STOCK PLANS

On April 28, 2006, the shareholders of the Company approved the 2006 Equity and Performance Incentive Plan, as amended ("EPI Plan"), which replaced the 1998 Stock Plan, as amended and restated in May 2003. The EPI Plan provides for the granting of options, appreciation rights, restricted shares, restricted stock units and performance-based awards up to an additional 6,000,000 of the Company's common shares. In addition, on April 28, 2006, the shareholders of the Company approved the 2006 Stock Plan for Non-Employee Directors, as amended ("Director Plan"), which replaced the Stock Option Plan for Non-Employee Directors adopted in 2000. The Director Plan provides for the granting of options, restricted shares and restricted stock units up to an additional 600,000 of the Company's common shares. At December 31, 2012, there were 2,517,228 common shares available for future grant under all plans.

Stock Options

The following table summarizes stock option activity for each of the three years ended December 31, 2012, under all Plans:



	Year Ended December 31,
	2012				2011				2010
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Balance at beginning of year	3,632,463		$	26.05	3,779,824		$	23.99	3,596,884		$	22.28
Options granted	412,980		47.66		459,263		35.34		491,010		31.29
Options exercised	(962,029	)	19.52		(572,795	)	19.82		(260,084	)	13.49
Options canceled	(22,470	)	24.07		(33,829	)	26.62		(47,986	)	27.84
Balance at end of year	3,060,944		30.98		3,632,463		26.05		3,779,824		23.99
Exercisable at end of year	2,208,455		27.19		2,677,071		23.73		2,749,168		22.40

Options granted under both the EPI Plan and its predecessor plans may be outstanding for a maximum of 10 years from the date of grant. The majority of options granted vest ratably over a period of three years from the grant date. The exercise prices of all options were equal to the quoted market price of the Company's common shares at the date of grant. The Company issued shares of common stock from treasury upon all exercises of stock options in 2012, 2011 and 2010.

The Company uses the Black-Scholes option pricing model for estimating fair values of options. In estimating the fair value of options granted, the expected option life is based on the Company's historical experience. The expected volatility is based on historical volatility. The weighted average assumptions for each of the three years ended December 31, 2012 were as follows:



	Year Ended December 31,
	2012			2011			2010
Expected volatility	45.67		%	41.92		%	42.15		%
Dividend yield	1.66		%	1.63		%	2.02		%
Risk-free interest rate	0.70		%	0.80		%	1.64		%
Expected option life (years)	4.5			4.3			4.9
Weighted average fair value per option granted during the year	$	15.87		$	10.97		$	10.01

The following table summarizes non-vested stock options for the year ended December 31, 2012:



	Year Ended December 31, 2012
	Number of Options		Weighted Average Fair Value at Grant Date
Balance at beginning of year	929,382		$	10.78
Granted	412,980		15.87
Vested	(470,243	)	10.19
Forfeited	(19,630	)	19.60
Balance at end of year	852,489		13.63

The aggregate intrinsic value of options outstanding and exercisable which would have been received by the optionees had all awards been exercised at December 31, 2012 was $54,178 and $47,464, respectively. The total intrinsic value of awards exercised during 2012, 2011 and 2010 was $18,776, $10,028 and $4,270, respectively.

The following table summarizes information about awards outstanding as of December 31, 2012:



	Outstanding			Exercisable
Exercise Price Range	Number of Stock Options	Weighted Average Exercise Price		Number of Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Life (years)
Under $19.99	449,884	$	18.59	449,884	$	18.59	2.4
$20.00 - $32.99	1,389,730	27.79		1,284,025	27.50		6.5
Over $33.00	1,221,330	39.18		474,546	34.50		8.0
	3,060,944			2,208,455			6.5

Restricted Share Awards

The following table summarizes restricted share award activity for each of the three years ended December 31, 2012, under all Plans:



	Year Ended December 31,
	2012				2011				2010
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Balance at beginning of year	379,233		$	28.06	523,730		$	27.36	435,770		$	26.61
Shares granted	20,099		47.81		22,779		35.55		112,864		31.05
Shares vested*	(62,524	)	32.10		(159,842	)	26.97		(24,904	)	31.07
Shares forfeited	—		—		(7,434	)	24.67		—		—
Balance at end of year	336,808		28.49		379,233		28.06		523,730		27.36

_______________________________________________________________________________


*	Includes shares vested but not exercisable

Restricted share awards are valued at the quoted market price on the grant date. The majority of restricted share awards vest over a period of three to five years. The Company issued shares of common stock from treasury upon the granting of restricted share awards in 2012, 2011 and 2010. Under the EPI Plan, the Company issued 82,992 restricted shares at a weighted average market price of $30.97 per share in 2010. The Company issued 20,099 restricted shares at a weighted average market price of $47.81 per share, 22,779 restricted shares at a weighted average market price of $35.55 per share and 29,872 restricted shares at a weighted average market price of $31.28 per share under the Director Plan in 2012, 2011 and 2010, respectively. The remaining weighted average life of all non-vested restricted share awards is 1.8 years as of December 31, 2012.

The following table summarizes non-vested restricted share awards for the year ended December 31, 2012:



	Year Ended December 31, 2012
	Number of Restricted Shares		Weighted Average Fair Value at Grant Date
Balance at beginning of year	355,933		$	28.18
Granted	20,099		47.81
Vested	(57,944	)	31.93
Balance at end of year	318,088		28.74

Restricted Stock Units ("RSUs")

The following table summarizes restricted stock unit activity for the years ended December 31, 2012 and 2011, under all Plans:



	Year Ended December 31,
	2012				2011
	Units		Weighted Average Grant Date Fair Value		Units	Weighted Average Grant Date Fair Value
Non-vested at beginning of year	166,519		$	34.55	—	$	—
Units granted	133,944		47.97		166,519	34.55
Units vested	(10,499	)	33.06		—	—
Units forfeited	(1,295	)	35.55		—	—
Non-vested at end of year	288,669		40.83		166,519	34.55

RSUs are valued at the quoted market price on the grant date. The majority of RSUs vest over a period of three to five years. The Company will issue shares of common stock from treasury upon the vesting of RSUs and any earned dividend equivalents. Conversion of 10,499 RSUs to common stock in 2012 were deferred as part of the 2005 Deferred Compensation Plan for Executives (the "2005 Plan"). As of December 31, 2012, 10,713 RSUs, including related dividend equivalents, have been deferred under the 2005 Plan. These units are reflected within dilutive shares in the calculation of earnings per share. Under the EPI Plan, the Company issued 133,944 and 166,519 restricted stock units at a weighted average market price of $47.97 and $34.55 per share in 2012 and 2011, respectively. Restricted stock units were not granted prior to 2011. The remaining weighted average life of all non-vested RSUs is 4.3 years as of December 31, 2012.

Stock-Based Compensation Expense

Expense is recognized for all awards of stock-based compensation by allocating the aggregate grant date fair value over the vesting period. No expense is recognized for any stock options, restricted or deferred shares or restricted stock units ultimately forfeited because recipients fail to meet vesting requirements. Total stock-based compensation expense recognized in the Consolidated Statements of Income for 2012, 2011 and 2010 was $8,961, $6,610 and $8,213, respectively. The related tax benefit for 2012, 2011 and 2010 was $3,409, $2,515 and $3,112, respectively. As of December 31, 2012, total unrecognized stock-based compensation expense related to non-vested stock options, restricted shares and restricted stock units was $23,718, which is expected to be recognized over a weighted average period of approximately 37 months.

Lincoln Stock Purchase Plan

The 1995 Lincoln Stock Purchase Plan provides employees the ability to purchase open market shares on a commission-free basis up to a limit of ten thousand dollars annually. Under this plan, 800,000 shares have been authorized to be purchased. Shares purchased were 4,908 in 2012, 4,466 in 2011 and 4,240 in 2010.