guarantee;
and
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certain
other conditions prescribed in the subordinated indenture are met.
(Section 8.1)
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The
general provisions of the subordinated indenture do not afford holders of the
subordinated debt securities protection in the event of a highly leveraged
or
other transaction involving us that may adversely affect holders of the
subordinated debt securities.
Satisfaction,
Discharge and Defeasance
The
subordinated indenture provides that when:
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all
subordinated debt securities not previously delivered to the subordinated
indenture trustee for cancellation have become due and payable or
will
become due and payable at their stated maturity within one
year;
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we
deposit or cause to be deposited with the subordinated indenture
trustee
funds, in trust, in the currency or currencies in which those subordinated
debt securities are payable;
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the
deposited amount is for the purpose and is sufficient to pay and
discharge
the entire amount of principal, premium and interest on those subordinated
debt securities to the date of the deposit if those debt securities
have
become due and payable or to the stated maturity, as the case may
be
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we
have paid or caused to be paid all other sums payable pursuant to
the
subordinated indenture; and
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certain
other conditions prescribed in the subordinated debenture are
met,
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then
with
certain exceptions the subordinated indenture will cease to be of further effect
and we will be deemed to have satisfied and discharged the subordinated
indenture. (Section 4.1)
Conversion
or Exchange
If
and to
the extent indicated in the applicable prospectus supplement, the subordinated
debt securities of any series may be convertible or exchangeable into trust
preferred securities or other securities. We will describe the specific terms
on
which subordinated debt securities of any series may be so converted or
exchanged in the applicable prospectus supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at our option, in which case the number of shares of trust preferred
securities or other securities to be received by the holders of subordinated
debt securities would be calculated as of a time and in the manner stated in
the
applicable prospectus supplement.
Subordination
Any
subordinated debt securities issued by us under the subordinated indenture
will
be subordinate and junior in right of payment to all Senior Debt to the extent
provided in the subordinated indenture. (Section 13.1) Upon any payment or
distribution of our assets to creditors upon any liquidation, dissolution,
winding up, reorganization, assignment for the benefit of creditors, marshaling
of assets or any bankruptcy, insolvency, debt restructuring or similar
proceedings in connection with our insolvency, the holders of Senior Debt will
first be entitled to receive payment in full of principal and premium and
interest, if any, on the Senior Debt before the holders of subordinated debt
securities or, in the case of corresponding subordinated debt securities, the
property trustee on behalf of the holders, will be entitled to receive or retain
any payment with respect to the subordinated debt securities.
(Section 13.2)
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In
the
event of the acceleration of the maturity of any subordinated debt securities,
the holders of all Senior Debt outstanding at the time of such acceleration
will
first be entitled to receive payment in full of all amounts due on the
outstanding Senior Debt (including any amounts due upon acceleration) before
the
holders of subordinated debt securities will be entitled to receive or retain
any payment with respect to the subordinated debt securities.
(Section 13.3)
No
payments on account of principal, premium or interest, if any, in respect of
the
subordinated debt securities may be made if there has occurred and is continuing
a default in any payment with respect to Senior Debt, or an event of default
with respect to any Senior Debt resulting in the acceleration of its maturity,
or if any judicial proceeding is pending with respect to any default.
(Section 13.4)
“Debt”
means with respect to any person or entity, whether recourse is to all or a
portion of the assets of that person or entity and whether or not
contingent,
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every
obligation of that person or entity for money
borrowed;
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every
obligation of that person or entity evidenced by bonds, debentures,
notes
or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or
businesses;
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every
reimbursement obligation of that person or entity with respect to
letters
of credit, bankers’ acceptances or similar facilities issued for the
account of that person or entity;
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every
obligation of that person or entity issued or assumed as the deferred
purchase price of property or services, other than trade accounts
payable
or accrued liabilities arising in the ordinary course of
business;
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every
capital lease obligation of that person or entity;
and
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every
obligation of the type described above of another person or entity
and all
dividends of another person or entity the payment of which, in either
case, that person or entity has guaranteed or is responsible or liable,
directly or indirectly, as obligor or otherwise.
(Section 1.1)
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“Senior
Debt” means the principal of, and premium and interest, if any (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to us) whether or not such claim for post-petition
interest is allowed in that proceeding), on Debt, whether incurred on or prior
to the date of the subordinated indenture or incurred after that date, unless,
in the instrument creating or evidencing the Debt or pursuant to which the
Debt
is outstanding, it is provided that the obligations with respect to that Debt
are not superior in right of payment to the subordinated debt securities or
to
other Debt which is equal with, or subordinated to, the subordinated debt
securities; provided, however, that Senior Debt shall not be deemed to
include:
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any
of our Debt which was without recourse to us when incurred and without
respect to any election under Section 1111(b) of the Bankruptcy
Code,
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any
of our Debt to any of our
subsidiaries,
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any
of our Debt to any of our
employees,
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any
liability for taxes,
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indebtedness
or monetary obligations to trade creditors or assumed by us or any
of our
subsidiaries in the ordinary course of business in connection with
the
obtaining of materials or services,
and
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any
other debt securities issued pursuant to the subordinated indenture.
(Section 1.1)
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The
subordinated indenture provides that the subordination provisions described
above, insofar as they relate to any particular issue of subordinated debt
securities, may be changed prior to such issuance. We will describe any change
in the applicable prospectus supplement.
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Governing
Law
The
subordinated indenture and the subordinated debt securities will be governed
by
and construed in accordance with the laws of the state of New York.
Information
Concerning the Subordinated Indenture Trustee
The
subordinated indenture trustee will have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to those provisions, the subordinated indenture trustee
is under no obligation to exercise any of the powers vested in it by the
subordinated indenture at the request of any holder of subordinated debt
securities, unless offered reasonable indemnity by the holder against the costs,
expenses and liabilities which the subordinated trustee might incur in
connection with its exercise of those powers. The subordinated indenture trustee
is not required to expend or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if the subordinated
indenture trustee reasonably believes that it is not reasonably assured of
repayment or adequate indemnity.
The
subordinated trustee is a participant in certain of our credit agreements,
and
we have maintained other banking relationships with the trustee in the normal
course of business. The subordinated indenture trustee acts as property trustee
and guarantee trustee for our 7.65% Series E trust preferred securities and
6.75% Series F trust preferred securities and may act as trustee under
various of other indentures, trusts and guarantees of LNC and its affiliates
in
the ordinary course of business.
Corresponding
Subordinated Debt Securities
We
may
issue corresponding subordinated debt securities in one or more series of
subordinated debt securities under the subordinated indenture with terms
corresponding to the terms of a series of related trust preferred securities.
In
that event, concurrently with the issuance of each trust’s trust preferred
securities, the trust will invest the proceeds of that issuance and the
consideration paid by us for the common securities in a series of corresponding
subordinated debt securities issued by us to the trust. We will issue each
series of corresponding subordinated debt securities with a principal amount
equal to the aggregate stated liquidation amount of the related trust preferred
securities and the common securities of such trust. Each series of corresponding
subordinated debt securities will rank equally with all other series of
subordinated debt securities. Unless otherwise provided in the applicable
prospectus supplement, holders of the related trust preferred securities for
a
series of corresponding subordinated debt securities will have certain rights
in
connection with modifications to the subordinated indenture and upon occurrence
of subordinated debt security events of default as described under
“—Modification of Subordinated Indenture” and “—Subordinated Debt Security
Events of Default”.
If
a
Special Event (which we define in “Description of Securities We May Sell—Trust
Preferred Securities—Redemption or Exchange” below) has occurred and is
continuing with respect to a trust that issued trust preferred securities,
we
may, at our option, redeem the corresponding subordinated debt securities at
any
time within 90 days of the occurrence of the Special Event, in whole but not
in
part, subject to the provisions of the subordinated indenture. The redemption
price for any corresponding subordinated debt securities will be equal to 100%
of the principal amount of the outstanding corresponding subordinated debt
securities plus accrued and unpaid interest to the redemption date. As long
as
the applicable trust is the holder of all the outstanding series of
corresponding subordinated debt securities, the trust will use the proceeds
of
the redemption to redeem the corresponding trust securities. We may not redeem
a
series of corresponding subordinated debt securities in part unless we have
paid
in full all accrued and unpaid interest on all outstanding corresponding
subordinated debt securities of that series for all interest periods terminating
on or prior to the redemption date.
We
will
covenant in the subordinated indenture as to each series of corresponding
subordinated debt securities, that if and so long as:
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the
trust of the related series of trust securities is the holder of
all the
corresponding subordinated debt
securities;
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a
Tax Event (which we define in “Description of Securities We May Sell—Trust
Preferred Securities—Redemption or Exchange” below) in respect of such
trust has occurred and is continuing;
and
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We
have elected, and have not revoked such election, to pay additional
sums
(which we define under “Description of Securities We May Sell—Trust
Preferred Securities—Redemption or Exchange” below) with respect to the
trust securities,
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We
will
pay to the trust the additional sums.
We
will
also covenant, as to each series of corresponding subordinated debt securities
that:
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we
or any of our permitted successors under the subordinated indenture
will
maintain directly or indirectly 100% ownership of the common securities
of
the trust to which we have issued corresponding subordinated debt
securities;
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we
will not voluntarily terminate, wind-up or liquidate any trust, other
than:
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in
connection with a distribution of corresponding subordinated debt
securities to the holders of the trust preferred securities in liquidation
of the trust, or
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in
connection with certain mergers, consolidations or amalgamations
permitted
by the related trust agreement, and
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we
will use its reasonable efforts, consistent with the terms and provisions
of the related trust agreement, to cause the trust to remain classified
as
a grantor trust and not as an association taxable as a corporation
for
U.S. federal income tax purposes.
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Common
Stock and Preferred Stock
General
We
may
issue, separately or together with other offered securities, shares of common
stock or preferred stock, all as set forth in the prospectus supplement relating
to the common stock or preferred stock for which this prospectus is being
delivered. In addition, if the prospectus supplement so provides, the debt
securities or preferred stock may be convertible into or exchangeable for common
stock.
Our
articles of incorporation currently authorize the issuance of 800,000,000 shares
of common stock and 10,000,000 shares of preferred stock. We may issue our
preferred stock from time to time in one or more series by resolution of our
board of directors. We have outstanding one series of preferred stock,
consisting of LNC’s $3.00 Cumulative Convertible preferred stock, Series A
(without par value), which we refer to as “Series A preferred stock.” At
February 3, 2006, we had issued and outstanding 174,159,561 shares of
common stock and 15,335 shares of Series A preferred stock.
As
described under “Description of Securities We May Sell—Depositary Shares”, we
may, at our option, elect to offer depositary shares evidenced by depositary
receipts, each representing an interest (to be specified in the prospectus
supplement relating to the particular series of the preferred stock) in a share
of the particular series of the preferred stock issued and deposited with a
preferred stock depositary.
The
following descriptions of the classes of our capital stock are summaries, do
not
purport to be complete, and are subject, in all respects, to the applicable
provisions of the Indiana Business Corporation Law, which we refer to the IBCL
and our articles of incorporation (including a board of directors’ certificate
of resolution designating the rights and preferences of the Series A
preferred stock), and the rights agreement described below, which, in each
case,
are included as exhibits to the registration statement that includes this
prospectus.
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Common
Stock
Transfer
Agent and Registrar. Our common stock is traded on
the New York, Pacific and Chicago Stock Exchanges under the symbol “LNC.” The
registrar and transfer agent is Mellon Investor Services LLC.
Voting
Rights. Each holder of record of our common stock is
entitled to one vote for each share of our common stock held on all matters
submitted to a vote of the shareholders, including election of directors.
Holders of our common stock do not have cumulative voting rights with respect
to
the election of directors or any other matter.
Dividend
Rights. The holders of our common stock may receive
cash dividends, if and when declared by our board of directors out of funds
legally available for that purpose, and subject to preferential rights of the
holders of preferred stock or other special classes of stock.
Liquidation
Rights. In the event of a liquidation, dissolution
or winding up, holders of our common stock will be entitled to share ratably
in
all assets remaining after payments to creditors and after satisfaction of
the
liquidation preference, if any, of the holders of any preferred stock that
may
at the time be outstanding.
Preemptive
Rights. Holders of our common stock do not have any
preemptive or similar equity rights.
Shareholders
Rights Plan
We
have
in place a shareholders rights plan, which is referred to as the Rights Plan,
which could discourage unwanted or hostile takeover attempts that are not
approved by our board of directors. The Rights Plan permits holders of our
common stock to purchase either shares of our common stock or shares of the
acquirer at a discount to the market value in response to specified takeover
events. These rights do not apply to the merger. The Rights Plan is expected
to
continue in effect after the merger until it expires on November 14, 2006
or is extended by our board of directors.
The
Rights. On November 6, 1986, our board of
directors declared a dividend of one common share purchase right, which is
referred to as a Right or Rights, for each share of our common stock then
outstanding and each share of our common stock issued thereafter. The Rights
currently trade with our common stock.
Exercisability. The
Rights separate from the shares of our common stock upon the “Distribution
Date,” which is the earlier of either (i) the tenth calendar day after the
announcement that a person or group has acquired beneficial ownership of 15%
or
more of our common stock or (ii) the tenth business day after a person
commences, or announces an intention to commence, an offer the consummation
of
which will result in such person owning 15% or more of our common stock, in
both
scenarios the persons are referred to as an Acquiring Person. After separation,
each Right entitles its holder to purchase from us one common share at an
“Exercise Price” of $200.00, until the earlier of November 14, 2006, unless
the Rights Plan is extended or the Rights are redeemed by our board of
directors. The Rights will begin trading separately following the Distribution
Date.
Flip-Over
Events and Flip-In Events. In the event that
(i) we are acquired in a merger or other business combination,
(ii) any person consolidates or mergers with us and all or part of our
common stock is exchanged for securities, cash or property of any other person
or (iii) 50% or more of our consolidated assets or earning power are sold,
which is referred to collectively as a Flip-Over Event, each Right will entitle
its holder, other than the Acquiring Person, to purchase at the Exercise Price,
upon exercise of the Right, common stock in the surviving corporation with
a
market value of two times the Exercise Price. In the event that a person
acquires 15% or more of our outstanding common stock, which is referred to
as a
Flip-In Event, alternatively, each Right will entitle its holder, other than
the
Acquiring Person, the right to purchase at the Exercise Price, upon exercise
of
the Right, our common stock with a market value of two times the Exercise
Price.
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Exchange
Option. At any time after a person becomes an
Acquiring Person, but before its acquisition of 50% or more of the our common
stock, our board of directors may exchange Rights, other than the Rights owned
by the Acquiring Person, in whole or in part, at an exchange ratio of one share
of our common stock per Right, subject to adjustment.
Redemption. Rights
are redeemable in whole, but not in part, at $0.01 per Right at anytime prior
to
the expiration of 10 calendar days from the date of the public announcement
that
a person or group has become an acquiring person. Until a Right is exercised,
the holder of the Right will have no rights as a shareholder, including without
limitation, the right to vote or to receive dividends.
The
purchase price payable and the number of shares of our common stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution:
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in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, our common
stock;
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as
a result of the grant to holders of our common stock of certain rights
or
warrants to subscribe for our common stock or convertible securities
at
less than the current market price of our common stock;
or
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as
a result of the distribution to holders of our common stock of evidences
of indebtedness or assets (other than regular periodic cash dividends
or
dividends payable in our common stock) or of subscription rights
or
warrants, other than those referenced
above.
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The
Rights Agreement will not prevent our takeover. However, the Rights Agreement
may cause a substantial dilution to a person or group that acquires 15% or
more
of our common stock unless our board of directors first elects to redeem the
Rights. Nevertheless, the Rights Agreement should not interfere with a
transaction that our board of directors determines is in our and our
shareholders’ best interest because the Rights can be redeemed prior to the
completion of that transaction or the Rights Agreement can be amended in any
manner prior to the Distribution Date.
The
complete terms of the Rights are contained in the Rights Agreement. The
foregoing description of the Rights and the Rights Agreement is qualified in
its
entirety by reference to the Rights Agreement. To obtain a copy of the Rights
Agreement, please see “Where You Can Find More Information”.
Preferred
Stock
General. Our
articles of incorporation authorize our board of directors to provide for the
issuance of up to 10 million shares of preferred stock, in one or more
series, and to fix by resolution and to the extent permitted by the IBCL, the
relative rights, preferences and limitations of each series of preferred stock,
including dividend, redemption, liquidation, sinking fund, conversion and other
provisions in the resolutions or certificate establishing or designating the
series, without a vote or any other action taken by our
shareholders.
Shares
Outstanding. We currently have only one series of
preferred stock outstanding, the Series A preferred stock. All outstanding
shares of Series A preferred stock are duly authorized, validly issued,
fully paid and non-assessable.
Series A
Preferred Stock
Voting
Rights. Each holder of preferred stock of any series
outstanding is entitled to one vote per share and to vote together, as a single
class, with holders of our common stock on all matters submitted to a vote
of
the common shareholders.
Special
Voting Rights With Respect to Directors. In the event that six
or more quarterly dividends, whether or not consecutive, on any series of
preferred stock are in default, the holders of any outstanding series of
preferred
24
stock
as
to which the default exists will be entitled, at the next annual meeting of
shareholders, to vote as a class to elect two of our directors. This right
will
continue with respect to shares of cumulative preferred stock, including the
Series A preferred stock, until all accumulated and unpaid dividends on all
such shares, the holders of which are entitled to vote at the previous special
meeting of shareholders, have been paid or declared and set aside for payment
and, with respect to shares of non-cumulative preferred stock, if any, until
any
non-cumulative dividends have been paid or declared and set apart for payment
for four consecutive quarterly dividend periods on all such shares, the holders
of which were entitled to vote at the previous annual meeting of
shareholders.
Other
Special Voting Rights. In addition, the approval of
the holders of record of at least two-thirds of the outstanding shares of all
series of our preferred stock, voting as a class, will be required to take
the
following actions:
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amend
our articles of incorporation to create or authorize any stock ranking
prior to or on a parity with the outstanding preferred stock with
respect
to the payment of dividends or distributions upon dissolution, liquidation
or winding up;
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to
create or authorize any security convertible into shares of stock
ranking
prior to or on a parity with the outstanding preferred stock with
respect
to the payment of dividends or distributions upon dissolution, liquidation
or winding up;
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amend,
alter, change or repeal any of the express terms of any outstanding
preferred stock, or any series thereof, in any prejudicial manner
(provided only holders of two-third of the outstanding shares of
the
series prejudiced by such change or repeal need consent to such
action);
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merge
or consolidate with another corporation where we are not the surviving
entity, if the rights, preferences or powers of the preferred stock
would
be adversely affected or if securities would thereupon be authorized
or
outstanding which could not otherwise have been created without the
approval of the preferred shareholders;
or
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authorize,
or revoke a previously authorized, voluntary dissolution of LNC,
approve
any limitation of the terms of our existence, or authorize the sale,
lease, exchange or other disposition of all or substantially all
of our
property.
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Dividend
Rights. To the extent permitted by law, holders of
LNC Series A preferred stock are entitled to receive, but only when and as
declared by our board of directors, cash dividends at the per annum rate of
$3.00 per share, payable $0.75 per share quarterly. Dividends on the
Series A preferred stock are cumulative.
Liquidation: Holders
of Series A preferred stock are entitled to a liquidation preference of
$80.00 per share, plus accrued dividends, before any assets may be distributed
to holders of our common stock or any other stock ranking junior to the
Series A preferred stock.
Redemption: The
Series A preferred stock may be redeemed at any time at the option of our
board of directors, in whole or in part, at a redemption price of $80.00 per
share plus accrued but unpaid dividends.
Conversion. Each
share of Series A preferred stock is currently convertible at the option of
the holder thereof into sixteen shares of our common stock, subject to certain
further adjustments. There is no conversion rate adjustment for a
merger.
Anti-Takeover
Considerations
Certain
Provisions of LNC’s Articles of Incorporation.
Our
articles of incorporation provide that the affirmative vote of the holders
of
three-fourths of our voting stock is required to amend Article VII, which
deals with the number, classification, qualifications and removal of directors.
Article VII provides that the number of directors may be fixed in the
bylaws, that qualifications for
25
directors
may be set in the bylaws, and that the bylaws may provide for classification
of
our board of directors. The bylaws can be amended only by action of our board
of
directors. Article VII also provides that directors can be removed, with or
without cause, at a meeting of shareholders called expressly for that purpose
upon the affirmative vote of the holders of at least three-fourths of our voting
stock.
The
provisions of Article VII requiring the affirmative vote of three-fourths
of our voting stock to amend Article VII could make it difficult for the
shareholders to change the existing provision of that article, which, in turn,
could discourage proxy contests and tender offers and make it more likely that
incumbent directors will maintain their positions.
Article X
of our articles of incorporation also provide that no shares of the common
stock
of The Lincoln National Life Insurance Company, our primary insurance
subsidiary, may be sold, leased, exchanged, mortgaged, pledged or otherwise
disposed of except by the vote of the holders of three-fourths of our shares
outstanding and entitled to vote thereon at an annual or special meeting of
shareholders.
The
articles of incorporation also contain a “fair price” provision which requires,
subject to certain exceptions, the holders of at least three-fourths of our
voting stock to approve certain kinds of business combinations involving LNC
and
any shareholder holding 10% or more of our voting stock or certain affiliates
of
that shareholder unless:
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the
transaction is approved by a majority of the members of our board
of
directors who are not affiliated with the 10% shareholder making
the
proposal; or
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the
transaction meets certain minimum price and procedural
requirements.
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In
either
of these cases, only the normal shareholder and director approval requirements
of the IBCL would govern the transaction. The “fair price” provision may be
amended or repealed only upon the affirmative vote of the holders of at least
three-fourths of our voting stock. The “fair price” provision is intended to
increase the likelihood that all our shareholders will be treated similarly
if
certain kinds of business combinations are effected. The “fair price” provision
may have the effect of making a takeover of us more expensive and may therefor
discourage tender offers for less than three-fourths of our stock and
acquisitions of substantial blocks of our stock with a view to acquiring control
of us.
Certain
State Law Provisions.
Chapter 43
of the IBCL also restricts business combinations with interested shareholders.
It prohibits certain business combinations, including mergers, sales of assets,
recapitalizations, and reverse stock splits, between certain corporations having
100 or more shareholders that also have a class of voting shares registered
with
the SEC under Section 12 of the Securities Exchange Act of 1934 (which
includes us) and an interested shareholder, defined as the beneficial owner
of
10% or more of the voting power of the outstanding voting shares of that
corporation, for five years following the date the shareholder acquired such
10%
beneficial ownership, unless the acquisition or the business combination was
approved by the board of directors in advance of that date. If the combination
was not previously approved, the interested shareholder may effect a combination
after the five-year period only if the shareholder receives approval from a
majority of the disinterested shares or the offer meets certain fair price
criteria. A corporation may elect to opt out of these provisions in an amendment
to its articles of incorporation approved by a majority of the disinterested
shares. Such an amendment, however, would not become effective for
18 months after its passage and would apply only to stock acquisitions
occurring after its effective date. Our articles of incorporation do not elect
to opt out of these provisions.
Chapter
42 of the IBCL includes provisions designed to protect minority shareholders
in
the event that a person acquires, pursuant to a tender offer or otherwise,
shares giving it more than 20%, more than 33 1/3%,
or more than 50% of the
outstanding voting power (which we refer to as “control shares”) of an “issuing
public corporation.” Unless the issuing public corporation’s articles of
incorporation or bylaws provide that Chapter 42
26
does
not
apply to control share acquisitions of shares of the corporation before the
control share acquisition, an acquirer who purchases control shares without
seeking and obtaining the prior approval of the board of directors cannot vote
the control shares until each class or series of shares entitled to vote
separately on the proposal, by a majority of all votes entitled to be cast
by
that group (excluding the control shares and any shares held by officers of
the
corporation and employees of the corporation who are directors thereof), approve
in a special or annual meeting the rights of the acquirer to vote the control
shares. Unless otherwise provided in a corporation’s articles of incorporation
or bylaws before a control share acquisition has occurred, in the event that
control shares acquired in a control share acquisition are accorded full voting
rights and the acquiring person acquires control shares with a majority or
more
of all voting power, all shareholders of the issuing public corporation have
dissenters’ rights to receive the fair value of their shares.
“Issuing
public corporation” means a corporation which is organized in Indiana, has 100
or more shareholders, its principal place of business, its principal office
or
substantial assets within Indiana and one of the following:
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more
than 10% of its shareholders resident in
Indiana;
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more
than 10% of its shares owned by Indiana residents;
or
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10,000
shareholders resident in Indiana.
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An
issuing public corporation may elect not to be covered by the statute by so
providing in its articles of incorporation or bylaws. Our articles of
incorporation do not elect to opt out of these provisions.
Indiana
insurance laws and regulations provide that no person may acquire our voting
securities if that person would directly or indirectly be in control of us
after
the acquisition, unless that person has provided certain required information
to
us and to the Indiana Insurance Commissioner and the Indiana Insurance
Commissioner has approved the acquisition. Control of us is presumed to exist
if
any person beneficially owns 10% or more of our voting securities. Furthermore,
the Indiana Insurance Commissioner may determine, after notice and hearing,
that
control exists despite the absence of a presumption to that effect.
Consequently, no person may acquire, directly or indirectly, 10% or more of
our
voting securities to be outstanding after any offering of securities pursuant
to
this prospectus, or otherwise acquire control of us, unless that person has
provided such required information to the Indiana Insurance Commissioner and
the
Indiana Insurance Commissioner has approved such acquisition.
Depositary
Shares
The
descriptions below and in any prospectus supplement of certain provisions of
the
deposit agreement and depositary receipts summarize the material terms of these
documents. Because these summaries are not complete, you should refer to the
form of deposit agreement and form of depositary receipts relating to each
series of the preferred stock.
General
We
may,
at our option, elect to have shares of preferred stock be represented by
depositary shares. We will deposit the shares of any series of preferred stock
underlying the depositary shares under a separate deposit agreement (which
we
refer to as a “deposit agreement”) between us and a bank or trust company
selected by us (which we refer to as the “preferred stock depositary”). We will
include the name and address of the preferred stock depositary for any
depositary shares in the applicable prospectus supplement. Subject to the terms
of the deposit agreement, each owner of a depositary share will be entitled,
proportionately, to all the rights, preferences and privileges of the preferred
stock represented by that depositary share, including dividend, voting,
redemption, conversion, exchange and liquidation rights.
The
depositary shares will be evidenced by depositary receipts issued pursuant
to
the deposit agreement. Each depositary share will represent the applicable
interest in a number of shares of a particular series of preferred stock
described in the applicable prospectus supplement.
27
A
holder
of depositary shares will be entitled to receive the number of whole shares
of
preferred stock underlying the holder’s depositary shares. If the depositary
receipts delivered by the holder evidence a number of depositary shares in
excess of the whole number of shares of preferred stock to be withdrawn, the
depositary will deliver to the holder the number of whole shares of preferred
stock to be withdrawn, together with a new depositary receipt evidencing the
excess number of depositary shares.
Dividends
and other Distributions
The
preferred stock depositary will distribute all cash dividends or other cash
distributions on the preferred stock to the record holders of depositary
receipts in proportion, insofar as possible, to the number of depositary shares
owned by the holders.
If
we
distribute property other than in cash with respect to the preferred stock,
the
preferred stock depositary will distribute property received by it to the record
holders of depositary receipts in proportion, insofar as possible, to the number
of depositary shares owned by the holders, unless the preferred stock depositary
determines that it is not feasible to make the distribution. In this event,
the
preferred stock depositary may, with our approval, adopt any method it deems
equitable and practicable for the purpose of effecting the distribution,
including a public or private sale of the property and distribution of the
net
proceeds from the sale to the record holders of the depositary
receipts.
The
amount so distributed in any of the circumstances described above will be
reduced by any amount required to be withheld by us or the preferred stock
depositary on account of taxes.
Conversion
and Exchange
We
will
describe any terms relating to the conversion or exchange of any series of
preferred stock underlying the depositary shares in the applicable prospectus
supplement. If any preferred stock underlying the depositary shares is subject
to provisions relating to its conversion or exchange, each record holder of
depositary shares will have the right or obligation to convert or exchange
the
depositary shares pursuant to the terms thereof.
Redemption
of Depositary Shares
If
preferred stock underlying the depositary shares is subject to redemption,
the
depositary shares will be redeemed from the proceeds received by the preferred
stock depositary as a result of the redemption, in whole or in part, of the
preferred stock held by the preferred stock depositary. The redemption price
per
depositary share will be equal to the aggregate redemption price payable with
respect to the number of shares of preferred stock underlying that depositary
share. Whenever we redeem preferred stock from the preferred stock depositary,
the preferred stock depositary will redeem as of the same redemption date a
proportionate number of depositary shares representing the shares of preferred
stock that were redeemed. If less than all the depositary shares are to be
redeemed, the depositary shares to be redeemed will be selected by lot or
proportionately as we may determine.
After
the
date fixed for redemption, the depositary shares called for redemption will
no
longer be deemed to be outstanding and all rights of the holders of the
depositary shares will cease, other than the right to receive the redemption
price upon redemption. Any funds deposited by our with the preferred stock
depositary for any depositary shares which the holders fail to redeem shall
be
returned to us after a period of two years from the date the funds are
deposited.
Voting
Upon
receipt of notice of any meeting at which the holders of any shares of preferred
stock underlying the depositary shares are entitled to vote, the preferred
stock
depositary will mail the information contained in the notice to the record
holders of the depositary receipts. Each record holder of depositary receipts
on
the record
28
date
(which will be the same date as the record date for the preferred stock) will
be
entitled to instruct the preferred stock depositary as to the exercise of the
voting rights pertaining to the number of shares of preferred stock underlying
that holder’s depositary shares. The preferred stock depositary will endeavor,
insofar as practicable, to vote the number of shares of preferred stock
underlying the depositary shares in accordance with those instructions, and
we
will agree to take all reasonable action which may be deemed necessary by the
preferred stock depositary in order to enable the preferred stock depositary
to
do so. The preferred stock depositary will abstain from voting the preferred
stock to the extent it does not receive specific written instructions from
holders of depositary receipts representing the preferred stock.
Record
Date
Whenever:
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any
cash dividend or other cash distribution becomes payable, any distribution
other than cash is made or any rights, preferences or privileges
are
offered with respect to the preferred
stock,
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the
preferred stock depositary receives notice of any meeting at which
holders
of preferred stock are entitled to vote or of which holders of preferred
stock are entitled to notice, or
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the
preferred stock depositary receives notice of the mandatory conversion
of
or any election on our part to call any preferred stock for
redemption,
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the
preferred stock depositary shall in each case fix a record date (which shall
be
the same as the record date for the preferred stock) for the determination
of
the holders of depositary receipts:
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who
shall be entitled to receive the dividend, distribution, rights,
preferences or privileges or the net proceeds of their
sale,
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who
shall be entitled to give instructions for the exercise of voting
rights
at any meeting, or
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who
shall be entitled to receive notice of the meeting or of the redemption
or
conversion, subject to the provisions of the deposit
agreement.
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Amendment
and Termination of the Deposit Agreement
We
and
the preferred stock depositary may amend the form of depositary receipt and
any
provision of the deposit agreement at any time. However, any amendment which
imposes or increases any fees, taxes or other charges payable by the holders
of
depositary receipts (other than taxes and other governmental charges, fees
and
other expenses payable by the holders as described below under “Charges of
Preferred Stock Depositary”), or which otherwise prejudices any substantial
existing right of holders of depositary receipts, will not take effect as to
outstanding depositary receipts until the expiration of 90 days after notice
of
the amendment has been mailed to the record holders of outstanding depositary
receipts.
Whenever
so directed by us, the preferred stock depositary will terminate the deposit
agreement by mailing notice of the termination to the record holders of all
depositary receipts then outstanding at least 30 days prior to the termination
date. The preferred stock depositary may likewise terminate the deposit
agreement if at any time:
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45
days have expired after the preferred stock depositary has delivered
to us
written notice of its election to resign,
and
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a
successor depositary has not been appointed and accepted its
appointment.
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If
any
depositary receipts remain outstanding after the date of termination, the
preferred stock depositary:
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will
discontinue the transfer of depositary
receipts,
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will
suspend the distribution of dividends to the
holders,
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will
not give any further notices under the deposit agreement, other than
notice of the termination, and
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will
not perform any further acts under the deposit
agreement
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except
as
provided below and except that the preferred stock depositary will continue
to:
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collect
dividends and any other distributions on the preferred stock,
and
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without
any liability for any interest, deliver the preferred stock, together
with
those dividends and distributions and the net proceeds of any sales
of
rights, preferences, privileges or other property, in exchange for
depositary receipts surrendered.
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At
any
time beginning two years after the termination date, the preferred stock
depositary may sell the preferred stock then held by it at public or private
sales, at places and upon terms as it deems proper. Without liability for any
interest, the preferred stock depositary may hold the net proceeds of any sale,
together with any money and other property then held by it, for the
proportionate benefit of the holders of depositary receipts which have not
been
surrendered.
Charges
of Preferred Stock Depositary
Except
for taxes, transfer taxes, governmental charges and any other charges that
are
expressly provided in the deposit agreement to be at the expense of holders
of
depositary receipts or persons depositing preferred stock, we will pay all
charges of the preferred stock depositary including charges in connection
with:
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the
initial deposit of the preferred
stock,
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the
initial issuance of the depositary
receipts,
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the
distribution of information to the holders of depositary receipts
with
respect to matters on which preferred stock is entitled to
vote,
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withdrawals
of the preferred stock by the holders of depositary receipts,
and
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redemption
or conversion of the preferred
stock.
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Miscellaneous
The
preferred stock depositary will make available for inspection by holders of
depositary receipts at its corporate office and its New York office, all reports
and communications that we deliver to the preferred stock depositary as the
holder of preferred stock.
Neither
we nor the preferred stock depositary will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the deposit agreement. The obligations of the preferred stock
depositary under the deposit agreement are limited to performing its duties
without negligence or bad faith. The obligations under the deposit agreement
are
limited to performing its duties in good faith. Neither we nor the preferred
stock depositary are obligated to prosecute or defend any legal proceeding
regarding any depositary shares or preferred stock unless satisfactory indemnity
is furnished. We and the preferred stock depositary are entitled to rely upon
advice of or information from counsel, accountants or other persons believed
to
be competent and on documents believed to be genuine.
We
may
remove the preferred stock depositary and the preferred stock depositary may
resign at any time, effective upon the acceptance by a successor depositary
of
its appointment. However, if a successor preferred stock depositary has not
been
appointed or accepted such appointment within 45 days after the preferred stock
depositary has delivered to us a notice of election to resign, the preferred
stock depositary may terminate the deposit agreement. See “—Amendment and
Termination of the Deposit Agreement” above.
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Warrants
General
We
may
issue warrants to purchase debt securities, common stock, preferred stock or
depositary shares representing preferred stock (which we refer to collectively
as, the “underlying warrant securities”). We may issue the warrants
independently or together with any underlying warrant securities and either
attached to or separate from any underlying warrant securities. We will issue
each series of warrants under a separate warrant agreement (which we refer
to as
a “warrant agreement”) to be entered into between LNC and a warrant agent. The
warrant agent will act solely as our agent in connection with the series of
warrants and will not assume any obligation or agency relationship for or with
holders or beneficial owners of warrants. The following describes certain
general terms and provisions of the warrants offered pursuant to this
prospectus. We will describe further terms of the warrants and the warrant
agreement in the applicable prospectus supplement.
The
applicable prospectus supplement will describe the terms of any warrants with
respect to which this prospectus is being delivered, including the
following:
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the
title of the warrants;
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the
aggregate number of warrants;
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the
price or prices at which the warrants will be
issued;
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the
currency or currencies, including composite currencies, in which
the price
of the warrants may be payable;
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the
designation and terms of the underlying warrant securities purchasable
upon exercise of the warrants;
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the
price at which and the currency or currencies, including composite
currencies, in which the underlying warrant securities purchasable
upon
exercise of the warrants may be
purchased;
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the
date on which the right to exercise the warrants will commence and
the
date on which that right will
expire;
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whether
the warrants will be issued in registered form or bearer
form;
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if
applicable, the minimum or maximum amount of warrants which may be
exercised at any one time;
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if
applicable, the designation and terms of the underlying warrant securities
with which the warrants are issued and the number of warrants issued
with
each underlying warrant security;
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if
applicable, the date on and after which the warrants and the related
underlying warrant securities will be separately
transferable;
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information
with respect to book-entry procedures, if
any;
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if
applicable, a discussion of certain U.S. federal income tax
considerations; and
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any
other terms of the warrants, including terms, procedures and limitations
relating to the exchange and exercise of the
warrants.
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Stock
Purchase Contracts
and
Stock Purchase Units
We
may
issue stock purchase contracts, representing contracts obligating holders to
purchase from us, and obligating us to sell to the holders, a specified number
of shares of common stock or preferred stock at a future date or dates. The
price per share may be fixed at the time the stock purchase contracts are issued
or may be determined by reference to a specific formula set forth in the stock
purchase contracts. The stock purchase contracts may be issued separately or
as
a part of units (which we refer to as “stock purchase units”) consisting of a
stock purchase contract and either:
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senior
debt securities or subordinated debt
securities,
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debt
obligations of third parties, including U.S. Treasury securities,
or
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trust
preferred securities of a trust, securing the holder’s obligations to
purchase the common stock under the stock purchase
contracts.
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The
stock
purchase contracts may require us to make periodic payments to the holders
of
the stock purchase units or vice versa, and such payments may be unsecured
or
prefunded on some basis. The stock purchase contracts may require holders to
secure their obligations thereunder in a specified manner. In certain
circumstances, LNC may deliver newly issued prepaid stock purchase contracts
(which we refer to as “prepaid securities”) upon release to a holder of any
collateral securing the holder’s obligations under the original stock purchase
contract.
We
will
describe the terms of any stock purchase contracts, stock purchase units and
prepaid securities in the applicable prospectus supplement. The description
in
the prospectus supplement will not purport to be complete and will be qualified
in its entirety by reference to the stock purchase contracts, the collateral
arrangements and depositary arrangements, if applicable, relating to the stock
purchase contracts, stock purchase units and prepaid securities and any document
pursuant to which the prepaid securities will be issued.
Trust
Preferred Securities
Pursuant
to the terms of the trust agreement for each trust, the issuer trustees on
behalf of the trust will issue the trust preferred securities and the common
securities. The trust preferred securities of a particular issue will represent
preferred beneficial interests in the trust. The holders of trust preferred
securities will be entitled to a preference in certain circumstances with
respect to distributions and amounts payable on redemption or liquidation over
the common securities of the trust, as well as other benefits as described
in
the corresponding trust agreement. Each of the trusts is a legally separate
entity and the assets of one are not available to satisfy the obligations of
any
of the others.
This
summary of certain provisions of the trust preferred securities and each trust
agreement does not purport to be complete and is subject to, and is qualified
in
its entirety by reference to, all the provisions of each trust agreement,
including the definitions of certain terms, and the Trust Indenture Act.
Wherever we refer to particular defined terms of a trust agreement in this
prospectus or in a prospectus supplement, those defined terms are incorporated
in this prospectus and the prospectus supplement by reference. We have filed
the
form of the trust agreement as an exhibit to the registration statement that
includes this prospectus.
General
The
trust
preferred securities of a trust will rank equally, and payments will be made
on
the trust preferred securities proportionately, with the common securities
of
that trust except as described under “—Subordination of Common
Securities.” Each trust will use the proceeds from the sale of trust
preferred securities and common securities to purchase an aggregate principal
amount of corresponding subordinated debt securities of LNC equal to the
aggregate liquidation amount of the trust preferred securities and common
securities. The property trustee of each trust will hold legal title to the
corresponding subordinated debt securities for the benefit of the holders
of
32
the
related trust preferred securities and common securities. In addition we will
execute a guarantee for the benefit of the holders of the related trust
preferred securities. Our obligations under each guarantee are subordinate
to
our Senior Debt. Each guarantee will not guarantee payment of distributions
or
amounts payable on redemption or liquidation of the trust preferred securities
when the related trust does not have funds on hand available to make the
payments. See “Description of Securities We May Sell—Guarantees of Trust
Preferred Securities.”
Distributions
Each
trust’s trust preferred securities represent beneficial interests in the
applicable trust. The revenue of each trust available for distribution to the
holders of its trust preferred securities will be limited to payments received
from us on the corresponding subordinated debt securities. If we do not make
a
required payment on the corresponding subordinated debt securities, the trust
will not have sufficient funds to make the related payments on the trust
preferred securities.
The
following are the general distribution rights of the trust preferred
securities:
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Distributions
on each trust preferred security will be payable at a rate specified
in
the applicable prospectus
supplement.
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Distributions
on the trust preferred securities will be cumulative, will accumulate
from
the date of original issuance and will be payable on such dates as
specified in the applicable prospectus
supplement.
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If
any date on which distributions are payable on the trust preferred
securities is not a business day, the trust will pay those distributions
on the next succeeding day that is a business day without any interest
or
other payment as a result of the delay. However, if that business
day is
in the next succeeding calendar year, the trust will make the payment
on
the immediately preceding business day with the same force and effect
as
if made on the date the payment was originally
payable.
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The
amount of distributions payable for any period will be computed on
the
basis of a 360-day year of twelve 30-day months unless we specify
otherwise in the applicable prospectus
supplement.
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Distributions
to which holders of trust preferred securities are entitled will
accumulate additional distributions at the rate per annum if and
as
specified in the applicable prospectus supplement.
(Section 4.1)
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If
provided in the applicable prospectus supplement, we have the right under the
subordinated indenture to defer the payment of interest at any time or from
time
to time on any series of the corresponding subordinated debt securities for
a
period which we will specify in the applicable prospectus supplement (which
we
refer to as an “extension period”). However, no extension period may extend
beyond the stated maturity of the corresponding subordinated debt securities.
If
we elect to defer interest payments on the subordinated debt securities, the
trust will defer distributions on the corresponding trust preferred securities
during the extension period. Deferred distributions will continue to accumulate
additional distributions at the rate per annum set forth in the applicable
prospectus supplement. (Section 4.1)
During
the extension period, we may not, and may not permit any of our subsidiaries
to:
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declare
or pay any dividends or distributions on, or redeem, purchase, acquire
or
make a liquidation payment with respect to, any of our capital
stock;
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make
any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any of our debt securities that rank equally
with or
junior in interest to the corresponding subordinated debt securities;
or
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make
any guarantee payments with respect to any guarantee of debt securities
of
any of our subsidiaries if that guarantee ranks equally or junior
in
interest to the corresponding subordinated debt
securities.
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33
The
following actions are not subject to the restrictions discussed
above:
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dividends
on or distributions in our common
stock;
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redemptions
or purchases of any rights pursuant to our rights plan, or any successor
to our rights plan, and the declaration of a dividend of rights or
the
issuance of stock under stock plans in the
future;
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payments
under any guarantee; and
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purchases
of common stock related to the issuance of common stock under any
of our
benefit plans for its directors, officers or
employees.
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Distributions
on the trust preferred securities will be payable to the holders as they appear
on the register of the trust on the relevant record dates, which, as long as
the
trust preferred securities remain in book-entry form, will be one business
day
prior to the relevant distribution date. Subject to any applicable laws and
regulations and the provisions of the applicable trust agreement, the trust
will
make each payment as described under “Book-Entry Issuance.” If any trust
preferred securities are not in book-entry form, the relevant record date for
those trust preferred securities will be the date at least 15 days prior to
the
relevant distribution date, as specified in the applicable prospectus
supplement. (Section 4.1)
Redemption
or Exchange
Mandatory
Redemption. If we repay or redeem any corresponding
subordinated debt securities, in whole or in part, whether at maturity or upon
earlier redemption as provided in the subordinated indenture, the property
trustee, upon not less than 30 nor more than 60 days notice, will apply the
proceeds from the repayment or redemption to redeem trust securities on a
proportionate basis with an aggregate stated liquidation amount equal to the
aggregate principal amount of the subordinated debentures repaid or redeemed.
The redemption price (which we refer to as the “redemption price”) will equal
the aggregate liquidation amount of the trust securities plus accumulated but
unpaid distributions on the trust securities to the redemption date and the
related amount of the premium, if any, paid by us upon the concurrent redemption
of the corresponding subordinated debt securities. See “Description of
Securities We May Sell—Debt Securities—Junior Subordinated Debt
Securities—Redemption.” (Section 4.2)
We
will
have the right to redeem any series of corresponding subordinated debt
securities:
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in
whole at any time or in part from time to time, subject to the conditions
described under “Description of Securities We May Sell—Debt
Securities—Junior Subordinated Debt
Securities—Redemption”;
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at
any time, in whole but not in part, upon the occurrence of a Tax
Event or
an Investment Company Event (each as defined below and which we
collectively refer to as a “Special Event”) and subject to the further
conditions described under “Description of Securities We May Sell—Debt
Securities—Junior Subordinated Debt Securities—Redemption”;
or
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as
we specify in the applicable prospectus
supplement.
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Special
Event Redemption or Distribution of Corresponding Subordinated Debt
Securities. If a Special Event with respect to a
series of trust preferred securities and common securities has occurred and
is
continuing, we have the right to redeem the corresponding subordinated debt
securities in whole but not in part and thereby cause a mandatory redemption
of
the related trust preferred securities and common securities in whole but not
in
part at the redemption price within 90 days following the occurrence of the
Special Event. We have the right to terminate the related trust at any time
and,
after satisfaction of the liabilities of creditors of the trust as provided
by
applicable law, cause the corresponding subordinated debt securities to be
distributed to the holders of the trust preferred securities and common
securities in liquidation of the trust. If we do elect either option described
above, the applicable series of trust preferred securities will remain
outstanding. If a Tax Event has occurred and is continuing, additional sums
(as
defined below) may be payable on the corresponding subordinated debt
securities.
Extension
of Maturity of Corresponding Subordinated Debt
Securities. If provided in the applicable prospectus
supplement, we will have the right to extend or shorten the maturity of any
series of corresponding subordinated debt securities at the time that we
exercise our right to elect to terminate the related trust and
cause
34
the
corresponding subordinated debt securities to be distributed to the holders
of
the trust preferred securities and common securities in liquidation of the
trust. However, we may extend the maturity only if it satisfies certain
conditions specified in the applicable prospectus supplement at the time the
election is made and at the time of the extension.
The
subordinated indenture defines “additional sums” as the additional amounts as
may be necessary in order that the amount of distributions then due and payable
by a trust on the outstanding trust preferred securities and common securities
of the trust will not be reduced as a result of any additional taxes, duties
and
other governmental charges to which the trust has become subject as a result
of
a Tax Event.
“Investment
Company Event” means the receipt by the applicable trust of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, the applicable trust is or will be considered
an
investment company that is required to be registered under the Investment
Company Act of 1940, which change becomes effective on or after the date of
original issuance of the series of trust preferred securities.
(Section 1.1)
“Tax
Event” means the receipt by the applicable trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to,
or change or announced prospective change in, the laws or regulations of the
U.S. or any political subdivision or taxing authority in the U.S., or as a
result of any official administrative pronouncement or judicial decision
interpreting or applying those laws or regulations, which amendment or change
is
effective or which pronouncement or decision is announced on or after the date
of issuance of the trust preferred securities under the trust agreement, there
is more than an insubstantial risk that:
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the
trust is, or will be within 90 days of the date of the opinion, subject
to
U.S. federal income tax with respect to income received or accrued
on the
series of corresponding subordinated debt
securities,
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interest
payable by us on the series of corresponding subordinated debt securities
is not, or within 90 days of the date of the opinion, will not be,
deductible by us, in whole or in part, for U.S. federal income tax
purposes, or
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the
applicable trust is, or will be within 90 days of the opinion, subject
to
more than a minimal amount of other taxes, duties or other governmental
charges.
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After
the
liquidation date fixed for any distribution of corresponding subordinated debt
securities for any series of trust preferred securities:
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•
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that
series of trust preferred securities will no longer be deemed to
be
outstanding;
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The
Depository Trust Company, referred to as DTC, or its nominee, as
the
record holder of that series of trust preferred securities, will
receive a
registered global certificate or certificates representing the
corresponding subordinated debt securities to be delivered upon such
distribution; and
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any
certificates representing that series of trust preferred securities
not
held by DTC or its nominee will be deemed to represent corresponding
subordinated debt securities having a principal amount equal to the
stated
liquidation preference of that series of trust preferred securities,
and
bearing accrued and unpaid interest in an amount equal to the accrued
and
unpaid distributions on that series of trust preferred securities
until
such certificates are presented to the administrative trustees or
their
agent for transfer or reissuance.
(Section 1.1)
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We
cannot
predict the market prices for the trust preferred securities or the
corresponding subordinated debt securities that may be distributed in exchange
for trust preferred securities if a dissolution and liquidation of a trust
were
to occur. Accordingly, the trust preferred securities that an investor may
purchase, or the corresponding subordinated debt securities that the investor
may receive on dissolution and liquidation of a trust, may trade at a discount
to the price that the investor paid to purchase the trust preferred securities
offered pursuant to this prospectus.
35
Redemption
Procedures
A
trust
will redeem trust preferred securities on each redemption date at the redemption
price with the applicable proceeds from the contemporaneous redemption of the
corresponding subordinated debt securities. A trust will redeem trust preferred
securities and pay the redemption price only to the extent that the trust has
funds on hand available for the payment of the redemption price. See also
“—Subordination of Common Securities.”
If
a
trust gives a notice of redemption with respect to its trust preferred
securities, then, by 12:00 noon, New York City time, on the redemption date,
to
the extent funds are available, the property trustee will irrevocably deposit
with DTC funds sufficient to pay the applicable redemption price and will give
DTC irrevocable instructions and authority to pay the redemption price to the
holders of the trust preferred securities. See “Book-Entry Issuance.” If the
trust preferred securities are no longer in book-entry form, to the extent
funds
are available, the property trustee will irrevocably deposit with the paying
agent for the trust preferred securities funds sufficient to pay the applicable
redemption price and will give the paying agent irrevocable instructions and
authority to pay the redemption price to the holders upon surrender of their
certificates evidencing the trust preferred securities. However, distributions
payable on or prior to the redemption date for any trust preferred securities
called for redemption will be payable to the holders of the trust preferred
securities on the relevant record dates for the related distribution dates.
(Section 4.2)
If
the
trust has given the notice of redemption and the property trustee has deposited
the funds as required, then upon the date of such deposit, all rights of the
holders of the trust preferred securities called for redemption will cease,
other than the right of the holders of the trust preferred securities to receive
the redemption price without interest, and the trust preferred securities will
cease to be outstanding. If the date fixed for redemption of trust preferred
securities is not a business day, then the trust will pay the redemption price
on the next succeeding day which is a business day without any interest or
other
payment in respect of any such delay. However, if that business day falls in
the
next calendar year, the trust will make the payment on the immediately preceding
business day. If payment of the redemption price of trust preferred securities
called for redemption is improperly withheld or refused and not paid either
by
the trust or by us pursuant to the guarantee as described under “Description of
Securities We May Sell—Guarantees of Trust Preferred Securities”, distributions
on the trust preferred securities will continue to accrue at the then applicable
rate, from the redemption date originally established by the trust for the
trust
preferred securities to the date the redemption price is actually paid. In
this
event, the actual payment date will be the date fixed for redemption for
purposes of calculating the redemption price. (Section 4.2)
Subject
to applicable law (including U.S. federal securities law), we or our
subsidiaries may at any time and from time to time purchase outstanding trust
preferred securities by tender, in the open market or by private
agreement.
The
trust
will pay the redemption price on the trust preferred securities and make any
distribution of corresponding subordinated debt securities to the applicable
holders of record of the trust preferred securities as they appear on the
register for the trust preferred securities on the relevant record date. The
record date will generally be one business day prior to the relevant redemption
date or liquidation date, as applicable. However, if any trust preferred
securities are not in book-entry form, the relevant record date for the trust
preferred securities will be a date at least 15 days prior to the redemption
date or liquidation date, as applicable, as specified in the applicable
prospectus supplement. (Section 4.2)
If
less
than all of the trust preferred securities and common securities are to be
redeemed on a redemption date, then the aggregate liquidation amount of the
trust preferred securities and common securities to be redeemed will be
allocated proportionately to the trust preferred securities and the common
securities based upon their relative liquidation amounts. The property trustee
shall select the particular trust preferred securities to be redeemed on a
proportionate basis not more than 60 days prior to the redemption date from
the
outstanding trust preferred securities not previously called for redemption,
by
such method as the property trustee deems fair and appropriate. The property
trustee may provide for the selection for redemption of portions (equal to
$25
or an integral multiple of $25) of the liquidation amount of trust preferred
securities of a denomination larger than $25. The property trustee shall
promptly notify the trust registrar in writing of the trust preferred securities
selected for
36
redemption
and, in the case of any trust preferred securities selected for partial
redemption, the liquidation amount of the trust preferred securities to be
redeemed. For all purposes of each trust agreement, unless the context otherwise
requires, all provisions relating to the redemption of trust preferred
securities will relate, in the case of any trust preferred securities redeemed
or to be redeemed only in part, to the portion of the aggregate liquidation
amount of trust preferred securities which has been or is to be redeemed.
(Section 4.2)
The
property trustee will mail the notice of any redemption at least 30 days but
not
more than 60 days before the redemption date to each holder of trust securities
to be redeemed at its registered address. Unless we default in payment of the
redemption price on the corresponding subordinated debt securities, on and
after
the redemption date interest will cease to accrue on the subordinated debt
securities or portions thereof (and distributions will cease to accrue on the
related trust preferred securities or portions thereof) called for redemption.
(Section 4.2)
Subordination
of Common Securities
Each
trust will pay distributions on, and the redemption price of, the trust
securities it issues equally among its trust preferred securities and common
securities based on their respective liquidation amounts. However, if on any
distribution date or redemption date a subordinated debt security event of
default has occurred and is continuing, the trust will not pay any distribution
on, or redemption price of, any of the trust’s common securities and will not
make any other payment on account of the redemption, liquidation or other
acquisition of the trust’s common securities, in each case unless payment in
full in cash of all accumulated and unpaid distributions on all of the trust’s
outstanding trust preferred securities for all distribution periods terminating
on or before the redemption, liquidation or other acquisition, or in the case
of
payment of the redemption price the full amount of the redemption price on
all
of the trust’s outstanding trust preferred securities then called for
redemption, will have been made or provided for. In this event, the property
trustee will apply all available funds first to the payment in full in cash
of
all distributions on, or redemption price of, the trust’s trust preferred
securities then due and payable. (Section 4.3)
In
the
case of any trust agreement event of default resulting from a subordinated
debt
security event of default, we as holder of the trust’s common securities will be
deemed to have waived any right to act with respect to the trust agreement
event
of default under the applicable trust agreement until the effect of all such
trust agreement events of default with respect to the trust preferred securities
have been cured, waived or otherwise eliminated. Until any trust agreement
events of default with respect to the trust preferred securities have been
cured, waived or otherwise eliminated, the property trustee will act solely
on
behalf of the holders of such trust preferred securities and not on our behalf
as holder of the trust’s common securities, and only the holders of the trust
preferred securities will have the right to direct the property trustee to
act
on their behalf. (Section 4.3)
Liquidation
Distribution Upon Termination
Pursuant
to each trust agreement, each trust will automatically terminate upon expiration
of its term and will terminate on the first to occur of:
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certain
events of our bankruptcy, dissolution or
liquidation;
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the
distribution of a like amount of corresponding subordinated debt
securities to the holders of its trust securities, if we, as depositor,
have given written direction to the property trustee to terminate
the
trust, which direction is optional and wholly within our
discretion;
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the
redemption of all of the trust’s trust securities following a Special
Event;
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redemption
of all of the trust’s trust preferred securities as described under
“Description of Securities We May Sell—Trust Preferred
Securities—Redemption or Exchange—Mandatory Redemption”;
and
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the
entry of an order for the dissolution of the trust by a court of
competent
jurisdiction. (Section 9.2)
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37
If
an
early termination of the trust occurs other than as a result of redemption
of
all of the trust’s trust preferred securities as described under “Description of
Securities We May Sell—Trust Preferred Securities—Redemption or
Exchange—Mandatory Redemption” or following a Special Event, the issuer trustees
will liquidate the trust as expeditiously as possible by distributing, after
satisfaction of liabilities to creditors of the trust as provided by applicable
law, to the holders of the trust securities a like amount of the corresponding
subordinated debt securities, unless the property trustee determines that
distribution of the corresponding debt securities is impracticable. If the
property trustee determines that distribution of the corresponding subordinated
debt securities is impracticable, the holders of trust preferred securities
will
be entitled to receive, after satisfaction of liabilities to creditors of the
trust as provided by applicable law, an amount equal to the aggregate
liquidation amount of the trust preferred securities plus accrued and unpaid
distributions to the date of payment (which we refer to as a “liquidation
distribution”). If the trust can pay the liquidation distribution only in part
because the trust has insufficient assets available to pay in full the aggregate
liquidation distribution, then the trust will pay amounts payable on its trust
preferred securities on a proportionate basis. The holders of the trust’s common
securities will generally be entitled to receive distributions upon the
liquidation proportionately with the holders of its trust preferred securities.
However, if a subordinated debt security event of default has occurred and
is
continuing, the trust preferred securities will have a priority over the common
securities. A supplemental Indenture may provide that if an early termination
occurs as a result of the entry of a court order for the dissolution of the
trust, the corresponding subordinated debt securities may be subject to optional
redemption in whole but not in part. (Section 9.4)
Events
of Default; Notice
Any
one
of the following events constitutes an “event of default” under each trust
agreement (which we refer to as a “trust agreement event of default”) with
respect to the trust preferred securities issued under that trust agreement,
whatever the reason for the trust agreement event of default and whether it
is
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body:
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the
occurrence of a subordinated debt security event of default under
the
subordinated indenture (see “Description of Securities We May Sell—Debt
Securities—Junior Subordinated Debt Securities—Subordinated Debt Security
Events of Default”);
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default
by the property trustee in the payment of any distribution when it
becomes
due and payable, and continuation of the default for a period of
30
days;
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default
by the property trustee in the payment of any redemption price of
any
trust security when it becomes due and
payable;
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default
in the performance or breach in any material respect of any covenant
or
warranty of the issuer trustees in the trust agreement (other than
a
default by the property trustee in the payment of any distribution
on, or
redemption price of, trust securities as described above), and
continuation of the default or breach for a period of 60 days after
the
holders of at least 25% in aggregate liquidation preference of the
outstanding trust preferred securities of the applicable trust have
provided, by registered or certified mail, a written notice to the
defaulting issuer trustee or trustees specifying the default or breach
and
requiring it to be remedied and stating that such notice is a “Notice of
Default” under the trust agreement;
or
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the
occurrence of certain events of bankruptcy or insolvency with respect
to
the property trustee and our failure to appoint a successor property
trustee within 60 days of that event.
(Section 1.1)
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Within
90
days after the occurrence of any trust agreement event of default actually
known
to the property trustee, the property trustee will transmit notice of the trust
agreement event of default to the holders of the trust’s trust preferred
securities, the administrative trustees and to us, as depositor, unless the
trust agreement event of default is cured or waived. (Section 8.2) We, as
depositor, and the administrative trustees are required to file annually with
the property trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under each trust
agreement. (Section 8.16)
38
If
a
subordinated debt security event of default has occurred and is continuing,
the
trust preferred securities will have a preference over the common securities
upon termination of each trust as described above. See “—Liquidation
Distribution Upon Termination.” The existence of a trust agreement event of
default does not entitle the holders to accelerate the maturity of the trust
preferred securities.
Removal
of Issuer Trustees
Unless
a
subordinated debt security event of default has occurred and is continuing,
the
holder of the common securities may remove any issuer trustee at any time.
If a
subordinated debt security event of default has occurred and is continuing,
the
holders of a majority in liquidation amount of the outstanding trust preferred
securities may remove the property trustee and the Delaware trustee at such
time. The holders of the trust preferred securities do not have the right to
vote to appoint, remove or replace the administrative trustees, which voting
rights are vested exclusively in us as the holder of the common securities.
No
resignation or removal of an issuer trustee and no appointment of a successor
trustee will be effective until the successor trustee accepts the appointment
in
accordance with the applicable trust agreement. (Section 8.10)
Co-trustees
and Separate Property Trustee
Unless
a
trust agreement event of default has occurred and is continuing, for the purpose
of meeting the legal requirements of the Trust Indenture Act or any jurisdiction
in which any part of the trust property may at the time be located, we, as
the
holder of the common securities, and the administrative trustees may appoint
one
or more persons to act either:
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as
a co-trustee, jointly with the property trustee, of all or any part
of the
trust property; or
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to
act as separate trustee of any of the trust
property.
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The
co-trustee or separate trustee will have such powers as may be provided in
the
instrument of appointment. We and the administrative trustees may vest in the
co-trustee or separate trustee any property, title, right or power deemed
necessary or desirable, subject to the provisions of the applicable trust
agreement. If subordinated debt security event of default has occurred and
is
continuing, the property trustee alone will have power to make the appointment.
(Section 8.9)
Merger
or Consolidation of Issuer Trustees
Any
corporation into which the property trustee, the Delaware trustee or any
administrative trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which that trustee will be a party,
or
any corporation succeeding to all or substantially all the corporate trust
business of that trustee, will be the successor of that trustee under each
trust
agreement, provided the corporation is otherwise qualified and eligible.
(Section 8.12)
Mergers,
Consolidations, Amalgamations or Replacements of the
Trusts
A
trust
may not merge with or into, consolidate, amalgamate, or be replaced by, or
convey, transfer or lease its properties and assets substantially as an entirety
to any corporation or other person or entity, except as described below. A
trust
may, at our request, with the consent of the administrative trustees and without
the consent of the holders of the trust preferred securities, merge with or
into, consolidate, amalgamate, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to a trust organized
under the laws of any state; provided, that:
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the
successor entity either expressly assumes all of the obligations
of the
trust with respect to the trust preferred securities or substitutes
for
the trust preferred securities other securities having substantially
the
same terms as the trust preferred securities (which we refer to as
“successor securities”), so long as the successor securities have the same
rank as the trust preferred securities with respect to distributions
and
payments upon liquidation, redemption and
otherwise;
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we
expressly appoint a trustee of the successor entity possessing the
same
powers and duties as the property trustee as the holder of the
corresponding subordinated debt
securities;
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the
successor securities are listed, or any successor securities will
be
listed upon notification of issuance, on any national securities
exchange
or other organization on which the trust preferred securities are
then
listed, if any;
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the
merger, consolidation, amalgamation, replacement, conveyance, transfer
or
lease does not cause the trust preferred securities, including any
successor securities, to be downgraded by any nationally recognized
statistical rating organization;
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the
merger, consolidation, amalgamation, replacement, conveyance, transfer
or
lease does not adversely affect the rights, preferences and privileges
of
the holders of the trust preferred securities, including any successor
securities, in any material
respect;
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the
successor entity has a purpose identical to that of the
trust;
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prior
to the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, LNC has received an opinion from independent counsel
to
the trust experienced in such matters to the effect
that:
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the
merger, consolidation, amalgamation, replacement, conveyance, transfer
or
lease does not adversely affect the rights, preferences and privileges
of
the holders of the trust preferred securities, including any successor
securities, in any material respect,
and
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following
the merger, consolidation, amalgamation, replacement, conveyance,
transfer
or lease, neither the trust nor the successor entity will be required
to
register as an investment company under the Investment Company Act
of
1940; and
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we
(or any permitted successor or assignee) own all of the common securities
of the successor entity and guarantees the obligations of the successor
entity under the successor securities at least to the extent provided
by
the guarantee.
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Despite
the foregoing, a trust will not, except with the consent of holders of 100%
in
liquidation amount of the trust preferred securities, consolidate, amalgamate,
merge with or into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to any other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace
it
if the consolidation, amalgamation, merger, replacement, conveyance, transfer
or
lease would cause the trust or the successor entity to be classified as other
than a grantor trust for U.S. federal income tax purposes.
(Section 9.5)
Voting
Rights; Amendment of Each Trust Agreement
Except
as
provided below and under “Description of Securities We May Sell—Guarantees of
Trust Preferred Securities—Amendments and Assignment” and as otherwise required
by law and the applicable trust agreement, the holders of the trust preferred
securities will have no voting rights. (Section 6.1)
We,
the
property trustee and the administrative trustees may amend a trust agreement
from time to time without the consent of the holders of the trust preferred
securities:
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to
cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or make
any
other provisions with respect to matters or questions arising under
the
trust agreement which are not inconsistent with the other provisions
of
the trust agreement; or
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to
modify, eliminate or add to any provisions of the trust agreement
to the
extent necessary to ensure that the trust will be classified for
U.S.
federal income tax purposes as a grantor trust at all times that
any trust
securities are outstanding or to ensure that the trust will not be
required to register as an “investment company” under the Investment
Company Act of 1940;
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40
provided,
however, that in the case of the first bullet point above, the action will
not adversely affect in any material respect the interests of any holder of
trust securities. Any amendments of the trust agreement will become effective
when notice of the amendment is given to the holders of trust
securities.
We
and
the issuer trustees may generally amend a trust agreement with:
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the
consent of holders representing not less than a majority in liquidation
amount of the outstanding trust securities;
and
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receipt
by the issuer trustees of an opinion of counsel to the effect that
the
amendment or the exercise of any power granted to the issuer trustees
in
accordance with the amendment will not affect the trust’s status as a
grantor trust for U.S. federal income tax purposes or the trust’s
exemption from status as an “investment company” under the Investment
Company Act of 1940.
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However,
we and the issuer trustees may not amend a trust agreement without the consent
of each holder of trust securities to:
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change
the amount or timing of any distribution on the trust securities
or
otherwise adversely affect the amount of any distribution required
to be
made with respect to the trust securities as of a specified date;
or
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restrict
the right of a holder of trust securities to institute suit for the
enforcement of any payment on or after that date.
(Section 10.2)
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So
long
as any corresponding subordinated debt securities are held by the property
trustee, the issuer trustees will not:
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direct
the time, method and place of conducting any proceeding for any remedy
available to the subordinated indenture trustee or executing any
trust or
power conferred on the property trustee with respect to the corresponding
subordinated debt securities;
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waive
any past default that is waivable under Section 5.13 of the
subordinated indenture;
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exercise
any right to rescind or annul a declaration that the principal of
all the
subordinated debt securities is due and payable;
or
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consent
to any amendment, modification or termination of the subordinated
indenture or the corresponding subordinated debt securities where
such
consent is required, without, in each case, obtaining the prior approval
of the holders of a majority in aggregate liquidation amount of all
outstanding trust preferred securities; provided, however, that where
a
consent under the subordinated indenture would require the consent
of each
holder of corresponding subordinated debt securities affected thereby,
the
property trustee may not consent without the prior approval of each
holder
of corresponding trust preferred securities.
(Section 6.1)
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The
issuer trustees may not revoke any action previously authorized or approved
by a
vote of the holders of the trust preferred securities except by subsequent
vote
of the holders. The property trustee will notify each holder of trust preferred
securities of any notice of default with respect to the corresponding
subordinated debt securities. In addition to obtaining the approvals of the
holders of the trust preferred securities referred to above, prior to taking
any
of the foregoing actions, the issuer trustees will obtain an opinion of counsel
experienced in such matters to the effect that the trust will not be classified
as a corporation for U.S. federal income tax purposes on account of the action.
(Section 6.1)
Any
required approval of holders of trust preferred securities may be given at
a
meeting of holders of trust preferred securities convened for that purpose
or
pursuant to written consent. The property trustee will cause a notice of any
meeting at which holders of trust preferred securities are entitled to vote,
or
of any matter upon which action by written consent of such holders is to be
taken, to be given to each holder of record of trust preferred securities in
the
manner set forth in each trust agreement. (Section 6.2)
41
No
vote
or consent of the holders of trust preferred securities will be required for
a
trust to redeem and cancel its trust preferred securities in accordance with
the
applicable trust agreement.
Notwithstanding
that holders of trust preferred securities are entitled to vote or consent
under
any of the circumstances described above, any of the trust preferred securities
that we own, the issuer trustees or any of our affiliates or any issuer
trustees, will, for purposes of the vote or consent, be treated as if they
were
not outstanding.
Global
Trust Preferred Securities
A
trust
may issue trust preferred securities of a series in whole or in part in the
form
of one or more global securities that the trust will deposit with, or on behalf
of, the depository identified in the prospectus supplement relating to that
series. Unless otherwise indicated in the applicable prospectus supplement,
the
depository will be DTC. A trust may issue global securities only in fully
registered form and in either temporary or permanent form. Unless and until
it
is exchanged in whole or in part for the individual trust preferred securities
it represents, a global security may not be transferred except as a
whole:
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by
the depository for the global security to a nominee of the
depository;
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by
a nominee of the depository to the depository or another nominee
of the
depository; or
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by
the depository or any nominee to a successor depository or any nominee
of
the successor.
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Unless
otherwise specified in the applicable prospectus supplement, a global security
representing a series of trust preferred securities will be exchangeable for
individual trust preferred securities of that series in the following
circumstances:
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if
a depository is unwilling or unable to continue as depository or
if the
depository ceases to be a clearing agency registered under the Securities
Exchange Act of 1934;
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at
any time in our sole discretion if we determine not to have any trust
preferred securities of that series represented by a global
security;
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if
we so specify with respect to a series of trust preferred securities,
at
any time upon the request of an owner of a beneficial interest
in a global
security representing trust preferred securities of that series
if the
exchange is made on terms acceptable to us, the subordinated indenture
trustee and the depository; or
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a
subordinated debt security event of default has occurred and is continuing
with respect to the corresponding subordinated debt
securities.
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To
the
extent not described under the heading “Book-Entry Issuance,” we will describe
the terms of the depository arrangement for a series of trust preferred
securities to be represented by a global security in the applicable prospectus
supplement.
Payment
and Paying Agency
Payments
in respect of any global certificate representing trust preferred securities
will be made to the depositary, which will credit the relevant accounts at
the
depository on the applicable distribution dates. Payments in respect of trust
preferred securities held in certificated form will be made by check mailed
to
the address of the holder entitled thereto as the address appears on the
register. Unless otherwise specified in the applicable prospectus supplement,
the paying agent will initially be the property trustee and any co-paying agent
chosen by the property trustee and acceptable to the administrative trustees
and
us. The paying agent may resign as paying agent upon 30 days’ written notice to
the property trustee and us. If the property trustee will no longer be the
paying agent, the administrative trustees will appoint a successor, which will
be a bank or trust company acceptable to the administrative trustees and us,
to
act as paying agent. (Section 5.9)
42
Registrar
and Transfer Agent
Unless
otherwise specified in the applicable prospectus supplement, the property
trustee will act as registrar and transfer agent for the trust preferred
securities.
The
registrar and transfer agent will register transfers of trust preferred
securities without charge by or on behalf of each trust, but upon payment of
any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The trusts will not be required to register or cause
to be
registered the transfer of their trust preferred securities after the trust
preferred securities have been called for redemption.
(Section 5.4)
Information
Concerning the Property Trustee
The
property trustee, other than during the occurrence and continuance of a trust
agreement event of default, undertakes to perform only those duties as are
specifically set forth in each trust agreement and, after a trust agreement
event of default, must exercise the same degree of care and skill as a prudent
person would exercise or use in the conduct of his or her own affairs. Subject
to this provision, the property trustee is under no obligation to exercise
any
of the powers vested in it by the applicable trust agreement at the request
of
any holder of trust preferred securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby. If:
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the
property trustee is required to decide between alternative causes
of
action, construe ambiguous provisions in the applicable trust agreement
or
is unsure of the application of any provision of the applicable trust
agreement,
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the
matter is not one on which holders of trust preferred securities
are
entitled to vote under the trust agreement,
and
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no
trust agreement event of default has occurred and is
continuing,
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then
the
property trustee will take such action as is directed by us and if not so
directed, will take such action as it deems advisable and in the best interests
of the holders of the trust securities and will have no liability except for
its
own bad faith, negligence or willful misconduct. (Section 8.3)
Miscellaneous
The
administrative trustees are authorized and directed to conduct the affairs
of
and to operate the trusts in such a way that:
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no
trust will be deemed to be an “investment company” required to be
registered under the Investment Company Act of
1940;
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no
trust will be classified as an association taxable as a corporation
for
U.S. federal income tax purposes;
and
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the
corresponding subordinated debt securities will be treated as our
indebtedness for U.S. federal income tax
purposes.
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We
and
the administrative trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of each trust or each trust
agreement, that we and the administrative trustees determine in their discretion
to be necessary or desirable for the purposes described above, as long as the
action does not materially adversely affect the interests of the holders of
the
related trust preferred securities.
Holders
of the trust preferred securities have no preemptive or similar
rights.
No
trust
may borrow money or issue debt or mortgage or pledge any of its
assets.
43
Guarantees
of Trust Preferred Securities
We
will
execute a guarantee concurrently with the issuance by each trust of its trust
preferred securities for the benefit of the holders from time to time of the
trust preferred securities. J.P. Morgan Trust Company, National Association,
whom we refer to in such capacity as the “guarantee trustee”, will act as
indenture trustee under each guarantee for the purposes of compliance with
the
Trust Indenture Act. The guarantee trustee will hold each guarantee for the
benefit of the holders of the related trust’s trust preferred securities. Each
guarantee will be qualified as an indenture under the Trust Indenture
Act.
This
summary of certain provisions of the guarantees does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of each guarantee agreement, including the definitions of certain
terms, and the Trust Indenture Act. We have filed the form of the guarantee
as
an exhibit to the registration statement that includes this prospectus.
Reference in this summary to trust preferred securities means that trust’s trust
preferred securities to which a guarantee relates.
General
Pursuant
to and to the extent set forth in the guarantee, we will irrevocably agree
to
pay in full the guarantee payments on a subordinated basis to the holders of
the
trust preferred securities, as and when due, regardless of any defense, right
of
set-off or counterclaim that the trust may have or assert other than the defense
of payment. The following payments constitute “guarantee payments” with respect
to the trust preferred securities and, to the extent not paid by or on behalf
of
the related trust, will be subject to the guarantee:
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any
accumulated and unpaid distributions required to be paid on the trust
preferred securities, to the extent that the trust has funds on hand
available therefor at such time,
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the
redemption price with respect to any trust preferred securities called
for
redemption to the extent that the trust has funds on hand available
therefor at such time, or
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upon
a voluntary or involuntary dissolution, winding up or liquidation
of the
trust (unless the corresponding subordinated debt securities are
distributed to holders of the trust preferred securities), the lesser
of
the liquidation distribution and the amount of assets of the trust
remaining available for distribution to holders of trust preferred
securities.
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Our
obligation to make a guarantee payment may be satisfied by direct payment of
the
required amounts by us to the holders of the applicable trust preferred
securities or by causing the trust to pay the required amounts to the holders.
(Section 5.1)
Each
guarantee will be an irrevocable guarantee on a subordinated basis of the
related trust’s obligations under the trust preferred securities, but will apply
only to the extent that the related trust has funds sufficient to make such
payments. If we do not make interest payments on the corresponding subordinated
debt securities held by the trust, the trust will not be able to pay
distributions on the trust preferred securities and will not have funds legally
available therefor. Each guarantee will rank subordinate and junior in right
of
payment to all of our Senior Debt. See “—Status of the Guarantees.”
We
are a
non-operating holding company and our consolidated subsidiaries own almost
all
of our operating assets. We rely primarily on dividends from our subsidiaries
to
meet our obligations for payment of principal and interest on its outstanding
debt obligations and corporate expenses. Accordingly, our obligations under
the
guarantees will be effectively subordinated to all existing and future
liabilities of our subsidiaries, and claimants should look only to our assets
for payments thereunder. The payment of dividends by our insurance company
subsidiaries is limited under the insurance holding company laws in which our
subsidiaries are domiciled. Except as otherwise provided in the applicable
prospectus supplement, the guarantees do not limit our incurrence or issuance
of
other secured or unsecured debt, whether under the Indenture, any other
indenture that we may enter into in the future or otherwise. See the prospectus
supplement relating to any offering of trust preferred securities.
44
Our
obligations described in this prospectus and in any accompanying prospectus
supplement, through the applicable guarantee, the applicable trust agreement,
the subordinated debt securities, the subordinated indenture, any supplemental
indentures to the subordinated indenture, and the expense agreement, taken
together, constitute a full, irrevocable and unconditional guarantee by us
of
payments due on the trust preferred securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes a guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the trust’s obligations under the trust preferred securities. See “The
Trusts,” “Description of Securities We May Sell—Trust Preferred Securities,” and
“Description of Securities We May Sell—Debt Securities—Junior Subordinated Debt
Securities.”
Status
of the Guarantees
Each
guarantee will constitute our unsecured obligation and will rank subordinate
and
junior in right of payment to all of our Senior Debt.
(Section 6.1)
Each
guarantee will rank equally with all other similar preferred securities
guarantees issued by us on behalf of holders of preferred securities of any
trust affiliated with us, which is a financing vehicle. (Section 6.2) Each
guarantee will constitute a guarantee of payment and not of collection.
(Section 5.5) Therefor, to the extent provided below, the guaranteed party
may institute a legal proceeding directly against us to enforce its rights
under
the guarantee without first instituting a legal proceeding against any other
person or entity. (Section 5.4) Each guarantee will be held for the benefit
of the holders of the related trust preferred securities. None of the guarantees
places a limitation on the amount of additional Senior Debt that we may incur.
We expect from time to time to incur additional indebtedness constituting Senior
Debt.
Amendments
and Assignment
Except
with respect to any changes which do not materially adversely affect the rights
of holders of the related trust preferred securities, in which case no vote
will
be required, no guarantee may be amended without the prior approval of the
holders of not less than a majority of the aggregate liquidation amount of
the
outstanding trust preferred securities covered by that guarantee.
(Section 8.2) The manner of obtaining any approval will be as set forth
under “Description of Securities We May Sell— Trust Preferred Securities—Voting
Rights; Amendment of Each Trust Agreement.” All guarantees and agreements
contained in each guarantee will bind the successors, assigns, receivers,
trustees and representatives of LNC and will inure to the benefit of the holders
of the related trust preferred securities then outstanding.
(Section 8.1)
Events
of Default
An
event
of default under each guarantee will occur upon the failure of LNC to perform
any of its payment or other obligations under that guarantee. The holders of
not
less than a majority in aggregate liquidation amount of the related trust
preferred securities covered by a guarantee have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
guarantee trustee in respect of that guarantee or to direct the exercise of
any
trust or power conferred upon the guarantee trustee under that guarantee.
(Section 5.4)
If
the
guarantee trustee fails to enforce the guarantee after a holder has made a
written request for the guarantee trustee to do so or if we have failed to
make
a guarantee payment, then any holder of the trust preferred securities covered
by a guarantee may, to the extent permitted by law, institute a legal proceeding
directly against us to enforce its rights under that guarantee without first
instituting a legal proceeding against the trust, the guarantee trustee or
any
other person or entity. (Section 5.4)
We,
as
guarantor, are required to file annually with the guarantee trustee a
certificate as to whether or not we are in compliance with all the conditions
and covenants applicable to it under the guarantee.
(Section 2.4)
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Information
Concerning the Guarantee Trustee
The
guarantee trustee, other than during the occurrence and continuance of a default
by us in performance of any guarantee, undertakes to perform only such duties
as
are specifically set forth in each guarantee and, after default with respect
to
any guarantee, must exercise the same degree of care and skill as a prudent
person would exercise or use in the conduct of his or her own affairs.
(Section 3.1) Subject to this provision, the guarantee trustee is under no
obligation to exercise any of the powers vested in it by any guarantee at the
request of any holder of any trust preferred securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might
be
incurred thereby. (Section 3.2)
Termination
of the Guarantees
Each
guarantee will terminate and be of no further force and effect
upon:
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full
payment of the redemption price of the related trust preferred
securities;
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full
payment of the amounts payable upon liquidation of the related trust;
or
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upon
distribution of corresponding subordinated debt securities to the
holders
of the related trust preferred
securities.
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Each
guarantee will continue to be effective or will be reinstated, as the case
may
be, if at any time any holder of the related trust preferred securities must
restore payment of any sums paid under the trust preferred securities or the
related guarantee. (Section 7.1)
Governing
Law
Each
guarantee will be governed by and construed in accordance with the laws of
the
State of New York.
The
Expense Agreement
Pursuant
to the expense agreement entered into by us under each trust agreement, we
will
irrevocably and unconditionally guarantee to each person or entity to whom
the
trust becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the trust, other than obligations of the trust to pay to the
holders of any trust preferred securities or other similar interests in the
trust the amounts due those holders pursuant to the terms of the trust preferred
securities or such other similar interests, as the case may be.
46
Relationship
among the Trust Preferred Securities,
the
Corresponding Subordinated Debt Securities
and
the Guarantees
Full
and Unconditional Guarantee
As
and to
the extent set forth under “Description of Securities We May Sell—Guarantees of
Trust Preferred Securities,” we will irrevocably guarantee payments of
distributions and other amounts due on the trust preferred securities to the
extent the trust has funds available for the payment of such distributions.
Taken together, our obligations under each series of subordinated debt
securities, the subordinated indenture, the related trust agreement, the related
expense agreement and the related guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of distributions and other
amounts due on the related series of trust preferred securities. No single
document standing alone or operating in conjunction with fewer than all of
the
other documents constitutes a guarantee. It is only the combined operation
of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the trust’s obligations under the trust preferred
securities. If and to the extent that we do not make payments on any series
of
corresponding subordinated debt securities, the related trust will not pay
distributions or other amounts due on its trust preferred securities. The
guarantees do not cover payment of distributions when the related trust does
not
have sufficient funds to pay the distributions. In that event, the remedy of
a
holder of a series of trust preferred securities is to institute a legal
proceeding directly against us for enforcement of payment of distributions
to
the holder. Our obligations under each guarantee are subordinate and junior
in
right of payment to all our Senior Debt.
Sufficiency
of Payments
As
long
as we make interest and other payments when due on each series of corresponding
subordinated debt securities, such payments will be sufficient to cover
distributions and other payments due on the related trust preferred securities,
primarily because:
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the
aggregate principal amount of each series of corresponding subordinated
debt securities will be equal to the sum of the aggregate stated
liquidation amount of the related trust preferred securities and
related
common securities;
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the
interest rate and interest and other payment dates on each series
of
corresponding subordinated debt securities will match the distribution
rate and distribution and other payment dates for the related trust
preferred securities;
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we
will pay for all and any costs, expenses and liabilities of the trust
except the trust’s obligations to holders under the trust preferred
securities; and
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each
trust agreement further provides that the trust will not engage in
any
activity that is not consistent with the limited purposes of the
trust.
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Despite
anything in the subordinated indenture to the contrary, we have the right to
set-off any payment it is otherwise required to make under the subordinated
indenture with and to the extent we have previously made, or concurrently on
the
date of such payment making, a payment under the related guarantee.
Enforcement
Rights of Holders of Trust Preferred Securities
If
the
guarantee trustee fails to enforce the guarantee after a holder has made a
written request for the guarantee trustee to do so or if we have failed to
make
a guarantee payment, a holder of any related trust preferred security may
institute a legal proceeding directly against us to enforce its rights under
the
related guarantee without first instituting a legal proceeding against the
guarantee trustee, the related trust or any other person or entity.
47
A
default
or event of default under any of our Senior Debt would not constitute a trust
agreement event of default. However, in the event of payment defaults under,
or
acceleration of, our Senior Debt, the subordination provisions of the
subordinated indenture provide that no payments may be made in respect of the
corresponding subordinated debt securities until the Senior Debt has been paid
in full or any payment default thereunder has been cured or waived. Failure
to
make required payments on any series of corresponding subordinated debt
securities would constitute a trust agreement event of default.
Limited
Purpose of Trusts
Each
trust’s trust preferred securities evidence a beneficial interest in that trust,
and each trust exists for the sole purpose of issuing its trust preferred
securities and common securities and investing the proceeds from the issuance
in
corresponding subordinated debt securities. A principal difference between
the
rights of a holder of a trust preferred security and a holder of a corresponding
subordinated debt security is that a holder of a corresponding subordinated
debt
security is entitled to receive from us the principal amount of and interest
accrued on corresponding subordinated debt securities held, while a holder
of
trust preferred securities is entitled to receive distributions from the trust
(or from us under the applicable guarantee) if and to the extent the trust
has
funds available for the payment of the distributions.
Rights
Upon Termination
Upon
any
voluntary or involuntary termination, winding-up or liquidation of any trust
involving the liquidation of the corresponding subordinated debt securities,
the
holders of the related trust preferred securities will be entitled to receive,
out of assets held by such trust, the liquidation distribution in cash. See
“Description of Securities We May Sell—Trust Preferred Securities—Liquidation
Distribution Upon Termination.” Upon our voluntary or involuntary liquidation or
bankruptcy, the property trustee, as holder of the corresponding subordinated
debt securities, would be a subordinated creditor of us, subordinated in right
of payment to all Senior Debt, but entitled to receive payment in full of
principal and interest, before any of our stockholders receive payments or
distributions.
USE
OF PROCEEDS
We
intend
to use the net proceeds from the sales of the securities as set forth in the
applicable prospectus supplement.
VALIDITY
OF THE SECURITIES
In
connection with particular offerings of the securities in the future, and if
stated in the applicable prospectus supplements, the validity of those
securities may be passed upon for us by Dennis L. Schoff, Esquire, Senior Vice
President and General Counsel of LNC and for the trusts by Richards,
Layton & Finger, special Delaware counsel to the trusts, and/or by
counsel named in the applicable prospectus supplement. As of the date of this
registration statement, Mr. Schoff beneficially owns approximately 96,260
shares of our Common Stock including options exercisable within sixty
(60) days of the date of the registration statement and for any
underwriters or agents by counsel named in the applicable prospectus
supplement.
EXPERTS
The
consolidated financial statements of LNC appearing in LNC’s Annual Report
(Form 10-K) for the year ended December 31, 2004 (including schedules
appearing therein) and LNC management’s assessment of the effectiveness of
internal control over financial reporting as of December 31, 2004 included
therein, have been audited by Ernst & Young LLP, independent registered
public accounting firm, as set forth in their reports thereon, included therein,
and incorporated herein by reference. Such 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.
48