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LINCOLN NATIONAL CORPORATION AND SUBSIDIARIES
EXHIBIT 10(a) - LINCOLN NATIONAL CORPORATION
1986 STOCK OPTION INCENTIVE PLAN
LINCOLN NATIONAL CORPORATION
1986 STOCK OPTION INCENTIVE PLAN
(as amended through May 13, 1993)
SECTION 1
GENERAL
1.1. Effective Date and Purpose. Lincoln National Corporation, an
Indiana corporation, ("LNC") has established the LINCOLN NATIONAL CORPORATION
1986 STOCK OPTION INCENTIVE PLAN (the "Plan") effective as of January 8, 1986
(the "Effective Date"), subject to approval of the Plan at the 1986 Annual
Meeting of LNC shareholders by the holders of a majority of the shares of LNC
stock entitled to vote at that meeting. The purpose of the Plan is to promote
the long-term financial performance of LNC by (a) attracting and retaining
executive and other key employees of LNC and its Subsidiaries (as defined in
subsection 2.1) who possess outstanding abilities with incentive compensation
opportunities which are competitive with those of other major corporations;
(b) motivating such employees to further the long-range goals of LNC; and (c)
furthering the identity of interests of participating employees and LNC
shareholders through opportunities for increased employee ownership of LNC
common stock.
1.2. Plan Administration. The Plan shall be administered by the
Committee (as described below). In addition to those rights, duties, and
powers vested in the Committee by other provisions of the Plan, the Committee
shall have sole authority to:
(a) interpret the provisions of the Plan;
(b) adopt, amend and rescind rules and regulations for the
administration of the Plan; and
(c) make all other determinations deemed by it to be necessary
or advisable for the administration of the Plan;
provided that the Committee shall exercise its authority in accordance with
the provisions of the Plan. The Committee may not exercise its authority at
any time that it has fewer than three members. The Committee shall exercise
its authority only by a majority vote of its members at a meeting or by a
writing without meeting. At any date, the members of the Committee shall be
those members of the Compensation Committee of the Board of Directors of LNC
who are not eligible and who have not been eligible within one year preceeding
that date to participate in the Plan or any other plan of LNC or a Subsidiary
under which stock, stock options or stock appreciation rights of LNC or a
Subsidiary may be granted. In the event that fewer than three members of the
Compensation Committee of the Board are eligible to serve on the Committee,
the Board of Directors of LNC may appoint one of its other members who is
otherwise eligible to serve, to serve on the Committee until such time as
three members of the Compensation Committee are eligible to serve.
1.3. Shares Available. The sum of the number of shares of LNC common
stock for which Incentive Stock Options and Non-qualified Stock Options (both
as defined in subsection 3.1) may be granted; of shares of LNC common stock
which may be awarded under a Restricted Stock Award (as defined in subsection
5.1); and of shares awarded pursuant to Section 6 may not exceed 5,000,000.
If all or a portion of an Incentive Stock Option or Non-qualified Stock Option
expires or is terminated without having been exercised in full and without
having been surrendered to exercise any related Stock Appreciation Rights (as
defined in subsection 4.1) or if any Restricted Stock Award is forfeited,
then the number of shares which were forfeited or not purchased shall not
thereafter be considered in determining whether the 5,000,000 limitation
described in the next preceding sentence has been exceeded. The shares of
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LNC common stock delivered pursuant to the Plan shall be authorized but
unissued shares. In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other similar change in the
corporate structure or capitalization of LNC which affects the LNC common
stock, appropriate adjustment, as determined by the Board of Directors of LNC
(or its successor), shall be made with respect to the number and kinds of
shares (or other securities) which may thereafter be awarded or be subject to
option under the Plan. The shares available provided for in this subsection
1.3 reflect an adjustment for a two for one stock split effected through a
stock dividend declared by the Board of Directors of LNC on May 13, 1993.
Agreements evidencing grants and awards under the Plan shall be subject to and
shall provide for appropriate adjustments, determined by the Board of
Directors of LNC (or its successor) in the event of such changes in the
corporate structure or capitalization of LNC occurring after the date of grant
or award.
1.4. Term, Amendment, and Termination of Plan. Grants and awards may
not be made under the Plan after the earlier of January 7, 1996, or the
termination date of the Plan. The Board of Directors of LNC may amend or
terminate the Plan at any time except that, without the approval of the
holders of a majority of LNC stock entitled to vote at a duly held meeting of
such shareholders, the Board may not:
(a) increase the number of shares of LNC common stock which may be
issued under the Plan, except as provided in subsection 1.3;
(b) reduce the minimum option price under any stock option, except as
provided in subsection 1.3;
(c) increase the maximum period during which Incentive Stock Options,
Non-qualified Stock Options and Stock Appreciation Rights may be
exercised;
(d) extend the term of the Plan; and
(e) amend the standards for participation described in Section 2.
Amendment or termination of the Plan shall not affect the validity or terms of
any grant or award previously made to a Participant in any way which is
adverse to the Participant without the consent of the Participant.
SECTION 2
PLAN PARTICIPATION
2.1. Participation Designations. The Committee may, at any time,
designate any key executive, managerial, supervisory or professional employee
of LNC or of a Subsidiary (as defined below) or any person holding either an
agent`s or broker's contract with a Subsidiary to be a Participant. For
purposes of the Plan, the term "Subsidiary" means any corporation at any date
that LNC owns directly, or indirectly through an unbroken chain of subsidiary
corporations, stock possessing a majority of the total combined voting power
of all classes of stock of that corporation.
2.2. Participation Not Contract of Employment. The Plan does not
constitute a contract of employment. Participation in the Plan does not give
any employee the right to be retained in the employ of LNC or a Subsidiary and
does not limit in any way the right of LNC or a Subsidiary to change the
duties or responsibilities of any employee.
2.3. Withholding Taxes on Plan Benefits. LNC and the Subsidiaries shall
have the right to deduct from any cash payment made pursuant to the Plan the
amount of any tax required by law to be withheld from that payment. LNC and
the Subsidiaries shall have the right to require payment to them from any
person entitled to receive LNC common stock pursuant to the Plan of the
amount of any tax required by law to be withheld with respect to that stock
prior to its delivery. A Participant may elect with respect to any
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Non-qualified Stock Option, any Stock Appreciation Right which is paid in
whole or in part in LNC common stock and any Restricted Stock Award, to
surrender shares of LNC common stock the fair market value of which on the
date of surrender satisfies all or part of the withholding requirements. Such
election must be made by filing a Stock Surrender Withholding Election with
the Secretary of LNC which meets the following requirements and conditions:
(a) Any Stock Surrender Withholding Election shall be in writing and be
irrevocable;
(b) The Committee shall have the right with respect to any or all
outstanding awards to terminate or suspend for any period the right
of a Participant to make a Stock Surrender Withholding Election at
any time prior to the making of such election;
(c) Any Stock Surrender Withholding Election must be made prior to the
date that the amount of tax to be withheld is determined (the "Tax
Date"); and
(d) If a Participant is an "officer" of LNC within the meaning of
section 16 of the Securities Exchange Act of 1934, as amended, or
any successor law, the Stock Surrender Withholding Election must be
made:
(i) more than six months after the date of grant of the award
with respect to which such election is made (except whenever
such election is made by a disabled Participant or the
estate or personal representative of a deceased
Participant); and
(ii) either at least six months prior to the Tax Date or during
the ten day "window period" beginning on the third day
following the release for publication of LNC`s summary
statement of earnings for a quarter or fiscal year.
SECTION 3
STOCK OPTIONS
3.1. Grantees. The Committee may, at any time, designate a
participant to receive an Incentive Stock Option or Non-qualified Stock Option
(each as defined below) whether or not the Participant has previously received
a grant under the Plan. For purposes of the Plan, the term "Incentive Stock
Option" means an option to purchase LNC common stock which meets the
requirements of section 422A(b) of the Internal Revenue Code of 1986, as
amended, (the "Code") and which has been designated by the Committee as an
Incentive Stock Option, and the term "Non-qualified Stock Option" means an
option to purchase LNC common stock which is not an Incentive Stock Option and
which is designated by the Committee as a Non-qualified Stock Option." Each
Incentive Stock Option ("ISO") and Non-Qualified Stock Option ("NQSO")
granted under the Plan shall be evidenced by an agreement between the
Participant and LNC. The Provisions of each agreement shall be determined by
the Committee in accordance with the provisions of the Plan. LNC shall notify
a Grantee of any grant of a Stock Option, and a written option agreement or
agreements shall be duly executed and delivered by LNC to the Grantee. A
Participant shall not have any rights of a shareholder of LNC common stock
with respect to shares subject to an ISO or NQSO until such shares are
purchased on exercise of the option.
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3.2. Number of Shares Optioned and Option Price. The Committee shall,
subject to the limitations of subsection 1.3 and this Section 3, determine the
number of shares of LNC common stock which may be purchased and the option
price of each share on exercise of each ISO and NQSO granted under the Plan.
The number of shares of LNC common stock for which ISOs may be granted to a
Participant under this Plan and any other plan of LNC or a Subsidiary during
any calendar year beginning before January 1, 1987 shall not exceed the number
whose aggregate Fair Market Value (as defined below), at the time each ISO is
granted, does not exceed the dollar limitation (including unused carry-
overs) described in section 422A(b)(8) of the Code. The aggregate Fair Market
Value (determined as of the time the option is granted) of LNC stock with
respect to which ISOs granted after December 31, 1986 are exercisable for the
first time by a Participant during any calendar year under the Plan or any
other Plan of LNC or a Subsidiary shall not exceed $100,000. The option price of
each share under an ISO or NQSO shall not be less than 100% the Fair
Market Value of a share of LNC common stock on the date the option is granted.
For purposes of the Plan, the term "Fair Market Value" means the average of
the highest and lowest prices of a share of stock, as quoted on the composite
transactions table covering transactions on the New York Stock Exchange, on
the first date that the stock was traded on that Exchange which next precedes
the date as of which the determination is being made.
3.3. Exercise of Options and Payment. Each ISO and NQSO shall become
exercisable in full at such time, or in such portions at such times, as the
Committee determines subject to the following provisions of this subsection
3.3. No ISO or NQSO granted to a Participant shall be exercisable prior to
the first anniversary of the date that the option was granted except, in the
discretion of the Committee and subject to the limitations of subsection 3.2,
if the Participant`s employment with LNC and all Subsidiaries terminates by
reason of death, disability (as defined by the Committee), or retirement (as
described in subsection 3.4(d)). During any period that an ISO or NQSO is
exercisable, it may be exercised by delivering a written notice which
specifies the number of shares purchased and full payment of the purchase
price to the Secretary of LNC. Payment may be made in cash, in shares of LNC
common stock with an aggregate Fair Market Value on the date of exercise equal
to the purchase price, or in any combination of cash and such shares,
provided, however, payment of the exercise price may only be made in shares
of LNC common stock which have been owned by the Participant for at least six
months.
3.4. Termination of Options. Each ISO and NQSO shall terminate and not
be exercisable after the date determined by the Committee which date shall not
be later than the earliest of (a) the tenth anniversary of the date that the
option was granted; (b) the last day of the three month period beginning on
the date the Participant's employment with LNC and all Subsidiaries
terminates for reasons other than described in (c) or (d) following; (c) the
first anniversary of the date the Participant's employment with LNC and all
Subsidiaries terminates on account of death or disability (as defined by the
Committee); or (d) the fifth anniversary of the Participant's normal
retirement or, with the approval of the Participant's employer, early
retirement at either age 55 with 5 years of service or under the terms of a
retirement plan of LNC or a Subsidiary.
3.5. Transferability. Each ISO and NQSO granted to a Participant may
not be transferred by the Participant except by will or the laws of descent
and distribution, and may be exercisable during the Participant`s lifetime
only by the Participant.
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SECTION 4
STOCK APPRECIATION RIGHTS
4.1. Grantees. The Committee may, at the time a stock option is granted
under Section 3 to a Participant or at any time thereafter, designate that
Participant to be granted, in conjunction with that stock option, a Stock
Appreciation Right (as defined below). The Committee may grant a Stock
Appreciation Right to a Participant only after it has determined that such
grant is necessary or desirable to create a reasonable opportunity for the
Participant to acquire an increased ownership interest in LNC. In making such
determination, the Committee shall consider the number of shares of LNC common
stock then owned by the Participant, the Participant`s outstanding stock
options for LNC common stock and related Stock Appreciation Rights, and such
other factors that the Committee considers relevant. No Stock Appreciation
Right may be granted in conjunction with a previously granted ISO without the
written consent of the affected Participant. For purposes of the Plan, the
term "Stock Appreciation Right" means a right to surrender all or a portion of
a stock option and receive, in exchange, payment of an amount no greater than
the excess of the Fair Market Value (as defined in subsection 3.2) of one or
more shares of LNC common stock determined on the date the related stock
option was granted. Each Stock Appreciation Right ("SAR") granted under the
Plan shall be evidenced by an agreement between the Participant and LNC. The
provisions of each agreement shall be determined by the Committee in
accordance with the provisions of the Plan.
4.2. Terms of SARs. The Committee shall determine the number of shares
of LNC common stock and the percentage (not more than 100 percent) or maximum
amount of the increase in the Fair Market Value of those shares over the
relevant period upon which payment of each SAR at exercise shall be based.
Each SAR may be exercisable at any date with respect to no more than the
number of shares for which the related stock option is exercisable on that
date. Each SAR issued in conjunction with an ISO may be exercisable only when
there has been an increase in Fair Market Value of the shares over the
relevant period. If a Participant to whom an SAR has been granted is subject
to Section 16 of the Securities Exchange Act of 1934, as amended, the
Committee may, at any time, impose such conditions and limitations to such SAR
as the Committee deems necessary or desirable for the Participant to comply
with or obtain an exemption from such Section 16 and applicable rules and
regulations. The terms of an SAR may include such other conditions and
limitations on exercise as the Committee deems desirable.
4.3. Exercise of SARs and Payment. During any period that a SAR is
exercisable, it may be exercised by delivering a written notice which
specifies the extent to which the SAR is being exercised to the Secretary of
LNC. Payment to the Participant shall be made as soon as practicable after
exercise of the SAR and may be made in cash, in shares of LNC common stock
with an aggregate Fair Market Value on the date of exercise equal to the
amount to be paid, or in any combination of cash and such shares as determined
by the Committee. Upon exercise of an SAR, the right to exercise the related
stock option shall automatically be terminated to the same extent that the SAR
was exercised.
4.4. Termination of SARs. Each SAR shall terminate and not be
exercisable after the same date that the related stock option terminates.
4.5. Transferability. Each SAR granted to a Participant may not be
transferred by the Participant except together with the related stock option
and except by will or the laws of descent and distribution, any may be
exercisable during the Participant`s lifetime only by the Participant.
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SECTION 5
RESTRICTED STOCK AWARDS
5.1. Grantees. The Committee may, at any time, designate a Participant
to receive a Restricted Stock Award (as defined below) whether or not the
Participant has previously received a grant under the Plan. For purposes of
the Plan, the term "Restricted Stock Award" means the right to receive, at
specified times and subject to specified conditions, shares of LNC common
stock which may bear such restrictive endorsements as the Committee
determines. Each Restricted Stock Award ("RSA") shall be evidenced by an
agreement between the Participant and LNC. The provisions of each agreement
shall be determined by the Committee in accordance with the provisions of the
Plan.
5.2. Grants of Restricted Stock Awards. The Committee shall, subject to
subsection 1.3 and this Section 5, determine the number of shares of LNC
common stock which may be awarded, the time or times the shares may be
awarded, and the conditions which must be met for award and delivery of the
shares to the Participant under each RSA granted under the Plan. An RSA may
provide, in the discretion of the Committee, for the crediting to the
Participant, on each dividend payment date, of an amount equal to the product
of the dividend paid on a share of LNC common stock multiplied by the number
of shares which may be awarded under that RSA, and for the payment in cash to
the Participant of the amounts so credited at such time as the Committee may
determine. An RSA may provide, in the discretion of the Committee, for the
issuance of the shares which may be awarded under the RSA in the name of the
Participant subject to the following restrictions:
(a) the shares may not be issued earlier than six months after the
grant of the RSA;
(b) the shares may not be sold, transferred, pledged or
otherwise assigned or encumbered;
(c) each stock certificate shall be registered in the name of the
Participant and deposited with the Secretary of LNC;
(d) dividends paid on the shares shall be paid to the
Participant at such times as the Committee shall
determine; and
(e) the shares and dividends paid shall be subject to a
forfeiture in accordance with subsection 5.4.
Subject to the foregoing restrictions, the Participant shall have all of the
rights of a holder of LNC common stock with respect to the shares issued to
him or her under this subsection 5.2.
5.3. Distribution of Shares. Subject to the provisions of subsection
5.4, each RSA shall provide for the distribution of the awarded shares of LNC
Common stock free of all restrictions to the Participant or, in the event of
the Participant`s death, the person or persons to whom the RSA was transferred
by will or the laws of descent and distribution. Distribution shall be
provided for at such time or times during the period beginning on the first
anniversary and ending on the tenth anniversary of the date of grant of the
RSA as the Committee shall determine; except that, in the discretion of the
Committee, distribution may be provided for prior to such first anniversary if
the Participant's employment with LNC and all Subsidiaries terminates on
account of death, disability (as determined by the Committee), or retirement
(as described in subsection 3.4(d)).
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5.4. Forfeiture. Each RSA shall provide that a Participant shall
forfeit all rights under the RSA, all shares of LNC common stock issued
pursuant to the RSA which had not been distributed to the Participant free of
all restrictions, and all undistributed amounts credited to the Participant
with respect to dividends paid on LNC common stock pursuant to the RSA if:
(a) the Participant`s employment with LNC and all Subsidiaries
terminates for any reason other than death, disability (as defined
by the Committee), retirement (as described in subsection 3.4(d)),
or other reasons determined by the Committee which should not
cause forfeiture; or
(b) the conditions, if any, specified in the RSA are not fully
satisfied within the prescribed time.
5.5. Transferability. Each RSA granted to a Participant may not be
transferred by the Participant except by will or the laws of descent and
distribution.
SECTION 6
STOCK INCENTIVE AWARDS
6.1. Management Incentive Plan II. The Committee may, in its
discretion, designate that a Participant who is eligible for a cash award
under the terms of the LNC Management Incentive Plan II (the "MIP II Plan")
receive such award as a grant of restricted stock in lieu of all or a portion
of the MIP II Plan cash award, such RSA shall be made subject to subsection
1.3 and Section 5. The amount, if any, of the MIP II award which is not paid
as an RSA shall be paid in cash. This cash payment shall be determined by
subtracting from the MIP II Plan award the total Fair Market Value, on the
date of the RSA, of the shares of LNC common stock represented by the RSA
without discount for any restrictions.
6.2. Executive Value Sharing Plan. The Committee may, in its
discretion, designate that a Participant who is eligible for a cash award
under the terms of the LNC Executive Value Sharing Plan (the "EVS Plan")
receive such award as a grant of restricted stock in lieu of all or a portion
of the EVS Plan cash award. If the Committee decides to make an RSA in lieu
of all or a portion of the EVS Plan cash award, such RSA shall be made subject
to subsection 1.3 and Section 5. The amount, if any, of the EVS Plan award
which is not paid as an RSA shall be paid in cash.
SECTION 7
POSTPONEMENT OF EXERCISE
The Committee may postpone any exercise of an ISO, NQSO, or SAR or
distribution pursuant to an RSA for such time as the Committee in its
discretion may deem necessary in order to permit LNC (a) to effect or maintain
registration of the Plan or LNC common stock issuable pursuant to the Plan
under the Securities Act of 1933, as amended, or the securities laws of any
applicable jurisdiction; (b) to take any action necessary to comply with
restrictions or regulations incident to the maintenance of a public market for
LNC common stock; or (c) to determine that no action referred to in (a) or (b)
above needs to be taken. LNC shall not be obligated to issue shares upon
exercise of any ISO, NQSO or SAR or to issue shares pursuant to an RSA in
violation of any law. Any such postponement shall not extend the term of an
ISO, NQSO or SAR. Neither LNC nor its directors or officers shall have any
obligation or liability to any Participant (or successor in interest) because
of the loss or rights under any grant or award under the Plan due to
postponements pursuant to this Section 7.
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SUPPLEMENT A
THE LNC STOCK OPTION INCENTIVE SCHEME
FOR U.K. EMPLOYEES
This Supplement A is adopted as part of the Lincoln National Corporation 1986
Stock Option Incentive Plan ('the Plan') and is referred to as 'the U.K.
Scheme'.
The Rules of the Plan will apply to United Kingdom employees subject to the
following additions and modifications.
1. The U.K. Scheme will be effective from the date approved by the Board of
Inland Revenue.
2. (1) Subject to sub paragraphs (2) and (3) of this paragraph
participation in the U.K. Scheme will be determined in the same
manner as for the Plan.
(2) No person shall obtain rights under the U.K. Scheme unless he is
at that time an eligible employee of a participating Company. For
this purpose
(i) an eligible employee of a company is any director or employee who
is required to devote to his duties not less than 25 hours (or in
the case of any employee who is not a director, 20 hours) per
week (excluding meal breaks), including any time spent in
carrying out duties for any other participating company, and this
is not precluded by paragraph 4(1)(b) of Schedule 10 of the
Finance Act of 1984 from participating in the U.K. Scheme, and
(ii) a participating company is any body corporate including Cannon
Assurance Limited which is under the control (within the
meaning of Section 534 of the Income and Corporation Taxes Act
of 1970) of Lincoln National Corporation.
(3) No person shall be entitled to obtain or exercise rights under the U.K.
Scheme at any time when he has or within the preceding 12 months had a
material interest in a close company within the meaning of Chapter IV of
Part XI of the Income and Corporation Taxes Act 1970, which is
(i) a company the shares of which may be acquired pursuant to
the exercise of rights obtained under the U.K. Scheme; or
(ii) a company which has control of such a company or is a member of a
consortium which controls such a company.
3. No option shall be granted under the U.K. Scheme to an eligible employee
if immediately following such grant he would hold outstanding options
which have neither lapsed nor been exercised with an aggregate
subscription price exceeding the greater of 100,000 British
Pounds Sterling or four times the amount of the Eligible
Employee`s relevant emoluments for the period of 12 months
beginning with the first day during the current year of
assessment in respect of which there are relevant emoluments. For this
purpose
(i) outstanding options include all options granted under the U.K.
Scheme and other scheme approved under schedule 10 of the Finance
Act 1984 and established by Lincoln National Corporation or any
participating company (as defined in Rule 1 and Rule 2 above) and
(ii) relevant emoluments has the same meaning as in paragraph 5(5) of
Schedule 10 of the Finance Act of 1984.
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4. For the purpose of the U.K. Scheme the option price of each share shall
instead of the price quoted under paragraph 3.2. of the Plan be the
middle market quotation derived from the Stock Exchange Daily Official
List for the date the option is granted, provided that if the Fair
Market Value (as defined in the said paragraph 3.2.) for that date is
higher when converted to sterling at the rate of exchange quoted for
that day by National Westminster Bank, then the option price will be the
Fair Market Value (as so converted).
5. (1) On exercise of an option by a Participant payment shall be made in
cash and the right under the Plan (paragraph 3.3.) to make payment or
partially to make payment in shares of LNC common stock shall not apply
to the U.K. Scheme.
(2) Shares acquired on the exercise of an option under the U.K. Scheme
will be issued and allocated not later than 30 days after the exercise
of the option.
6. For the purposes of the U.K. Scheme all references to 'LNC Common Stock'
shall be deemed to be references to LNC common stock which satisfy the
conditions specified in Paragraphs 7 to 11 inclusive of Schedule 10 to
the Finance Act 1984.
7. Section 4 (Stock Appreciation Rights), Section 5 (Restricte Stock
Awards) and Section 6 (Stock Incentive Awards) of the Plan shall not
apply to the U.K. Scheme.
8. All amendments to the U.K. Scheme shall be subject to the prior approval
of the Board of Inland Revenue and any amendments to the Plan shall be
ineffective for the purposes of the U.K. Scheme until approved by the
Board of Inland Revenue.