lincolndef14a.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant [  ]
Check the appropriate box:
[     ] Preliminary Proxy Statement
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[ X ] Definitive Proxy Statement
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[     ] Soliciting Material under ss. 240.14a-12

Lincoln National Corporation
(Name of Registrant as Specified In Its Charter)
 
     N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
 
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[   ]
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 
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RADNOR, PENNSYLVANIA




April 15, 2011


Dear Fellow Shareholder:

You are cordially invited to attend our Annual Meeting of Shareholders scheduled for Thursday, May 26, 2011, at 9:00 a.m., local time, at the Ritz-Carlton Hotel, 10 Avenue of the Arts, Philadelphia, Pennsylvania 19102.  Our Board of Directors and management team look forward to greeting you.

The notice of meeting and proxy statement describe the matters to be acted upon at the Annual Meeting of Shareholders.  Please review these documents carefully.

This year we have mailed many of our shareholders a notice of internet availability instead of a paper copy of our proxy statement and our 2010 annual report to shareholders.  The notice of internet availability contains instructions on how shareholders can access these documents over the internet as well as how shareholders can receive a paper or e-mail copy of our proxy materials including our proxy statement, our 2010 annual report to shareholders and a proxy card.  We believe electronic delivery allows us to provide our shareholders with the information they need, while lowering the costs of the delivery of the materials and reducing the environmental impact of printing and mailing paper copies.

It is important that you vote your shares of our stock, by either attending the Annual Meeting and voting in person, or voting as promptly as possible by proxy, through the use of a proxy card, or voting via telephone or over the internet.

On behalf of the entire Board of Directors, thank you for your continued support.

 
 
 
Sincerely,
   
 
 
William H. Cunningham
 
Chairman of the Board
 
 
 
 
 
 

 
 
LINCOLN NATIONAL CORPORATION
RADNOR, PENNSYLVANIA



NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS


April 15, 2011

The Annual Meeting of Shareholders of Lincoln National Corporation will be held on Thursday, May 26, 2011, at 9:00 a.m., local time, at the Ritz-Carlton Hotel, 10 Avenue of the Arts, Philadelphia, Pennsylvania 19102.

The items of business are:

1.     
to elect three directors for three-year terms expiring at the 2014 Annual Meeting;
2.     
to ratify the appointment of Ernst & Young LLP as independent registered public accounting firm for 2011;
3.     
to approve an amendment to the Company’s Restated Articles of Incorporation to allow shareholders to amend the bylaws;
4.     
to approve an advisory proposal on the Company’s Executive Compensation;
5.     
to respond to an advisory proposal regarding the frequency (every one, two or three years) of future advisory proposals on the Company’s Executive Compensation; and
6.     
to consider and act upon such other matters as may properly come before the meeting.

You have the right to receive this notice and vote at the Annual Meeting of Shareholders if you were a shareholder of record at the close of business on March 21, 2011.  Please remember that your shares cannot be voted unless you cast your votes by one of the following methods: (1) sign and return a proxy card; (2) vote via telephone; (3) vote via the internet; (4) vote in person at the Annual Meeting; or (5) make other arrangements to vote your shares.
 
 
 

 
For the Board of Directors,
   
 
 
Charles A. Brawley, III
 
Vice President, Associate General Counsel &
Secretary




 
 

 

TABLE OF CONTENTS

GENERAL INFORMATION                                                                                                                            
SECURITY OWNERSHIP                                                                                                                            
GOVERNANCE OF THE COMPANY                                                                                                                            
THE BOARD OF DIRECTORS AND COMMITTEES                                                                                                                            
ITEM 1 – ELECTION OF DIRECTORS                                                                                                                            
     Nominees for Director                                                                                                                            
     Directors Continuing in Office                                                                                                                            
COMPENSATION OF DIRECTORS                                                                                                                            
ITEM 2 – RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM                                                                                                                            
     Independent Registered Public Accounting Firm Fees and Services                                                                                                                            
     Audit Committee Pre-Approval Policy                                                                                                                            
     Audit Committee Report                                                                                                                            
ITEM 3 – APPROVAL OF AN AMENDMENT TO THE RESTATED ARTICLES OF
INCORPORATION TO ALLOW SHAREHOLDERS TO AMEND THE BYLAWS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
EXECUTIVE COMPENSATION                                                                                                                            
     Compensation Discussion & Analysis                                                                                                                            
     Compensation Committee Report                                                                                                                            
     Summary Compensation Table                                                                                                                            
     Grants of Plan-Based Awards                                                                                                                            
     Outstanding Equity Awards at Fiscal Year-End                                                                                                                            
     Option Exercises and Stock Vested                                                                                                                            
     Pension Benefits                                                                                                                            
     Nonqualified Deferred Compensation                                                                                                                            
     Potential Payments Upon Termination or Change of Control                                                                                                                            
ITEM 4 – ADVISORY PROPOSAL ON EXECUTIVE COMPENSATION                                                                                                                            
ITEM 5 – ADVISORY PROPOSAL REGARDING THE FREQUENCY OF FUTURE ADVISORY PROPOSALS ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
RELATED PARTY TRANSACTIONS                                                                                                                            
GENERAL                                                                                                                            
     Shareholder Proposals                                                                                                                            
     Incorporation by Reference                                                                                                                            
     Annual Report                                                                                                                            
     Other Matters  66
EXHIBIT 1 – Section 10 – Notice of Shareholder Business                                                                                                                            
EXHIBIT 2 – Section 11 – Notice of Shareholder Nominees                                                                                                                            
EXHIBIT 3 – Policy Regarding Approval of Services of Independent Auditor                                                                                                                            
EXHIBIT 4 – Amendment to the Restated Articles of Incorporation                                                                                                                            
EXHIBIT 5 – List of Investment Companies from 2009 McLagan Survey                                                                                                                            
EXHIBIT 6 – Compensation Plans for our Senior Executive Officers and Employees and
     Discussion of Risk                                                                                                                            

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 26, 2011:
This proxy statement and the accompanying annual report are available at: http://bnymellon.mobular.net/bnymellon/lnc.
 
 
 
 

 
 
LINCOLN NATIONAL CORPORATION
150 N. RADNOR CHESTER ROAD
RADNOR, PENNSYLVANIA 19087

PROXY STATEMENT
Annual Meeting of Shareholders
May 26, 2011

The Board of Directors of Lincoln National Corporation (the “Company,” “we,” “our,” or “us”) is soliciting proxies in connection with the proposals to be voted on at the Annual Meeting of Shareholders scheduled for May 26, 2011 (the “Annual Meeting”).  The Annual Meeting will be held at the Ritz-Carlton Hotel, 10 Avenue of the Arts, Philadelphia, Pennsylvania 19102, beginning at 9 a.m. local time.  This proxy statement and a proxy card or a notice of internet availability was first sent to our shareholders on or about April 15, 2011.  Whenever we refer in this proxy statement to the “Annual Meeting,” we are also referring to any meeting that results from an adjournment of the Annual Meeting.

GENERAL INFORMATION

Why did I receive this proxy statement or notice of internet availability of proxy materials?

You are receiving a proxy statement, or a notice of internet availability of proxy materials, because you owned shares of our stock on March 21, 2011, the record date, and that entitles you to vote at the Annual Meeting.  This proxy statement describes the matters to be voted on at the Annual Meeting, provides information on these matters, and provides information about the Company that must be disclosed when your proxy is solicited.

What will I be voting on at the Annual Meeting?

At the Annual Meeting, shareholders are being asked to vote upon the following items of business:

1.  
to elect three directors for three-year terms expiring at the 2014 Annual Meeting;
2.  
to ratify the appointment of Ernst & Young LLP as independent registered public accounting firm for 2011;
3.  
to approve an amendment to the Company’s Restated Articles of Incorporation to allow shareholders to amend the bylaws;
4.  
to approve an advisory proposal on the Company’s Executive Compensation;
5.  
to respond to an advisory proposal regarding the frequency (every one, two or three years) of future advisory proposals on the Company’s Executive Compensation; and
6.  
to consider and act upon such other matters as may properly come before the meeting.

What are the Board of Directors recommendations?

·  
for the election of three director nominees named in this proxy statement;
·  
for the ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for 2011;
·  
for the approval of an amendment to the Company’s Restated Articles of Incorporation to allow shareholders to amend the bylaws;
·  
for the approval of an advisory proposal on the Company’s Executive Compensation; and
·  
for one-year as the frequency of future advisory proposals on the Company’s Executive Compensation.

Why did some shareholders receive a one-page notice in the mail regarding the internet availability of proxy materials instead of a full set of the printed proxy materials?

In accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) instead of mailing a printed copy of our proxy materials to each shareholder of record, we may furnish proxy materials by providing access to those documents on the internet.  Most shareholders received a notice of internet availability (the “Notice”) containing instructions as to how to access and review all of the proxy
 
 
 
 
 
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materials on the internet.  The Notice also contains instructions on how shareholders can request a paper copy of our proxy materials including our proxy statement, our 2010 annual report to shareholders and a proxy card form.  The Notice also instructs shareholders how to submit their proxy on the internet.  Shareholders receiving the Notice who would like to receive paper or e-mail copies of our proxy materials should follow the instructions in the Notice for requesting those materials.  To ensure timely delivery of such proxy materials prior to the Annual Meeting, shareholders should make such request by May 12, 2011.
 
Who is entitled to vote at the Annual Meeting?

Only shareholders of record at the close of business on March 21, 2011, the record date for the meeting, are entitled to vote at the Annual Meeting.  As of the record date, we had 315,075,604 shares of common stock and 10,914 shares of $3.00 cumulative convertible preferred stock, series A, issued, outstanding and entitled to vote at the Annual Meeting.  You are entitled to one vote for each share of common stock and each share of preferred stock you own.  The number of shares you own (and may vote) is listed on the proxy card or the Notice that you received.

What constitutes a quorum?

A majority of all outstanding shares entitled to vote at the Annual Meeting, or 157,543,260, constitutes a quorum, which is the minimum number of shares that must be present or represented by proxy at the Annual Meeting in order to transact business.  Subject to the rules regarding the votes necessary to adopt the proposals discussed below, abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present.  Generally, “broker non-votes” occur when brokerage firms return proxies for which no voting instructions have been received from beneficial owners and the broker does not have discretionary authority to vote on the proposal.  Once a share is represented for any purpose at the Annual Meeting, it will be deemed present for quorum purposes for the remainder of the meeting (including any meeting resulting from an adjournment of the Annual Meeting, unless a new record date is set).

How do I vote?

1.  In person.  If you are a shareholder of record, you may attend the Annual Meeting and vote your shares or send a personal representative with an appropriate proxy.

If you own your shares in “street name” (i.e., through a broker-dealer or other financial institution) and you want to vote at the Annual Meeting, you will need to obtain a proxy card from the institution that holds your shares and present that card at the Annual Meeting.

If you own share equivalents through the Lincoln National Corporation Stock fund of the Lincoln National Corporation Employees’ Savings and Retirement Plan or The Lincoln National Life Insurance Company Agents’ Savings and Profit-Sharing Plan, both of which are 401(k) plans, you cannot vote in person at the Annual Meeting.  Instructions on voting these share equivalents are described in more detail below under “How do I vote my 401(k) and/or dividend reinvestment plan shares.

You can obtain directions to attend the Annual Meeting and vote in person by contacting Shareholder Services at 1-800-237-2920 or shareholderservices@lfg.com.

2.  By Mail.  Mark, date, sign and mail the proxy card in the prepaid envelope the Company has provided you if you received a paper copy of the proxy materials.  If you return the proxy card but do not mark your voting preference, the individuals named as proxies will, to the extent permissible, vote your shares in accordance with the description of each item in this proxy statement.  With respect to any other matter that properly comes before the Annual Meeting, the individuals named as proxies will, to the extent permissible, vote all proxies in the manner they perceive to be in our best interests.

3.  By Telephone or Internet.  If you are a shareholder of record, you may submit your proxy with voting instructions by telephone if you are calling within the United States, Canada or Puerto Rico.  If you are a shareholder of record, you may also submit your proxy through the internet by visiting the website listed on the proxy card or Notice.
 
 
 
 
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If you choose to submit your proxy with voting instructions by telephone or through the internet, you will be required to provide your assigned control number noted on the proxy card or Notice before your proxy will be accepted.  In addition to the instructions that appear on the proxy card or Notice, step-by-step instructions will be provided by recorded telephone message or at the designated website on the internet.

If you hold your shares in “street name,” please check your proxy card or Notice, or contact your broker, nominee, fiduciary or other custodian to determine if you will be able to vote by telephone or internet.

How many votes are needed to approve each proposal and what are the effects of broker non-votes, abstentions and unmarked proxy cards?

A majority of the votes cast by the holders of shares entitled to vote at the annual meeting, assuming a quorum is present, is required for the approval of the election of each director.  Assuming a quorum is present, the ratification of the appointment of Ernst & Young LLP as our independent registered accounting firm, the approval of an amendment to the Company’s Restated Articles of Incorporation and the advisory vote to approve the Company’s Executive Compensation will be approved if the votes cast for the proposal exceed those cast against the proposal.  Abstentions will not count as votes cast either for or against a nominee or the above proposals.

The advisory vote on the frequency of future advisory proposals on the Company’s Executive Compensation asks shareholders to express their preference for one of three choices for future advisory votes on executive compensation – every year, every two years, or every three years. Abstentions have the same effect as not expressing a preference. The proposals regarding the approval of the Company’s Executive Compensation and the frequency of future votes to approve the Company’s Executive Compensation are advisory only and not binding on the Board of Directors.   If any other matters are properly presented at the Annual Meeting, a particular proposal will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against the proposal.

If you sign and return a proxy or voting instruction card, but do not mark how your shares are to be voted, they will be voted as the Board recommends.  If you hold your shares in “street name,” you may instruct your broker how you would like your shares voted. If you choose not to provide voting instructions, your shares are referred to as broker non-votes and the bank, broker or other custodian may be permitted to vote your shares (discretionary voting) only on certain items.  These broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting for purposes of determining a quorum, but will not be considered in determining the number of votes necessary for approval and will have no effect on the outcome of the vote for directors, the advisory proposal on the Company’s Executive Compensation or the advisory proposal regarding the frequency of future advisory proposals on the Company’s Executive Compensation.  Unmarked, signed proxy cards will be vote for each management proposal.

Can I revoke my proxy or change my vote after I vote my proxy?

Yes.  You may revoke your proxy or change your vote at any time prior to the Annual Meeting by: (1) sending our Corporate Secretary a written revocation; (2) submitting a new proxy by mail, telephone or internet; or (3) attending the Annual Meeting and voting your shares in person.

How do I vote my 401(k) and/or dividend reinvestment plan shares?

If you have invested in the Lincoln National Corporation Stock fund of the Lincoln National Corporation Employees’ Savings and Retirement Plan or The Lincoln National Life Insurance Company Agents’ Savings and Profit-Sharing Plan, your voting instructions, whether submitted via telephone or through the internet, will instruct the trustee of your plan how to vote the shares of common stock allocated to the plans.  If our stock books contain identical account information regarding common stock that you own directly and common stock that you have an interest in through these plans, you will receive a single proxy/voting instruction card representing all shares owned by you.  If you participate in one of these plans and do not provide the trustee with your voting instructions by 11:59 p.m. (E.D.T.) on May 23, 2011, the trustee of the plans will vote the shares in your account in proportion to shares held by the plans for which voting instructions have been received.

If you participate in our dividend reinvestment plan, your proxy/voting instruction card(s) will also include your shares of common stock allocated to your accounts in that plan.  To vote your shares in this plan, you must return your proxy/voting instruction card(s) or submit your voting instructions by telephone or over the internet as instructed on your proxy/voting instruction card(s).
 
 
 
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Who may solicit proxies?

Our directors, officers and employees, as well as Georgeson Inc., our proxy solicitation firm, may solicit proxies on behalf of the Board in person, by mail, telephone, fax and other electronic means.

Who pays for the costs of soliciting proxies?

We will pay the cost of soliciting proxies. Our directors, officers and employees will receive no additional compensation for soliciting proxies.  We will reimburse certain brokerage firms, banks, custodians and other fiduciaries for the reasonable mailing and other expenses they incur in forwarding proxy materials to the beneficial owners of stock that those brokerage firms, banks, custodians and fiduciaries hold of record.  As noted above, we have retained Georgeson Inc. to solicit proxies.  We will pay Georgeson Inc. a fee of $10,000, plus reasonable expenses, for these services.

SECURITY OWNERSHIP

Security Ownership of More than 5% Beneficial Owners

We have two classes of equity securities outstanding: common stock and preferred stock.  The following table shows the names of persons known by us to beneficially own more than 5% of our common stock as of December 31, 2010.

 
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
AS OF DECEMBER 31, 2010
 
 
TITLE
OF CLASS
 
NAME AND ADDRESS
OF BENEFICIAL OWNER
 
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
 
 
PERCENT OF CLASS
 
 
Common Stock
 
 
FMR LLC
82 Devonshire Street
Boston, MA  02109
 
 
 
29,483,079
 
 
9.308%
 
 
Common Stock
 
 
BlackRock Inc.
40 East 52nd Street
New York, NY  10022
 
 
 
17,443,947
 
 
5.51%

The information set forth in this table is based solely on our review of Schedules 13G filed with the SEC and as of the date set forth above.  We do not have information regarding the foregoing share position after December 31, 2010.  The information regarding the amount and nature of beneficial ownership is to the best of our knowledge.
 
 
 
 
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Security Ownership of Directors, Nominees and Executive Officers

The following table shows the number of shares of common stock and stock units (i.e., non-transferable, non-voting “phantom” units, the value of which is the same as the value of the corresponding number of shares of common stock) beneficially owned on March 10, 2011, by each director, nominee for director and “Named Executive Officer,” individually, and by all directors and executive officers as a group.  As of March 10, 2011, none of the persons listed in the table owned any shares of our preferred stock.

Whenever we refer in this proxy statement to the Named Executive Officers (“NEOs”), we are referring to those executive officers that we are required to identify in the Summary Compensation Table on page 44.
 
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
AS OF MARCH 10, 2011
 
NAME
 
AMOUNT OF LNC COMMON STOCK AND NATURE OF BENEFICIAL OWNERSHIP1
 
PERCENT OF CLASS
 
LNC STOCK UNITS2
 
TOTAL OF LNC COMMON STOCK AND STOCK UNITS
 
TOTAL PERCENT OF CLASS
William J. Avery
36,660
*
19,727
56,387
*
Frederick J. Crawford
273,370
*
3,828
277,198
*
William H. Cunningham
69,546
*
34,584
104,130
*
Robert W. Dineen
314,663
*
999
315,662
*
Wilford H. Fuller
44,525
*
139
44,664
*
Dennis R. Glass
1,560,537
*
28,474
1,589,011
*
George W. Henderson, III
68,914
*
35,996
104,910
*
Eric G. Johnson
37,835
*
29,167
67,002
*
Gary C. Kelly
4,094
*
1,908
6,002
*
Mark E. Konen
339,325
*
0
339,325
*
M. Leanne Lachman
41,582
*
38,775
80,357
*
Michael F. Mee
28,535
*
32,305
60,840
*
William P. Payne
79,357
*
17,911
97,268
*
Patrick S. Pittard
76,321
*
19,933
96,254
*
David A. Stonecipher
1,378,284
*
6,033
1,384,317
*
Isaiah Tidwell
29,264
*
11,414
40,677
*
All Directors and Executive Officers as a group –[20] persons
4,716,652
1.48%
281,967
4,998,619
1.57%

_________________________________
* Each of these amounts represents less than 1% of the outstanding shares of our common stock as of March 10, 2011.

1.  The number of shares that each person named in this table has a right to acquire within 60 days of March 10, 2011 is as follows:  Mr. Avery, 25,234 shares; Mr. Crawford, 193,007 shares; Mr. Cunningham, 68,308 shares; Mr. Dineen, 199,175 shares; Mr. Fuller, 8,211 shares; Mr. Glass, 1,361,217 shares; Mr. Henderson, 68,308 shares; Mr. Johnson, 31,234 shares; Mr. Kelly, 3,094 shares; Mr. Konen, 285,502 shares; Ms. Lachman, 31,234 shares; Mr. Mee, 28,234; Mr. Payne, 68,308 shares; Mr. Pittard, 68,308 shares; Mr. Stonecipher, 915,972 shares; and Mr. Tidwell, 29,174 shares.
Mr. Konen’s shares include 441 shares for his son for which he is a custodian.  Mr. Stonecipher’s shares include 381,499 shares held in a trust and 12,677 shares owned by his spouse.  Mr. Stonecipher’s shares also include 24,974 shares that are held by the Stoneypeak Foundation of which Mr. Stonecipher is a trustee, and with respect to which, he does not have a pecuniary interest.  Mr. Stonecipher retired from the Board effective March 31, 2011.

2.  LNC Stock Units are non-voting, non-transferable phantom stock units that track the economic performance of our common stock.
 
 
 
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GOVERNANCE OF THE COMPANY

Our Board of Directors consists of 11 members.  Ten of these directors are non-employees, or outside directors, and the Board has determined that all 10 are independent as discussed below.  The Board has also determined that Mr. Stonecipher, one of our outside directors during 2010, who retired form the Board effective March 31, 2011, is independent.

Board Leadership Structure

The Board has no policy requiring separation of the offices of chief executive officer, or CEO, and Chairman of the Board.  The Board believes this decision is part of the succession planning process and takes into consideration the best interests of the Company in making this determination.  Currently, we separate the roles of CEO and Chairman of the Board in recognition of the differences between the two roles.  The CEO is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the Chairman of the Board provides guidance and sets the agenda for Board meetings and presides over meetings of the full Board.  In May 2009, independent director William H. Cunningham became the non-executive chairman of the Board and was
re-elected in May of 2010 to serve another one-year term.  In addition to the duties described above, Mr. Cunningham acts as the key liaison between the Board and management and helps set the agendas for Board Committee meetings.  As chairman, Mr. Cunningham also has the authority to call special meetings of the Board.

Board’s Role in Risk Oversight

Enterprise risk management is an integral part of our business processes.  We have a chief risk officer who has responsibility for enterprise risk management.  The Board has delegated the regular oversight of our risk management efforts to the Audit Committee and the oversight of compensation-related risk to the Compensation Committee.  The Audit Committee receives regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal, regulatory, strategic and competitive risks.  After the Audit Committee receives the report, the Chairman of the Audit Committee reports on the discussion to the full Board during the Audit Committee report at the next Board meeting. This enables the Board and its Committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.  We believe that our current leadership structure supports the Board’s oversight role.  For a further discussion of the Compensation Committee oversight of compensation-related risk, see “Risk Considerations Relating to Compensation” at page 31.

Our Corporate Governance Guidelines

Listed below are what we believe are some, but not all, of the more significant aspects of our Corporate Governance Guidelines.  The full text of our Corporate Governance Guidelines is available on our website at www.lincolnfinancial.com.

·  
A majority of our Board, including the nominees for director, must at all times be independent under the applicable SEC rules and New York Stock Exchange (“NYSE”) listing standards and our guidelines for determining the independence of directors which are included in our Corporate Governance Guidelines.  Director independence is discussed further below.
·  
The independent directors must meet in executive session at least once a year and may meet at such other times as they may desire.  The outside directors meet in connection with each regularly scheduled Board meeting and at such other times as they may desire.  Mr. Cunningham, a director and our non-executive chairman, presides over the meeting(s) of independent directors and the outside directors.
·  
The Board has, among other committees, an Audit Committee, Compensation Committee and Corporate Governance Committee.  Only independent directors may serve on each of these committees, and all of the directors serving on those committees are independent under applicable NYSE listing standards and our Corporate Governance Guidelines.
·  
Outside directors are not permitted to serve on more than five boards of public companies in addition to our Board, and independent directors who are chief executive officers of publicly held companies may not serve on more than two boards of public companies in addition to our Board.  Inside directors are not permitted to serve on more than two boards of public companies in addition to our Board.
·  
The written charters of the Audit, Compensation, Corporate Governance and Finance Committees of the Board are reviewed not less than annually.  The charters of the Audit, Compensation and Corporate
 
 
 
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Governance Committees comply with the NYSE’s listing standards.  The charters are available on our website at www.lincolnfinancial.com.
·  
We have Corporate Governance Guidelines that comply with the NYSE’s listing standards and were recommended by the Corporate Governance Committee and adopted by the Board.
·  
We have a Code of Conduct that is available on our website at www.lincolnfinancial.com.  The Code of Conduct comprises our “code of ethics” for purposes of Item 406 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and our “code of business conduct and ethics” for purposes of the NYSE listing standards.  We intend to disclose amendments to or waivers from a required provision of the code by including such information on our website at www.lincolnfinancial.com.
·  
We have a mandatory retirement age of 72 for outside directors.
·  
The Board conducts a review of the performance of the Board and its Committees each year.
·  
The Corporate Governance Committee is responsible for individual director assessments and obtains input for such assessments from all Board members other than the director being assessed.  These assessments, including confidential feedback to the director, will be completed at least one year prior to a director’s anticipated election for a new term.
·  
The Board conducts an annual CEO performance evaluation.  The non-executive chairman of the Board discusses the evaluation with the outside directors and communicates the results to the CEO.
·  
The Board reviews the annual succession planning report from the CEO, including the position of CEO as well as other executive officers.
·  
The Board, Audit Committee, Compensation Committee, Corporate Governance Committee, Executive Committee and Finance Committee each have authority to retain legal counsel or any other consultant or expert without notification to, or prior approval of, management.
·  
Directors are required to submit their resignation from the Board upon changing their occupational status, and the Corporate Governance Committee, with input from the chairman, makes a recommendation to the Board regarding acceptance of such resignation.
·  
Directors are required to achieve share ownership of three times the cash portion of their annual retainer within five years of election to the Board, and based on the December 31, 2010 closing price of our common stock of $27.81, our directors are in compliance with such requirements.
·  
We will pay the reasonable expenses for each director to attend at least one continuing education program per year.
·  
We have a director orientation program for new directors, and all directors are invited to attend orientation programs when they are offered.
·  
We will not make any personal loans or extensions of credit to directors or executive officers.
·  
The Corporate Governance Committee must re-evaluate the Corporate Governance Guidelines each year.

Director Independence

Our common stock is traded on the NYSE.  NYSE listing standards and our Corporate Governance Guidelines require that a majority of our directors meet the criteria for independence as set forth in the NYSE listing standards.  The NYSE listing standards provide that in order to be considered independent, the Board must determine that a director has no material relationship with us other than as a director.  The Board has adopted standards to assist it in determining whether its members have such a material relationship with us.  These standards, which are part of our Corporate Governance Guidelines, are discussed below and can be found on our website at www.lincolnfinancial.com.

The Corporate Governance Committee and the Board have reviewed the independence of each director, including the nominees for director at the Annual Meeting, considering the standards set forth in our Corporate Governance Guidelines (which include the NYSE standards for independence).  As a result of this review, the Board affirmatively determined that directors Avery, Cunningham, Henderson, Johnson, Kelly, Lachman, Mee, Payne, Pittard  and Tidwell are independent because they have none of the following material relationships with us (either directly or as a partner, shareholder or officer of an organization that has a material relationship with us):

·  
is or was an employee, or whose immediate family member is or was an executive officer, of us or our subsidiaries during the three years prior to the independence determination;

·  
has received, or whose immediate family member received, from us, during any 12-month period within the three years prior to the independence determination, more than $120,000 in direct compensation, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
 
 
 
- 7 -

 
 
 
 
·  
(1) is, or an immediate family member is, a current partner of our external or internal auditor (to the extent the internal auditor is a third-party); (2) is a current employee of such a firm; (3) has an immediate family member who is a current employee of such a firm and who personally works on our audit; or (4) was, or who has an immediate family member that was, within the three years prior to the independence determination (but is no longer) a partner or employee of such a firm and personally worked on our audit within that time;

·  
is or was employed, or whose immediate family member is or was employed, as an executive officer of another company where any of our present executives served at the same time on that company’s compensation committee within the three years prior to the independence determination;

·  
is or was an executive officer or an employee, or whose immediate family member is or was an executive officer, of a company that makes payments to, or receives payments from, us for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues within the three years prior to the independence determination;

·  
is an executive officer of a not-for-profit organization to which we or the Lincoln Financial Foundation, Inc.’s annual made discretionary contributions in excess of the greater of $1 million or 2% of the organization’s latest publicly available total annual revenues; and

·  
has any other material relationship with us (either directly or as a partner, shareholder or officer of an organization that has a relationship with us, including any contributions we made to a charitable organization of which the director serves as an executive officer).

The Board of Directors also has determined that the following relationships are not material and do not impair a director’s independence and do not require further review by the Board of Directors:

·  
a director’s, or a director’s immediate family member’s, purchase or ownership of an insurance, annuity, mutual fund or other product from us, or use of our financial services, all on terms and conditions substantially similar to those generally available to other similarly situated third parties in arm’s-length transactions and does not otherwise violate the criteria listed above;

·  
a director’s membership in the same professional association, or the same social, fraternal or religious organization or club, as one of our executive officers or other directors;

·  
a director’s current or prior attendance at the same educational institution as one of our executive officers or other directors;

·  
a director’s service on the board of directors of another public company on which one of our executive officers or directors also serves as a director, except for prohibited compensation committee interlocks;

·  
a director’s employment by another public company whose independent registered public accounting firm is the same as ours;

·  
Relationships involving the provision of products or services either by or to the Company or our subsidiaries or affiliates and involving a director, a director’s immediate family members, or a company or charitable organization of which the director or an immediate family member is (or at the time of the transaction, was) a partner, stockholder, officer, employee or director so long as the following conditions are satisfied:  the products and services are being provided in the ordinary course of business and on substantially the same terms and conditions, including price, as would be available to similarly situated customers; and the payments to, or payments from, the Company for such products or services do not, in any single fiscal year, equal or exceed the lesser of $120,000 or 2% of the consolidated gross revenues of such other company or charitable organization;

·  
A director’s or a director’s immediate family member’s service as an officer, director or trustee of another company to which the Company is indebted where the total amount of interest and other fees payable to such other company do not equal or exceed the lesser of $120,000 or 2% of the consolidated gross revenues of such other company; and
 
 
 
 
- 8 -

 
 
 
·  
A director’s or a director’s immediate family member’s service as an officer, director or trustee of a charitable organization where our discretionary charitable contributions to the organization are less than the lesser of $120,000 and 2% of that organization’s consolidated gross revenue.

In addition, a director who is also a member of our Audit Committee must meet the following additional requirements regarding independence as required by Rule 10A-3(b)(1)(ii) under the Exchange Act:

 
1.  
A director is not independent if he or she accepts, directly or indirectly, any consulting, advisory or other compensatory fee from us or any of our subsidiaries, other than the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with us or any of our subsidiaries (provided that such compensation is not contingent in any way on continued service).

 
2.  
A director is not independent if he or she is an “affiliated person” (as defined in Rule 10A-3(e)(1) under the Exchange Act) of us or any of our subsidiaries.

Finally, the Board determined that those directors who are members of the Audit, Corporate Governance and Compensation Committees are likewise independent of our management and us under our Corporate Governance Guidelines and the applicable SEC and NYSE rules.

In conducting its independence review discussed above, the Board considered, among other things, transactions and relationships between each outside director or any member of his or her immediate family and us or our subsidiaries and affiliates.  In making these determinations, the Board considered that in the ordinary course of business, transactions occur between us and companies at which some of our directors are or have been directors, employees or officers.  In each case, the amount of transactions with these companies in each of the last three years did not reach the thresholds set forth in the standards.  Mr. Cunningham is a professor at and employee of The University of Texas with which we engage in ordinary course of business transactions, namely, providing a 403(b) investment product.  These transactions were on terms that are substantially equivalent to those prevailing at the time for comparable transactions, and none reached the threshold levels set forth in our standards.

Under our standards, only discretionary contributions to not-for-profit organizations, for which a director serves as an executive officer, which are greater than $1 million or 2% of the organization’s latest publicly available total annual revenues will impair the director’s independence.  None of our directors are executive officers of the not-for-profit organizations to which we or the Lincoln Financial Foundation, Inc. made contributions during 2010.

Director Nomination Process

The Corporate Governance Committee of the Board, which is composed solely of independent directors, is responsible for: (1) assisting the Board by identifying individuals qualified to become Board members;
(2) recommending to the Board the director nominees for the next annual meeting of shareholders; and (3) evaluating the competencies appropriate for the Board and identifying missing or under-represented competencies.  Our Corporate Governance Guidelines provide that the Board is responsible for selecting its own members.

The Corporate Governance Committee does not have any specific minimum qualifications that must be met by a nominee.  However, its charter provides that “[I]n nominating candidates, the Committee shall take into consideration such factors as it deems appropriate.  These factors may include judgment, skill, diversity, experience, the extent to which the candidate’s experience complements the experience of other Board members and the extent to which the candidate would be a desirable addition to the Board and any Committees of the Board.  The Committee may consider candidates proposed by management, but is not required to do so.”

The Corporate Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue in service.  The Corporate Governance Committee begins by reviewing the individual director assessments of existing directors who are being considered for re-nomination. Current members of the Board who have skills and experience that are relevant to our business, who are willing to continue to serve and whose director assessment indicates the director has performed well during the most recent term are considered for re-nomination.  If any member of the Board being considered for re-nomination does not wish to serve, or if the Corporate Governance Committee decides not to re-nominate a given member, the Corporate Governance Committee identifies the desired skills and experience that a potential new nominee should possess.  The Corporate Governance Committee also considers whether it is necessary or desirable that the nominee be considered independent under the NYSE listing
 
 
 
 
 
 
- 9 -

 
 
standards, and, if so, whether the individual meets the standards for independence. The Corporate Governance Committee may, but is not required to, retain an outside firm to assist in the identification and evaluation of potential nominees.
 
The Corporate Governance Committee is responsible for reviewing with the Board the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board.  This assessment includes integrity, business acumen, age, experience, professional accomplishments, skills such as an understanding of marketing, finance, accounting, regulation and public policy and a commitment to our shared values, among others – all in the context of an assessment of the perceived needs of the Board at a given point in time.  Our Corporate Governance Guidelines also specify that diversity should be considered by the Corporate Governance Committee in the director identification and nomination process.  The Committee seeks nominees with a broad diversity of backgrounds, experience, professions, education and differences in viewpoints and skills.  The Corporate Governance Committee does not have a formal policy with respect to diversity; however, the Board and the Corporate Governance Committee believe that the backgrounds and qualifications of the directors, considered as a group, should provide a significant mix of experience, knowledge and abilities that allow the Board to fulfill its responsibilities.  In the annual evaluation of the Board and committees, the Board considers whether the members of the Board reflect such diversity and whether such diversity contributes to a constructive and collegial environment.

The Board has delegated the process of screening potential nominees who are not current directors to the Corporate Governance Committee with input from the CEO.  In connection with the evaluation of a new nominee, the Corporate Governance Committee determines whether it should interview the nominee, and, if warranted, one or more members of the Corporate Governance Committee interviews the nominee.  Upon completing the evaluation and the interview, the Corporate Governance Committee makes a recommendation to the Board as to whether to nominate the director nominee.

Although the Corporate Governance Committee does not solicit shareholder recommendations regarding director nominees to be proposed by the Board, it will consider such recommendations if they are made in accordance with the procedures set forth in Article I, Section 11 of our Bylaws, which is set forth in Exhibit 2 to this proxy statement and discussed beginning on page 64 under the heading “Shareholder Proposals.”  If the Corporate Governance Committee determines that such a nominee should be considered as a director, it will recommend the nominee to the Board.  The Board may accept or reject the proposed nominee.  There are no differences in the manner in which the Corporate Governance Committee evaluates nominees for director based on whether the nominee is recommended by a shareholder.

Communications with Directors

The Board provides a process for interested persons to send communications to the Board or to the outside directors of the Board.  Interested persons with information pertaining to any possible violation of our Code of Conduct, or concerns or complaints pertaining to our accounting, internal accounting controls or audit or other concerns are invited to communicate this information to the outside members of the Board of Directors at:

The Outside Directors
Lincoln National Corporation
150 N. Radnor Chester Road
Radnor, PA  19087
Attention:  Office of the Corporate Secretary

All complaints and concerns will be received and processed by the Corporate Secretary.  Relevant and appropriate complaints and concerns will be referred to the non-executive Chairman of the Board.  You may report your concerns anonymously and/or confidentially.  If you choose to report your concerns anonymously, we will be unable to contact you in the event we require further information in the course of our investigation.  If you choose to report your concerns confidentially, we cannot guarantee absolute confidentiality.  In certain circumstances, it would be impossible to conduct a thorough investigation without revealing your identity.  No retaliatory action will be taken against employees who raise any concern in good faith.
 
 
 
- 10 -

 
 
 

Director Attendance at 2010 Annual Meeting

The Board does not have a formal policy regarding attendance by Board members at our Annual Meeting of Shareholders, but directors are encouraged to attend the Annual Meeting of Shareholders.  All of our directors attended the 2010 Annual Meeting of Shareholders.

THE BOARD OF DIRECTORS AND COMMITTEES

Our Board is composed of 11 members.  The members of the Board, including Board nominees, their relevant term of office and certain biographical information are set forth below under “Item 1 – Election of Directors.”  Compensation of our directors is discussed below under “Compensation of Directors.”

During 2010, the Board met five times.  All directors attended 75% or more of the aggregate of: (1) the total number of meetings of the Board and (2) the total number of meetings held by committees on which he or she served.

Board Committees

The Board currently has six standing committees:  the Audit Committee, the Compensation Committee, the Corporate Governance Committee, the Executive Committee, the Finance Committee and the Committee on Corporate Action.  The following table lists the Directors who currently serve on the Committees and the number of meetings held for each Committee during 2010.  The Audit, Compensation, Corporate Governance and Finance Committees each conduct a self-evaluation of their respective committee’s performance each year.

Current Committee Membership and Meetings Held During 2010
(C=Chair     M=Member)
Name
Audit
Compensation
Corporate Governance
 
Executive
Finance
Corporate Action1
William J. Avery
M
 
M
     
William H. Cunningham
   
M
C
M
 
Dennis R. Glass
     
M
 
C
George W. Henderson, III
M
     
M
 
Eric G. Johnson
 
M
 
M
C
 
Gary C. Kelly
M
         
M. Leanne Lachman
C
         
Michael F. Mee
 
M
 
M
M
 
William P. Payne
   
C
M
   
Patrick S. Pittard
 
C
       
David A. Stonecipher2
     
M
M
 
Isaiah Tidwell
M
 
M
     
Number of Meetings in 2010:
8
6
4
0
6
0

1 The Committee on Corporate Action takes action by the unanimous written consent of the member of that Committee, and eight such actions were taken in 2010.
2 Mr. Stonecipher retired from the Board of Directors effective March 31, 2011.

The functions and responsibilities of the standing committees of our Board are described below.

Audit Committee

The primary function of the Audit Committee is oversight, including risk oversight.  The principal functions of the Audit Committee include:

·  
assist the Board of Directors in its oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) the independent auditor’s qualifications and independence, (4) the performance of our general auditor and independent auditor and (5) our policies and processes for risk assessment and risk management;
·  
select, evaluate and replace the independent auditors, and approve all engagements of the independent auditors;
 
 
 
- 11 -

 
 
 
·  
review significant financial reporting issues and practices;
·  
discuss our annual and quarterly consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our SEC filings and annual report to shareholders, if applicable;
·  
inquire about significant risks and exposures, if any, and review and assess the steps taken to monitor and manage such risks;
·  
review and discuss the risk policies and procedures adopted by management and the implementation of these policies;
·  
review the qualifications and background of senior risk officers;
·  
establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal auditing controls or auditing matters, and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
·  
consult with management before the appointment or replacement of the internal auditor;
·  
prepare the report required to be prepared by the Audit Committee pursuant to the rules of the SEC for inclusion in our annual proxy statement; and
·  
report the Committee’s activities to the Board on a regular basis and make any recommendations as the Committee deems appropriate.

The Board has determined that William J. Avery is an “audit committee financial expert,” as defined under Item 407 of Regulation S-K under the Exchange Act.  Mr. Avery is an independent director under applicable SEC rules, NYSE listing standards and our Corporate Governance Guidelines.  The Audit Committee has authority to obtain advice and assistance from internal or external legal, accounting or other advisors.  The Board has adopted a written charter for the Audit Committee, a copy of which is available on our website at www.lincolnfinancial.com.

More information concerning the Audit Committee, including the Audit Committee Report, is set forth below under “Ratification of the Appointment of the Independent Registered Public Accounting Firm” beginning on page 22.
 
Compensation Committee

The principal functions of the Compensation Committee include:

·  
establish, in consultation with its compensation consultant and senior management, our general compensation philosophy;
·  
review and confer on the selection and development of executive officers and key personnel;
·  
review and approve corporate goals and objectives relevant to the compensation of the CEO, evaluate the CEO’s performance in light of these goals and set the CEO’s compensation level based on this evaluation;
·  
evaluate on an annual basis whether the Company’s compensation programs create unnecessary risks that are reasonably likely to have a material adverse effect on the Company;
·  
review and recommend to the Board for approval candidates for CEO;
·  
review and approve all compensation strategies, policies and programs that encompass total remuneration of our executive officers and key personnel;
·  
make recommendations to the Board regarding incentive compensation and equity-based plans, and approve all grants and awards under such plans to executive officers;
·  
approve employment and severance agreements for executive officers;
·  
approve employee benefit and executive compensation plans and programs and changes to such plans and programs, if the present value cost of each plan or change to a plan will not exceed $20 million for the next five calendar years after their effectiveness; and
·  
report the Committee’s activities to the Board on a regular basis and make any recommendations as the Committee deems appropriate.

A copy of the Compensation Committee Charter is available on our website at www.lincolnfinancial.com.  The Compensation Committee has the authority to retain and terminate compensation consultants and to approve any compensation consultant’s fees and terms of retention and to obtain advice and assistance from internal or external legal, accounting or other advisors.  More information concerning the Compensation Committee, including the role of its compensation consultants, and our executive officers in determining or recommending the amount or form of executive compensation is set forth in the “Compensation Discussion & Analysis” beginning on page 24 below.
 
 
 
 
- 12 -

 
 

 
Corporate Governance Committee

The principal functions of the Corporate Governance Committee include:

·  
identify individuals qualified to become Board members;
·  
subject to our Bylaws, recommend to the Board nominees for director (including those recommended by shareholders in accordance with our Bylaws) and for Board Committees;
·  
take a leadership role in shaping our corporate governance and recommend to the Board the corporate governance principles applicable to us;
·  
develop and recommend to the Board standards for determining the independence of directors;
·  
recommend to the Board an overall compensation program for directors;
·  
make recommendations to the Board regarding the size of the Board and the size, structure and function of Board Committees;
·  
assist in the evaluation of the Board and be responsible for the evaluation of individual directors; and
·  
report the Committee’s activities to the Board on a regular basis and make any recommendations as the Committee deems appropriate.

The Corporate Governance Committee has the authority to retain and terminate search firms and to approve any search firm’s fees and terms of retention and to obtain advice and assistance from internal or external legal, accounting or other advisors.  A copy of the Corporate Governance Committee Charter is available on our website at www.lincolnfinancial.com.

Executive Committee

The Executive Committee meets at such times as it determines to be appropriate and has the authority to act for the Board in the management and direction of the business and affairs of the Company during intervals between Board meetings, except for those matters which are expressly delegated to another committee or the full Board.  The Executive Committee will report to the Board of Directors any actions taken by the Committee as soon as practicable.  A copy of the Executive Committee Charter is available on our website at www.lincolnfinancial.com.

Finance Committee

The principal functions of the Finance Committee include:

·  
review and provide guidance to senior management with respect to our annual three-year financial plan;
·  
review and provide guidance to senior management with respect to our capital structure, including reviewing and approving (within guidelines established by the Board) issuance of securities by us or any of our affiliates, reviewing and approving significant “off balance sheet” transactions and reviewing and recommending changes, if necessary, to our dividend and share repurchase strategies;
·  
review our overall credit quality and credit ratings strategy;
·  
review and provide guidance to senior management with respect to our reinsurance strategies;
·  
review and provide guidance to senior management with respect to proposed mergers, acquisitions, divestitures, joint ventures and other strategic investments;
·  
review the general account and approve our investment policies, strategies and guidelines;
·  
review our hedging program and the policies and procedures governing the use of financial instruments including derivative instruments;
·  
review the adequacy of the funding of our qualified pension plans, including significant actuarial assumptions, investment policies and performance; and
·  
report the Committee’s activities to the Board on a regular basis and make any recommendations as the Committee deems appropriate.

The Finance Committee has authority to obtain advice and assistance from internal or external legal, accounting or other advisors.  A copy of the Finance Committee Charter is available on our website at www.lincolnfinancial.com.
 
 
 
 
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Committee on Corporate Action

Within limits now or hereafter specified by the Board and, in some cases, the Finance Committee, the principal functions of the Committee on Corporate Action include:

·  
determine the pricing of the securities offered from our shelf registration statement (including the interest rate, dividend rate, distribution rate or contract adjustment payments, as applicable, the conversion ratio or settlement rate, as applicable, the price at which such securities will be sold to the underwriters, the underwriting discounts, commissions and reallowances relating thereto and the price at which such securities will be sold to the public);
·  
approve, as necessary, the underwriting agreement, security and other transaction documents relating to the offering and sale of the securities under our shelf registration statement; and
·  
elect certain classes of our officers as the Board may determine by resolution.

ITEM 1 - ELECTION OF DIRECTORS

Our Board is divided into three classes.  Directors elected at the Annual Meeting are elected for three-year terms.  William H. Cunningham has served as our non-executive chairman since 2009, and a director since 2006.  The Board of Directors is authorized under our Bylaws to fill a vacancy in the class of directors or reduce the size of the Board without seeking shareholder approval.  The following provides information as of the date of this proxy statement regarding the particular experience, qualifications, attributes or skills that led our Board to the conclusion that each of the persons listed below should serve as a director for the Company.  Each director brings a strong and unique background and set of skills to the Board, giving the Board as a whole competence, diversity and experience in a wide variety of areas.  The Board believes all of our directors have integrity and honesty and adhere to high ethical standards.  They have each demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to the Company and our Board.

Nominees For Director

Unless you direct otherwise or specifically indicate that you are withholding authority to vote for one or more of the nominees on the proxy you complete, your proxy will be voted for the Board’s nominees for terms expiring at the 2014 Annual Meeting or until their successors are duly elected and qualified.  All of the nominees are current directors of the Company.  All nominees have agreed to serve on the Board if they are elected.  If any nominee is unable (or for whatever reason declines) to serve as a director at the time of the Annual Meeting, proxies may be voted for the election of a qualified substitute nominee selected by the Board.
 
 
 
- 14 -

 
 
 

Nominees for a Term Expiring at the 2014 Annual Meeting

Dennis R. Glass
Director since 2006
Age 61
 
Principal Occupation and Business Experience:
President and Chief Executive Officer of Lincoln National Corporation (2007 – Present).  President and Chief Operating Officer of Lincoln National Corporation (2006 – 2007).  President and Chief Executive Officer of Jefferson-Pilot Corporation (2004 – 2006).  President and Chief Operating Officer of Jefferson-Pilot Corporation (2001 – 2004).
 
Public and Investment Company Directorships:
Jefferson-Pilot Corporation (2004 – 2006).
 
Having held executive level positions in the insurance and investment industries for nearly 30 years, Mr. Glass brings to his role as a director a deep knowledge of our industry, our competitors and our products.  An experienced and seasoned executive, Mr. Glass has served as our President since 2006, and our CEO and a member of our Board since 2007.  Prior to our merger with Jefferson-Pilot Corporation in 2006, he was the President, CEO and also served on the board of directors of Jefferson-Pilot Corporation from 2004 through the merger in 2006.  Mr. Glass’s background also includes senior executive experience in financial accounting and reporting as well as past service as the Chairman of the Board of the American Council of Life Insurers.
   
Gary C. Kelly
Director since 2009
Age 56
 
Principal Occupation and Business Experience:
Chairman of the Board, President (2008 – Present) and Chief Executive Officer of Southwest Airlines, Co. (2004 – Present); its Executive Vice President & Chief Financial Officer (2001 – 2004); its Vice President Finance & Chief Financial Officer (1989 – 2001); and its Controller (1986 – 1989).
 
Public and Investment Company Directorships:
Southwest Airlines (2004 – Present); and Jefferson-Pilot Corporation (2005 – 2006);
 
 
Mr. Kelly currently serves as the Chairman of the Board, President and CEO of Southwest Airlines, the fifth largest airline in the U.S., and one well known for its commitment to customer service and knowledge of the customer experience.  Prior to becoming the CEO of Southwest, Mr. Kelly held a number of senior level positions within the organization, including as Chief Financial Officer, providing him with substantial expertise in finance, accounting and financial reporting.  Prior to joining Southwest, Mr. Kelly served as a CPA for a public auditing firm.
 
 
 
 
 
 
- 15 -

 

 

Michael F. Mee
Director since 2001
Age 68
 
Principal Occupation and Business Experience:
Retired Executive.  Executive Vice President and Chief Financial Officer of Bristol-Myers Squibb Company, a pharmaceutical and related health care products company (March 1994 – April 2001).
 
Public and Investment Company Directorships:
Director of Ferro Corporation (2001 – 2010).
 
 
Mr. Mee brings significant public accounting and financial reporting skills from his experience as the CFO at a number of public companies, including Bristol-Myers Squibb, Co., Wang Laboratories and Monsanto Co.  In addition to his management experience and leadership skills as a senior executive officer, Mr. Mee has also developed expertise in corporate strategy, investments and development, international operations and risk assessment while with these companies.  In addition to serving on our Board, Mr. Mee also served on the board of Ferro Corporation, a public global materials producer until March 2010.
 
The Board of Directors recommends a vote FOR each of the nominees.

Directors Continuing in Office

The identity of, and certain biographical information relating to, the directors who will continue in office after the Annual Meeting are set forth below.

Continuing in Office for a Term Expiring at the 2012 Annual Meeting

George W. Henderson, III
Director since 2006
Age 62
 
Principal Occupation and Business Experience:
Retired Executive.  Chairman and Chief Executive Officer of Burlington Industries, Inc., a manufacturer of textile products (1995 – 2003).  (Burlington filed for bankruptcy protection under Chapter 11 in late 2001 to transition and modify its business model in the highly competitive textile business).
 
Public and Investment Company Directorships:
Director of Bassett Furniture Industries, Inc. (2004 – Present); Jefferson-Pilot Corporation (1995 – 2006); and Propex Fabrics, Inc. (2004 – 2007).
 
 
Mr. Henderson, the former CEO and Chairman of the Board of Burlington Industries, has substantial executive leadership skills and management experience as the senior executive of a public company.  Mr. Henderson’s background includes significant experience with international operations and accounting and financial reporting.  In addition to our Board, Mr. Henderson serves on the board of Bassett Furniture Industries, Inc., a public company.
 
 
 
 
- 16 -

 
 

 
 
Eric G. Johnson
director since 1998
age 60
 
Principal Occupation and Business Experience
President and Chief Executive Officer of Baldwin Richardson Foods Company, a manufacturer of dessert products and liquid condiments for retail and the food service industry (December 1997 – Present).
public and investment company directorships:
None.
 
Since 1997, Mr. Johnson has served as the President and CEO of a private company that manufactures products for the food service industry.  In this role, Mr. Johnson has developed extensive executive management skills, expertise in marketing, corporate strategy, development and execution, as well as experience in mergers and acquisitions.  Through his prior services as the CEO of a public company, Mr. Johnson brings broad finance expertise to the Board.
 
M. Leanne Lachman
Director since 1985
Age 68
Principal Occupation and Business Experience:
President of Lachman Associates LLC, an independent real estate consultant and investment advisor (October 2003 – Present).   Executive in Residence, Columbia Graduate School of Business (2000 – Present).
Public and Investment Company Directorships:
Director of Liberty Property Trust (1994 – Present).
 
Ms. Lachman serves as President of a real estate consultancy firm.  Through her career she has served in executive level positions, including as the CEO or a Partner for a number of different companies.  In addition, Ms. Lachman has an extensive background in real estate analysis, investment management and development, as well as international operations.  In 25 years of service as a director of our Company, she has acquired a deep understanding of our business, our organization and our industry.  In addition to her service on our Board, she is also on the board, audit committee and compensation committee (which she chairs) of Liberty Property Trust, a public real estate investment trust.
 
Isaiah Tidwell
Director since 2006
Age 66
Principal Occupation and Business Experience:
Retired Executive.  Executive Vice President and Georgia Wealth Management Director, Wachovia Bank, N.A., a diversified commercial banking organization (2001 – 2005).
 
Public and Investment Company Directorships
Director of Lance, Inc. (1995 – Present); Jefferson-Pilot Corporation (2005 – 2006); and Ruddick Corporation (1999 – Present).
 
 
Over his 32 year career with Wachovia Bank, Mr. Tidwell developed extensive experience in banking, financial services and wealth management.  In addition to serving on our Board, Mr. Tidwell has also served for a number of years on the boards of other public companies, including Lance, Inc. and Ruddick Corporation.  Through this experience, Mr. Tidwell has also developed knowledge of risk assessment practices and a significant understanding of finance and accounting principles.
 
 
 
 
- 17 -

 
 

 
Continuing in Office for a Term Expiring at the 2013 Annual Meeting

William J. Avery
Director since 2002
Age 70
 
Principal Occupation and Business Experience:
Retired Executive. Chairman of the Board and Chief Executive Officer of Crown Cork & Seal Company, Inc., a manufacturer of packaging products for consumer goods (1990 – 2001).
 
public and investment Company Directorships:
Director of Rohm & Haas (1997 – 2009).
 
 
Through his experience as the former President, CEO and Chairman of the Board of Crown, Cork & Seal (now Crown Holdings, Inc.), Mr. Avery brings a wealth of experience in driving strategic direction and leading organizational growth.  Mr. Avery also has substantial experience in accounting, financial reporting, marketing and mergers and acquisitions, the first two of which serve to qualify him as an “audit committee financial expert” under the SEC guidelines.  In addition to his years of service on our Board, he previously served for over 10 years on the board and audit committee of Rohm and Haas Company, a diversified chemical company.
 
William H. Cunningham
Director since 2006
Age 67
 
Principal Occupation and Business Experience:
Professor at The University of Texas at Austin (2000 – Present).  President and CEO of IBT Technologies (2000 – 2001) (IBT Technologies filed for Bankruptcy under Chapter 7 and was thereafter liquidated.)
 
Public and Investment Company Directorships:
Director of Hayes Lemmerz International, Inc. (2003 – 2009); Hicks Acquisition Company I, Inc. (2007 – 2009); Introgen Therapeutics, Inc. (2000 – 2009); Jefferson-Pilot Corporation (1986 – 2006); John Hancock Mutual Funds (1986 – Present); LIN Television Corporation (2002 – 2007, 2009 – Present); Resolute Energy Corporation (2009 – Present); and Southwest Airlines Co.  (2000 – Present).
 
 
Mr. Cunningham has substantial experience in accounting, marketing, finance and corporate governance serving as a professor for more than 30 years at the University of Texas, a large state-owned university.  Mr. Cunningham, who holds a Ph.D. in business administration, also has significant experience in leading a large public institution through his service as the Chancellor and CEO of the University of Texas.  Further, Mr. Cunningham has and continues to serve on the board of a number of public companies.  This includes over 20 years of experience in our industry through his service on the board of directors of Jefferson-Pilot Corporation, a public insurance company that was merged into one of our wholly-owned subsidiaries in 2006.
 
 
 
 
 
- 18 -

 
 

 
William Porter Payne
Director since 2006
Age 63
 
Principal Occupation and Business Experience:
Executive Management, Gleacher & Company Inc., investment banking and asset management firm (2010 – present); Managing Director, Broadpoint Gleacher Securities Group, investment banking and asset management firm (2009 – 2010, which in 2010 became Gleacher & Company Inc.); Partner, Gleacher Partners Inc., investment banking and asset management firm (2000 – 2009, which in 2009 merged to form Broadpoint Gleacher Securities Group).
 
Public and Investment Company Directorships:
Director of Anheuser Busch, Inc. (1997 – 2008); Cousins Properties, Inc. (1996 – Present); Crown Crafts, Inc. (2001 – 2006); and Jefferson-Pilot Corporation (1993 – 2006).
 
 
Having served in an executive management role for the past ten years with an investment banking and asset management firm, Mr. Payne has developed extensive experience and financial expertise by providing strategic advisory services to complex organizations.  In addition to his financial and investment experience, Mr. Payne has experience as an attorney in mergers and acquisitions, which allows him to bring an interdisciplinary set of skills to the Board.  Mr. Payne has also served on the board of a number of public companies, including Cousins Properties, Inc., Anheuser Busch, Inc. and Crown Crafts, Inc.
 
Patrick S. Pittard
Director since 2006
Age 65
 
Principal Occupation and Business Experience
Distinguished Executive in Residence at the Terry Business School, University of Georgia (2002 – Present).  Chairman, President and Chief Executive Officer of Heidrick & Struggles International, Inc., a global provider of senior level executive search and leadership development services (1983 – 2001).
 
Public and Investment Company Directorships:
Director of Artisan Funds (2001 – Present); CBeyond, Inc. (2007 – 2009); and Jefferson-Pilot Corporation (1986 – 2006).
 
 
As the former Chairman, President and CEO of Heidrick & Struggles International, Inc., one of the largest publicly traded global recruiting firms, Mr. Pittard brings his insights as a senior executive along with his understanding of executive compensation matters, insurance, investment banking and his experience in driving strategic organizational growth.  More recently, Mr. Pittard has served on the faculty of the Terry Business School at the University of Georgia.  In addition to serving on our Board, Mr. Pittard has also served on the boards of other public companies, including Artisan Funds and CBeyond, Inc.
 
 
Mr. Stonecipher, a retired executive, has served on our Board since 2006 and retired from our Board effective March 31, 2011  Prior to that he served as the non-executive Chairman of the Board of Jefferson-Pilot Corporation from 2004 to  2006, and the Chairman of the Board and Chief Executive Officer of Jefferson-Pilot Corporation from 1993 to 2004.  He also served as a director of Bassett Furniture Industries from 2001 to 2006.  Mr. Stonecipher provided substantial understanding, knowledge and insight into our business and our industry gained through his experience as the former chairman, president and CEO of Jefferson-Pilot Corporation.
 
 
 
- 19 -

 
 

 
COMPENSATION OF DIRECTORS

The Board of Directors adheres to the following guidelines in establishing outside director compensation:
 
 
·  
A significant portion of each outside director’s compensation is to be paid in shares of our common stock or stock units based on our common stock;

·  
In order to avoid the appearance of employee-like tenure or compromised independence, we do not offer our outside directors defined benefit pensions; and

·  
Outside directors are expected to own shares of our common stock, or stock units based on our common stock, at least equal in value to three times the cash portion of their annual retainer (3 x $86,000) within five years of first being elected (33% of vested options are counted toward this requirement).

During 2010, our outside directors received an annual retainer of $172,000, excluding any fees received for holding the position of non-executive Chairman of the Board, a committee chair or a member of the Audit Committee.  The annual retainer was paid as follows: $86,000 in cash; $43,000 in deferred stock units; and $43,000 in stock options.  Beginning in 2011, our outside directors will receive $78,000 in deferred stock units and the total annual retainer will be $207,000.  Directors may elect to defer the cash component of their annual retainer into various “phantom” investment options, including the Lincoln National Corporation stock unit investment option, available under the Lincoln National Corporation Deferred Compensation Plan for Non-Employee Directors, (the “Directors’ DCP”).  The investment options are the same as those offered under our 401(k) Plan for employees.  Amounts notionally invested into “phantom” investment options are credited with earnings or losses as if the deferred amounts had been actually invested in either our common stock, or in any of the available investment options.  All amounts deferred under the Directors’ DCP are payable only upon the director's retirement or resignation from the Board.  Any amounts invested in the Lincoln National Corporation stock unit account option are payable only in shares of our common stock.

In addition, our non-executive Chairman of the Board receives an additional $200,000 annual retainer payable in deferred stock units.  Committee chairs receive an annual cash retainer of $10,000, except the chair of the Audit Committee.  The chair of the Audit Committee receives an annual cash retainer of $20,000, and each other Audit Committee member receives an annual cash retainer fee of $5,000.  No Board or Committee meeting fees are paid for regularly scheduled meetings.

The Corporate Governance Committee has discretion to recommend to the Board additional compensation ($1,100 per meeting) for meetings in addition to the regularly scheduled Board or Committee meetings.  Outside directors who are also directors of Lincoln Life & Annuity Company of New York (“LLANY”), our indirect, wholly owned subsidiary, receive an annual cash retainer of $15,000 and a fee of $1,100 for each Board and Committee meeting of LLANY that they attend.  For 2010, these outside directors of LLANY, who received such fees, were Mr. Henderson, Ms. Lachman and Mr. Pittard.

We also provide financial planning services to non-employee directors with a value not to exceed $20,000 for an initial financial plan, and $10,000 for annual updates.  A Lincoln Financial Network financial planner must provide the financial planning services to be eligible for reimbursement.  We also allow non-employee directors to participate in certain of our health and welfare benefits including our self-insured medical and dental plans as well as life insurance and accidental death and dismemberment coverages.  The participating non-employee director is responsible for all of the premiums for the coverage.  Finally, directors are eligible to participate in a matching charitable gift program through which the Lincoln Financial Foundation, Inc. will donate a matching gift from a director to one or more eligible recipient organizations, up to annual total maximum of $10,000 for all gifts.
 
 
 
- 20 -

 
 

 
The table below contains information about the compensation paid to outside directors during the fiscal year ended December 31, 2010.
 
COMPENSATION OF NON-EMPLOYEE DIRECTORS DURING 2010
 
Name*
 
 
Fees Earned or Paid in
Cash1
($)
 
 
Stock
Awards2
($)
 
 
Option Awards3
($)
 
   
All Other
Compensation
($)
 
 
Total
($)
 
William J. Avery
91,000
43,000
43,005
 
20,0004,5
197,005
William H. Cunningham
86,000
243,000
43,005
 
10,0005
382,005
George W. Henderson, III
110,400
43,000
43,005
 
4,5005
200,905
Eric G. Johnson
96,000
43,000
43,005
 
--
182,005
Gary C. Kelly
91,000
43,000
43,005
 
--
177,005
M. Leanne Lachman
125,400
43,000
43,005
 
10,0005
221,405
Michael F. Mee
86,000
43,000
43,005
 
10,0005
182,005
William Porter Payne
96,000
43,000
43,005
 
--
182,005
Patrick S. Pittard
115,400
43,000
43,005
 
--
201,405
David A. Stonecipher
86,000
43,000
43,005
 
10,0005
182,005
Isaiah Tidwell
91,000
43,000
43,005
 
7,0005
184,005

* Mr. Glass, an employee-director, does not receive any director compensation.

1.  As described above, $43,000 of the annual retainer of $172,000 in 2010 was paid in deferred stock units under the Directors’ DCP, which are reported in the Stock Awards column.  The outside directors could elect to defer additional retainer and fees in the Directors’ DCP.  In 2010, Mr. Mee elected to defer 100% of his cash fees, and Mr. Henderson and Mr. Tidwell elected to defer 50% and 80% of their respective cash fees.  The fees shown also include any fees that an outside director was paid or earned as the chair of a committee, as a member of the Audit Committee or for service on the Board of LLANY.

2.  Represents the grant date fair value of the portion of each director’s annual retainer that was paid in deferred stock units.  Mr. Cunningham received an additional $200,000 in deferred stock units for serving as non-executive Chairman of the Board during 2010.  The fair values of the stock and option awards were determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation.  The assumptions made in calculating the grant date fair value of stock and option awards are set forth in Note 20 of the Notes to the Consolidated Financial Statements, included in Item 8 of the Form 10-K for the year ended December 31, 2010.  At December 31, 2010, the vested stock units beneficially owned by the directors were: Mr. Avery, 19,694; Mr. Cunningham, 34,527; Mr. Henderson, 35,937; Mr. Johnson, 29,119; Mr. Kelly, 1,905; Ms. Lachman, 38,711; Mr. Mee, 32,252; Mr. Payne, 17,882; Mr. Pittard, 19,900; Mr. Stonecipher, 6,023; and Mr. Tidwell, 11,395.  Stock awards consist of the deferred stock units reported in the Stock Awards column above and phantom units awarded under the Directors’ Value Sharing Plan, which was terminated as of July 1, 2004, and including any accrued dividend equivalents, which are automatically deemed reinvested in additional phantom units of our common stock.

3.  Represents the grant date fair value of the portion of each director’s annual retainer that was paid in option awards.  At December 31, 2010, the number of unexercised stock options held by each of the directors was:  Mr. Avery, 22,581; Mr. Cunningham, 65,655; Mr. Henderson, 65,655; Mr. Johnson, 28,581; Mr. Kelly, 441; Ms. Lachman, 28,581; Mr. Mee, 25,581; Mr. Payne, 65,655; Mr. Pittard, 65,655; Mr. Stonecipher, 913,319; and Mr. Tidwell, 26,521.  The options held by Messrs. Cunningham, Henderson, Payne, Pittard, Stonecipher and Tidwell include former options for Jefferson-Pilot Corporation common stock, which were converted into options for our common stock in connection with our merger with Jefferson-Pilot.

4.  This amount includes the provision of financial planning services with a Lincoln Financial Network advisor with an aggregate incremental cost to us of $10,000.

5.  Directors are eligible to participate in the Lincoln Financial Foundation, Inc. matching charitable gift program, which matches contributions to various non-profit entities.  These amounts reflect matching contributions made under this program.
 
 
 
- 21 -

 
 
 
ITEM 2 - RATIFICATION OF THE APPOINTMENT OF
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

On February 23, 2011, our Audit Committee appointed Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2011.  We have engaged this firm and its predecessors in this capacity continuously since 1968.  Although not required, as a matter of good corporate governance we request that you ratify this appointment.  If you do not ratify this appointment, the Audit Committee may reconsider its appointment.  Even if you do ratify this appointment, the Audit Committee is empowered to terminate Ernst & Young LLP and select and retain another independent registered public accounting firm at any time during the year.

Representatives of Ernst & Young LLP will be present at the Annual Meeting.  They will be given the opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions relating to the audit of our audited consolidated financial statements for the year ended December 31, 2010.

The Board of Directors recommends a vote FOR the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2011.

Independent Registered Public Accounting Firm
Fees and Services

Below are fees that were incurred by Ernst & Young LLP, our independent registered public accounting firm, for fiscal years 2010 and 2009 for professional services rendered as well as the related percentage of total fees that each category comprises.

 
Fiscal Year Ended -
December 31,  2010
 
% of Total Fees
Fiscal Year Ended -
December 31, 2009
 
% of Total Fees
Audit Fees
$8,314,149
86.9
$8,104,655
82.0
Audit-Related Fees
 1,252,906
13.1
  1,784,717
18.0
Tax Fees
--
--
--
--
All Other Fees
--
--
--
--
TOTAL FEES:
$9,567,055
100
$9,889,372
100
 
Audit Fees

Fees for audit services include fees and expenses associated with the annual audit, the reviews of our interim financial statements included in quarterly reports on Form 10-Q, accounting consultations directly associated with the audit, and services normally provided in connection with statutory and regulatory filings.

Audit-Related Fees

Audit-related services principally include employee benefit plan audits, service auditor reports on internal controls, due diligence procedures in connection with acquisitions and dispositions, reviews of registration statements and prospectuses and accounting consultations not directly associated with the audit or quarterly reviews.

Tax Fees

Tax fees include fees for tax compliance, tax advice, and tax planning services.  There were no fees in this category for either the fiscal year ended 2010 or 2009.
 
 
 
- 22 -

 
 
 

All Other Fees

There were no fees in this category for either the fiscal year ended 2010 or 2009.

Audit Committee Pre-Approval Policy

In accordance with its charter, the Audit Committee’s policy is to pre-approve services provided by Ernst & Young LLP.  These pre-approval procedures are set forth in Exhibit 3 hereto.  During the years ended December 31, 2010 and December 31, 2009, all services provided by Ernst & Young LLP were pre-approved by the Audit Committee in accordance with this policy.
 
 
Audit Committee Report

Management has primary responsibility for preparing our financial statements and establishing financial reporting systems and internal controls.  Management also is responsible for reporting on the effectiveness of the Company’s internal control over financial reporting.  The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing a report on those financial statements.  The independent registered public accounting firm is also responsible for issuing an attestation report on the Company’s internal control over financial reporting.

In this context, the Audit Committee has reviewed and discussed with management the audited financial statements for the fiscal year ended December 31, 2010.  The Audit Committee has also discussed with the Company’s independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61 (now SAS 114), as amended (AICPA, Professional Standards, Vol. 1 AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.  Additionally, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence.

Based upon the review and discussions referred to in this report, the Audit Committee recommended to the Board that the audited consolidated financial statements for the fiscal year ended December 31, 2010 be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for filing with the SEC.
 
 
The Audit Committee

William J. Avery
George W. Henderson, III
Gary C. Kelly
M. Leanne Lachman, Chair
Isaiah Tidwell
 
ITEM 3 – APPROVAL OF AN AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
TO ALLOW THE SHAREHOLDERS TO AMEND THE BYLAWS

Our Board of Directors has approved, and recommends that you approve, an amendment to our Restated Articles of Incorporation to allow for the amendment of our Amended and Restated Bylaws (the “Bylaws”) by action of the shareholders.  Please see Exhibit 4 to this proxy statement for the text of the proposed addition to Article IV, new Section 2.

Indiana law provides that, unless otherwise specified by the articles of incorporation, the bylaws may only be amended by the directors.  The Company’s Restated Articles of Incorporation (the “Articles”) do not specify that shareholders may amend the Bylaws, as a result the Bylaws may only be amended by the directors.

Our Board is committed to good corporate governance and has carefully considered the advantages and disadvantages of adopting a change to our Articles to allow for shareholders to amend the Bylaws.  The Company’s Bylaws establish a number of fundamental corporate governance operating principles, including rules for meetings of
 
 
 
 
 
- 23 -

 
 
 
directors and shareholders and the election and duties of directors and officers, among other provisions.  If shareholders were able to amend the Bylaws by a simple majority vote, there is a risk that a small number of large shareholders could adopt changes to these operating principles that would be detrimental to minority shareholders.   In the past, the Board believed that the default position under Indiana law provided an effective means for the Board to ensure that any amendments to our Bylaws were prudent and designed to protect and maximize long-term value for all shareholders.  More recently, and in light of the fact that many of the S&P 500 companies have provisions allowing their shareholders to have some ability to amend the bylaws, the Corporate Governance Committee again considered the various positions for and against allowing shareholders to amend the Bylaws.
 
After weighing these considerations, and upon the recommendation of the Corporate Governance Committee, the Board has concluded that amending the Articles to allow shareholders to amend our Bylaws, if balanced by certain protections, will give shareholders a say in important governance principles while protecting the minority shareholders’ view.  The Board believes, however, that certain fundamental governing provisions of the Bylaws should only be amended upon the approval of the Board or the affirmative vote of seventy-five percent of the combined voting power of the outstanding shares of the Company entitled to vote in the election of directors.  This enhanced standard would not preclude changes to these governance principles.  It would simply help to ensure that certain fundamental changes are made only with a broad consensus of shareholders.  The Board believes that the amendment to our Articles as proposed provides the appropriate balance between the interests of shareholders in having a say in the governance of the Company and the interest of protecting shareholders against the actions of one or more large shareholders whose interests may diverge from those of other shareholders.

If approved, the Amendment to the Articles will be effective upon filing with the State of Indiana, which the Company intends to do promptly if shareholder approval is obtained.  In addition, a corresponding amendment to our Bylaws would become effective at the same time.

If this proposal is not approved, the proposed amendments to our Restated Articles of Incorporation and Bylaws would not be made and all existing provisions, including the default position under Indiana law reserving authority to amend the Bylaws to the Board, will remain in effect.

The Board of Directors recommends a vote FOR the amendment to the Restated Articles of Incorporation to provide for the amendment of our Amended and Restated Bylaws by the shareholders.

SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors, certain officers and beneficial owners of greater than 10% of our equity securities to file reports of holdings and transactions with the SEC and the NYSE.  Based on written representations that we have received from our officers subject to Section 16 and directors, and a review of the reports filed with respect to transactions that occurred during 2010, we believe that each of our directors and officers subject to Section 16 met all applicable filing requirements.
 
EXECUTIVE COMPENSATION

Compensation Discussion & Analysis

Executive Summary

This Compensation Discussion & Analysis (“CD&A”) provides a discussion and analysis of the various actions taken with respect to the 2010 compensation of those executive officers named in the compensation tables (hereinafter referred to as “executives” or “NEOs”) beginning on page 44 of this proxy statement.

Our NEOs for 2010 are:

·  
Dennis R. Glass, President and Chief Executive Officer, our principal executive officer;
·  
Frederick J. Crawford, Executive Vice President, Corporate Development and Investments, our principal financial officer during all of 2010;
·  
Robert W. Dineen, President of Lincoln Financial Network;
 
 
 
- 24 -

 
 
 
·  
Wilford H. Fuller, President of Lincoln Financial Distributors; and
·  
Mark E. Konen, President of Insurance and Retirement Solutions

Company Performance Summary

For the full year of 2010, our reported income from operations reached $1.0 billion, capping a year of solid growth in operating revenues and income from operations, which demonstrates the earnings power of our franchise.  We finished 2010 with a stronger capital structure in place and sizeable retirement account balances.

Our 2010 operating highlights include:

·  
consolidated deposits of $20.9 billion, up 6% compared to the prior year;
·  
variable annuity deposits of $8.3 billion, up 15% over the prior year;
·  
defined contribution gross deposits of $5.3 billion, up 7% over the prior year;
·  
gross life insurance deposits of $4.9 billion, up 11% over the prior year; and
·  
life insurance in force up 4% to $563 billion, including 7% increase in term insurance.

Additionally, during 2010, as a result of the strength of our business model and our capital position, as well as the improvements in the economy and capital markets, we were able to take several actions intended to strengthen the enterprise and increase value for our shareholders.

Specifically, to address our capital position, including statutory reserving issues related to our business, we:

·  
raised $368 million in proceeds from a common stock offering and $250 million of proceeds from a senior notes offering;
·  
secured $2 billion of bank credit facilities;
·  
completed a 30-year senior notes offering of $500 million; and
·  
replaced $500 million of shorter term letters of credit with a financing structure having a 30-year term.

As a result of the actions we took to increase our capital, we:

·  
funded the repurchase of the preferred stock sold to the U.S. Department of the Treasury (the “Treasury”) under the Capital Purchase Program (“CPP”);
·  
repurchased, and subsequently cancelled, approximately 2.9 million warrants to purchase our common stock issued to the Treasury under CPP; and
·  
redeemed all of our outstanding 6.75% Junior Subordinated Deferrable Interest Debentures, Series F due 2052.

To increase value for our shareholders, we:
 
·  
increased the dividend on our common stock during the fourth quarter of 2010 from $0.01 to $0.05 per share; and
·  
instituted a plan to repurchase up to $125 million of common stock, completing $25 million of stock repurchases during the fourth quarter of 2010.

An Overview of 2010 Compensation

Traditionally, our executives receive four standard types of compensation:

·  
base salary;
·  
annual incentive program or “AIP” awards;
·  
long term incentive or “LTI” awards; and
·  
other elements of compensation under our employee benefit plans.

While we set base salary at a meaningful level, in general, the fixed elements of compensation – base salary and benefits – make up the smallest percentage of total annual executive compensation, while the largest component of total executive compensation – incentive awards – fluctuates in value based on corporate performance and the
 
 
 
 
 
 
 
- 25 -

 
 
performance of our business segments.  This allocation of compensation supports our foundational “pay for performance” philosophy (see discussion of “Pay for Performance” below).
 
During the first half of 2010, our NEOs were subject to the compensation restrictions for CPP participants set forth under regulations implemented by the Treasury (the “Treasury Rules”), which included a prohibition on the payment or accrual of any bonuses (including equity-based incentive compensation) to certain executives and employees, except for awards of long term restricted stock and stock units.  Upon entering CPP, we eliminated prohibited incentive compensation for our NEOs resulting in the forfeiture of a portion of previously granted AIP and LTI awards for our executives.  In November 2009, the Compensation Committee met and approved an overall compensation framework for our NEOs for 2010 to ensure compliance with the compensation restrictions and prohibitions in the Treasury Rules.

The limitations imposed by the Treasury Rules on the types of compensation we could pay to these executive officers presented a unique challenge to the Compensation Committee.  Under the Treasury Rules, we could not pay or accrue incentive compensation, including AIP and LTI awards for our NEOs, which under our traditional compensation arrangements typically made up a substantial portion of the total targeted direct compensation for our NEOs.

In developing the compensation arrangements of our NEOs for 2010, the Compensation Committee had to balance these restrictions with our overall goal of attracting, retaining and motivating exceptional leaders with compensation that continues to be competitive to our marketplace for talent.   The Compensation Committee reviewed, with its compensation consultant, the market data, as detailed on page 33, for executives in equivalent positions and also considered the compensation structures utilized by other CPP participants for their executive officers.

Based on this review, the Compensation Committee approved a compensation structure that would comply with the Treasury Rules and align the interests of our executives with those of our shareholders, resulting in a structure in which at least two-thirds of the targeted total compensation was equity-based, including salary paid in shares of our common stock (“Salary Shares”) and long term restricted stock units (“RSUs”).

On June 30, 2010, we redeemed in full the preferred stock sold to the Treasury under CPP.  As a result, after that date we were no longer subject to the compensation restrictions under the Treasury Rules.  Thereafter, the Compensation Committee met in August 2010 and revised the compensation of our NEOs to reflect a return to our traditional compensation practices.  The elements of compensation approved by the Committee for 2010 are discussed in more detail in “2010 Executive Compensation” at page 32.

The Company’s Executive Compensation Program Philosophy

We believe that attracting and retaining key executives by offering competitive compensation packages that reward performance is essential to our continued growth and strong performance.  Our compensation programs are designed to motivate and engage successful, high-achieving employees through a pay for performance culture and to foster a long term focus on enhancing shareholder value.  Accordingly, our compensation practices are based on the following fundamental guiding principles:

 
·
“Pay for Performance” – using a formulaic approach based on key performance metrics creates a strong nexus between levels of executive compensation and our long term and short term financial performance;
 
·
Competitive Compensation – targeted in general to “median” of our compensation peer groups identified below based on comparable market data, and payment of above-average incentive compensation for above-average performance;
 
·
Balanced Performance Measures and Goals – weighs risk and reward to create the proper incentives for our NEOs to achieve our short and long term business goals; and
 
·
Alignment with Shareholders – sets forth share ownership requirements and long term equity programs that align the financial interests of our NEOs with those of our shareholders.

Each of these principles plays an important role in how we set and pay compensation to our NEOs and is discussed more fully below.
 
 
 
 
- 26 -

 
 

 
Pay for Performance

A significant portion of our executives’ annual compensation is linked to our annual business performance and each individual’s contribution to that performance.  Our traditional long term and short term incentive programs are designed to reward:
 
·  
above-average financial performance with above-average compensation;
·  
average financial performance with below-average compensation; and
·  
below-average performance with, in some cases, no payout at all.

Our compensation programs are also designed to be easily communicated to and understood by both our NEOs and shareholders.  We put a strong emphasis on “line of sight” factors for our executives that are specific to the segment(s) of the business they direct.  It is important to us and to our executives for performance to be measurable and for compensation to be paid based on criteria that both executives and shareholders can reasonably identify and understand.

Competitive Compensation

In general, we aim to target total compensation (base salary, target annual incentive compensation and target long term incentive compensation) at median for our executives as compared to the compensation paid to executives in similar positions at similarly sized insurance-based, financial services, investment sales and management companies, or the general industry, as applicable.

The Compensation Committee traditionally establishes compensation targets for the following fiscal year at its November meeting.  At its November 2009 meeting, the Compensation Committee’s compensation consultant, Towers Watson, reviewed with the Compensation Committee market data for comparable executive roles with similar responsibilities in organizations of similar size and type.  Understanding that there is no perfect match between the roles played by our executives and the executives in the peer companies we have identified, we may consider multiple sources of market data for this purpose.

However, we do not take a formulaic approach to determining target compensation for our executives and market data is only one point in a discussion that considers a number of factors, including a subjective review of each executive’s individual performance during the prior year, relevant experience, the significance of each NEO’s role to our business strategy and his particular short and long term challenges.

When making decisions to set the target amount for each element of compensation, the Compensation Committee considers the recommendation of our CEO and chief human resources officer (“CHRO”), the opinion of its compensation consultant, the available market data, and tally sheets illustrating all elements of total targeted direct compensation.  The tally sheets help to ensure that the Compensation Committee understands the historical context that is relevant to current compensation decisions, but they are just one point of information used by the Compensation Committee in the process of determining NEO compensation.  In addition, the Compensation Committee took into account the various factors discussed above, including emerging compensation trends, each executive’s unique skills, experience and past performance, future challenges, organizational considerations, and the general industry within which the executive’s business competes.  The Compensation Committee performed a similar analysis to establish the total targeted direct compensation for our CEO.
 
While we generally aim to target compensation to the market median, in some cases, we may target above-median compensation.  We may pay above-median compensation in cases where we have moved an executive from a leadership role in one business segment to a leadership role in another business or in cases where we have recruited executives from outside the Company.  In such cases, the compensation of the executive may reflect median market compensation for their former position, but may be above-median compensation for their new position.  The Compensation Committee may do this for a variety of reasons, including:

·  
organizational considerations, such as the role is considered critical in the overall business strategy as well as succession planning;
·  
the need for specific expertise in the task of building a new business or improving an existing one; or
·  
for executives whom we have recruited from outside of the insurance industry.
 
 
 
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Balanced Performance Measures and Goals

Traditionally, our long term and short term incentive programs have been designed to align the financial interests of our NEOs with those of our shareholders by putting executive pay at risk based on successful corporate performance.  In establishing the performance measures and goals for the incentive programs for our NEOs, the Compensation Committee chooses measures that emphasize a focus on our overall corporate strategy of balancing top-line growth, with profitability and financial stability.  The goals for each performance measure are then linked to the Company’s financial plan.  In setting the goals to be achieved with respect to the incentive program performance measures, both management and the Compensation Committee intend the target levels to present a challenge for our NEOs, therefore creating a strong incentive for growth.  For 2010, the Compensation Committee chose these performance measures for the short term incentive program for the following reasons.

2010 Incentive Program Measure
Objective/Purpose
Income from Operations per Diluted Share
This measure is a significant valuation tool used by stock analysts in the financial services industry and also reflective of actions that management has taken during the applicable period to increase shareholder value.
Statutory Earnings
In response to the financial market crisis of 2008-09, a premium was placed on financial strength ratings and overall capital management.  This measure is a significant indicator of financial stability, especially in our industry and recognizes the importance of capital management.
Sales
In our business, sales in the short term do not significantly impact our income from operations per share, but over time and at a compounded growth rate, sales create value by building the in-force contribution to earnings and returns. We believe that distribution strength (depth and breadth) is among the more important drivers of valuation, and sales growth is a good way to measure the value of the distribution franchise and overall product competitiveness.
Budget
Management establishes a budget for the corporation as well as a budget for each specific business unit, as one of the key assumptions in guaranteeing the success of our financial plan for 2010.  Therefore, the Compensation Committee set a budget-related performance goal for the truncated performance period to reinforce the importance of containing costs and expenses across the entire enterprise.

Alignment with Shareholders

Through our share ownership requirements and the features of long term equity programs, we align the financial interests of our NEOs with those of our shareholders.  Some of these features include the “clawback” features of our equity awards, which support retention of key executives and protect our business.

Our 2010 equity awards for our NEOs are subject to non-compete, non-disclosure, non-solicitation, non-disparagement and other restrictive covenants.  Violations of these provisions may result in the Compensation Committee’s cancellation, forfeiture, or rescission (“clawback”) of awards.  Specifically, if a breach of a restrictive covenant occurs within six months of an option exercise or payment of performance shares, we may demand that the exercise or award be rescinded and the amount of gain realized or payment received by the executive returned to us.  By including these clawback provisions, we are attempting to protect the Company from anti-competitive behavior by executives.  Equity awards granted during 2010 in compliance with the Treasury Rules contain additional clawback language, which provides in part for the rescission of awards wherein the distribution or accrual was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria.

The multi-year performance criteria for our long term incentives and multi-year vesting elements of our other equity awards promote the retention of our executives and align the interests of our executives with the long term health of the Company and the interest of shareholders.

In addition, the Compensation Committee has adopted share ownership requirements for our executive officers, including our NEOs, and officers who are members of our Corporate Leadership Group (or “CLG”).  The requirements formalize the Compensation Committee’s belief that our officers should maintain a material personal financial stake in the Company to promote a long term perspective in managing our business, and to align officer and shareholder interests, which reduces the incentives for short term risk-taking.  Under these requirements, each officer
 
 
 
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must retain 50% of the shares of a restricted stock or restricted stock unit award for 5 years from the grant date and 50% of the shares acquired upon the exercise of stock option awards for 6 months from the date of exercise, both net of taxes.  Like many companies, we have transitioned away from requirements tied to specific multiples of base salary because retention ratios accomplish the goal of promoting long term share ownership by our executives and are less sensitive to volatile market changes.
 
We believe these guiding principles provide competitive compensation that retains our NEOs and appropriately drives performance and shareholder returns.  We also have an Insider Trading and Confidentiality Policy that governs trading in our securities, which includes provisions prohibiting speculation in our securities.  In addition, executive officers may not, without the approval of the Corporate Governance Committee, use derivative instruments to hedge the value of any of our securities.

The Role of the Compensation Committee

The Compensation Committee of the Board has primary authority for considering and determining the compensation for our executive officers, including our NEOs.  For a description of the principal functions of the Compensation Committee, see “The Board of Directors and Committees – Compensation Committee” on page 12.

The Compensation Committee determines the form in which the compensation will be paid – e.g. cash or equity – and determines the form of equity, including stock options, performance shares, restricted stock or restricted stock units, among others.  The Compensation Committee also establishes the targets and performance measures under the various short term and long term compensation programs.

The Compensation Committee normally determines the vesting of performance-based incentive awards at its first regularly scheduled meeting of the calendar year (usually in February or March) following the applicable performance period.  During this meeting, the Compensation Committee reviews financial data provided by management reporting the results for the various performance measures previously established for the just-completed annual and long term performance cycles.  The Compensation Committee certifies the achievement (or non-achievement as the case may be) of the performance measures and approves the vesting of awards, as appropriate.

The Compensation Committee has delegated to the Chair of the Committee the authority to approve changes to executive compensation, subject to the Compensation Committee’s review and ratification.  This delegation of authority was done primarily to facilitate changes in compensation between Compensation Committee meetings, if and as necessary, usually in connection with a promotion or new hire.  However, grants of equity awards for executives and the establishment and determination of performance goals intended to satisfy the performance-based compensation exception of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”) may only be made by the full Compensation Committee.

Equity Award Procedures

In November 2006, the Compensation Committee formally approved equity grant procedures, including procedures for granting stock options.  Under these procedures, which remained in effect for 2010, all options for our common stock are granted with a “strike” or exercise price set at the closing price of our common stock, as reported on the composite transactions table of the NYSE, on the date of grant.  Only the full Compensation Committee or the Board of Directors has the authority to make equity grants with respect to our executive officers.

The Compensation Committee generally grants equity awards to our executives once annually as part of our long term incentive compensation program.  These grants are made during its first regularly scheduled meeting of the calendar year.  However, the Compensation Committee or the Board of Directors may also grant equity awards to executives at other regularly scheduled or special meetings or by taking action through unanimous written consent in order to accommodate special circumstances such as new hires or promotions.  For equity awards granted at a regularly scheduled meeting of the Board or Committee, the grant date is the date of the meeting.  However, if the equity award is granted at a “special” meeting of the Board or Committee, and such meeting does not occur during the period in which trading of our securities is permitted under our Insider Trading and Confidentiality Policy (a “window period”), then the grant becomes effective on the first business day of the next window period.  Window periods generally begin on the later of the second business day after our quarterly earnings release or the first business day after our public call with investors.
 
 
 
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In cases where the Compensation Committee or the Board of Directors grants equity awards by written consent, the grant becomes effective on the first business day of the week following the effective date of the written consent; provided, however, that if such business day is not during a window period, the grant becomes effective on the first business day of the next window period.

The Role of Executive Management

In making determinations with respect to executive compensation, the Compensation Committee considers input from a number of sources including executive management.  The Compensation Committee considers the views and insights of the CEO and the CHRO in making compensation decisions for our NEOs and others.  The Compensation Committee believes the input of these executive officers with respect to the assessment of individual performance, the business environment and the competition for talent is an essential component of the process.  Our CEO and CHRO make recommendations to the Compensation Committee with respect to the base salary, target annual incentive awards and target long term incentive awards for each of the NEOs, except for our CEO.

The Role of the Compensation Consultant

The Compensation Committee regularly consults with an external compensation consultant in performing its duties.  The Compensation Committee has the authority to retain and terminate any compensation consultant, as well as to establish the scope of the consultant’s work.  While the consultant reports to the Compensation Committee, the consultant also works with the Company’s human resources staff and executive management as approved by the Compensation Committee.

For the first nine months of 2010, the Compensation Committee utilized Towers Watson to provide advice regarding compensation practices for our executives and directors.  In October 2010, the individual members consulting with the Compensation Committee, as well as several other members, of Towers Watson’s executive compensation practice left to form Pay Governance, a new, independent consulting organization focusing on executive and director compensation.  At that time, the Compensation Committee decided to engage Pay Governance as its compensation consultant going forward.  This decision was made in order to provide continuity of the advice provided to the Compensation Committee and to eliminate any potential conflict of interest in the future, as Towers Watson may continue to provide consulting advice to the Company in areas unrelated to the compensation of our executives or directors.

During 2010, these consulting firms provided the Compensation Committee with:

·  
market data including the evaluation of executive officers’ base salaries, short term incentive targets and long term incentive compensation relative to identified peers and the broader market;
·  
information on trends in executive and director compensation – such as the use of various forms of equity compensation and the prevalence of different types of compensation vehicles;
·  
advice on the design of the Company’s short term and long term incentive plans; and
·  
an evaluation of the impact of the Company’s equity programs on the pool of shares available for grant.

During 2010, while providing compensation consulting services, Towers Watson also provided additional services to management on the following matters unrelated to executive or director compensation, including: (i) health and welfare plan design, financial management and communications strategy; (ii) financial services consulting relating to various reinsurance programs, hedging platforms and subsidiary financial reporting; (iii) actuarial services for certain subsidiaries; and (iv) financial services consulting related to the divestiture of Lincoln National UK plc (“Lincoln UK”).

The table below shows the total amounts that Towers Watson, or its affiliates, invoiced for services rendered, directly or indirectly as a result of its relationship with the Company in 2010.

 
Services Provided
 
2010 Payments
Executive and Director Compensation advice provided to the Compensation Committee
 
$151,317
Survey Data and Health, Welfare, Financial, Actuarial and Pension related consulting services provided to the Company
 
$1,736,699

 
 
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The services listed in the table above as provided to the Company were requested by areas of the Company that do not have direct responsibility for executive compensation and were approved by management and not the Compensation Committee.  Towers Watson is no longer providing consulting services to the Compensation Committee.

The total amount that Pay Governance invoiced for services rendered, directly or indirectly, as a result of its relationship with the Company during 2010 was $32,629.  Pay Governance does not provide any services to the Company other than advice for the Compensation Committee regarding executive compensation and to the Corporate Governance Committee regarding director compensation.

Risk Considerations Relating to Compensation

We have designed the structure and administration of our compensation programs to: (1) provide competitive incentives for our executives and other employees; (2) appropriately balance risk and reward; and (3) align the interests of our executives and other employees with those of our shareholders.

As part of the risk assessment of our compensation plans, we undertook a formal process to identify, discuss, and evaluate the various compensation programs across the business units enterprise-wide to assess any risks posed to us by those programs.  The risk assessment process included, but was not limited to:

·  
identifying the compensation programs that cover all of our employees;
·  
reviewing the compensation programs from a design and governance perspective, including evaluating the behavior each program was designed to encourage and detailing the flow of compensation;
·  
identifying any risks inherent in the programs; and
·  
identifying and discussing any additional mitigation factors in the program design and any additional risk controls outside of the compensation process specific to each business model.

Our chief risk officer and the head of total rewards formally reviewed the analysis of our programs and thereafter met with the Compensation Committee to discuss their findings.

Some of the features of our compensation programs that limit risk include:

·  
Incentive plan awards are based on a variety of indicators of performance, thus preventing the potential of any single indicator of performance to have an undue influence on payout;
·  
Incentive plan awards are not based on a simple formulaic approach that could focus performance on short term outcomes; rather, they take into account individual performance and other qualitative factors (i.e., is the focus on key metrics);
·  
The Compensation Committee approves the final incentive plan awards after the review of executive and corporate performance and they have the discretion to adjust the awards down even if the performance goals are met;
·  
The Compensation Committee reviews whether our compensation plans encourage excessive risk taking;
·  
The “clawback” features of our equity awards;
·  
The multi-year performance criteria for our LTI program and the multi-year vesting elements of our other equity awards align the interests of our executives with the long term health of the Company;
·  
The balanced pay mix decreases the significance of any single element of pay and decreases the likelihood that an executive would take inappropriate risks to inflate any such pay;
·  
Our share ownership guidelines require meaningful long term executive ownership of company shares which aligns our executives’ long term interests with the long term interests of our shareholders; and
·  
Fixed compensation is set at a meaningful level allowing executives to meet their essential financial needs.

The Compensation Committee discussed in detail the evaluation and risk assessment review of our compensation programs with the chief risk officer and the head of total rewards.  In addition to the features listed above, the evaluation also identified aspects of the administration and oversight of our plans that build considerable risk mitigation into the organizational structure of the plans.  These discussions confirmed that the design and implementation of our compensation programs: (a) do not encourage our Senior Executive Officers to take: (i) unnecessary or excessive risks; or (ii) any risk, including short term or long term risks, that could threaten the value of our business; (b) do not encourage behavior focused on short term results versus long term value creation; (c) do not
 
 
 
 
 
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encourage the manipulation of our reported earnings to enhance employee compensation; and (d) do not unnecessarily expose us to risk.
 
2010 Executive Compensation

This section discusses how we set the target compensation levels for our NEOs and how we awarded compensation during 2010 in our key areas:

·  
Annual compensation consisting of salary and an annual or short term incentive award program referred to as the transition incentive award program; and
·  
Long term compensation consisting of long term equity awards of RSUs, as well as the certification of performance under the previously established 2008-2010 LTI performance cycle.

Section 162(m) caps a public company’s corporate income tax deduction for compensation at $1 million per year for each NEO.  However, compensation that qualifies as performance-based compensation is not subject to this cap.  The incentive awards that we pay are intended to qualify as performance-based compensation under Section 162(m) and are subject to limits established under the LNC 2009 Amended and Restated Incentive Compensation Plan (the “ICP”) in compliance with the rules of that Section.

Under the ICP, our 2010 awards could in no event exceed, in the case of a cash award, $8,000,000, or, in the case of equity awards or stock options, two million shares.  The Compensation Committee may decide to further limit such awards.  During our participation in the CPP, the Treasury Rules further limited the deductibility of compensation paid during a fiscal year to a covered employee to $500,000, and eliminated the exception for “performance-based compensation” for covered employees.

In the case of our performance awards, the Compensation Committee retains the discretion to reduce the target award or payout of any “covered executive” as defined under Section 162(m), or increase or decrease any other executive’s individual payout, based on certain circumstances that may occur during the cycle.  The Compensation Committee may also consider paying non-performance-based compensation to covered executives based on circumstances that could impact performance results such as changing economic and market conditions, mergers or acquisitions, sale of a business, restructuring charges, reserve strengthening or release, and/or extraordinary natural occurrences or man-made events (e.g., acts of war).  In making such changes, the Compensation Committee would consider investor reaction, stock price performance, performance of peers, retention considerations, and the CEO’s recommendation. The guiding principle in making adjustments and modifications would be to encourage and reward management for consistently high financial and shareholder return performance relative to peers, while taking into consideration creation of shareholder value.

Notwithstanding the above and as may be permitted under our applicable plans, should compliance with Section 162(m) conflict with the Compensation Committee’s compensation philosophy, the Compensation Committee reserves the authority to act in the manner it perceives in the best interests of us and our shareholders, even if such compensation is not tax deductible.

Target Compensation

Prior to our repurchase of the preferred stock from the Treasury on June 30, 2010, we were subject to the compensation restrictions set forth under the Treasury Rules, which included a prohibition on the payment or accrual of any bonuses to our NEOs, except for awards of long term restricted stock and stock units.  As a result, the forms of compensation that we were able to provide to our NEOs for the first half of 2010 were significantly constrained.  The Compensation Committee met at the end of 2009 and established “targeted direct compensation” levels for 2010 for each of our NEOs, comprising a larger portion of fixed compensation, consisting mainly of equity-based compensation with multi-year vesting or holding requirements.

After the repurchase of the preferred stock, our NEOs were no longer subject to the restrictions under the Treasury Rules.  The Compensation Committee met again and reviewed the compensation structure for our NEOs.  For 2010, the Compensation Committee kept the targeted direct compensation levels for each of our NEOs at the same level as was established in 2009.  However, the Compensation Committee implemented changes to the compensation structure for the remainder of 2010 replacing a portion of fixed compensation with incentive-based compensation.  
 
 
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These changes reflected a return to our traditional “pay for performance” philosophy so that the interests of our executives would be more closely aligned with shareholders.
 
The below table reflects the dollar amount of targeted direct compensation levels for 2010 for our NEOs as established by the Compensation Committee at the November 2009 meeting.  Each element of targeted direct compensation is discussed more fully below.

2010 Targeted Total Annual Compensation
 
Name
Amount
($)
Dennis R. Glass
6,307,500
Frederick J. Crawford
2,307,500
Robert W. Dineen
2,446,000
Wilford H. Fuller
2,240,000
Mark E. Konen
2,510,500

When considering the 2010 targeted total compensation for Messrs. Glass, Crawford and Konen, we used market data drawn from the following companies included in the 2009 Diversified Insurance Study of Executive Compensation provided by Towers Watson:

· AEGON USA
· ING
· AFLAC
· John Hancock
· AIG
· Met Life
· Allstate
· Phoenix Companies
· AXA Equitable
· Principal Financial
· CIGNA
· Prudential Financial
· Genworth Financial
· Sun Life Financial
· Hartford Financial Services
· Unum Group

For Mr. Dineen, the President of Lincoln Financial Network, our retail distribution business, and Mr. Fuller, the President of Lincoln Financial Distributors, our wholesale distribution business, the Compensation Committee reviewed compensation data for executives in similar positions from the McLagan Partners’ Investment Products Sales and Marketing Survey for 2009, as well as from the above companies.  For a list of these companies refer to Exhibit 5.

Based on the data, as well as organizational needs for the expertise that they bring to the Company, in 2010, we targeted above-median compensation to Messrs. Dineen and Fuller.

Annual Compensation

During 2010, our annual compensation was delivered as a combination of salary, including base salary paid in cash and Salary Shares, and a short term incentive award under the transition incentive award program.  This section discusses each of these elements in further detail.

Base Salary and Salary Shares

As part of a total compensation opportunity designed to comply with the compensation restrictions under the Treasury Rules, the Compensation Committee approved targeted direct compensation for our NEOs comprising a significant portion of fixed compensation delivered as base salary and Salary Shares.  The Compensation Committee believed that paying a larger portion of salary in shares of our common stock rather than in cash ties that portion of the executive’s salary to the Company’s performance and aligns the executive’s interests with the shareholders.  The Salary Shares were intended to provide an appropriate compensation vehicle within the framework provided under the Treasury Rules while maintaining overall compensation levels that would be competitive within our marketplace for talent.  The table below shows the amounts of base salary and Salary Shares on an annualized basis as approved by the Compensation Committee for 2010 for each of these NEOs.
 
 
 
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2010 Targeted Annual Base Salary and Salary Share Amounts
Name
Base Salary
Salary Shares
Dennis R. Glass
$1,150,000
$3,107,500
Frederick J. Crawford
$637,500
$920,000
Robert W. Dineen
$525,000
$1,120,667
Wilford H. Fuller
$500,000
$993,333
Mark E. Konen
$646,875
$1,047,625

The Salary Shares were credited each regular pay period as shares of LNC common stock issued under the ICP.  The number of Salary Shares delivered each pay period was determined by dividing the amount of salary to be paid in Salary Shares for that pay period, net of applicable withholdings and deductions, by the average of the high and low price for a share of LNC common stock as quoted on the New York Stock Exchange on the date prior to the pay date for such period.  Fifty percent of the Salary Shares paid in 2010 are subject to holding restrictions for 5 years.

The actual amounts of cash salary paid during 2010 plus any amounts of applicable withholdings and deductions netted out from the Salary Shares are shown in the Salary Column of the Summary Compensation Table on page 44.  The actual amounts of Salary Shares paid during 2010 net of any applicable withholdings and deductions are shown in the Stock Awards Column of the Summary Compensation Table on page 44 and the Grants of Plan-Based Awards Table on page 47.  In addition, as part of their targeted annual compensation, in February 2010, each NEO received a grant of long term RSUs in compliance with the Treasury Rules.  This grant is discussed in more detail under the section titled “Long Term Compensation” at page 38 below.

On June 30, 2010, we redeemed in full the preferred stock sold to the Treasury under CPP.  As result, after that date we were no longer subject to the compensation restrictions under the Treasury Rules.  Thereafter, the Compensation Committee met in August 2010 to consider revisions to the compensation of our NEOs to reflect a return to our traditional compensation practices.  During that meeting, the Compensation Committee revised the salary levels for our NEOs by reducing base salary from the levels established under CPP and eliminating the payment of Salary Shares going forward.  This change represented a return to the salary levels in place during the first half of 2009 with the one exception being a merit increase of 2.5% in the salary levels for each of our NEOs.  This increase matched the merit increase opportunity provided to employees across the organization for 2010.  The table below shows the annualized base salary level approved by the Compensation Committee in August 2010 for each of our NEOs.  The revised base salary amounts were effective as of August 14, 2010.

 
 
Name
Revised 2010 Annualized
Base Salary Amount
Dennis R. Glass
$1,025,000
Frederick J. Crawford
$522,750
Robert W. Dineen
$430,500
Wilford H. Fuller
$410,000
Mark E. Konen
$530,438

Transition Incentive Award Program

For the first half of 2010, our NEOs were not eligible to participate in our annual incentive award program.  After our redemption of the preferred shares, issued under CPP, from the Treasury in June 2010, the compensation restrictions under the Treasury Rules ceased to apply to our NEOs.  In August 2010, the Compensation Committee revised the compensation structure of our NEOs and established the transition incentive award program, referred to as the “2010 TIP,” to reflect our return to a “pay for performance” culture for the second half of 2010.

To determine the appropriate TIP compensation targets for our CEO, the Compensation Committee considered tally sheets illustrating: (1) each element of total targeted direct compensation for the current year; (2) the total amount of each element of compensation that had already been delivered during 2010; and (3) the remaining amount of 2010 targeted direct compensation.  Based on a review of these materials and the opinion of its compensation consultant, the Compensation Committee established and approved 2010 TIP and long term compensation targets for our NEOs for the remainder of 2010.  The Compensation Committee prorated these targets to exclude the portion of the year prior to our repurchase of the preferred stock issued to the Treasury under CPP.  These revisions did not result in any increase to the total targeted direct compensation opportunities for our NEOs.
 
 
 
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The following table shows the dollar amount of the estimated possible payouts for the 2010 TIP at threshold, target and maximum as established by the Compensation Committee on the date of grant.  Any payouts of amounts under the 2010 TIP are conditioned upon the executive remaining employed by the Company through August 1, 2011.

Estimated Possible Payouts Under the 2010 TIP
 
Name
Threshold
($)
Target
($)
Maximum
($)
Dennis R. Glass
$11,827
$788,462
$1,576,923
Frederick J. Crawford
$3,317
$221,163
$442,327
Robert W. Dineen
$1,296
$432,156
$864,312
Wilford H. Fuller
$1,183
$394,231
$788,462
Mark E. Konen
$832
$277,460
$554,919

The 2010 Transition Incentive Award Program Measures

The Compensation Committee approved: (1) income from operations per share; (2) statutory earnings; (3) sales growth; and (4) achievement of budget goals, as the 2010 TIP performance measures in August 2010.  The Compensation Committee chose these measures because they focus on our overall corporate strategy of balancing top-line growth, with profitability and financial stability and because they are aligned with the metrics used in the corporate annual incentive program in which a majority of employees across the organization are eligible to participate.  The Compensation Committee’s rationale for these measures is discussed further on page 28.

“Income from Operations” is defined as net income for the relevant performance period in accordance with generally accepted accounting principles, but excluding the after-tax effects of the following items:

1)  
Realized gain (loss) – Realized gains and losses – defined as the following:
a.  
Sales or disposals of securities;
b.  
Impairments of securities;
c.  
Change in the fair value of embedded derivatives within certain reinsurance arrangements and the change in the fair value of our trading securities;
d.  
Change in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders within our variable annuities net of the change in reserves resulting from benefit ratio unlocking on our GDB and guaranteed living benefit riders within our variable annuities (“GLB”);
e.  
Change in the fair value of the embedded derivatives of our GLB riders within our variable annuities net of the change in the fair value of the derivatives we own to hedge the changes in the embedded derivative reserves; and
f.  
Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products;
2)  
FAS 113 reserve development and the related amortization on subsidiaries, businesses and other long-lived assets sold through indemnity reinsurance;
3)  
Gain or loss on early retirement of indebtedness;
4)  
Initial effect of the adoption of new accounting principles that become effective during the performance period;
5)  
Discontinued Operations – both the income in the period and the gain or loss on disposition (U.S. generally accepted accounting principles (“U.S. GAAP”) require that when a business meets the criteria for being classified as Discontinued Operations, all prior periods must be restated);
6)  
Expenses related to acquisitions, mergers, divestitures, integration and restructuring activities, including restructuring charges, and losses associated with changes to employee benefit plans;
7)  
Reductions in earnings in the performance period from those in the base year as a result of the on-going impact of a change in accounting principles;
8)  
Losses and expenses resulting from claims, damages, judgments, liabilities and settlements arising from legal and regulatory proceedings in excess of $10 million;
9)  
Reduction in earnings resulting from the sale or reinsurance of a business or block of business;
10)  
Increases in our effective tax rate due to changes in the computation of the separate account dividends received deduction under the federal income tax law, and increases to the corporate tax rate from the rate in effect at the beginning of the performance period due to legislative changes;
11)  
Reduction in earnings resulting from expenses associated with the Financial Crisis Responsibility Fee or similar assessment enacted by the U.S. Government;
 
 
 
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12)  
Reduction in earnings resulting from the completion of a comprehensive review of actuarial models and assumptions related to the conversion of actuarial systems; and
13)  
Reduction in earnings resulting from the initial adoption of a change to the deferred compensation plan related to LNC Stock.

The calculation of “Income from Operations per Share” is defined as “Income from Operations” (as defined above) divided by the average diluted shares.

“Statutory earnings” is defined as the sum of the following measures for the relevant performance period:

·  
Net Income;
·  
Change in Surplus as a result of reinsurance; and
·  
The impact to federal income taxes related to the funds withheld agreement supporting our variable annuity hedge program.

These measures are derived from the Annual Statements for our U.S. domiciled life insurance companies: The Lincoln National Life Insurance Company (“LNL”); LLANY; and First Penn-Pacific Life Insurance Company (“FPP”).  The Annual Statements for LNL and FPP are filed with the Indiana insurance department, and for LLANY are filed with the New York insurance department.

Under the Treasury Rules, we were restricted from prorating our NEOs into the annual incentive program that the Compensation Committee had established in February 2010 for those executive officers not covered by the CPP compensation restrictions.  As a result, the goals for each of TIP performance measures were linked to a specially developed corporate financial plan which reforecast our performance for the truncated period of July 1 through December 31, 2010, and were designed so that no part of the performance period would coincide with the period during which we participated in CPP.

In setting the goals for each of the 2010 TIP performance measures, both management and the Compensation Committee intended the maximum levels to present a challenge for our NEOs, therefore requiring strong performance for successful achievement of these goals.  Accordingly, the Compensation Committee approved the maximum goals for our 2010 TIP performance measures at a level that exceeded our reforecast internal financial plan.  The target corporate Income from Operations per Share performance measure was set after consideration of a number of factors, including peer group performance and our financial plan.  The target sales component of TIP, at both a corporate level and a business unit level, was based on our reforecast financial plan, and includes above-industry average sales growth rates, reflecting management’s assessment of the level of growth needed to gain market share.  For the statutory earnings component, we set the target measure per our reforecast financial plan and in recognition of the importance of capital management for the strength of the Company.  The goal for budget compliance at target was based upon controllable costs as budgeted for in our reforecast financial plan.

For our CEO, Mr. Glass, the above measures at a corporate level represented 100% of his 2010 TIP award.  For Mr. Crawford, with the exception of the budget goal, the above measures at a corporate level represented 90% of his 2010 TIP award, and a business unit budget goal represented 10% of his 2010 TIP award. For Messrs. Dineen, Fuller and Konen, the corporate measures represented 20% of their TIP award, while line of business specific performance measures represented 80% of their TIP award.  The variations in the levels of the measures for each NEO provides a direct line of sight that is specific to the areas they oversee, while balancing their specific business goals with overall corporate goals for financial performance.

The 2010 Transition Incentive Award Performance Results

The performance results for the 2010 TIP were certified by the Compensation Committee in February 2011.  In determining the performance results for income from operations per share, if the Compensation Committee found that any of the factors listed in items 6 through 13 listed above in the definition of Income from Operations for the 2010 TIP were reflective of individual performance, it could have, in its discretion, included—rather than excluded—any of these five items, or made any other adjustments to the definitions of Income from Operations, if the net effect of such discretionary adjustments would be to reduce award payouts.  In certifying the results for the 2010 TIP awards, the Compensation Committee calculated the final award payouts in accordance with the definition and did not exercise its downward discretion.
 
 
 
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Our 2010 financial results exceeded expectations.  The Compensation Committee certified the performance results for the 2010 TIP in February 2011, however as noted above, no amounts are payable to our NEOs unless they remain employed with the Company through August 1, 2011.  Therefore, the dollar amounts shown in the Summary Compensation Table at page 44 for the 2010 TIP for each of our NEOs will not be paid until after that date.

The below tables show the goals, weights and performance results for the corporate 2010 TIP measures.

($ amount in millions, except per share amounts)
LNC Corporate Measures
Relative
Weight
Threshold Performance for Payout
Target Performance for Payout
Maximum Performance for Payout
Actual
Performance
Results
Payout as a Percentage of Target
Income from Operations
per Diluted Share
45%
$1.43
$1.62
$1.88
$1.81
173%
Statutory Earnings
15%
$74
$148
$251
$449
200%
Corporate Sales
           
Insurance Solutions:
Life Sales
9%
$303
$344
$399
$354
118%
Insurance Solutions:
Group Protection
6%
$230
$262
$304
$224
0%
Retirement Solutions:
Annuities
9%
$4,951
$5,626
$6,527
$5,569
94%
Retirement Solutions:
Defined Contribution
6%
$1,957
$2,224
$2,580
$2,620
200%
Corporate Budget
Goal for all NEOs except for Mr. Crawford
10%
N/A
100%
90%
90%
200%
Business Unit Budget
Goal for Mr. Crawford
10%
N/A
100%
90%
88%
200%

The tables below show the goals, weightings and performance results for the business unit 2010 TIP measures for Messrs. Dineen, Fuller and Konen, respectively.

($ amount in millions, except per share amounts)
Lincoln Financial Network Measures for Mr. Dineen
Relative
Weight
Threshold Performance for Payout
Target Performance for Payout
Maximum Performance for Payout
Actual
Performance
Results
Payout as a Percentage of Target
Income from Operations
30%
($6.0)
($3.5)
($0.0)
($1.4)
160%
Life Sales
35%
$57
$65
$75
$74
190%
Other Sales
15%
$480
$545
$632
$487
33%
Budget Goal
20%
N/A
100%
90%
83%
200%

Lincoln Financial Distributors
 Measures for Mr. Fuller
Relative
Weight
Threshold Performance for Payout
Target Performance for Payout
Maximum Performance for Payout
Actual
Performance
Results
Payout as a Percentage of Target
Income from Operations
25%
($7.0)
($7.9)
($9.2)
($2.4)
200%
Life Sales
24%
$303
$344
$399
$354
118%
Annuities Sales
24%
$4,943
$5,618
$6,516
$5,554
93%
Defined Contribution Sales
12%
$621
$706
$819
$757
145%
Budget Goal
15%
N/A
100%
90%
85%
200%
 
 
 
 
- 37 -

 
 

 
Insurance & Retirement Solutions Measures
For Mr. Konen
Relative
Weight
Threshold Performance for Payout
Target Performance for Payout
Maximum Performance for Payout
Actual
Performance
Results
Payout as a Percentage of Target
Income from Operations
           
Life
22.5%
$267
$303
$351
$301
96%
Group Protection
6.75%
$47
$53
$61
$28
0%
Annuities
15.75%
$154
$175
$203
$252
200%
Sales
           
Life
13.33%
$303
$344
$399
$354
118%
Group Protection
13.33%
$230
$262
$304
$224
0%
Annuities
13.33%
$4,951
$5,626
$6,527
$5,569
94%
Budget Goal
15%
N/A
100%
90%
94%
168%

The chart below sets forth the approved aggregated, weighted performance results for the 2010 TIP for each of our NEOs as a percentage of target.

($ amount in millions, except per share amounts)
2010 TIP Combined Performance
Results for:
 [Corporate Results  x Corporate Weight] + [Bus. Unit Results x  Bus. Unit Weight]  =
 
 Total Payout 
Percentage
 
Corporate
Results as a
Percentage of
Target
   
Corporate
Weight
   
Business Unit
Results as a
Percentage of
Target
   
Business Unit
Weight
   
Total Payout
as a
Percentage of
Target
Dennis R. Glass
159%
   
100%
   
N/A
   
0%
   
159%
Frederick J. Crawford
154%
   
90%
   
200%
   
10%
   
159%
Robert W. Dineen
159%
   
20%
   
159.5%
   
80%
   
159.4%
Wilford H. Fuller
159%
   
20%
   
148%
   
80%
   
150.2%
Mark E. Konen
159%
   
20%
   
106%
   
80%
   
117%

Long Term Compensation

Our 2010 long term compensation, consistent with our past LTI programs, was designed to encourage executives to create value for our shareholders by linking executive pay to the achievement of performance measures that drive shareholder return.  Traditionally, our LTI programs have been performance based and are intended to pay out above-target compensation only when performance has been above-target, consistent with our fundamental or guiding principles for executive compensation.  The LTI program established by the Compensation Committee in February 2008 for the 2008-2010 performance cycle, discussed in detail at page 39, was designed in this manner.  However, as a result of our participation in CPP, for 2010, the LTI awards were granted 100% as an award of long term RSUs.  The Compensation Committee did not establish any performance measures for the 2010 LTI award due to our participation in CPP and the associated restrictions on “bonus” payments under the Treasury Rules.

These equity incentive awards vest over a multi-year period and are not tied to formulas that could focus our executives on specific short term outcomes.  Instead, the value of these awards to our NEOs depends on the positive financial performance of our Company over time, as expressed through the increase in share value.  Long term equity-based awards such as these encourage our NEOs to act as owners, thus aligning their interests with those of shareholders.  Additionally, these equity awards are subject to the clawbacks detailed on page 28.  The use of equity-based awards in conjunction with our share ownership requirements, discussed on page 28, reinforces our belief that our executives should maintain a material personal financial stake in the Company to promote a long term perspective in managing our business, and to align executive and shareholder interests, which reduces the incentives for short term risk-taking.
 
 
 
- 38 -

 
 
 

2010 RSU Awards

As an element of their targeted direct compensation for 2010, each of our NEOs received a CPP-compliant long term RSU award, granted as of February 22, 2010, as shown in the Table below.

February 2010 Grant of
CPP-Compliant Long Term RSUs
Name
Number of RSUs
Grant Date Value
Dennis R. Glass
81,237
$2,050,000
Frederick J. Crawford
29,721
$750,000
Robert W. Dineen
31,716
$800,333
Wilford H. Fuller
29,589
$746,667
Mark E. Konen
32,337
$816,000

After our repurchase of the preferred shares issued to Treasury under CPP, and as part of a return to our traditional pay for performance culture, the Compensation Committee decided to make an additional grant of long term RSUs to each of our NEOs, which was prorated to exclude any portion of the year prior to our repurchase of the preferred stock issued to the Treasury under CPP.  This grant of RSUs was provided to increase the overall amount of long term compensation to be more in line with our traditional compensation programs, and to ensure that the total targeted compensation opportunity for 2010 remained unchanged from the amounts established by the Compensation Committee for 2010 at its November 2009 meeting.  The following table sets forth the number of RSUs granted by the Compensation Committee at its meeting on August 11, 2010 for each of our NEOs.

August 2010 Grant of RSUs
Name
Number of RSUs
Grant Date Value
Dennis R. Glass
18,264
$451,923
Frederick J. Crawford
7,154
$177,010
Robert W. Dineen
1,439
$35,600
Wilford H. Fuller
907
$22,436
Mark E. Konen
6,881
$170,257

These equity-based awards promote long term executive share ownership and serve to align the interests of our executives with those of our shareholders.  Each of these grants of RSUs was issued under the ICP and vest in full on the third anniversary of the date of grant.

2008-2010 Long Term Incentive Award Performance Cycle Results

In February 2008, the Compensation Committee established the 2008-2010 Long Term Incentive Award Performance Cycle (the “2008-2010 LTI”).  For the 2008-2010 performance cycle, the executives had the opportunity to elect to receive an earned award (if any) as either: (a) 100% shares of our common stock; or (b) 75% shares of our common stock and 25% in cash.  The payouts for the 2008-2010 performance period could have ranged from 0% to 200% of each executive’s target 2008-2010 LTI performance award with a threshold payout for each measure equal to 50% of target.  The following table shows the estimated possible number of shares that could have vested in accordance with the 2008-2010 LTI performance awards at threshold (lowest weighted performance achieved for a single measure), target and maximum as established by the Compensation Committee on the date of grant.

Estimated Possible Payouts Under
the 2008-2010 Performance Award Cycle
Name
Threshold
Target
Maximum
Dennis R. Glass
2,003
48,077
96,154
Frederick J. Crawford
574
13,780
27,560
Robert W. Dineen
556
13,327
26,654
Wilford H. Fuller1
1,387
33,254
66,508
Mark E. Konen
530
12,722
25,444
1. Mr. Fuller received a pro-rated grant of performance shares under the 2008-2010 LTI on February 23, 2009 in conjunction with the commencement of his employment with the Company.
 
 
 
 
- 39 -

 
 

 
In February 2011, the Compensation Committee reviewed all of the various reports and analysis provided to it by management regarding our performance during this cycle, and determined that the performance measures had not been satisfied to the extent required by the ICP and other performance cycle documents.  Therefore, none of the 2008-2010 LTI performance awards were paid out to our officers including our NEOs.

The chart below sets forth the various performance measures established for the 2008-2010 LTI performance award cycle in February 2008, as well as the relative weighting, the goal levels, and the actual performance results for each performance measure based on performance for the period beginning January 1, 2008 and ending December 31, 2010.

Performance Measures for 2008-2010 Performance Cycle
Relative
Weight
Goal at
Minimum
Goal at
Target
Goal at
Maximum
Actual
Performance
Results
Payout as a Percentage of Target
Growth in Income from Operations per Diluted Share
33.33%
5%
10%
15%
(12.18)%
0
Growth in Gross Deposits and Sales by Segment1
Individual Markets - Life
8.33%
5%
10%
15%
(8.32)%
0
Individual Markets – Annuities
8.33%
10%
15%
20%
(7.18)%
0
Employer Markets
8.33%
10%
15%
20%
(1.37)%
0
Investment Management
8.33%
5%
10%
15%
(7.94)%
0
Return on Equity Based on Income from Operations
33.34%
13%
13.75%
14.5%
8.47%
0
1 These represent our business segments as they were reported in the first half of 2008.  We have since realigned our business segments and effective January 4, 2010 we closed on the sale of Delaware Management Holdings Inc., our Investment Management business.

For the 2008-2010 Long Term Incentive Program (“LTI”), “Income from Operations” was defined as net income in accordance with GAAP, but excluding the following items:

·  
Realized gain (loss) – defined as gains and losses on investments and derivative investments (including reinsurance embedded derivative, net of the corresponding trading securities), losses from impairments of long-lived assets (including goodwill and other intangibles), gain and loss on the sale of subsidiaries, businesses, and other long-lived assets, net gain and loss on reinsurance embedded derivative and trading securities;
·  
FAS 113 reserve development and the related amortization on subsidiaries, businesses and other long-lived assets sold through indemnity reinsurance;
·  
Loss on early retirement of indebtedness;
·  
Initial effect of the adoption of new accounting principles (such as the adoption of Statement of Financial Accounting Standard No. 157, “Fair value Measurements” effective January 1, 2008 and other accounting principles that become effective during the performance period); and
·  
Discontinued Operations – both the income in the period and the gain or loss on disposition (U.S. GAAP requires that when a business meets the criteria for being classified as Discontinued Operations, all prior periods must be restated).

In addition, the following items were excluded from the definition of Income from Operations because the Compensation Committee believed that these items were generally attributable to factors largely unrelated to an individual’s performance: expenses related to acquisitions, mergers, divestitures, integration and restructuring activities, including restructuring charges, and losses associated with changes to employee benefit plans; reductions in earnings in the performance period from those in the base year as a result of the on-going impact of a change in accounting principles; reductions in earnings from changes in the hedging program or an increase in fair value of the embedded derivative liability in excess of the change in fair value of the related hedging instruments (excluding the cost of the
 
 
 
 
 
- 40 -

 
 
 
hedging program) related to the variable annuity living benefits; losses and expenses resulting from claims, damages, judgments, liabilities and settlements arising from legal and regulatory proceedings in excess of $10 million; and increases in our tax rate due to changes in the computation of separate account dividends received deduction under the federal income tax law, and increases to the corporate income tax rate from the rate in effect at the beginning of the performance period due to legislative changes.
 
If the Compensation Committee found that any of these factors were reflective of individual performance, it could have, in its discretion, included—rather than excluded—any of the items listed above in the definition of Income from Operations, or made any other adjustments to the definitions of Income from Operations, if the net effect of such discretionary adjustments would be to reduce award payouts.  In certifying the results for the 2008-2010 LTI awards, the Compensation Committee excluded all of these items in the final calculation.

This definition of income from operations is consistent with the definition used to report segment income from operations at the time that the 2008-2010 LTI performance award cycle was established.  Income from operations is an internal measure that we use in the management of our operations.  Growth in income from operations per share was expressed as a compounded growth rate based on the point-to-point difference between such measure for the year prior to the beginning of the cycle (2007) and the final year of the cycle (2010).  Return on equity was defined as Income from Operations divided by average shareholders’ equity for the year.  Shareholders equity excluded other comprehensive income and other similar items and the unleveraged goodwill associated with an acquisition during the performance period.

Employee Benefit Plans

Many of the benefits offered to our executive officers are the same benefits that we offer to our general employee population.  With some exceptions, the additional benefits available to our executives are offered through plans and programs that promote tax efficiency and replacement of benefit opportunities lost due to regulatory limits in the broad-based tax-qualified plans.  In addition to providing retirement income, our benefits help to protect our employees and executives from the financial hardship that can result from unexpected illness, disability, or death.  These types of benefits are typically offered by our peer group of companies with whom we compete, and therefore, help us to attract and retain key employees.

Our Deferred Compensation Plan

We provide certain benefits to our executive officers, including our NEOs, under our non-qualified defined contribution plan, the Lincoln National Corporation Deferred Compensation & Supplemental/Excess Retirement Plan (the “DC SERP”).  These benefits are targeted to provide retirement benefits above median, based on market data from our peer companies described in the chart at page 33 above.

All of our NEOs participating in the DC SERP are eligible to receive an annual contribution from us of up to 15% of their total pay (because a portion of this contribution is a matching contribution, this percentage assumes the NEO contributed the maximum amount allowable).  “Total Pay” under the DC SERP means base salary and AIP paid during the fiscal year.  For our NEOs, this 15% will be deemed to come from a number of different source contributions:

·  
a 6% basic matching contribution opportunity;
·  
a guaranteed 4% core contribution;
·  
any transition contributions (the result of our transition at the end of 2007 from a defined benefit to a defined contribution retirement program); and
·  
a special executive credit.

The total of these various contributions for each executive will generally be expressed as a percentage of total pay.  To the extent that this total percentage is less than 15% for an NEO, the shortfall will be contributed as a “special executive credit” under the DC SERP for each NEO.  The “special executive credit” for each NEO, if contributed for 2010, appears in footnote 5 to the Summary Compensation Table at page 44.  The target of 15% of Total Pay as an annual contribution is considered to be above the market rate for an executive defined contribution retirement program.
 
 
 
 
- 41 -

 
 

 
Change of Control Arrangements

We sponsor a single plan where the payment of benefits is triggered by a termination of employment (under specific circumstances) in anticipation of or within two years after our change of control:  the Lincoln National Corporation Executives’ Severance Benefit Plan, effective as of August 7, 2008 (the “LNC COC Plan”). The LNC COC Plan provides for a cash payment to the executive based on a multiple of “annual base salary” and “target bonus” following the occurrence of two events (or triggers):

(1) our change of control; and
(2) either: (a) the executive’s employment is terminated for any reason other than “cause;” or (b) the executive terminates his or her employment for “good reason.”

The cash payment may entitle the executive to an after-tax payment, or “gross up, ” to cover any excise tax amounts deemed to be “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended.  Additionally, a change of control of the Company would trigger benefit enhancements under the DC SERP.

A more detailed description of the gross-up provision of the LNC COC Plan, the enhanced benefits provided under the DC SERP and the benefits provided under other plans upon our change of control is provided below under “Potential Payments upon Termination or Change of Control” beginning on page 56.

The objectives of the change of control benefits are:

·  
to attract and retain qualified executives in the face of an actual or threatened change of control of Lincoln National Corporation (in the case of the LNC COC Plan);
·  
to enable such executives to help our Board assess any proposed change of control of us and advise the Board as to whether such a proposal is in the best interests of the Company, our shareholders, our policyholders and customers without being unduly influenced by the possibility of employment termination; and
·  
to demonstrate to those executives our desire to treat them fairly and competitively in such circumstances.

At its February 22, 2010 meeting, the Compensation Committee reviewed a tally sheet prepared by Towers Watson, estimating our costs and executive benefits associated with a potential change of control for each NEO.  The Compensation Committee agreed that the costs associated with a change of control were reasonable.

Severance Plans

We sponsor the Severance Plan for Officers of Lincoln National Corporation (which was amended and restated effective as of January 1, 2010) (the “Officers’ Severance Plan”), which provides for 52 weeks of severance benefits to our executive officers, including our NEOs, as well as a lump-sum severance stipend of $200/week for each week of the severance period. Executive officers are paid in a lump sum no earlier than the first day of the month which is six months after the date the officer’s job was eliminated.  “Job Elimination” under the Officers’ Severance Plan means that the job worked by the officer no longer exists (e.g., because of a reduction in force, office closing, or a corporate reorganization).

In order to qualify for benefits under the Officers’ Severance Plan, each affected officer must sign our standard form of agreement, waiver and release of claims that includes a non-compete provision, among other conditions.  Any payments made under the Officers’ Severance Plan would offset, or reduce, on a dollar-for-dollar basis, any payments to an executive under the LNC COC Plan.
 
 
 
- 42 -

 
 
 
Compensation Committee Report

The Compensation Committee certifies that for the period from January 1, 2010 through June 30, 2010:

(1) It has reviewed with LNC’s senior risk officers the compensation plans for our senior executive officers (“SEO”) and has made all reasonable efforts to ensure that these plans do not encourage our SEOs to take unnecessary and excessive risks that threaten the value of the Company;

(2) It has reviewed with LNC’s senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to the Company; and

(3) It has reviewed the employee compensation plans to eliminate any features of these plans that would
encourage the manipulation of reported earnings of the Company to enhance the compensation of any employee.

A list of the SEO plans reviewed and an explanation of how each plan does not encourage SEOs to take unnecessary and excessive risks that threaten the value of the Company is provided in Exhibit 6, which is incorporated into this report by reference.  The list of employee compensation plans reviewed and an explanation of how these plans do not encourage the manipulation of reported earnings to enhance the compensation of any employee is also provided in Exhibit 6, which is incorporated into this report by reference.

The members of the Compensation Committee have reviewed and discussed this Compensation Discussion & Analysis with management.  Based on that review and discussion, the Compensation Committee has recommended to the Board of Directors of the Corporation that the Compensation Discussion & Analysis be included in this proxy statement and incorporated by reference into the Corporation’s Form 10-K for the year ended December 31, 2010.
 
 
The Compensation Committee

Patrick S. Pittard, Chair
Eric G. Johnson
Michael F. Mee
 
 
 
 
- 43 -

 
 
 
 
Summary Compensation Table

The table below contains information about our NEOs’ compensation earned or paid during the fiscal year ended December 31, 2010.  The NEOs for 2010 are:

·  
our CEO and our CFO during 2010; and
·  
our three other most highly compensated executive officers employed on December 31, 2010.

                                     
Name and Principal Position
 
Year
 
Salary
($)1
 
Bonus
($)
 
Stock
Awards
($)2
 
Option Awards
($)2
 
Non-Equity Incentive
Plan
Compensation
($)3
 
Change in Pension Value and Non-Qualified Deferred Compensation Earnings
($)4
 
All Other Compensation
($)5
 
Total
($)6
Dennis R. Glass
 
2010
 
1,995,233
 
 
3,516,402
 
 
1,253,655
 
213,424
 
401,698
 
7,380,412
  President and CEO of LNC  
2009
 
2,239,123
 
 
3,026,447
 
 
1,328,533
 
94,030
 
308,463
 
6,996,596
   
2008
 
1,000,000
 
 
1,250,002
 
2,500,007
 
800,000
 
 
2,259,340
 
7,809,349
Frederick J. Crawford7
 
2010
 
817,702
 
510,000
 
1,269,184
 
 
351,651
 
16,387
 
89,617
 
3,054,541
  Executive Vice President, Corporate Development and Investments, our CFO during 2010  
2009
 
825,643
 
 
1,164,428
 
 
335,447
 
27,456
 
82,562
 
2,435,536
   
2008
 
509,769
 
 
358,280
 
716,554
 
244,400
 
15,073
 
135,408
 
1,979,484
Robert W. Dineen
 
2010
 
830,583
 
 
1,184,301
 
 
688,857
 
27,410
 
216,930
 
2,948,081
 
President, Lincoln Financial Network
 
2009
 
710,279
 
 
1,176,381
 
460,153
 
947,994
 
30,082
 
154,490
 
3,479,379
2008
419,754
116,667
 
581,029
693,001
504,252
25,697
383,400
2,723,800
Wilford H. Fuller8
 
2010
 
707,586
 
 
1,138,222
 
 
592,133
 
 
66,366
 
2,504,307
 
President, Lincoln Financial Distributors
 
2009
 
355,385
 
800,181
 
1,517,151
 
398,401
 
1,428,000
 
 
471,197
 
4,970,315
Mark E. Konen
 
2010
 
875,753
 
 
1,357,339
 
 
324,628
 
65,598
 
162,250
 
2,785,568
  President, Insurance Solutions and Retirement Solutions  
2009
 
908,563
 
75,000
 
1,630,640
 
581,920
 
449,134
 
20,673
 
110,325
 
3,776,255
   
2008
 
499,327
 
330,772
 
661,502
 
86,240
 
 
236,088
 
1,813,929

1. For each of our NEOs this includes amounts of applicable withholdings and deductions on amounts paid in Salary Shares as follows:

Named Executive Officer
2009
2010
Dennis R. Glass
$1,171,896
$893,134
Frederick J. Crawford
$271,515
$224,315
Robert W. Dineen
$253,955
$341,891
Wilford H. Fuller
N/A
$242,148
Mark E. Konen
$346,264
$273,630

2.  Represents the grant date fair value of stock and option awards that were granted in 2010, 2009 and 2008.  The fair values of these awards were determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation.  The assumptions made in calculating the grant date fair value of stock and option awards with respect to the years ended  December 31, 2010, 2009 and 2008 are set forth in Note 20 of the Notes to the Consolidated Financial Statements, included in Item 8 of the Form 10-K for the year ended December 31, 2010.  The stock and option awards granted in 2010 are described in more detail in the Grants of Plan-Based Awards table below.  The value of the stock awards shown for each of our NEOs includes the amounts for Salary Shares, net of withholdings, paid in accordance with the Treasury Rules for CPP participants as discussed in the CD&A at page 33.  For 2010, net amounts of Salary Shares paid in our common stock for each of our NEOS were as follows:
Mr. Glass:  $1,014,479; Mr. Crawford: $342,174; Mr. Dineen: $348,368; Mr. Fuller $369,119; and Mr. Konen: $371,082.

3. Represents the TIP awards earned for the shortened 2010 performance period under the ICP.  By their terms these awards are not payable unless the NEO remains employed by the Company through August 1, 2011.  More information on the TIP awards, including the applicable performance targets, is provided in the Grants of Plan-Based Awards table below and the CD&A at pages 34 to 38.

4.  These amounts solely reflect the total of all increases in the actuarial present value of each NEO’s accumulated benefits under our qualified and non-qualified defined benefit pension plans shown in the Pension Benefits table on page 53.  For Messrs. Glass and Konen the amounts attributable to the change in pension value for 2008 resulted in a decrease of $(107,566), and $(22,092) respectively.  We froze all of our qualified and non-qualified defined benefit pension plans at the end of 2007.
 
 
 
 
- 44 -

 
 
 
 
 
Present values are calculated at year-end 2008, 2009 and 2010, respectively, using the interest rate and mortality rate assumptions used in Note 18 of the Notes to our Consolidated Financial Statements, included in Item 8 of the Forms 10-K for the fiscal years ended December 31, 2008, 2009 and 2010.  Totals for the plans listed above include the sum of increases only.
 
The NEOs did not have any preferential non-qualified deferred compensation earnings.

5.  All Other Compensation:

Name
 
Perquisitesa
($)
 
401(k) Matching Contributionsb
($)
 
Additional Company Contributions into Deferred Compensation
Plan (Match, Core and Transitional Contributions)b
($)
 
Special Executive
Credit into Deferred Compensation Planc
($)
 
TOTAL
($)6
Dennis R. Glass
 
35,090
 
33,429
 
333,180
 
 
401,698
Frederick J. Crawford
 
 
22,175
 
24,530
 
42,912
 
89,617
Robert W. Dineen
 
13,850
 
20,800
 
113,353
 
68,927
 
216,930
Wilford H. Fuller
 
 
24,500
 
19,744
 
22,122
 
66,366
Mark E. Konen
 
15,864
 
32,273
 
98,439
 
15,674
 
162,250

(a)  
For Mr. Glass, the amount reflects the aggregate incremental cost of personal use of the corporate aircraft, the cost of matching charitable gifts made by the Lincoln Financial Foundation, Inc. on his behalf, and the incremental cost of activities and welcome items for him and his spouse in connection with offsite business events, which spouses were expected to attend.
 
For Mr. Dineen, the amount reflects matching charitable gifts made by Lincoln Financial Foundation, Inc. on his behalf, the reimbursement of expenses for a medical exam, the reimbursement of tax preparation expenses, and the incremental cost of activities and welcome items for him and his spouse in connection with offsite business events, which spouses were expected to attend.

For Mr. Konen, the amount reflects the cost of the annual installment of country club initiation fees, the cost of matching charitable gifts made by Lincoln Financial Foundation, Inc. on his behalf, the reimbursement of tax preparation expenses, the cost of attending sporting events and the incremental cost of activities and welcome items for him and his spouse in connection with offsite business events, which spouses were expected to attend.

More information regarding perquisites and personal benefits, including the manner in which we value personal use of the corporate aircraft is discussed under “Narrative Disclosure to the Summary Compensation Table” below.

(b)  
Represents Company matching contributions under our Employees’ Savings and Retirement Plan, or 401(k) plan, and excess Company matching, core and transition contributions to the DC SERP, which are amounts above applicable Internal Revenue Code limits.

(c)  
For all NEOs (except Mr. Glass), an additional contribution—a “special executive credit”— was made to the DC SERP, which is described in more detail in the CD&A on page 41.  

6.  Some numbers may not add due to rounding.

7.  At its November 2008 meeting, the Compensation Committee approved a discretionary cash retention award for Mr. Crawford, who at the time was our CFO.  The retention award was equal to Mr. Crawford’s annual base salary, $510,000, and was payable to him in cash provided he remained with the Company until at least until January 1, 2010.  Our CEO recommended the retention award for Mr. Crawford in recognition of the importance of ensuring continuity in the role of CFO and the exceptional talent, expertise and leadership Mr. Crawford has brought to the company.  This retention bonus was paid in January 2010.

8.  Mr. Fuller joined the Company in February 2009.
 
 
 
 
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Narrative Disclosure to the Summary Compensation Table

2010 Transition Incentive Plan

The dollar amounts included in the Summary Compensation Table at page 44 for the 2010 TIP for each of our NEOs reflect the performance results for the 2010 TIP that were certified by the Compensation Committee in February 2011, which exceeded target amounts.  For further details on the 2010 TIP and the performance measures and targets see the CD&A, pages 34 to 38.  As noted above, no amounts are payable to our NEOs unless they remain employed with the Company through August 1, 2011.

Perquisites and Personal Benefits

The following discusses the primary perquisites and personal benefits offered to the NEOs in 2010, not all of which were received by the NEOs.  Under the financial planning and tax preparation program, the NEOs, along with the other executive officers, were eligible for reimbursement of the costs of utilizing a Lincoln Financial Network financial planner to provide financial planning services.  The reimbursement opportunity was equal to 100% of the first $1,800 of costs, plus 50% of costs above that amount up to a maximum of $6,000.  In addition, the same officer group was eligible to receive up to $2,700 for the reimbursement of tax preparation services provided by any fee-for-service tax preparer who was a certified public accountant, excluding Ernst & Young LLP, our independent registered public accounting firm.  If the officer does not use the entire tax preparation reimbursement allowance in a year, any remaining amount may be applied to the financial planning reimbursement, but not vice versa.

In 2005, the Committee adopted a policy advising our CEO to use the corporate aircraft for personal travel as well as business travel, when practical.  The policy was adopted due to security concerns and to allow for more efficient travel time so that the CEO can devote more time to our business.  In general, our policy with respect to our executive officers’ personal use of the corporate aircraft is as follows.  To the extent any executive and guest of an executive used corporate aircraft for personal purposes, the usage was treated as a perquisite for proxy statement reporting purposes.  For purposes of determining the value of such services, the personal use is calculated based on the aggregate incremental cost to us.  For personal flights on corporate aircraft, aggregate incremental cost is calculated based on a cost-per-flight-hour charge that reflects the operating costs of the aircraft, including parts, labor, overhauls (but not engine overhauls of the type incurred every 5-10 years), fuel, landing and parking fees/taxes and crew travel expenses.  We also include, as an aggregate incremental cost, empty aircraft flights to reposition the corporate aircraft (i.e., dead head flights) that are determined to be the product of a personal flight.  Executive officers, their families and invited guests occasionally fly on the corporate aircraft as additional passengers on business flights.  Since such flights do not result in additional aggregate incremental costs under our cost-per-flight-hour methodology, no incremental cost is reflected in the Summary Compensation Table.  Finally, if more than one executive officer is on a personal flight, we allocate the incremental cost on a proportional basis depending on the number of guests of each officer.

We also have a matching charitable gift program.  Under the program in 2010, all NEOs were eligible to apply for matching contributions of up to $10,000.  Our full-time employees are eligible to apply for up to $2,500 in matching contributions.

Retirement Benefits

Under the DC SERP, all of our participating NEOs are eligible to receive an additional contribution—a “special executive credit” as a percentage of “Total Pay.”  For the purpose of determining the special executive credit, “Total Pay” under the DC SERP means base salary and AIP paid during the fiscal year.  For each NEO, the special executive credit is calculated annually as follows: 15% of Total Pay expressed as a percentage, offset by the total of: (a) the executive officer’s maximum basic matching contribution opportunity (6%), plus (b) core contributions (4%), plus (c) transition contributions, if any (0.2%-8%) as determined under our 401(k) Plan, each expressed as a percentage.  For more details on the DC SERP, the contributions and the calculations of these amounts, see page 54 below.
 
 
 
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Grants of Plan-Based Awards

The table below provides information on grants of plan-based awards during fiscal year 2010 to the NEOs granted under the ICP, including grants of Salary Shares, which are discussed in detail at pages 33-34, which were credited each regular pay period as shares of LNC common stock issued under the ICP.

Name
Grant Date
 
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
 
All Other Stock Awards: Number of Shares of Stock or Units
(#)
 
All Other Option Awards: Number of Securities Underlying Options
(#)
 
Exercise or Base Price of Option Awards
($/SH)
 
Grant Date Fair Value of Stock and Option Awards
($)5
 
 
Threshold
($)
 
Target
($)
 
Maximum
($)
       
Dennis R. Glass
   
11,827
 
788,462
 
1,576,9231
               
1/15/20102
             
2,219
         
59,971
1/29/20102
             
2,389
         
59,976
2/12/20102
             
2,304
         
55,974
2/22/20103
             
81,237
         
2,050,422
2/26/20102
             
2,408
         
59,971
3/12/20102
             
2,214
         
59,977
3/26/20102
             
2,037
         
59,969
4/9/20102
             
1,913
         
59,992
4/23/20102
             
1,883
         
59,988
5/7/20102
             
2,178
         
59,982
5/21/20102
             
2,279
         
59,983
6/4/20102
             
2,564
         
69,702
6/18/20102
             
2,518
         
69,686
7/2/20102
             
2,938
         
69,689
7/16/20102
             
2,930
         
69,690
7/30/20102
             
2,764
         
69,694
8/11/20104
             
18,264
         
452,034
8/13/20102
             
3,051
         
69,700
Frederick J. Crawford
   
3,317
 
221,163
 
442,3271
               
1/15/20102
             
791
         
21,378
1/29/20102
             
851
         
21,364
2/12/20102
             
880
         
21,379
2/22/20103
             
29,721
         
750,158
2/26/20102
             
858
         
21,368
3/12/20102
             
789
         
21,374
3/26/20102
             
726
         
21,373
4/9/20102
             
681
         
21,356
4/23/20102
             
671
         
21,376
5/7/20102
             
776
         
21,371
5/21/20102
             
812
         
21,372
6/4/20102
             
786
         
21,367
6/18/20102
             
772
         
21,365
7/2/20102
             
901
         
21,372
7/16/20102
             
899
         
21,383
7/30/20102
             
848
         
21,382
8/11/20104
             
7,154
         
177,062
8/13/20102
             
936
         
21,383
 
 
 
- 47 -

 
 
 

 
Name
Grant Date
 
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
 
All Other Stock Awards: Number of Shares of Stock or Units
(#)
 
All Other Option Awards: Number of Securities Underlying Options
(#)
 
Exercise or Base Price of Option Awards
($/SH)
 
Grant Date Fair Value of Stock and Option Awards
($)5
 
 
Threshold
($)
 
Target
($)
 
Maximum
($)
       
Robert W. Dineen
   
1,296
 
432,156
 
864,3121
               
1/15/20102
             
860
         
23,243
1/29/20102
             
926
         
23,247
2/12/20102
             
957
         
23,250
2/22/20103
             
31,716
         
800,512
2/26/20102
             
933
         
23,236
3/12/20102
             
858
         
23,243
3/26/20102
             
716
         
21,079
4/9/20102
             
672
         
21,074
4/23/20102
             
662
         
21,090
5/7/20102
             
766
         
21,096
5/21/20102
             
801
         
21,082
6/4/20102
             
776
         
21,096
6/18/20102
             
762
         
21,088
7/2/20102
             
889