SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
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RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Vectren Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
[VECTREN CORPORATION LOGO]
VECTREN CORPORATION
20 N. W. Fourth Street
Evansville, Indiana 47708
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 2001
TO THE SHAREHOLDERS OF VECTREN CORPORATION
The annual meeting of shareholders of Vectren Corporation (the "Company")
will be held at the Company's Norman P. Wagner Operations Center, One North
Main Street, Evansville, Indiana on Wednesday, April 25, 2001, at 9:30 a.m.
(Central Daylight Time), for the following purposes:
1. To elect four directors of the Company to serve for a term of three
years or until their successors are duly qualified and elected;
2. To approve the Company's At-Risk Compensation Plan; and
3. To transact such other business as may properly come before the meeting,
or any adjournment of the meeting.
As allowed by the Company's Code of By-Laws, the board of directors has
fixed the close of business on March 2, 2001 as the record date for
determining the shareholders entitled to notice of and to vote at the meeting
and at any adjournment of the meeting.
It is important that your stock be represented at this meeting to assure a
quorum. Whether or not you now expect to be present at the meeting, please
fill in, date and sign the enclosed proxy and return it promptly to the
Company in the accompanying addressed envelope. No stamp is required if mailed
in the United States. You may also authorize the individuals named on your
proxy card to vote your shares by calling toll-free 1-877-779-8683 or using
the Internet (www.eproxyvote.com/vvc) by following the instructions included
with your proxy card. Please note that if your shares are not registered in
your own name, your bank, broker or other institution holding your shares may
not offer telephone or Internet voting. You have the unconditional right to
revoke your proxy at any time before the authority granted by it is exercised.
By order of the board of directors.
Vectren Corporation
[Ronald E. Christian]
RONALD E. CHRISTIAN
Senior Vice President, General
Counsel, and Corporate Secretary
Evansville, Indiana
March 16, 2001
LOCATION OF APRIL 25, 2001
ANNUAL SHAREHOLDERS' MEETING
[MAP]
NORMAN P. WAGNER OPERATIONS CENTER
Vectren Corporation
One North Main Street
Evansville, Indiana
Parking for shareholders will be provided in the Employee and Visitor
parking lot on the corner of North Main and Division Streets. Please use the
Main Street entrance.
YOUR VOTE IS IMPORTANT
PLEASE READ THE PROXY STATEMENT AND SIGN, DATE AND MAIL THE PROXY IN THE
PREPAID ENVELOPE WITHOUT DELAY, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
YOU MAY REVOKE YOUR PROXY PRIOR TO OR AT THE MEETING AND VOTE IN PERSON IF YOU
WISH. IF YOUR SHARES ARE HELD BY A BROKER, BANK OR NOMINEE, IT IS IMPORTANT
THAT THEY RECEIVE YOUR VOTING INSTRUCTIONS.
TABLE OF CONTENTS
Page
----
Proxy Statement........................................................... 1
Solicitations of Proxies................................................ 1
Purposes of Meeting..................................................... 1
Voting Securities....................................................... 1
Item 1. Election of Directors............................................. 2
Class I Directors....................................................... 2
Class II Directors...................................................... 3
Class III Directors..................................................... 3
Other Executive Officers.................................................. 4
Common Stock Ownership by Directors and Executive Officers................ 5
Certain Relationships and Related Transactions............................ 6
Meetings and Committees of the Board of Directors......................... 6
Director Compensation..................................................... 7
Section 16(a) Beneficial Ownership Reporting Compliance................... 7
Report of the Audit Committee............................................. 7
Executive Compensation and Other Information.............................. 8
Report of the Compensation Committee...................................... 8
A. Executive Compensation Policy........................................ 8
B. Components of Executive Compensation................................. 9
Base Salary........................................................... 9
Annual Incentive Compensation......................................... 9
Long-Term Incentive Compensation...................................... 10
C. Chief Executive Officer Compensation................................. 11
D. Share Ownership...................................................... 11
E. Compensation Consultant, Termination Benefits Agreements and
Deductibility of Executive Compensation............................... 11
Compensation Committee Interlocks and Insider Participation............... 13
Compensation.............................................................. 13
Table I:Summary Compensation............................................ 13
Table I(A):Earnings for Former Indiana Energy Executives................ 14
Table II:Option Grants in Last Fiscal Year.............................. 16
Table III: Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values from 1/1/2000 - 12/31/2000........... 16
Table IV: Long-Term Incentive Plan Awards in Last Fiscal Year........... 16
Retirement Savings Plan................................................... 17
Retirement Plans.......................................................... 17
Table: Pension Plan..................................................... 18
Stock Option Plan......................................................... 19
Employment Agreements..................................................... 19
Corporate Performance..................................................... 20
Comparison of 9 Month Cumulative Total Return........................... 20
i
Page
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Item 2. Approval of Company's At-Risk Compensation Plan................... 21
Stock Options........................................................... 21
Restricted Stock........................................................ 21
Other Stock Based Awards................................................ 22
Annual Incentive Awards................................................. 22
Awards Under the At-Risk Compensation Plan.............................. 22
United States Federal Income Tax Aspects of the At-Risk Compensation
Plan................................................................... 22
Incentive Stock Options............................................... 22
Restricted Stock...................................................... 23
Stock Units Awards.................................................... 23
Section 162(m) of the Internal Revenue Code........................... 23
Required Vote and Recommendation........................................ 24
Independent Public Accountants of the Company............................. 24
Audit Fees.............................................................. 24
Financial Systems Design and Implementation Fees........................ 24
All Other Fees.......................................................... 24
Cost and Method of Solicitation........................................... 25
Annual Report............................................................. 25
Revocation Rights......................................................... 25
Nomination of Directors by Shareholders................................... 25
Shareholders' Proposals for 2002 Annual Meeting........................... 26
APPENDIX A--Audit Committee Charter....................................... A-1
APPENDIX B--At-Risk Compensation Plan..................................... B-1
ii
VECTREN CORPORATION
20 N. W. Fourth Street
Evansville, Indiana 47708
(812) 491-4000
PROXY STATEMENT
The following information is furnished in connection with the solicitation
of the enclosed proxy by and on behalf of the board of directors of the
Company. The proxy will be used at the annual meeting of shareholders to be
held at the Company's Norman P. Wagner Operations Center, One North Main
Street, Evansville, Indiana, on Wednesday, April 25, 2001, at 9:30 a.m.
(Central Daylight Time), and at any adjournment of the meeting for the matters
to be acted upon under its authority. The proxy and this proxy statement were
first mailed to the shareholders on or about March 16, 2001.
SOLICITATIONS OF PROXIES
The management solicits your proxy for use at the annual meeting of the
Company. Shares held in your name and represented by your proxy will be voted
as you instruct if your proxy is duly executed and returned prior to the
meeting. Shares represented by proxies that are returned signed but without
instructions for voting will be voted as recommended by management. Shares
represented by proxies that are returned unsigned or improperly marked will be
treated as abstentions for voting purposes. You may revoke your proxy at any
time before it is exercised by written notice to the Secretary of the Company
received prior to the time of the meeting, or orally at the meeting.
If you are a participant in the Company's Automatic Dividend Reinvestment
and Stock Purchase Plan, your proxy card will represent the number of shares
registered in your name and the number of shares credited to your plan
account. For those shares held in the plan, your proxy card will serve as
direction to the Plan Administrator as to how your account is to be voted.
PURPOSES OF MEETING
As of this date, the only known business to be presented at the 2001 annual
meeting of shareholders is (1) the reelection of four directors of the Company
to serve for a term of three years or until their successors are duly
qualified and elected, and (2) the approval of the Company's At-Risk
Compensation Plan. However, the enclosed proxy authorizes the proxy holders to
vote on all other matters that may properly come before the meeting, and it is
the intention of the proxy holders to take any such action utilizing their
best judgment. Only shares held by those present at the meeting or for which
proxies are returned will be considered to be represented at the meeting. For
the purposes of determining a quorum, shares represented at the meeting are
counted without regard to abstentions or broker non-votes as to any particular
item.
VOTING SECURITIES
On March 31, 2000, Indiana Energy, Inc. ("Indiana Energy") and SIGCORP,
Inc. ("SIGCORP") merged with and into the Company. As a result of the merger,
each Indiana Energy shareholder received 1 share of the Company's common stock
for each share of Indiana Energy common stock owned by the shareholder, and
each SIGCORP shareholder received 1.333 shares of the Company's common stock
for each share of SIGCORP common stock owned by the shareholder. Immediately
following the merger, the former Indiana Energy shareholders owned 48.6% of
the Company, and the former SIGCORP shareholders owned 51.4% of the Company.
As of March 2, 2001, the Company had one class of capital stock
outstanding, consisting of 67,712,468 shares of common stock without par
value. The holders of the outstanding shares of common stock are entitled
1
to one vote for each share held of record on each matter presented to a vote
of the shareholders at the meeting. However, unless the holder personally
appears at the meeting, shares for which no proxy is returned (whether
registered in the name of the actual holder thereof or in nominee or street
name) will not be voted. Only shareholders of record at the close of business
on March 2, 2001 will be entitled to vote at the meeting or at any adjournment
of the meeting.
ITEM 1. ELECTION OF DIRECTORS
The Company's board of directors currently consists of sixteen directors
divided into three classes having staggered terms of three years each. Four of
the five Class I directors, John D. Engelbrecht, William G. Mays, J. Timothy
McGinley, and Richard P. Rechter, are nominees for election with terms
expiring in 2004. The fifth member of Class I, James S. Vinson, is not
standing for reelection due to his impending retirement and relocation to
South Carolina. The Class II directors, Lawrence A. Ferger, Donald A. Rausch,
Ronald G. Reherman, Richard W. Shymanski, and Jean L. Wojtowicz, have terms
expiring in 2002. The Class III directors, John M. Dunn, Niel C. Ellerbrook,
Anton H. George, Andrew E. Goebel, Robert L. Koch II, and James C. Shook, have
terms expiring in 2003. Messrs. Ellerbrook and Goebel also serve as directors
of Vectren Utility Holdings, Inc., a holding company for the Company's
regulated gas and electric distribution company subsidiaries, Indiana Gas
Company, Inc. ("Indiana Gas"), Southern Indiana Gas and Electric Company
("SIGECO"), and Vectren Energy Delivery of Ohio, Inc. Messrs. Ellerbrook and
Goebel also serve as directors of Vectren Capital, Corp. ("Vectren Capital"),
the Company's subsidiary that serves as the vehicle for financing non-
regulated business activities, and Vectren Enterprises, Inc. ("Vectren
Enterprises"), the Company's subsidiary that serves as the corporate parent
for non-regulated business activities. The placement of a portion of the
Company's directors on the board of directors of Vectren Capital and Vectren
Enterprises will ensure the participation of those individuals in decision
making with respect to financing and non-regulated business activities.
At each annual meeting of shareholders, directors are elected to succeed
those whose terms then expire for a term of three years or until their
successors are duly qualified and elected. Accordingly, four directors are to
be elected by a plurality of votes cast at the annual meeting of shareholders
to be held on April 25, 2001.
The board of directors intends that the enclosed proxy will be voted by the
proxy holders in favor of the election of the nominees named below for the
office of director of the Company to hold office for a term of three years or
until their respective successors are duly qualified and elected. Each of such
nominees is now serving as a director of the Company and has signified the
willingness to serve if elected. Directors are elected by a plurality of the
votes cast. Plurality means that the individuals who receive the largest
number of votes cast are elected up to the maximum number of directors to be
chosen at the meeting. Abstentions, broker non-votes, and instructions on the
accompanying proxy card to withhold authority to vote for one or more of the
nominees might result in some nominees receiving fewer votes. However, the
number of votes otherwise received by the nominee will not be reduced by such
action. If, however, any situation should arise under which any nominee should
be unable to serve, the authority granted in the enclosed proxy may be
exercised by the proxy holders for the purpose of voting for a substitute
nominee.
Certain information concerning the nominees and the other directors of the
Company is set forth below and under the caption "Meetings and Committees of
the Board of Directors." If not otherwise indicated, the principal occupation
listed for any individual has been the same for at least five years.
Class I Directors--Term expiring 2004
John D. Engelbrecht, age 49, has been a director of SIGCORP or the Company
since 1996. Mr. Engelbrecht is President and Chief Executive Officer of South
Central Communications, owner and operator of radio and television stations in
Indiana, Kentucky and Tennessee, and MUZAK franchises in 14 U.S. cities.
William G. Mays, age 54, has been a director of Indiana Energy or the
Company since 1998. Mr. Mays is President of Mays Chemical Company, Inc., an
Indianapolis, Indiana based chemical company, and is also a director of
Anthem, Inc.
2
J. Timothy McGinley, age 60, has been a director of Indiana Energy or the
Company since January 1999. Mr. McGinley is Managing Partner and principal
owner of House Investments, a real estate investment company. Mr. McGinley is
also a director of Bindley Western Industries, Inc.
Richard P. Rechter, age 61, has been a director of Indiana Gas, Indiana
Energy, or the Company since 1984. Mr. Rechter is Chairman of Rogers Group,
Inc., a company providing crushed stone, sand and gravel, asphalt, highway
construction, concrete masonry and construction materials recycling;
President, Chief Executive Officer and director of Rogers Management, Inc.;
and President, Chief Executive Officer and director of Mid-South Stone, Inc.
Mr. Rechter is also a director of Monroe County Bank and Monroe Bancorp.
The board of directors recommends a vote "FOR" all nominees for Class I
director.
Class II Directors--Term expiring 2002
Lawrence A. Ferger, age 66, has been a director of Indiana Gas, Indiana
Energy, or the Company since 1984. From October 1997 through June 1, 1999, Mr.
Ferger served as Chairman and Chief Executive Officer of Indiana Energy and
Indiana Gas. Prior to that time and since January 1996, Mr. Ferger served as
Chairman, President and Chief Executive Officer of Indiana Energy and Indiana
Gas; and prior to that time and since 1987, Mr. Ferger was President and Chief
Executive Officer of Indiana Energy and Indiana Gas.
Donald A. Rausch, age 70, has been a director of SIGECO, SIGCORP, or the
Company since 1982. From 1990 through 1995, Mr. Rausch served as Chairman,
President and Chief Executive Officer of UF Bancorp, Inc. in Evansville,
Indiana. From 1985 through 1995, Mr. Rausch served as Chairman and President
of Union Federal Savings Bank in Evansville, Indiana.
Ronald G. Reherman, age 65, has been a director of SIGECO, SIGCORP, or the
Company since 1985. From January 1996 through March 2000, Mr. Reherman served
as Chairman, President, and Chief Executive Officer of SIGCORP. From September
1997 through March 2000, Mr. Reherman also served as Chairman of SIGECO. Prior
to that time and since 1991, Mr. Reherman served as Chairman, President and
Chief Executive Officer of SIGECO. Mr. Reherman is also a director of Integra
Bank of Evansville, Indiana.
Richard W. Shymanski, age 64, has been a director of SIGECO, SIGCORP, or
the Company since 1989. Mr. Shymanski is the retired Chairman and Chief
Executive Officer of Harding, Shymanski & Company, Professional Corporation,
Certified Public Accountants, in Evansville, Indiana.
Jean L. Wojtowicz, age 43, has been a director of Indiana Energy or the
Company since 1996. Ms. Wojtowicz is President and founder of Cambridge
Capital Management Corp., a consulting and venture capital firm.
Class III Directors--Term expiring 2003
John M. Dunn, age 63, has been a director of SIGCORP or the Company since
1996. Mr. Dunn is President and Chief Executive Officer of Dunn Hospitality
Group, a hotel development and management company. He is also director of Old
National Bank of Evansville.
Niel C. Ellerbrook, age 52, has been a director of Indiana Energy or the
Company since 1991. Mr. Ellerbrook is Chairman of the Board and Chief
Executive Officer of the Company, having served in that capacity since March
2000. Prior to that time and since June 1999, Mr. Ellerbrook served as
President and Chief Executive Officer of Indiana Energy. Prior to that time
and since October 1997, Mr. Ellerbrook served as President and Chief Operating
Officer of Indiana Energy. From January through October 1997, Mr. Ellerbrook
served as Executive Vice President, Treasurer and Chief Financial Officer of
Indiana Energy; and prior to that time and since 1986, Vice President,
Treasurer and Chief Financial Officer. Mr. Ellerbrook is a director of Vectren
Utility
3
Holdings, Vectren Capital, and Vectren Enterprises. He is also a director of
Fifth Third Bank, Indiana, and Deaconess Hospital of Evansville, Indiana.
Anton H. George, age 41, has been a director of Indiana Energy or the
Company since 1990. Mr. George is President and a director of Indianapolis
Motor Speedway Corporation, an auto racing company. Mr. George is also
President and a director of Hulman & Company, a manufacturer and distributor
of baking powder, and a director of First Financial Corporation.
Andrew E. Goebel, age 53, has been a director of SIGCORP or the Company
since 1997. Mr. Goebel is President and Chief Operating Officer of the
Company, having served in that capacity since March 2000. Prior to that time
and since April 1999, Mr. Goebel was President and Chief Operating Officer of
SIGCORP. From September 1997 through April 1999, Mr. Goebel served as
Executive Vice President of SIGCORP; and prior to that time and since 1996, he
served as Secretary and Treasurer of SIGCORP. Mr. Goebel is a director of
Vectren Utility Holdings, Vectren Capital, and Vectren Enterprises. Mr. Goebel
is also a director of Old National Bancorp and Old National Bank.
Robert L. Koch II, age 62, has been a director of SIGECO, SIGCORP, or the
Company since 1986. Mr. Koch is President and Chief Executive Officer of Koch
Enterprises, Inc., a holding company comprised of manufacturers of industrial
painting systems and wholesale distributors of heating and air conditioning
equipment. Mr. Koch is also a director of Fifth Third Bancorp, and Bindley
Western Industries, Inc.
James C. Shook, age 69, has been a director of Indiana Gas, Indiana Energy,
or the Company since 1983. Mr. Shook is President of Coldwell Banker / The
Shook Agency, Inc., a residential, commercial, and industrial real estate
brokerage firm in Lafayette, Indiana. Mr. Shook is also a director of
Crossmann Communities, Inc.
OTHER EXECUTIVE OFFICERS
Other executive officers of the Company are Jerome A. Benkert, Jr., age 42,
Carl L. Chapman, age 45, and J. Gordon Hurst, age 57.
On March 31, 2000, Mr. Benkert was elected as Executive Vice President and
Chief Financial Officer of the Company. Prior to March 31, 2000 and since
October 1, 1997, he was Executive Vice President and Chief Operating Officer
of Indiana Energy's administrative services company. Mr. Benkert has served as
Controller and Vice President of Indiana Gas. Mr. Benkert served as Chief
Accountant, Secretary/Treasurer and was a member of the board of directors of
Richmond Gas Corporation from February 1, 1986 to January 1, 1991. Mr. Benkert
served as Assistant Treasurer for Indiana Gas from January 1, 1991 to October
1, 1993.
On March 31, 2000, Mr. Chapman was elected Executive Vice President of the
Company. Prior to March 31, 2000 and since 1986, Mr. Chapman served as
Assistant Treasurer of Indiana Energy. Since October 1, 1997, Mr. Chapman has
served as President of IGC Energy, Inc., which has been renamed Vectren Energy
Solutions, Inc. As of May 1, 1998, when he assumed this position full-time, he
was again considered to be a named executive officer of Indiana Energy. Mr.
Chapman served as President of ProLiance Energy, LLC ("ProLiance"), a gas
supply and energy marketing joint venture partially owned by Vectren Energy
Solutions, Inc., an indirect, wholly owned subsidiary of the Company, from
March 15, 1996, until April 30, 1998. Currently, Mr. Chapman is the chairman
of ProLiance. From 1995 until March 15, 1996, he was Senior Vice President of
Corporate Development for Indiana Gas. Prior to 1995 and since 1987, he was
Vice President of Planning for Indiana Gas.
On March 31, 2000, Mr. Hurst was elected Executive Vice President of the
Company. Prior to March 31, 2000 and since 1966, Mr. Hurst has served in
various positions with SIGECO. From 1997 to 2000, he was Executive Vice
President and Chief Operating Officer; from 1992 to 1997, he was Senior Vice
President and General Manager of Operations. Mr. Hurst has served as Vice
President of Power and Gas Operations, Vice President of Gas and Warrick
Operations, and Vice President of SIGECO. He has also served as Director of
Gas Operations, Director of Power Production, and Director of Electrical
Engineering.
4
COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of common stock of the
Company beneficially owned by the directors, the chief executive officer, the
four additional named executive officers, and all directors and executive
officers as a group, as of December 31, 2000. Except as otherwise indicated,
each individual has sole voting and investment power with respect to the
shares listed below.
Name of Individuals or Identity of Group Shares Owned Beneficially (1)
---------------------------------------- -----------------------------
John M. Dunn............................... 3,751 (2)(4)
Niel C. Ellerbrook......................... 71,837 (2)(6)
John D. Engelbrecht........................ 5,178 (3)(4)
Lawrence. A. Ferger........................ 144,487 (4)(7)
Anton H. George............................ 2,586,907 (1)(4)(5)
Andrew E. Goebel........................... 147,350 (2)(3)(6)(9)
Robert L. Koch II.......................... 5,267 (2)(3)(4)
William G. Mays............................ 1,829 (4)
J. Timothy McGinley........................ 4,434 (2)(4)
Donald A. Rausch........................... 20,446 (4)
Richard P. Rechter......................... 11,714 (2)(4)
Ronald G. Reherman......................... 224,845 (3)(4)(10)
James C. Shook............................. 62,921 (4)(8)
Richard W. Shymanski....................... 15,014 (3)(4)
James S. Vinson............................ 1,813 (3)(4)
Jean L. Wojtowicz.......................... 1,798 (2)(4)
Jerome A. Benkert, Jr...................... 15,656 (2)(6)
Carl L. Chapman............................ 27,012 (2)(6)
J. Gordon Hurst............................ 108,576 (2)(3)(6)(9)
All Directors and Executive Officers as a
Group (19 Persons)........................ 3,460,835 (1)
--------
(1) Except for Anton H. George, no director or executive officer owned
beneficially as of December 31, 2000, more than .33 percent of common
stock of the Company. Excluding Anton H. George, all directors and
executive officers owned beneficially an aggregate of 873,928 shares or
1.29 percent of Common Stock of the Company. The beneficial ownership by
Anton H. George of 2,586,907 shares or 3.82% of Common Stock of the
Company is discussed below in footnote (5).
(2) This amount does not include derivative securities held under the
Company's Non-Qualified Deferred Compensation Plan. These derivative
securities are in the form of phantom stock units which are valued as if
they were Company Common Stock. The amounts shown for the following
individuals include the following amounts of phantom units:
Name of Individuals or Identity of Group Phantom Stock Units
---------------------------------------- -------------------
John M. Dunn......................................... 1,348
Niel C. Ellerbrook................................... 48,515
Andrew E. Goebel..................................... 4,530
Robert L. Koch II.................................... 395
J. Timothy McGinley.................................. 851
Richard P. Rechter................................... 11,896
Jean L. Wojtowicz.................................... 5,464
Jerome A. Benkert, Jr................................ 14,811
Carl L. Chapman...................................... 25,596
J. Gordon Hurst...................................... 726
All Directors and Executive Officers as a Group
(10 Persons)........................................ 114,132
(3) Includes shares held by spouse or jointly with spouse.
5
(4) Includes shares granted to non-employee directors under the Company's
Directors Restricted Stock Plan, which are subject to certain
transferability restrictions and forfeiture provisions.
(5) Of the 2,586,907 shares, Mr. George has both voting and investment power
with respect to 13,858 shares. Regarding the balance he may be deemed to
share voting or investment power in his capacity as a member of the
shareowner's board of directors or charitable donations committee. Mr.
George disclaims beneficial interest in these shares.
(6) Includes shares granted to executives under the Company's Executive
Restricted Stock Plan, which are subject to certain transferability
restrictions and forfeiture provisions.
(7) Includes 144,053 shares held in a family limited partnership, in which
Mr. Ferger is a general partner and owns limited partnership interests.
Mr. Ferger shares voting and investment power over these shares with his
wife.
(8) Includes 2,000 shares held by Mr. Shook's wife, and he disclaims
beneficial interest therein.
(9) Includes shares which the named individual has the right to acquire under
the SIGCORP, Inc. Stock Option Plan. See Table III for the number of
shares that can currently be acquired.
(10) As of December 31, 2000, Mr. Reherman had the right to acquire 242,908
shares under the SIGCORP, Inc. Stock Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Andrew E. Goebel is President and Chief Operating Officer of the Company.
During 2000, Hasgoe Cleaning Systems, a cleaning company owned by Mr. Goebel's
brother, performed certain cleaning services for the Company and certain of
its subsidiaries and is expected to perform such services in 2001. During
2000, the cost of such services was $174,372.88, which the Company believes to
be a fair and reasonable price for the services rendered.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors of the Company had eight (8) meetings during the
last fiscal year. No member attended fewer than 75 percent of the aggregate of
board meetings and meetings of the respective committees of the board of which
they are members.
The members of the Company's board of directors are elected to various
committees. The standing committees of the board are: the Executive Committee,
the Audit Committee, the Compensation Committee, and the Public and
Environmental Affairs Committee.
The members of the Executive Committee are Niel C. Ellerbrook, chairman,
Andrew E. Goebel, Anton H. George, Robert L. Koch II, John M. Dunn, and
Richard P. Rechter. The Executive Committee acts on behalf of the board of
directors of the Company when the board is not in session, except on those
matters which require action of the full board of directors. The Executive
Committee meets as required. There were two (2) meetings of the committee
during the past fiscal year.
The members of the Audit Committee are Anton H. George, chairman, John M.
Dunn, John D. Engelbrecht, J. Timothy McGinley, Dr. James S. Vinson, and Jean
L. Wojtowicz. The functions of the Audit Committee are described under "Report
of the Audit Committee" below. There were three (3) meetings of the committee
during the past fiscal year.
The members of the Compensation Committee are Robert L. Koch II, chairman,
J. Timothy McGinley, Donald A. Rausch, Richard P. Rechter, Richard W.
Shymanski, and Jean L. Wojtowicz. None of the members is an officer or
employee of the Company. The committee has the responsibility of formulating
recommendations to the board as to the compensation to be paid to the officers
of the Company and certain of its subsidiaries. If
6
the Company's At-Risk Compensation Plan is approved by the shareholders at the
annual meeting (see "Approval of Company's At-Risk Compensation Plan" below),
the committee will also administer that plan. There were five (5) meetings of
the committee during the past fiscal year. See the "Report of the Compensation
Committee" below.
The members of the Public and Environmental Affairs Committee are Dr. James
S. Vinson, chairman, Lawrence A. Ferger, William G. Mays, Ronald G. Reherman,
James C. Shook, and Richard W. Shymanski. The duties and powers of the
committee are to review current policies, programs, procedures, and processes
of the Company and its subsidiaries affected by public policy and affecting
the environment. It also reviews reports from Company management on public
policy and environmental matters and monitors compliance with, and trends and
emerging policy developments in, business and environmental regulation. In
addition, the committee reports to the board of directors on public policy and
environmental issues affecting the Company and its subsidiaries. There were
two (2) meetings of the committee during the past fiscal year.
DIRECTOR COMPENSATION
Non-employee directors of the Company receive combined fees totaling
$20,000 per year for service on the board. The fees are paid in the form of a
monthly retainer of $1,666.66. Committee chairs receive a cash retainer of
$2,000 per year, which is paid in the form of a monthly retainer of $166.66.
Non-employee directors also receive a fee of $1,000 for each Company board
meeting attended. Each non-employee member of a committee of the board is paid
a fee of $1,000 for each meeting of the committee attended, and each non-
employee chair of a committee is paid an additional fee of $500 for each
meeting attended.
On October 1, 2000, each non-employee member of the board received a grant
of 434 shares of restricted stock under the Vectren Corporation Directors
Restricted Stock Plan (formerly the Indiana Energy, Inc. Directors Restricted
Stock Plan). The terms of that grant provide that, subject to certain limited
exceptions, the restrictions will lift on October 1, 2003. At that time, if
the director continues serving on the board he or she will receive the shares
without restrictions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors, and persons who own more than 10% of the
Company's common stock to file reports of ownership and changes in ownership
concerning the common stock with the Securities and Exchange Commission, and
to furnish the Company with copies of all Section 16(a) forms they file. Based
solely on the Company's review of the Section 16(a) filings that the Company
has received, the Company believes that all filings required to be made under
Section 16(a) during 2000 were timely made.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the board of directors. The committee consists of six members, all
of whom are independent from the Company and the Company's management in
accordance with the New York Stock Exchange's listing requirements. The
committee met three (3) times during the past fiscal year, and operates under
a written Audit Committee Charter adopted by the board of directors of the
Company on March 31, 2000, a copy of which is included as Appendix A to this
proxy statement. Under the Audit Committee Charter, the committee has the
authority and the responsibility to select, evaluate, and replace the
independent accountants, to review the scope, conduct, and results of audits
performed, and to make inquiries as to the differences of views, if any,
between such independent accountants and officers and employees of the Company
and subsidiaries with respect to the
7
financial statements and records and accounting policies, principles, methods
and systems. It further considers whether the provision by the independent
auditors of services for the Company in addition to the annual audit
examination is compatible with maintaining the independent auditors'
independence. Finally, the committee reviews the policies and guidelines of
the Company and subsidiaries designed to ensure the proper use and accounting
for corporate assets, and the activities of the Company's Internal Audit
department.
In fulfilling its oversight responsibilities, the committee reviewed the
audited financial statements in the Annual Report on Form 10-K with
management, including a discussion of the quality and acceptability of the
Company's financial reporting and controls. The committee reviewed with the
independent auditors, who are responsible for expressing an opinion on the
conformity of those audited financial statements with generally accepted
accounting principles, their judgments as to the quality and the acceptability
of the Company's financial reporting and such other matters as are required to
be discussed with the committee under generally accepted auditing standards.
In addition, the committee has discussed with the independent auditors the
auditors' independence from management and the Company, including the matters
in the auditors' written disclosures required by the Independence Standards
Board.
The committee also discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The
committee meets periodically with the internal and independent auditors, with
and without management present, to discuss the results of their examinations,
their evaluations of the Company's internal controls, and the overall quality
of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the committee
recommended to the board of directors that the audited financial statements be
included in the Annual Report on Form 10-K for the fiscal year ended December
31, 2000 for filing with the Securities and Exchange Commission. The committee
also evaluated and recommended to the board of directors the reappointment of
the Company's independent auditors for fiscal year 2001.
Audit Committee
Anton H. George, Chairman
John M. Dunn
John D. Engelbrecht
J. Timothy McGinley
James S. Vinson
Jean L. Wojtowicz
EXECUTIVE COMPENSATION AND OTHER INFORMATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is responsible for reviewing and approving all
elements of the total compensation program for officers of the Company and
certain of its subsidiaries and serves as the administrator of the annual and
long-term incentive plan. In the future the committee will also administer the
Company's "At-Risk Compensation Plan" which will provide for annual and long-
term incentives. The "At-Risk Compensation Plan" is attached as Appendix B to
this document for review and approval by shareholders. The committee is also
responsible for monitoring the Company's executive compensation programs to
ensure that they are aligned with the Company's business strategies and
financial goals. The committee is composed entirely of independent, non-
employee directors.
A. Executive Compensation Policy.
The Company's total compensation program for officers includes base
salaries, an annual incentive program, and long-term incentives. The
committee's primary objective is to achieve above-average performance by
providing the opportunity to earn above-average total compensation (base
salary, at-risk annual and long-term
8
incentives) for above-average performance. Each element of total compensation
is designed to work in concert. The total program is designed to attract,
motivate, reward and retain the broad-based management talent required to
serve customer, employee, and shareholder interests. The Company believes that
the program also motivates the Company's officers to acquire and retain
appropriate levels of stock ownership and is competitive with programs offered
by comparable organizations of similar revenue size. It is the opinion of the
committee that the total compensation earned by Company officers in 2000
achieves these objectives and is fair and reasonable. Each aspect of the total
compensation program is discussed in greater detail below.
B. Components of Executive Compensation.
Base Salary
Individual salaries are set based on market comparisons to actual pay for
comparable positions within the utility industry, and industry in general. In
determining actual salaries, the committee takes into consideration individual
performance, experience, potential, and changes in executive responsibilities.
Establishing industry-based salaries provides an objective standard by which
to judge the reasonableness of the Company's salaries, maintains the Company's
ability to compete for and retain qualified executives, and ensures that
internal responsibilities are properly rewarded.
Annual Incentive Compensation
All of the Company's officers have a significant portion of their total
compensation at risk. Participation in the annual incentive plan, which
includes the chief executive officer, is extended to those positions that play
key roles in achieving annual financial and operating objectives. Annual
incentive opportunities are also based on periodic reviews of prevailing
practices for comparable positions among similar companies of comparable size.
The potential incentive award is determined annually by non-employee directors
and is based upon a percentage of each participant's base salary. During the
past year, target annual incentive opportunities for executive officers,
excluding the chief executive officer, ranged from 25 to 50 percent of salary.
Amounts actually paid under the annual incentive plans during 2000 relate
to:
. The performance for the first half of the 2000 fiscal year for Indiana
Energy up to the effective date of the merger on March 31, 2000.
. The performance for SIGCORP for 1999 and the 1st quarter of 2000.
For Indiana Energy, prior to the start of the fiscal year, its compensation
committee would recommend to the board of directors, and the non-employee
directors would determine, minimum, target, and maximum corporate goals to be
used in the incentive plan. The specific metric used was the consolidated
return on equity as compared to the average return on equity of peer group
companies, which consisted of a group of comparable energy companies. Target
performance levels were set in excess of peer group performance in order to
ensure linkage between financial performance and executive rewards. Depending
upon Indiana Energy's financial performance, the size of this component could
range from zero to the maximum established for each participant in the plan.
The second and smaller performance component was based upon each
executive's achievement of individual goals, which were consistent with
Indiana Energy's overall objectives and which were established prior to the
beginning of the fiscal year. Individual performance was monitored and
evaluated subjectively throughout the fiscal year. Overall performance was
measured after the end of the fiscal year by the chief executive officer.
Among the executive officers, for the amounts actually paid during the past
fiscal year, no person had more than 30 percent of their total potential
incentive under the Incentive Plan dependent upon the attainment of individual
objectives.
For executives of the former SIGCORP, the annual incentives paid in 2000
consisted of awards for the calendar year 1999 and for the first quarter of
2000 prior to the merger of Indiana Energy and SIGCORP into the
9
Company. For 1999, all senior corporate SIGCORP executives were measured in
part on corporate financial performance as measured by earnings per share
("EPS"). In addition, officers were measured on one of two bases:
. How well they achieved specific and measurable progress toward identified
strategic objectives; or
. Performance against specific operational goals which were:
. overall customer satisfaction index;
. total electric O&M per kWh sold;
. overall equivalent availability; and
. safety record.
For the 2000 partial performance year, all SIGCORP officers were measured
either on the basis of EPS only or a combination of EPS and the four
operational measures listed above.
The amounts payable under the Company's incentive plan commencing on April
1, 2000, will not be determined and paid until early in 2001 and accordingly
will be reflected in next year's proxy statement as part of calendar year 2001
compensation.
Long-Term Incentive Compensation
The purpose of the long-term incentive plan is to retain and motivate the
Company's principal officers to increase their incentive to work toward the
attainment of the Company's long-term growth and profit objectives. Under the
plan, the committee recommends to the board of directors, and the non-employee
directors determine, the executive officers, as well as other principal
officers, to whom grants will be made and the percentage of each officer's
base salary to be used for determining the number of shares or options to be
granted. Like the potential cash payment that may be received under the annual
incentive plan, this component of total compensation is also performance
driven and totally at-risk.
In 2000 the committee authorized and the board of directors approved grants
of restricted stock to each of the Company's executives pursuant to the former
Indiana Energy restricted stock plan, which remained in effect following the
merger creating the Company. To be eligible for a grant, the executive must
consent in writing to observe the restrictions imposed on the shares. The
shares may not be sold, transferred, pledged, or assigned until such
restrictions are lifted.
Pursuant to this plan these contingent grants of restricted stock are
subject to adjustment at the end of the performance period based on the
Company's performance relative to a peer group. For each measuring period
under the plan, depending upon the total return provided to the Company's
shareholders relative to the total return provided by each of the companies in
the peer group, there are three possible outcomes. If the Company's total
return places it in the bottom quartile, all of the shares are forfeited. If
the Company's total return places it in the second or third quartiles, the
original grant is vested, subject to continuing employment by the executives
during the remaining period of restriction. If the Company's total return
places it in the top quartile, the original grant is doubled and vested,
subject to continuing employment by the executives during the remaining period
of restriction.
For the grant authorized on October 1, 2000, the measurement period for
each third of the grant will commence on October 1, 2000, and conclude on
December 31, 2002, 2003, and 2004. Upon conclusion of each measurement period
and subsequent adjustment to the number of shares contingently granted, an
additional 1 year employment restriction is imposed.
It is the opinion of the committee that the long-term plan meets its
objective of providing executive officers, as well as other principal
officers, with the appropriate long-term interest in maximizing shareholder
value. A participant's increased level of equity in the Company is contingent
upon the additional enhancement of
10
shareholder value relative to the performance of companies in the peer group.
In addition, the vesting restrictions provide an incentive for all plan
participants to remain with the Company.
C. Chief Executive Officer Compensation.
The compensation of Niel C. Ellerbrook, Chairman and Chief Executive
Officer, consists of the same components as for other executive officers,
namely base salary, an at-risk payment under the annual incentive plan, and an
at-risk long-term incentive.
In establishing Mr. Ellerbrook's total compensation for 2000, the committee
considered the total compensation of other chief executive officers in
comparable companies, the financial and business performance of the Company,
and a subjective evaluation of the leadership role provided by Mr. Ellerbrook.
Mr. Ellerbrook's base salary was established on the same basis as the other
Company officers. This basis was described previously in this document.
Mr. Ellerbrook's payment received under the annual incentive plan during
2000 was based entirely upon the financial performance of Indiana Energy as
measured by its consolidated return on equity relative to the average return
on equity of companies in a peer group in accordance with Indiana Energy's
former plan. This method of measurement ensured the linkage of this aspect of
Mr. Ellerbrook's compensation to Indiana Energy's performance. For the first
half of Indiana Energy's fiscal year 2000, which began on October 1, 1999, Mr.
Ellerbrook was eligible to receive a maximum annual incentive of 60% of base
pay.
Mr. Ellerbrook's receipt of restricted shares under the long-term incentive
plan stock plan is likewise directly linked to the Company's performance.
Whether stock is received and, if so, in what amount, will depend upon the
measurement of the total return provided to the Company's shareholders in
comparison to the total return provided to the shareholders of companies in
the peer group as previously described.
For the same reasons expressed above with respect to the conclusion
regarding the appropriateness of the total compensation provided other
executive officers, it is the opinion of the committee that Mr. Ellerbrook's
total compensation is reasonable and appropriate.
D. Share Ownership.
The Company's share ownership policy requires officers to meet share
ownership targets. The program includes these key features:
. Participants have a share ownership target based on a multiple of their
base salary, ranging from two times base salary for certain participants
to five times for Mr. Ellerbrook.
. As an incentive to maximize shareholder value, a participant may count
toward his or her target the value of owned shares, including phantom
units of Company stock in the Company's Non-Qualified Deferred
Compensation Plan, the value of vested "in the money" stock options and
the market value of restricted shares, with market value based on the
market price of the Company's common shares.
. The committee expects participants to meet their targets within five
years and to make ratable progress each year.
E. Compensation Consultant, Termination Benefits Agreements And Deductibility
Of Executive Compensation.
To assist the committee, the services of an independent compensation
consultant are utilized. The consultant assists by evaluating the total
compensation system relative to the compensation systems employed by
comparable companies. The consultant also provides an additional measure of
assurance that the system is a reasonable and appropriate means to achieve the
Company's objectives.
11
As described elsewhere under the heading "Employment Agreements," the
Company has entered into employment agreements with each of the executive
officers. These agreements do not affect in any manner the recommendations of
the committee and the determinations by the non-employee members of the board
with respect to the total compensation provided the executive officers.
In 1993, Congress enacted Section 162(m) of the Internal Revenue Code
("Code"), applicable to the individual executives named in the Summary
Compensation Table, that disallows corporate deductibility for "compensation"
paid in excess of $1 million unless the compensation is payable solely on
achievement of an objective performance goal. The "At-Risk Compensation Plan"
attached to this document has been structured to satisfy the requirements of
162(m). Consequently, the committee does not anticipate that in the future the
compensation paid to executive officers in the form of base salaries and
incentive compensation will be non-deductible under Section 162(m) of the
Code.
Compensation Committee
Robert L. Koch II, Chair
J. Timothy McGinley
Donald A. Rausch
Richard P. Rechter
Richard W. Shymanski
Jean L. Wojtowicz
12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The functions and members of the Compensation Committee are set forth above
under "Meetings And Committees of the Board of Directors." None of the members
of the Compensation Committee has served as an officer or employee of the
Company or a subsidiary of the Company.
COMPENSATION
The following tabulation shows for years 1998, 1999, and 2000, the
compensation paid by the Company and its subsidiaries to each of the five most
highly compensated executive officers of the Company and its subsidiaries in
all capacities in which they serve.
TABLE I
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (g) (h) (i)
Long-term Compensation
Annual Compensation Payouts
---------------------------- ----------------------------
All Other
Other Annual Options LTIP Compen-
Name and Principal Salary Bonus Compensation (# Shares) Payouts sation
Position Year ($) ($) (1) ($) (2) (3) ($) (4) ($) (5)
------------------ ---- ------- ------- ------------ ---------- ------- ---------
Niel C. Ellerbrook...... 2000 470,873 94,357 19,063 -- 496,433 399,126
Chairman and Chief 1999 363,946 203,829 19,933 -- 214,863 51,286
Executive
Officer 1998 284,054 107,508 19,658 -- -- 21,053
Andrew E. Goebel........ 2000 326,143 137,000 6,720 -- -- 17,638
President and Chief 1999 275,014 80,156 -- 49,973 -- 13,023
Operating
Officer 1998 220,436 65,625 -- 9,340 -- --
J. Gordon Hurst......... 2000 259,118 99,089 3,148 -- -- 12,333
Executive Vice- 1999 217,048 62,500 -- 33,390 -- 8,762
President, President
Utility Group, 1998 196,637 59,375 -- 2,631 -- --
President SIGECO
Carl L. Chapman......... 2000 244,437 48,326 7,098 -- 218,066 220,132
Executive Vice 1999 214,615 119,879 9,589 -- 153,335 31,249
President
President Vectren 1998 87,115 -- 9,768 -- -- 7,406
Enterprises
Jerome A. Benkert Jr.... 2000 208,943 31,422 5,347 -- 163,389 159,550
Executive Vice 1999 164,692 75,405 5,807 -- 37,207 18,492
President and
Chief Financial Officer 1998 137,289 42,970 4,721 -- -- 11,166
For years 1999 and 2000, earnings are shown on a calendar year basis. For
1998, Mr. Goebel's and Mr. Hurst's earnings are shown on a calendar year
basis. For Mr. Ellerbrook, Mr. Chapman, and Mr. Benkert, 1998 earnings are
shown for the fiscal year ending September 30, 1998, as reported in the
Indiana Energy, Inc. 1999 proxy statement. For the 3-month period beginning
October 1, 1998 and ending December 31, 1998, the earnings for Mr. Ellerbrook,
Mr. Chapman, and Mr. Benkert are reported in the following table:
13
TABLE I(A)
EARNINGS FOR FORMER INDIANA ENERGY EXECUTIVES,
OCTOBER 1, 1998 TO DECEMBER 31, 1998
(a) (c) (d) (e) (h) (i)
Other Annual Long-term All Other
Salary Bonus Compensation Compensation Compensation
Name ($) ($) (1) ($) (2) Payouts ($) (3) ($) (2)
---- ------ ------- ------------ --------------- ------------
Niel C. Ellerbrook.... 80,769 174,132 5,701 -- 3,387
Carl L. Chapman....... 51,154 28,500 3,105 -- 3,473
Jerome A. Benkert Jr.. 39,039 65,661 1,443 -- 1,979
--------
(1) The amounts shown in this column are payments under Indiana Energy's
Annual Management Incentive Plan (for Mr. Ellerbrook, Mr. Chapman, and Mr.
Benkert) and the SIGCORP Corporate Performance Plan (for Mr. Goebel and
Mr. Hurst) which were discussed above in Part B, relating to "Annual
Incentive Compensation," and Part C of the Compensation Committee Report.
The amounts paid to Mr. Goebel and Mr. Hurst in 1998 and 1999 are
attributable to SIGCORP's performance in the previous year. For Mr.
Ellerbrook, Mr. Chapman, and Mr. Benkert, bonus payments shown in 1998 are
attributable to Indiana Energy's performance for the 1997 fiscal year and
the bonus shown in 1999 is attributable to Indiana Energy's performance
for the 1999 fiscal year. The bonus earned for the 1998 fiscal year is
shown in the supplementary table.
At the close of the merger of Indiana Energy and SIGCORP into the Company,
the existing annual incentive programs of the two companies were terminated
and a "stub year" payout was made based on the portion of the performance
cycle that had passed. For Indiana Energy, a prorated payout for six
months, October 1, 1999 to March 31, 2000 was made. For Mr. Ellerbrook, Mr.
Chapman, and Mr. Benkert, these bonus payments are listed in year 2000 in
the table. For the SIGCORP Performance Plan, a prorated payout for three
months, January 1, 2000 to March 31, 2000 was made. For Mr. Goebel, this
stub year bonus was $29,500. For Mr. Hurst, the stub year bonus was
$19,688. The balance of the amount shown for 2000 (for Mr. Goebel,
$107,500; for Mr. Hurst, $79,401) is attributable to SIGCORP's performance
for the period January 1 to December 31, 1999.
The amounts earned in the period beginning April 1, 2000 and ending
December 31, 2000 under the Vectren Corporation At-Risk Incentive Plan have
not been determined and approved for distribution by the Company's
Compensation Committee.
(2) The amounts shown in this column are dividends paid on restricted shares
issued under the Indiana Energy Executive Restricted Stock Plan, which was
discussed above in Part B, relating to "Long-Term Incentive Compensation,"
and C of the Compensation Committee Report. Note that the Stock Plan was
adopted by Vectren on March 31, 2000. Mr. Goebel and Mr. Hurst did not
participate in the Stock Plan prior to March 31, 2000.
(3) The shares shown in this column have been restated to reflect the
conversion ratio of 1.333 described above in Section titled "Voting
Securities."
(4) The amounts shown in this column represent the value of shares issued
under the Stock Plan and for which restrictions were lifted in each year.
At the time of the merger, Indiana Energy executives had restricted stock
performance grants relating to open performance measurement periods.
(Under normal circumstances, at the close of each performance cycle,
Indiana Energy's Total Shareholder Return would have been compared to a
peer group and the number of restricted shares granted would have been
adjusted in accordance with the plan.) The Board concluded that it would
be difficult, if not inappropriate, to use Vectren's performance to make
adjustments to the prior grants. Based upon the frequency of past
performance grants, the Board awarded 75% of the present value of the
potential performance grants. The value of these grants is included in the
2000 row. Grants related to this closing cycle are: Mr. Ellerbrook--10,758
shares, $213,493; Mr. Chapman--4,926 shares, $97,756; Mr. Benkert--3,828
shares, $75,967. The balance of the value in the 2000 row reflects stock
from other grant cycles for which restrictions were lifted in 2000
coincident with the consummation of the merger.
14
For further information on the Restricted Stock Plan, see the discussion
above in Part B relating to "Long-Term Incentive Compensation," and C of
the Compensation Committee Report.
(5) The amount shown in this column represents several compensation elements.
a) Relocation--As a result of the Vectren merger, many employees of Indiana
Energy were asked to move to Evansville, Indiana, the new headquarters
of Vectren Corporation. As part of a relocation program, relocating
employees were offered a "relocation bonus" equal to 25% of their annual
base salary and other allowances related to the move. Of the five
officers discussed in this section, three relocated and, therefore,
received income related to relocation: Mr. Ellerbrook--$204,797, Mr.
Chapman--$114,919, Mr. Benkert--$86,817.
b) Change-in-Control Walk-Away Provisions--Several Indiana Energy officers
had change-in-control agreements at the time of the merger. These
agreements contained "walk-away" provisions that would have allowed
officers to exercise their agreements anytime within a thirteen-month
period following the close of the Vectren merger. The Board felt it was
important to maintain the continuity of the officer group through the
merger process and asked that all change-in-control agreements be
terminated at the close of the merger and new agreements be put in
place. Recognizing the value of the walk-away provision, the Board felt
that officers should be compensated for losing the right to exercise the
provision. A settlement equal to 25% of the officers' annual base salary
was made. Of the five officers discussed in this section, three received
these settlements: Mr. Ellerbrook--$122,500, Mr. Chapman--$62,500, Mr.
Benkert--$55,000. These amounts were paid in 2000.
c) For Mr. Ellerbrook, Mr. Chapman, and Mr. Benkert, the balance of this
column reflects Company contributions to the retirement savings plan
(Ellerbrook: 2000--$10,200, 1999--$9,600, 1998--$6,522, last quarter of
1998--$1,794; Chapman: 2000--$10,200, 1999--$9,600, 1998--$2,689, last
quarter of 1998--$1,883, Benkert: 2000--$10,200, 1999--$9,600, 1998--
$7,022, last quarter of 1998--$1,849), the dollar value of insurance
premiums paid by, or on behalf of, the Company and its subsidiaries with
respect to split-dollar life insurance for the benefit of executive
officers (Ellerbrook: 2000--$24,496, 1999--$18,746, 1998--$14,530;
Chapman: 2000--$8,880, 1999--$8,589, 1998--$4,717; Benkert: 2000--
$4,705, 1999--$4,423, 1998--$4,144), credits for flexible spending
accounts, wellness, and perfect attendance (Ellerbrook: 2000--$75, 1999
--$579, last quarter of 1998--$2.89; Chapman: 2000--$150, 1999--$438;
Benkert: 2000--$196, 1999--$196, last quarter of 1998--$53), deferred
compensation contributions to restore employer contributions to the
Company Retirement Savings Plan (Ellerbrook: 2000--$18,174, 1999--
$12,237, 1998 Chapman: 2000--$4,507, 1999--$3,277; Benkert: 2000--
$2,632, 1999--$282), reimbursement for taxable expenses (Ellerbrook:
2000--$12,884, 1999--$10,124, last quarter of 1998--$1,590; Chapman:
2000--$18,977, 1999--$9,345, last quarter of 1998--$1,590; Benkert:
1999--$3,991, last quarter of 1998--$77.71), and non-cash earnings
(Ellerbrook: 2000--$6,000).
d) For Mr. Goebel and Mr. Hurst, this column contains income related to
reimbursement for club dues (Goebel: 2000--$954, 1999--$1,540; Hurst:
2000--$1,074, 1999--$1,190), imputed earnings from automobile usage
(Goebel: 2000--$961, 1999--$6,683; Hurst: 2000--$621, 1999--$2,772), and
Company contributions to the retirement savings plan (Goebel: 2000--
$10,184, 1999--$4,800; Hurst: 2000--$5,100, 1999--$4,800). In addition,
at the close of the merger, officers coming from SIGCORP were no longer
furnished with company automobiles (Indiana Energy executives were not
furnished with company automobiles). As a result of the termination of
this perquisite, officers with company cars were given a one-time
automobile buyout of $5,538.
15
TABLE II
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Number of % of Total Exercise or for Option Term
Shares Options Granted Base Price ($)
Underlying to Employees (Per Share) Expiration ------------------
Name Options Granted in Fiscal Year ($) Date 5% 10%
---- --------------- --------------- ----------- ---------- ------------------
Niel C. Ellerbrook...... 0 0 $ 0 N/A $ 0 $ 0
Andrew E. Goebel........ 0 0 $ 0 N/A $ 0 $ 0
J. Gordon Hurst......... 0 0 $ 0 N/A $ 0 $ 0
Carl L. Chapman......... 0 0 $ 0 N/A $ 0 $ 0
Jerome A. Benkert, Jr... 0 0 $ 0 N/A $ 0 $ 0
TABLE III
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES FROM 1/1/2000 TO 12/31/2000
Number of Unexercised Value of In-The-Money
Shares Value Options As of 12/31/00 Options
Acquired Realized ------------------------- -------------------------
Name on Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ---------- ----------- ------------- ----------- -------------
Niel C. Ellerbrook...... 0 $ 0 0 0 $ 0 $ 0
Andrew E. Goebel........ 3,895 $88,320.00 99,094 24,987 $745,818.35 $134,305.13
J. Gordon Hurst......... 0 $ 0 93,354 16,695 $809,175.50 $ 89,735.63
Carl L. Chapman......... 0 $ 0 0 0 $ 0 $ 0
Jerome A. Benkert, Jr... 0 $ 0 0 0 $ 0 $ 0
TABLE IV
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts Under
Non-Stock Price-Based Plans
-------------------------------
(a) (b) (c) (d) (e) (f)
Performance or Maximum
Number of Other Periods Threshold Target Number of
Shares; Units or Until Maturation Number of Number of Shares
Other Rights (1) or Payout (2) Shares (3) Shares (4) (5)
---------------- ---------------- ---------- ---------- ---------
Niel C. Ellerbrook...... 50,391 0 50,391 100,782
Andrew E. Goebel........ 26,354 0 26,354 52,708
J. Gordon Hurst......... 12,346 0 12,346 24,692
Carl L. Chapman......... 17,133 0 17,133 34,266
Jerome A. Benkert, Jr. . 12,950 0 12,950 25,900
--------
(1) This column shows the restricted shares awarded during fiscal year 2000
under the Stock Plan. The manner for determining the awards, and other
terms and conditions of the Stock Plan, are discussed in Part B of the
Compensation Committee Report relating to "Long-Term Incentive
Compensation." The market value of the shares on the dates of the grants
is determined according to a formula in the Stock Plan based on an average
price over a period of time preceding the grant. Dividends are paid
directly to the holders of the stock.
(2) As discussed above in Part B of the Compensation Committee Report relating
to "Long-Term Incentive Compensation," for the grant authorized on October
1, 2000, the measurement period for each third of the
16
grant will commence on October 1, 2000, and conclude on December 31, 2002,
2003, and 2004. Upon conclusion of each measurement period and subsequent
adjustment to the number of shares contingently granted, an additional 1
year employment restriction is imposed. The granting of additional shares,
if any, and the application of forfeiture provisions depends upon certain
measurements of the Company's total return to shareholders in comparison to
the total return to shareholders of a predetermined group of comparable
companies.
(3) The initial grant shares, which are the same as the total number of shares
in column (b), are also set forth in column (e), are subject to
forfeiture. If the Company's performance compared to the peer group during
this measurement period places it in the bottom quartile, the executive
officers will forfeit all of the shares granted for this period.
(4) The initial grant shares, which are the same as the total number of shares
in column (b), are presented in this column. If the Company's performance
compared to the peer group during this measurement period places it in the
middle two quartiles, these shares will vest.
(5) Under the Stock Plan, if the Company's performance compared to the peer
group during the initial measuring period places it in the top quartile,
an additional performance grant equal to the original grant will be made.
In that event, the shares shown in column (e) will be doubled.
RETIREMENT SAVINGS PLAN
During the past fiscal year, the Company sponsored the Retirement Savings
Plan which covers both bargaining and non-bargaining employees. Effective as
of July 1, 2000, retirement savings plans maintained by SIGCORP and its
subsidiaries were merged with and into the Company's Retirement Savings Plan.
In general, the Company's Retirement Savings Plan permits participants to
elect to have not more than 19 percent of their qualified compensation
(subject to certain maximums imposed on highly compensated employees by the
Internal Revenue Code) invested on a tax-deferred basis in shares of the
Company's common stock or various investment funds. Non-bargaining
participants in the Savings Plan who were employees of Indiana Energy or its
subsidiaries before the merger with the Company have matching Company
contributions made to the plan on their behalf equal to 100 percent of their
contributions not in excess of 6 percent of their individual redirected
compensation; non-bargaining participants in the Savings Plan who were not
employees of Indiana Energy or its subsidiaries before the merger with the
Company have matching Company contributions made to the plan on their behalf
equal to 50 percent of their contributions not in excess of 6 percent of their
individual redirected compensation. Also, a 3.0 percent lump sum Company
contribution is made to the Savings Plan for all eligible non-bargaining
employees at the end of each year who were not employees of Indiana Energy or
its subsidiaries before the merger and who did not elect to stay in the SIGECO
defined benefit formula as it existed before the merger.
The Summary Compensation Table shows the value of contributions made to the
plan for executive officers in the column marked "All Other Compensation."
RETIREMENT PLANS
During the past fiscal year, the Company sponsored a defined benefit
pension plan covering full-time employees of the Company and certain of its
subsidiaries who meet certain age and service requirements. The Company's plan
covers salaried employees, including executive officers, and provides fixed
benefits at normal retirement age based upon compensation and length of
service, the costs of which are fully paid by the employer and are computed on
an actuarial basis. The pension plan also provides for benefits upon death,
disability and early retirement under conditions specified therein. The
remuneration covered by this plan includes all compensation for regular work
periods (including overtime and bonuses). As of July 1, 2000, the retirement
plans maintained by SIGECO were merged into, and became part of, the Company's
defined benefit pension plan.
17
During the past fiscal year, the Company had a supplemental pension plan
covering certain of the principal officers of the Company and its
subsidiaries. The supplemental pension plan provides fixed benefits at normal
retirement age based upon compensation and is computed on an actuarial basis.
The supplemental pension plan also provides for benefits upon death,
disability and early retirement under conditions specified therein, including
service requirements. This supplemental pension plan also provides a reduced
benefit to a participant who voluntarily terminates his employment with a
participating employer (which may consist of the Company or one or more of its
subsidiaries) before normal retirement age (65), but following a change in
control of the Company. The remuneration covered by the supplemental pension
plan includes all compensation for regular work periods (including incentive
payments and other forms of additional compensation).
Upon retirement at or after age 65, any participant in the supplemental
pension plan will, in general, be entitled to an annual pension for life
which, when added to primary Social Security benefits, defined benefit pension
plan benefits, described above, and benefits under the Retirement Savings Plan
attributable to contributions by participants' employers, will equal
approximately 65 percent of the participant's average annual compensation
during the 60 consecutive calendar months immediately preceding the
participant's retirement date. The amounts paid under the supplemental pension
plan are unfunded and are paid from the general assets of the Company.
The following table illustrates the estimated normal annual retirement
benefits payable to a covered participant retiring at age 65 under the
supplemental pension plan, under the defined benefit plan based on the
specified remuneration, under the Retirement Savings Plan attributable to
contributions made by the Company and, as pertinent, one or more of its
subsidiaries, and including an estimated primary Social Security Benefit. The
compensation included in the Summary Compensation Table under salary and
payments under the annual Incentive Plan qualifies as remuneration for
purposes of these plans. The amounts shown do not reflect reductions, which
would result from joint and survivor elections.
PENSION PLAN TABLE
Years of Service(1)
-----------------------------------
Covered 30
Remuneration 15 20 25 or more
------------ -------- -------- -------- --------
$125,000............................ $ 40,625 $ 54,167 $ 67,708 $ 81,250
150,000............................ 48,750 65,000 81,250 97,500
175,000............................ 56,875 75,833 94,792 113,750
200,000............................ 65,000 86,667 108,333 130,000
225,000............................ 73,125 97,500 121,875 146,250
250,000............................ 81,250 108,333 135,417 162,500
300,000............................ 97,500 130,000 162,500 195,000
350,000............................ 113,750 151,667 189,583 227,500
400,000............................ 130,000 173,333 216,667 260,000
450,000............................ 146,250 195,000 243,750 292,500
500,000............................ 162,500 216,667 270,833 325,000
--------
(1) The compensation covered by the plans includes the salary and incentive
payments shown on the Summary Compensation Table. Years of service are not
used in calculating the benefit amount under the Unfunded Supplemental
Retirement Plan. The Supplemental plan above would be offset by Social
Security and benefits under the defined benefit plan benefits and
Retirement Savings Plan attributable to contributions made by the Company
and, as pertinent, one or more of its subsidiaries.
(2) Although the benefit attributable to the Savings Plan may be paid in a
single lump sum payment, it has been converted to an annual benefit for
purposes of this table. The estimated aggregate annual pension plan
benefit may be greater than the amounts in the table to the extent that
the Savings Plan benefit, after conversion to an annual benefit and when
added to the annual benefit under the applicable defined benefit
18
plan, exceeds the amount specified in the table. Since the Savings Plan has
only been in effect for a few years, it is unlikely in the near future that
the aggregated Savings Plan benefit and defined benefit plan benefits will
exceed the amount specified in the table.
STOCK OPTION PLAN
Prior to the merger with the Company, SIGCORP maintained its 1994 Stock
Option Plan. Effective as of the merger, each unexpired and unexercised option
to purchase SIGCORP common shares was automatically converted into an option
to purchase the number of the Company's common shares that could have been
purchased under the original option multiplied by 1.333. The exercise price
per share of Company common stock under the new options is equal to the
original per share option exercise price divided by 1.333. To date, a total of
999,752 options have been granted. Since the merger, no additional options
have been granted under the 1994 Stock Option Plan, nor does the Company
intend to issue any additional options under this plan.
EMPLOYMENT AGREEMENTS
The Company, with the approval of the board of directors, has entered into
employment agreements with Messrs. Niel C. Ellerbrook, Andrew E. Goebel,
Jerome A. Benkert, Jr., Carl L. Chapman, Ronald E. Christian, Timothy M.
Hewitt, J. Gordon Hurst, and Richard G. Lynch, each dated as of March 31,
2000. Each agreement continues for a period of three years, and is
automatically renewable on a month-to-month basis thereafter unless notice is
given by either party of its intention to terminate the agreement at the end
of the then current period. Each individual is entitled to compensation
consisting of an annual aggregate base salary, an annual bonus opportunity
based on performance targets set forth in each applicable agreement, and such
additional compensation as the board of directors determines throughout the
employment period. Under the agreements, each individual is eligible to
participate in all long-term incentive plans, all stock incentive plans, and
all savings and retirement plans to the extent applicable generally to other
peer executives of the Company. Each agreement is also subject to termination
in the event of disability, death, or voluntary retirement by the individual,
attainment by the individual of the age of 65, or his termination for cause.
Each employment agreement also requires the Company to pay amounts to the
individual when the applicable employment agreement has been terminated under
the following circumstances:
. If the Company terminates the employment of the executive for any reason
(other than cause, death, the executive's attainment of age 65, or the
executive's total and permanent disability); or
. If the executive voluntarily terminates his employment for good reason
(i.e., certain material changes in the terms of the executive's
employment); or
. The executive voluntarily terminates his employment without reason during
the 30-day period immediately following the first anniversary of a change
of control of the Company.
If an employment agreement is terminated coincident with or after an
acquisition of control of the Company, the Company is required to pay to the
individual a cash amount equal to: (a) the executive's annual base salary plus
the highest bonus paid to the executive during the previous three years
multiplied by (b) the lesser of three, or the number of years (rounded to the
nearest twelfth ( 1/12th) of a year) between the date the employment agreement
is terminated and the executive's attainment of age 65. If an employment
agreement is terminated under any of the other circumstances described above,
the Company is required to pay to the individual a cash amount equal to: (a)
the executive's annual base salary plus the highest bonus paid to the
executive during the previous three years multiplied by (b) the number of
years remaining in the employment agreement's term (rounded to the nearest
twelfth ( 1/12th) of a year). In addition to the cash payment, if an
employment agreement terminates under any of the circumstances described
above, any restricted stock, stock options, and any other stock awards under
any Company sponsored plan or arrangement that were outstanding (immediately
prior to March 31, 2000) become immediately vested and/or exercisable.
19
CORPORATE PERFORMANCE
The following Total Return to Shareholders graph compares the performance
of the Company with that of the S&P 500 Composite and the S&P Utilities Index.
COMPARISON OF 9 MONTH CUMULATIVE TOTAL RETURN*
AMONG VECTREN CORPORATION, THE S & P 500 INDEX
AND THE S & P UTILITIES INDEX
[Performance Graph]
Vectren Corporation S & P 500 S & P Utilities
------------------- --------- ---------------
4/3/00 100.00 100.00 100.00
6/00 86.42 97.34 106.70
9/00 103.05 96.40 141.33
12/00 131.40 88.86 147.73
$100 INVESTED IN COMPANY COMMON STOCK ON 4/3/00, WHICH WAS THE FIRST
DAY OF TRADING, OR IN THE S&P 500 OR S&P UTILITY INDEX ON 3/31/00--
INCLUDING REINVESTMENT OF DIVIDENDS FOR FISCAL YEAR ENDING DECEMBER 31,
2000.
20
ITEM 2. APPROVAL OF COMPANY'S AT-RISK COMPENSATION PLAN
The Company's shareholders are being requested to approve the Company's At-
Risk Compensation Plan (the "Plan") adopted by the board of directors of the
Company on January 24, 2001, subject to shareholder approval. The following
summary description of the Plan is qualified in its entirety by reference to
the full text of the Plan which is attached to this proxy statement as
Appendix B.
The Plan, which includes at-risk compensation payable in cash, stock
options, and restricted stock, was approved and recommended by the
Compensation Committee (the "Committee") of the board of directors. The Plan
is administered by the Committee, which has complete discretion in determining
the Company's key employees and officers (the "Eligible Employees") and
outside directors who shall be eligible to participate in the Plan. The at-
risk compensation for the Eligible Employees is based on the performance of
the Company and its success in attaining specific strategic goals. The Plan
includes both short-term and long-term incentives. The short-term incentives
are accomplished through potential payment of annual incentive awards. Equity
ownership, representing long-term incentive compensation, is achieved through
restricted shares and stock options. The purpose of the Plan is to promote the
interests of the Company and its shareholders through (a) the attraction and
retention of participants essential to the success of the Company; (b) the
motivation of participants using performance-related incentives linked to
performance goals and the interest of the Company shareholders, and (c)
enabling such individuals to share in the growth and success of the Company
and its subsidiaries.
An outside director who is selected by the Committee to participate in the
Plan will only be eligible for awards relating to stock and will not be
eligible for the annual incentive awards described in more detail below.
The number of shares of the Company's common stock which may be issued
pursuant to the Plan may not exceed in the aggregate 4,000,000 shares. Shares
of common stock may be available from the authorized but unissued shares,
shares issued and reacquired by the Company or shares purchased in the open
market for purposes of the Plan. As of March 2, 2001, the closing price for
the Company's common stock was $23.36 per share.
Stock Options. Under the Plan, the Committee may grant stock options to
participants as it shall determine. The Committee has complete discretion in
determining the type of option granted, the option price (which shall not be
less than 100% of the fair market value of the stock on the grant date), the
duration of the option, the number of shares of common stock to which an
option pertains, any condition imposed upon the exercisability or the
transferability of the options (including vesting conditions), the conditions
under which the option may be terminated, and any such other provisions as may
be warranted to comply with the law or rules of any securities trading system
or stock exchange. Each option grant shall have such specified terms and
conditions detailed in an option agreement made with the Eligible Employee.
The option agreement shall specify whether the option is intended to be an
incentive stock option or a non-qualified stock option. However, no incentive
stock option may be awarded (a) after the tenth anniversary of the date the
Plan was adopted by the board of directors, or (b) to a participant who is not
an employee. Options granted under the Plan shall be exercisable at such times
and be subject to such restrictions and conditions as the Committee shall
determine, which will be specified in the option agreement and need not be the
same for each participant.
Restricted Stock. The Committee may also grant shares of restricted stock
under the Plan to such participants, and in such amounts and for such duration
and/or consideration as it shall determine. Each restricted stock grant under
the Plan shall be evidenced by an award agreement that shall specify the
restriction period, the conditions which must be satisfied prior to removal of
the restriction, the forfeiture of such shares in the event such conditions
are not satisfied, the number of shares of restricted stock granted, and such
other provisions as the Committee shall determine. The Committee may specify
in the award agreement conditions or restrictions which the Committee may deem
advisable, including without limitation, conditions for acceleration or
achievement of the end of the restriction period based on any performance
criteria. Notwithstanding the foregoing, the Committee has the authority to
grant additional unrestricted stock to a participant under the Plan, provided
performance criteria are satisfied for a performance period. The shares of
restricted stock granted under
21
the Plan may not be sold, or otherwise transferred, until termination of the
applicable restriction period or upon earlier satisfaction of other conditions
as specified by the Committee in its sole discretion and set forth in the
applicable award agreement.
Other Stock Based Awards. In addition to stock options and restricted
stock, the Committee may issue to participants, either alone or in addition to
other awards made under the Plan, stock appreciation rights, performance
awards or other stock unit awards. Any such awards shall be governed by the
terms of an agreement, and the Committee may impose such terms and conditions,
similar to those described above, and not inconsistent with the terms of the
Plan. Stock appreciation rights shall have an exercise price determined at the
time of grant by the Committee, subject to the limitation that the grant price
shall not be less than 100% of fair market value of the common stock on the
grant date. Performance awards granted hereunder may be issued in the form of
either performance units or performance shares. The Committee shall set
performance criteria in its discretion for each participant who is granted a
performance award, and the extent to which such performance criteria are met
will determine the value of the performance unit or performance share to the
participant. Stock unit awards granted hereunder may but are not required to
be in the form of the Company's common stock or other securities. The value of
each such award shall be based, in whole or in part, on the value of the
underlying common stock on the grant date. The Committee, in its sole and
complete discretion, shall determine the terms, restrictions, conditions,
vesting requirements, and payment rules of the award.
Annual Incentive Awards. Under the Plan, annual cash incentive awards may
also be paid to Eligible Employees on the basis of the Company achieving
certain performance goals. Following the completion of a performance period,
the Committee will undertake or direct an evaluation of performance criteria,
and no annual incentive award may be paid without a certification by the
Committee that the performance goals have been met. Performance criteria of
the Company will be established in writing by the Committee before the
beginning of each performance period or at such later time as may be permitted
under the Plan. The maximum individual annual incentive award for a
performance period of twelve calendar months will be $1,500,000, provided the
Eligible Employee has been a participant under the Plan for such twelve month
period.
Awards Under The At-Risk Compensation Plan
Benefits payable or amounts that will be granted upon the approval of the
Plan by the shareholders are not determinable at this time. The Plan defines
the class of employees, officers, and directors eligible to participate under
the Plan. The Company currently expects that awards under the Plan will be
made to the Company's Section 16 officers, its corporate officers and other
key employees, and members of the Company's board of directors, which consists
of approximately 31 individuals in the aggregate.
United States Federal Income Tax Aspects of the At-Risk Compensation Plan
With respect to non-statutory stock options (an option other than an
incentive stock option, which is described below), as a general rule, no
federal income tax is imposed on the optionee upon the grant of a non-
statutory stock option. In addition, the Company is not entitled to a tax
deduction by reason of such a grant. Generally, upon the exercise of a non-
statutory stock option, the optionee will be treated as receiving compensation
taxable as ordinary income in the year of exercise in an amount equal to the
excess of the fair market value of the shares on the date of exercise over the
option price paid for such shares.
Upon the exercise of a non-statutory stock option, the Company may claim a
deduction for compensation paid at the same time and in the same amount as
compensation income is recognized to the award recipient assuming any federal
income tax withholding requirements are satisfied. Upon a subsequent
disposition of the shares received upon the exercise of a non-statutory stock
option, any appreciation after the date of exercise should qualify as a
capital gain.
Incentive Stock Options. The incentive stock options under the Plan are
intended to constitute "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the
22
"Code"). Incentive stock options are subject to special federal income tax
treatment. No federal income tax is imposed on the optionee upon the grant or
exercise of incentive stock options if the optionee does not dispose of shares
acquired pursuant to the exercise within the two-year period beginning on the
date the option was granted or within the one-year period beginning on the
date the option was exercised (collectively, the "holding period"). If these
conditions are met and no tax is imposed on the optionee, then the Company
would not be entitled to any deduction for federal income tax purposes in
connection with the grant or exercise of the option or the disposition of the
underlying shares. With respect to an incentive stock option, the difference
between the fair market value of the stock on the date of exercise and the
exercise price generally must be included in the optionee's alternative
minimum taxable income.
Upon disposition of the shares received upon exercise of an incentive stock
option after the holding period, the difference between the amount realized
and the exercise price should constitute a long-term capital gain or loss. If
an optionee disposes of shares acquired pursuant to his or her exercise of an
incentive stock option prior to the end of the holding period, the optionee
will be treated as having received, at the time of disposition, compensation
taxable as ordinary income. In such event, the Company may claim a deduction
for compensation paid at the same time and in the same amount as compensation
is treated as received by the optionee. The amount treated as compensation is
the excess of the fair market value of the shares at the time of exercise (or
in the case of a sale in which a loss would be recognized, the amount realized
on the sale if less) over the exercise price, and any amount realized in
excess of the fair market value of the shares at the time of exercise would be
treated as short-term or long-term capital gain, depending on the holding
period of the shares.
Restricted Stock. An individual who has been granted stock under the Plan
will not realize taxable income at the time of grant, and the Company will not
be entitled to a deduction at that time, assuming that the restrictions
constitute a substantial risk of forfeiture for federal income tax purposes.
Upon expiration of the forfeiture restrictions (i.e., as shares become
vested), the holder will realize ordinary income in an amount equal to the
excess of the fair market value of the shares at such time over the amount, if
any, paid for such shares, and, subject to the application of Section 162(m)
of the Code, the Company will be entitled to a corresponding deduction.
Dividend equivalents accrued and paid to the holder during the period that the
forfeiture restrictions apply will also be treated as compensation income to
the holder and deductible as such by the Company.
However, the recipient of restricted stock may elect to be taxed at the
time of grant of the restricted stock based upon the fair market value of the
shares on the date of the award. If the recipient makes this election, (a) the
Company will be entitled to a deduction at the same time and in the same
amount (subject to the limitations contained in Section 162(m)), (b) dividends
paid to the recipient during the period the forfeiture restrictions apply will
be taxable as dividends and will not be deductible by the Company, and (c)
there will be no further federal income tax consequences when the forfeiture
restrictions lapse.
Stock Units Awards. A recipient of stock units awards under the Plan will
generally not realize taxable income at the time of grant, and the Company
will not be entitled to a deduction at that time. At the time stock units are
settled in shares of the Company's common stock, the recipient will have
taxable compensation income and, subject to Section 162(m) as discussed below,
the Company will receive a corresponding deduction. The measure of this income
and deduction will be the fair market value of the shares at the time the
stock units are settled, plus any accrued dividend equivalents; provided,
however, that, with respect to a recipient subject to Section 16 of the
Securities and Exchange Act of 1934, as amended, unless such recipient elects
otherwise, such fair market value will be measured at the time any
restrictions imposed with respect to such shares under Section 16 of the
Exchange Act of 1934 subsequently lapse.
Section 162(m) of the Internal Revenue Code. Section 162(m) precludes a
public corporation from taking a deduction for compensation in excess of $1
million paid to its chief executive officer or any of its four other highest-
paid officers. However, compensation that qualifies under Section 162(m) as
"performance-based" is specifically exempt from the deduction limit. Based on
Section 162(m) and the regulations issued thereunder, the Company believes
that the income generated in connection with the exercise of stock options
granted under the Plan should qualify as performance-based compensation and,
accordingly, the Company's deductions for such
23
compensation should not be limited by Section 162(m). The Plan has been
designed to provide flexibility with respect to whether restricted stock
awards will qualify as performance-based compensation under Section 162(m).
The Company believes that certain awards of restricted stock under the Plan
will so qualify and the Company's deductions with respect to such awards
should not be limited by Section 162(m). The Plan does provide that all awards
under the Plan to employees covered by Section 162(m) are subject to other
conditions, restrictions, and requirements as the Committee may determine to
be necessary to avoid the loss of deduction by the Company under Section
162(m). However, certain awards of restricted stock may not qualify as
performance-based compensation and, therefore, the Company's compensation
expense deductions relating to such awards will be subject to the Section
162(m) deduction limitation.
Required Vote and Recommendation
Approval of the Company's At-Risk Compensation Plan requires an affirmative
vote of a majority of the shares present or by proxy and entitled to vote at
the meeting. For this proposal, an abstention will have the same effect as a
vote against the proposal. Broker non-votes will not be voted for or against
the proposal and will not be counted as entitled to vote.
The Board of Directors recommends voting "FOR" this proposal.
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
Arthur Andersen, L.L.P. ("Arthur Andersen") has been selected by the board
of directors as the independent public accountants of the Company and its
subsidiaries for fiscal year 2001. The selection was made by the board of
directors upon the recommendation of the Audit Committee. See "Report of the
Audit Committee." Arthur Andersen has served as auditors for the Company since
the time of the merger of Indiana Energy and SIGCORP into the Company in March
2000, and prior to that time as auditors for SIGECO since 1918, for SIGCORP
since its organization in 1996, for Indiana Energy since 1986, and for Indiana
Gas since its organization in 1945. A representative of Arthur Andersen will
be present at the annual meeting, will have the opportunity to make a
statement and will be available to respond to questions.
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of the Company's 2000 fiscal year annual financial statements, and reviews of
the Company's financial statements included in the Company's Forms 10-Q filed
during the Company's 2000 fiscal year were $290,000. Arthur Andersen also
performed audit services for certain of the Company's subsidiaries and
performed audits of the Company's various benefit plan financial statements.
The aggregate fees billed for these services totaled $81,000.
Financial Systems Design and Implementation Fees
No professional services were rendered by Arthur Andersen during the
Company's 2000 fiscal year in connection with: (a) operating or supervising
the operation of the Company's information system; or (b) designing or
implementing a hardware or software system that aggregates source data
underlying the Company's financial statements or generates information that is
significant to the Company's financial statements.
All Other Fees
The aggregate fees billed for services rendered by Arthur Andersen for
services other than audit fees during the Company's 2000 fiscal year were
$464,000. These fees were for such services as (i) tax planning and review of
tax returns of the Company, (ii) due diligence reviews, and (iii) evaluation
of the impact of various accounting issues and changes in accounting
standards.
24
The Audit Committee of the board of directors has considered and determined
that the provision by Arthur Andersen of the services described above is
compatible with maintaining Arthur Andersen's independence.
COST AND METHOD OF SOLICITATION
The cost of preparing, assembling, printing and mailing this proxy
statement, the enclosed proxy and any other material which may be furnished to
shareholders in connection with the solicitation of proxies for the meeting
will be borne by the Company. The Company has retained D. F. King & Company to
assist in soliciting proxies from shareholders, including brokers' accounts,
at an estimated fee of $7,500 plus reasonable out-of-pocket expenses. In
addition, some of the officers and regular employees of the Company, who will
receive no compensation therefor in addition to their regular salaries, may
solicit proxies by telephone, telegraph or personal visits, and it is
estimated that the cost of such additional solicitation, if any, will not
exceed $500, and will be borne by the Company. The Company expects to
reimburse banks, brokerage houses and other custodians of stock for their
reasonable charges and expenses in forwarding proxy material to beneficial
owners.
ANNUAL REPORT
A copy of the Company's annual report, including consolidated financial
statements for the fiscal year ended December 31, 2000, was mailed to
shareholders on or about March 16, 2001.
REVOCATION RIGHTS
A shareholder executing and delivering the enclosed proxy may revoke it by
written notice delivered to the secretary of the Company, or in person at the
annual meeting, at any time before the authority granted by it is exercised.
NOMINATION OF DIRECTORS BY SHAREHOLDERS
If a shareholder entitled to vote for the election of directors at a
shareholders' meeting desires to nominate a person for election to the board
of directors of the Company, pursuant to the Company's By-Laws, any such
nominations must be made pursuant to notice delivered to, or mailed and
received at, the principal office of the Company, not less than 90 days nor
more than 120 days prior to the first anniversary date of the annual meeting
of the shareholders for the preceding year; provided, however, that if the
annual meeting is not scheduled to be held within a period that commences 30
days before such anniversary date and ends 30 days after such anniversary
date, such shareholder notice shall be given by the later of: (a) the date 90
days prior to the actual date of shareholder meeting, or (b) the tenth day
following the day on which the annual meeting date is first publicly announced
or disclosed. In any case, such shareholder's notice must set forth, in
addition to the name and address of the shareholder submitting the nomination,
as to each person whom the shareholder proposes to nominate for election or
re-election as a director: (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Company which are
beneficially owned by such person, (iv) any other information relating to such
person that is required to be disclosed in the solicitation of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(including, without limitation, such person's written consent to be named in
the proxy statement as a nominee and to serve as a director, if elected), and
(v) the qualifications of the nominee to serve as a director of the Company.
25
SHAREHOLDERS' PROPOSALS FOR 2002 ANNUAL MEETING
Under Rule 14a-8 of the Securities Exchange Act of 1934, shareholders of
the Company may present proper proposals for inclusion in the Company's proxy
statement and for consideration at the 2002 annual meeting of its shareholders
by submitting their proposals to the Company in a timely manner. In order to
be so included for the 2002 annual meeting, shareholder proposals must be
received at the Company's principal office, 20 N. W. Fourth Street,
Evansville, Indiana 47708, Attention: Corporate Secretary, no later than
November 16, 2001, and must otherwise comply with the requirements of Rule
14a-8.
If a shareholder desires to bring business before the meeting which is not
the subject of a proposal timely submitted for inclusion in the proxy
statement, the shareholder must follow procedures outlined in the Company's
Code of By-Laws. A copy of these procedures is available upon request from the
Corporate Secretary at the address referenced above. One of the procedural
requirements in the Company's Code of By-Laws is timely notice in writing of
the business the shareholder proposes to bring before the meeting. To be
timely a shareholder's notice must be delivered to, or mailed and received at,
the principal office of the Company not less than 90 days nor more than 120
days prior to the first anniversary date of the annual meeting of the
shareholders for the preceding year; provided, however, that if the annual
meeting is not scheduled to be held within a period that commences 30 days
before such anniversary date and ends 30 days after such anniversary date,
such shareholder notice shall be given by the later of: (a) the date 90 days
prior to the actual date of shareholder meeting, or (b) the tenth day
following the day on which the notice of the annual meeting is first publicly
announced or disclosed. The shareholder's notice must set forth (i) a brief
description of the matter to be brought before the meeting, (ii) the name and
address as they appear on the corporate records of the shareholder proposing
the business, (iii) the number of shares of capital stock of the Company
beneficially owned by the shareholder and (iv) any interest of the shareholder
in the business.
In addition, if the Company does not receive the shareholder's notice
within the time period described above, the proxies designated by the board of
directors for that meeting may vote in their discretion on any such proposal
any shares for which they have been appointed proxies without mention of such
matter in the Company's proxy statement or on the proxy card for such meeting.
By order of the board of directors.
Vectren Corporation
RONALD E. CHRISTIAN
Senior Vice President, General
Counsel and
Corporate Secretary
Evansville, Indiana
March 16, 2001
Please fill in, date and sign the enclosed proxy and return it in the
accompanying addressed envelope. No further postage is required if mailed in
the United States. You may also authorize the individuals named on your proxy
card to vote your shares by calling toll-free 1-877-779-8683 or using the
Internet (www.eproxyvote.com/vvc) by following the instructions included with
your proxy card. If you attend the annual meeting and wish to vote your shares
in person, you may do so. Your cooperation in giving this matter your prompt
attention will be appreciated.
26
APPENDIX A
VECTREN CORPORATION
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit committee is to assist the Board of
Directors (Board) in fulfilling its oversight responsibilities by reviewing:
the financial reports and other financial information provided by the Company
to a governmental body or the public; the Company's system of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Company's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit committee should encourage continuous improvement of, and
adherence to the Company's policies, procedures and practices. The Audit
committee's primary responsibilities are to:
. Ensure that management of the Company maintains reliable accounting
policies, financial reporting and disclosure practices.
. Ensure that management maintains an adequate system of internal control.
. Ensure that management maintains processes to assure compliance with all
applicable laws, regulations and Company policy.
. Provide for open communication among the independent accountants,
financial and senior management, the Internal Audit department, and the
Board.
The Audit committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the committee.
All members of the committee shall have a working familiarity with basic
finance and accounting practices, and at least one member of the committee
shall have accounting or related financial management expertise.
III. MEETINGS
The Audit committee shall meet (either physically or by means of conference
call) consistent with the quarterly release of financial data or as other
circumstances dictate. As part of its job to foster open communication, the
committee should meet at least biannually with the director of internal
auditing and the independent accountants in executive sessions to discuss any
matters that the committee or either of these parties believe should be
discussed privately.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit committee shall:
Documents/Reports Review
1. Review and update this Charter periodically, at least annually, as
conditions dictate, and ensure that this charter is disclosed in the
Company's Proxy at least every three years.
A-1
2. Review the Company's annual financial statements and quarterly financial
statements submitted to the Securities and Exchange Commission. The Audit
committee may also be convened to review and discuss any significant (e.g.,
Form 8K) or unusual transactions. (In this context, review shall mean
listening to a presentation related to the financial statements, looking at
drafts of the statements and discussing unusual or significant
transactions.)
3. Review internal reports to management prepared by the Internal Audit
department and management's response.
4. Review and discuss earnings information prior to the quarterly release of
earnings information to the public. The Chair of the committee may
represent the entire committee for purposes of this review. This discussion
should focus on significant events, transactions and changes in accounting
estimates, which were considered by the independent accountants to have
affected the quality of the Company's financial reporting. This discussion
should also include appropriate members of financial management, the
internal auditor, and legal counsel. (Quality, in this context, refers to
relevance, reliability, comparability and understandability. Relevance
means that users find the information useful in making decisions;
reliability means that information is verifiable and faithfully represents
what it purports to represent; comparability means that the user can
compare from one company to another, and from one time period to another to
identify trends; and understandability means that the information is
presented in an organized, concise and clear fashion so that it can be
understood by competent users.)
Independent Accountants/Auditors
5. The independent accountants are ultimately accountable to the Board and the
Audit committee.
6. The Audit committee has the authority and responsibility to select,
evaluate, and replace the independent accountants of the Company and its
subsidiaries. This responsibility also includes approval of the fees and
other compensation to be paid to the independent accountants.
7. The Audit committee is responsible for ensuring that the independent
accountants submit a formal written statement regarding relationships and
services which may affect objectivity and independence, for discussing any
relevant matters with the independent accountants, and for recommending
that the full board take appropriate action to ensure the independence of
the auditors.
8. Review with management, the independent accountants and internal auditors
any significant risks and exposures, audit activities and significant audit
findings.
9. Review activities, organizational structure, and qualifications of the
Internal Audit department.
Financial Reporting Process
10. Consider the independent accountant's judgements about the quality and
appropriateness of the Company's accounting principles and practices as
applied to its financial reporting.
11. Review any significant disagreement among management and the independent
accountants or the Internal Audit department in conjunction with the
preparation of the financial statements.
12. Consider, approve, and monitor implementation of changes to the Company's
auditing and accounting principles and practices as suggested by the
independent accountants, management, or the Internal Audit department.
13. Discuss with the independent accountants and internal auditors any
significant difficulties encountered during the course of an audit,
including any restrictions on the scope of work or access to required
information.
Ethical and Legal Compliance
14. Review management's monitoring of the Corporate Code of Conduct (Code) and
ensure that management has the proper review controls in place. Suggest
changes to the Code as deemed necessary and appropriate.
A-2
15. Review, with the Company's counsel, any legal matter that could have a
significant impact on the Company's financial statements.
16. Review, with the Company's counsel, legal compliance matters including
corporate securities trading policies.
17. Conduct or authorize investigations into any matters within the scope of
the Audit committee's responsibilities. The Audit committee shall be
empowered to retain any resources necessary including independent counsel,
accountants or others to assist in such investigations.
18. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the committee or the Board deems necessary
or appropriate.
A-3
APPENDIX B
VECTREN CORPORATION
AT RISK COMPENSATION PLAN
Effective May 1, 2001
B-1
TABLE OF CONTENTS
Page
----
ARTICLE I--PURPOSE
1.1 Purpose............................................................ B-5
ARTICLE II--DEFINITIONS
2.1 "Agreement"........................................................ B-5
2.2 "Annual Incentive Award"........................................... B-5
2.3 "Award"............................................................ B-5
2.4 "Award Date" or "Grant Date"....................................... B-5
2.5 "Board" or "Board of Directors".................................... B-5
2.6 "Cashless Exercise"................................................ B-5
2.7 "Cause"............................................................ B-5
2.8 "Change in Control"................................................ B-5
2.9 "Code"............................................................. B-5
2.10 "Committee"........................................................ B-5
2.11 "Common Stock" or "Stock".......................................... B-5
2.12 "Company".......................................................... B-5
2.13 "Covered Participant".............................................. B-5
2.14 "Designated Beneficiary"........................................... B-6
2.15 "Disability"....................................................... B-6
2.16 "Effective Date"................................................... B-6
2.17 "Eligible Employee"................................................ B-6
2.18 "Employee"......................................................... B-6
2.19 "Exchange Act"..................................................... B-6
2.20 "Fair Market Value"................................................ B-6
2.21 "Good Reason"...................................................... B-6
2.22 "Incentive Stock Option"........................................... B-6
2.23 "Non-qualified Stock Option"....................................... B-6
2.24 "Option Price"..................................................... B-6
2.25 "Outside Director"................................................. B-6
2.26 "Participant"...................................................... B-6
2.27 "Participating Company"............................................ B-6
2.28 "Performance Award"................................................ B-7
2.29 "Performance Criteria"............................................. B-7
2.30 "Performance Period"............................................... B-7
2.31 "Performance Share"................................................ B-7
2.32 "Performance Unit"................................................. B-7
2.33 "Person"........................................................... B-7
2.34 "Plan"............................................................. B-7
2.35 "Restricted Stock"................................................. B-7
2.36 "Restriction Period"............................................... B-7
2.37 "Retirement"....................................................... B-7
2.38 "Rule of 16b-3".................................................... B-7
2.39 "Section 162(m)"................................................... B-7
2.40 "Securities Act"................................................... B-7
2.41 "Stock" or "Shares"................................................ B-8
2.42 "Stock Appreciation Right"......................................... B-8
2.43 "Stock Option" or "Option"......................................... B-8
2.44 "Stock Unit Award"................................................. B-8
2.45 "Subsidiary"....................................................... B-8
B-2
Page
----
ARTICLE III--ELIGIBILITY
3.1 Eligibility........................................................ B-8
ARTICLE IV--SHARES SUBJECT TO THE PLAN
4.1 Number of Shares................................................... B-8
4.2 Lapsed Awards or Forfeited Shares.................................. B-8
4.3 Delivery of Shares as Payment...................................... B-8
4.4 Capital Adjustments................................................ B-9
ARTICLE V--STOCK OPTIONS
5.1 Grant of Stock Options............................................. B-9
5.2 Option Price....................................................... B-9
5.3 Exercisability..................................................... B-9
5.4 Method of Exercise................................................. B-9
5.5 Death, Disability, Retirement or Other Termination of Employment... B-10
ARTICLE VI--RESTRICTED STOCK
6.1 Grant of Restricted Stock.......................................... B-10
6.2 Restricted Stock Award Agreement................................... B-10
6.3 Restriction Period................................................. B-10
6.4 Removal of Restrictions and Deferral of Payment.................... B-10
6.5 Voting Rights...................................................... B-11
6.6 Dividends and Other Distributions.................................. B-11
6.7 Death, Disability or Retirement.................................... B-11
ARTICLE VII--OTHER STOCK BASED AWARDS
7.1 Grant of Other Stock Based Awards.................................. B-11
7.2 Stock Appreciation Rights.......................................... B-11
7.3 Performance Awards................................................. B-12
7.4 Stock Unit Awards.................................................. B-12
7.5 Death, Disability, Retirement or Other Termination of Employment... B-13
7.6 Deferral of Payment................................................ B-13
ARTICLE VIII--ANNUAL INCENTIVE AWARDS
8.1 Timing and Determination of Annual Incentive Awards................ B-13
8.2 Performance Criteria for Annual Incentive Awards .................. B-13
8.3 Maximum Annual Incentive Award..................................... B-13
8.4 Short Performance Year............................................. B-14
8.5 Limitation on Right to Payment of Award............................ B-14
ARTICLE IX--SPECIAL PROVISIONS APPLICABLE TO COVERED PARTICIPANTS
9.1 Special Provisions Applicable to Covered Participants.............. B-14
ARTICLE X--CHANGE IN CONTROL
10.1 Change in Control Agreements....................................... B-15
10.2 Change in Control Defined.......................................... B-15
10.3 Good Reason Defined................................................ B-17
10.4 Cause Defined...................................................... B-18
ARTICLE XI--ADMINISTRATION
11.1 The Committee...................................................... B-18
11.2 Committee Decisions................................................ B-18
11.3 Rule 16b-3 and Section 162(m) Requirements......................... B-18
B-3
Page
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ARTICLE XII--GENERAL PROVISIONS
12.1 Withholding........................................................ B-19
12.2 Terms of Awards.................................................... B-19
12.3 Non-transferability................................................ B-19
12.4 No Right to Employment............................................. B-19
12.5 Rights as Shareholder.............................................. B-19
12.6 Construction of the Plan........................................... B-19
12.7 Amendment of Plan.................................................. B-19
12.8 Amendment of Award................................................. B-19
12.9 Exemption from Computation of Compensation for Other Purposes...... B-19
12.10 Legend............................................................. B-20
12.11 Special Provisions for Certain Participants........................ B-20
12.12 Unfunded Plan...................................................... B-20
12.13 Conflict with Employment Agreement................................. B-20
12.14 Gender and Number.................................................. B-20
12.15 Severability....................................................... B-20
12.16 Effect of Headings................................................. B-20
12.17 No Liability....................................................... B-20
B-4
ARTICLE I
PURPOSE
1.1 Purpose. Vectren Corporation, an Indiana corporation, hereby
establishes the Vectren Corporation At Risk Compensation Plan to promote the
interests of the Company and its shareholders through (a) the attraction and
retention of Participants essential to the success of the Company; (b) the
motivation of Participants using performance-related incentives linked to
performance goals and the interests of Company shareholders; and (c) enabling
such individuals to share in the growth and success of the Company and its
Subsidiaries. The Plan permits cash awards, the grant of Stock Options,
Restricted Stock, and, with prior Board approval, any other stock-based forms
of awards as the Committee, in its sole and complete discretion, may determine
to be appropriate in carrying out the intent and purposes of this Plan. The
Plan also provides for the grant of annual incentive awards.
ARTICLE II
DEFINITIONS
2.1 "Agreement" shall mean a written agreement between the Company and a
Participant implementing the grant, and setting forth the particular terms,
conditions and restrictions of each Award. With respect to the grant of a
Stock Option, the Agreement may be referred to herein as an "Option
Agreement," and with respect to any other Award hereunder, the Agreement may
be referred to herein as an "Award Agreement."
2.2 "Annual Incentive Award" shall mean a cash bonus payable to a
Participant under Article VIII.
2.3 "Award" shall mean an award or grant made to a Participant under
Article V, VI, or VII, or an Annual Incentive Award under Article VIII.
2.4 "Award Date" or "Grant Date" shall mean the date on which an Award is
made by the Committee under the Plan.
2.5 "Board" or "Board of Directors" shall mean the Board of Directors of
the Company.
2.6 "Cashless Exercise" shall mean the exercise of an Option by the
Participant through the use of a brokerage firm to make payment to the Company
of the exercise price either from the proceeds of a loan to the Participant
from the brokerage firm or from the proceeds of the sale of Stock issued
pursuant to the exercise of the Option, and upon receipt of such payment, the
Company delivers the exercised Shares to the brokerage firm.
2.7 "Cause" shall be defined in Section 10.4.
2.8 "Change in Control" shall be defined in Section 10.2.
2.9 "Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, or any successor law, as amended from time
to time.
2.10 "Committee" shall mean the Compensation Committee of the Board or such
other committee appointed by the Board to administer the Plan in accordance
with Article XI.
2.11 "Common Stock" or "Stock" shall mean the Common Stock of the Company
without par value, or such other security or right or instrument into which
such Common Stock may be changed or converted in the future.
2.12 "Company" shall mean Vectren Corporation, an Indiana corporation, or
any successor thereto.
2.13 "Covered Participant" shall mean a Participant who is a "covered
employee" as defined in Code Section 162(m)(3) and the regulations promulgated
thereunder.
B-5
2.14 "Designated Beneficiary" shall mean the beneficiary designated by the
Participant, pursuant to procedures established by the Committee, to receive
amounts due to the Participant in the event of the Participant's death. If the
Participant does not make an effective designation, then the Designated
Beneficiary will be deemed to be the Participant's estate.
2.15 "Disability" shall mean (a) the mental or physical disability of the
Participant defined as "Disability" under the terms of the long-term
disability plan sponsored by the Company and in which the Participant is
covered, as amended from time to time in accordance with the provisions of
such plan; or (b) a determination by the Committee, in its sole discretion, of
total disability (based on medical evidence) that precludes the Participant
from engaging in any occupation or employment for wage or profit for at least
twelve months and appears to be permanent. All decisions by the Committee
relating to a Participant's Disability (including a decision that a
Participant is not disabled), shall be final and binding on all parties.
2.16 "Effective Date" shall mean:
(a) January 1, 2001 with respect to Annual Incentive Awards granted
pursuant to Article VIII; and
(b) May 1, 2001 with respect to long-term incentive Awards granted
pursuant to Articles V, VI or VII.
2.17 "Eligible Employee" shall mean an Employee who is an officer or other
key employee of a Participating Company as designated by the Committee to be
eligible to participate in the Plan.
2.18 "Employee" shall mean an individual who is employed by a Participating
Company in a customary employer-employee relationship and designated as such
in accordance with the Company's standard employment practices.
2.19 "Exchange Act" shall mean the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, or any successor law as amended
from time to time.
2.20 "Fair Market Value" shall mean, on any given date, the closing price
of Common Stock as reported on the composite tape of the primary stock
exchange in which the Common Stock is listed on such day or, if no Shares were
traded on such stock exchange on such day, then on the next preceding day that
Stock was traded on such exchange, all as reported by The Wall Street Journal
or such other source as the Committee may select.
2.21 "Good Reason" shall be defined in Section 10.3.
2.22 "Incentive Stock Option" shall mean an option to purchase Stock,
granted under Article VI herein, which is designated as an incentive stock
option and is intended to meet the requirements of Code Section 422.
2.23 "Non-qualified Stock Option" shall mean an option to purchase Stock,
granted under Article V herein, which is not intended to qualify as an
Incentive Stock Option.
2.24 "Option Price" shall mean the exercise price per share of Stock
covered by an Option in accordance with Section 5.2.
2.25 "Outside Director" shall mean a member of the Board who is not an
Employee.
2.26 "Participant" shall mean an Eligible Employee or Outside Director who
has been selected from time to time under Article III to receive an Award
under the Plan.
2.27 "Participating Company" shall mean the Company, and such other
Subsidiaries as the Board authorizes to participate herein.
B-6
2.28 "Performance Award" shall mean a performance-based Award made under
Section 7.3, which may be in the form of either Performance Shares or
Performance Units.
2.29 "Performance Criteria" shall mean objectives established by the
Committee for a Performance Period for the purpose of determining when an
Award subject to such objectives has been earned, and may include alternative
and multiple Performance Criteria, including, but not limited to, operating
and maintenance expense targets, customer satisfaction, safety, and financial
goals (which may be adjusted for abnormal weather based on National Oceanic
and Atmospheric Administration measures or such other objective measures as
approved by the Committee before the beginning of a Performance Period)
including, but not limited to, absolute or relative (i.e., in relation to a
peer group of companies) total shareholder return, revenues, sales, net
income, EBITDA, return on assets, earnings per share and/or growth thereof, or
net worth of the Company, any of its Subsidiaries, divisions, business units
or other areas of the Company.
2.30 "Performance Period" shall mean the time period designated by the
Committee during which Performance Criteria must be met in order for a
Participant to obtain a performance-based award.
2.31 "Performance Share" shall mean an Award, designated as a Performance
Share, granted to a Participant pursuant to Section 7.3, the value of which is
linked to Company Stock and which is determined, in whole or in part, by the
attainment of pre-established Performance Criteria as deemed appropriate by
the Committee and described in the Agreement.
2.32 "Performance Unit" shall mean an Award, designated as a Performance
Unit, granted to a Participant pursuant to Section 7.3, the value of which is
determined, in whole or in part, by the attainment of pre-established
Performance Criteria which is linked to the performance of Company Stock as
deemed appropriate by the Committee and described in the Agreement.
2.33 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.34 "Plan" shall mean the Vectren Corporation At Risk Compensation Plan,
as herein established and as hereafter amended from time to time.
2.35 "Restricted Stock" shall mean an Award of Stock granted to a
Participant pursuant to Article VI herein.
2.36 "Restriction Period" shall mean the period during which the transfer
of Shares of Restricted Stock is restricted and is subject to a risk of
forfeiture, pursuant to Article VI.
2.37 "Retirement" shall mean the termination of employment for a
Participant who is eligible for early or normal retirement under the Vectren
Corporation Combined Non-Bargaining Retirement Plan. Notwithstanding the
foregoing, "Retirement" before the Participant has attained normal retirement
under such plan shall require prior approval by the Committee. With respect to
a Participant who is an Outside Director, "Retirement" shall mean the end of
the director's term of office upon attaining the mandatory retirement age for
directors.
2.38 "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the Exchange
Act as adopted in Exchange Act Release No. 34-37260 (May 30, 1996), or any
successor rule as amended from time to time.
2.39 "Section 162(m)" shall mean Section 162(m) of the Code, or any
successor section under the Code, as amended from time to time and as
interpreted by final or proposed regulations promulgated thereunder from time
to time.
2.40 "Securities Act" shall mean the Securities Act of 1933 and the rules
and regulations promulgated thereunder, or any successor law, as amended from
time to time.
B-7
2.41 "Stock" or "Shares" shall mean the shares of Common Stock of the
Company.
2.42 "Stock Appreciation Right" shall mean the right to receive an amount
equal to the excess of the Fair Market Value of a share of Stock (as
determined on the date of exercise) over the Option Price of a related Option
or the Fair Market Value of the Stock on the Grant Date of the Stock
Appreciation Right.
2.43 "Stock Option" or "Option" shall mean an Incentive Stock Option or a
Non-qualified Stock Option.
2.44 "Stock Unit Award" shall mean an award of Common Stock or units
granted under Section 7.4.
2.45 "Subsidiary" shall mean any entity (other than Vectren Corporation)
with respect to which Vectren Corporation owns, either directly or indirectly,
at least 50% of the total combined voting power of all classes of stock or
other ownership interest.
ARTICLE III
ELIGIBILITY
3.1 Eligibility. The Committee shall have sole and complete discretion in
determining the Eligible Employees and Outside Directors who shall be eligible
to participate in the Plan. An Outside Director who is selected by the
Committee to participate in the Plan shall only be eligible for Awards under
Articles V, VI or VII and shall not be eligible for Annual Incentive Awards
under Article VIII. An Eligible Employee or Outside Director of the Company
designated by the Committee as eligible hereunder shall be considered a
Participant upon receiving an Award under the Plan.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided for in Section 4.4
below, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed 4,000,000 Shares, which shall be
in a combination of Stock Options, Restricted Stock, and, at the discretion of
the Committee, other Awards as described in Article VII. Notwithstanding the
foregoing, the maximum aggregate number of shares which may be issued as
Awards in a form other than Stock Options shall not exceed 800,000 Shares.
Shares of Common Stock may be available from the authorized but unissued
Shares, Shares issued and reacquired by the Company or Shares purchased in the
open market for purposes of the Plan. Except as provided in Sections 4.2 and
4.3 herein, the issuance of Shares in connection with the exercise of, or as
other payment for, Awards under the Plan shall reduce the number of Shares
available for future Awards under the Plan.
4.2 Lapsed Awards or Forfeited Shares. In the event that:
(a) any Option or other Award granted under the Plan terminates,
expires, or lapses for any reason without having been exercised in
accordance with its terms,
(b) Shares issued pursuant to the Awards are canceled or forfeited
for any reason, or
(c) Awards are paid in cash,
the Shares subject to such Award shall thereafter be again available for grant
of an Award under the Plan.
4.3 Delivery of Shares as Payment. In the event a Participant pays for any
Option or other Award granted under the Plan through the delivery of
previously acquired shares of Common Stock, the number of shares of Common
Stock available for Awards under the Plan shall be increased by the number of
shares surrendered by the Participant.
B-8
4.4 Capital Adjustments. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering, or any other change in the corporate
structure, capitalization or Shares of the Company, the Committee shall make
such adjustments as are appropriate in the maximum number and kind of Shares
that may be issued under the Plan and to any Participant, in the number and
kind of Shares covered by any Awards granted before such change and in the
Option Price of any Option granted before such change or in the Fair Market
Value of the Shares on the Grant Date of any Stock Appreciation Right granted
before such change. Such adjustments shall be intended to put the Participant
in the same position as he or she was in immediately before such event.
ARTICLE V
STOCK OPTIONS
5.1 Grant of Stock Options. Subject to the limitation set forth in Section
4.1 and the other terms and provisions of the Plan and applicable law, the
Committee, at any time and from time to time, may grant Stock Options to
Participants as it shall determine. The Committee shall have sole and complete
discretion in determining the type of Option granted, the Option Price, the
duration of the Option, the number of Shares to which an Option pertains, any
conditions imposed upon the exercisability or the transferability of the
Options, including vesting conditions, the conditions under which the Option
may be terminated, and any such other provisions as may be warranted to comply
with the law or rules of any securities trading system or stock exchange. Each
Option grant shall have such specified terms and conditions detailed in an
Option Agreement. The Option Agreement shall specify whether the Option is
intended to be an Incentive Stock Option or a Non-qualified Stock Option.
However, no Incentive Stock Option may be awarded (a) after the tenth
anniversary of the date this Plan is adopted by the Board or approved by the
shareholders of the Company, whichever is earlier, or (b) to a Participant who
is not an Employee.
5.2 Option Price. The exercise price per share of Stock covered by an
Option shall be determined on the Grant Date by the Committee; provided that
the Option Price shall not be less than 100% of the Fair Market Value of the
Common Stock on the Grant Date. Further provided, in the case of an Incentive
Stock Option granted to any Employee who owns more than 10% of the total
combined voting power of all classes of stock of the Company or a Subsidiary,
the Option Price shall not be less than 110% of the Fair Market Value of the
Common Stock on the Grant Date.
(a) Restriction Against Re-Pricing or Replacement. No option shall
provide by its terms for the re-setting of its exercise price or for its
cancellation and reissuance, in whole or in part; provided that the
foregoing shall not limit the authority of the Committee to grant
additional Options hereunder.
5.3 Exercisability. Except as otherwise provided herein, Options granted
under the Plan shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall determine, which will be
specified in the Option Agreement and need not be the same for each
Participant. However, under no circumstances, may an Incentive Stock Option be
exercisable after the expiration of 10 years from the Grant Date (5 years from
the Grant Date for any Employee who owns more than 10% of the total combined
voting power of all classes of stock of the Company or a Subsidiary).
5.4 Method of Exercise. Options shall be exercised by the delivery of a
written notice from the Participant to the Company in a form prescribed by the
Committee setting forth the number of Shares with respect to which the Option
is to be exercised, accompanied by full payment of fee for the Shares. The
Option Price shall be payable to the Company in full in cash, or its
equivalent, or by delivery of Shares of Stock (not subject to any security
interest or pledge or acquired from the Company within the preceding six
months) having a Fair Market Value at the time of exercise equal to the
exercise price of the Shares, or by a combination of the foregoing. In
addition, at the request of the Participant, and subject to applicable laws
and regulations, the Company may (but shall not be required to) cooperate in a
Cashless Exercise of the Option. After receipt of written notice and full
payment of the Option Price, the Company shall deliver to the Participant as
soon as practicable, or, at a later
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date mutually agreed to with a Participant, a stock certificate or other
documentation, issued in the Participant's name, evidencing the number of
Shares with respect to which the Option was exercised.
5.5 Death, Disability, Retirement or Other Termination of Employment.
Except as otherwise provided in a Participant's Option Agreement:
(a) in the event of a Participant's death, Disability or Retirement,
Options granted to the Participant shall be considered immediately vested
and shall be exercisable at such time as specified in the Option Agreement,
and
(b) subject to Article X, in the event the Participant resigns, is
terminated from the Company or, in the case of an Outside Director, is not
reelected to the Board or otherwise resigns as a member of the Board,
Options which have not vested by such date shall be forfeited, and the
Participant shall have three months from such date to exercise vested
Options (but not beyond the expiration of the term of the Option, if
earlier). Notwithstanding the foregoing, if the Participant is terminated
from the Company for Cause (as defined in Section 10.4), the Participant
shall be required to exercise any vested Options immediately, and any
vested Options not immediately exercised shall lapse.
ARTICLE VI
RESTRICTED STOCK
6.1 Grant of Restricted Stock. Subject to the limitations set forth in
Section 4.1 and the other terms and provisions of the Plan and applicable law,
the Committee, at any time, and, from time to time, may grant shares of
Restricted Stock under the Plan to such Participants, and in such amounts and
for such duration and/or consideration as it shall determine.
6.2 Restricted Stock Award Agreement. Each Restricted Stock granted
hereunder shall be evidenced by an Award Agreement that shall specify the
Restriction Period, the conditions which must be satisfied prior to removal of
the restriction, the forfeiture of such Shares in the event such conditions
are not satisfied, the number of Shares of Restricted Stock granted, and such
other provisions as the Committee shall determine. The Committee may specify,
but is not limited to, the following types of conditions in the Award
Agreement: (a) conditions for acceleration or achievement of the end of the
Restriction Period based on any Performance Criteria and (b) any other
conditions or restrictions which the Committee may deem advisable, including
requirements established pursuant to the Securities Act, the Exchange Act, the
Code and any securities trading system or stock exchange upon which such
Shares under the Plan are listed.
Notwithstanding the foregoing, the Committee shall have the authority to
grant additional unrestricted Stock to a Participant hereunder, provided
Performance Criteria are satisfied for the Performance Period.
6.3 Restriction Period. Except as otherwise provided in this Article, the
Shares of Restricted Stock granted under the Plan may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until
the termination of the applicable Restriction Period or upon earlier
satisfaction of other conditions as specified by the Committee in its sole
discretion and set forth in the applicable Award Agreement.
Subject to Section 6.7 and Article X, if a Participant resigns, is
otherwise terminated from the Company or, in the case of an Outside Director
is not reelected to the Board or otherwise resigns as a member of the Board,
prior to the end of the Restriction Period, he or she will forfeit all
interests in the Award. All rights with respect to the Restricted Stock
granted to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant or his or her guardian or legal
representative.
6.4 Removal of Restrictions and Deferral of Payment. Except as otherwise
provided in this Article, Restricted Stock covered by each Award made under
the Plan shall become freely transferable by the Participant after the last
day of the Restriction Period and/or upon the satisfaction of other conditions
as determined by the Committee.
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Furthermore, upon the expiration of the Restriction Period, a Participant
may defer the value of the Awards under the non-qualified deferred
compensation plan, including any successor plan, sponsored by the Company if
the Participant is eligible under such plan and if such plan provides for
deferral of Awards hereunder.
6.5 Voting Rights. During the Restriction Period, Participants in whose
name Restricted Stock is granted under the Plan may exercise full voting
rights with respect to those shares.
6.6 Dividends and Other Distributions. During the Restriction Period,
Participants in whose name Restricted Stock is granted under the Plan shall be
entitled to receive all dividends and other distributions paid with respect to
those Shares. If any such dividends or distributions are paid in Shares, the
Shares shall be subject to the same restrictions on transferability and
forfeitability as the Restricted Stock with respect to which they were
distributed.
6.7 Death, Disability or Retirement. Except as otherwise provided in a
Participant's Award Agreement, in the event of the Participant's death,
Disability, or Retirement the following shall apply:
(a) If such event occurs after the end of the Performance Period but
before the end of the Restriction Period, restrictions on all Shares shall
be immediately removed;
(b) In the event of the Participant's Disability or Retirement before
the Performance Period has ended, the restrictions on the shares awarded to
the Participant shall be removed upon expiration of the Performance Period,
and the number of Shares the Participant shall be entitled to, if any,
shall equal (i) the number of Shares, if any, the Participant would
otherwise be entitled to had the individual been an active Participant at
the end of the Performance Period (i.e., as adjusted or forfeited based on
the Performance Criteria) multiplied by (ii) the portion of the Performance
Period the Participant was an active Participant hereunder; and
(c) In the event of the Participant's death before the Performance
Period has ended, the restrictions on the shares awarded to the Participant
shall be removed upon the Participant's date of death, and the number of
Shares the Participant shall be entitled to, if any, shall equal the number
of Shares contingently granted to the Participant, without any further
adjustment.
ARTICLE VII
OTHER STOCK BASED AWARDS
7.1 Grant of Other Stock Based Awards. Subject to the limitations set forth
in Section 4.1 and the other terms and provisions of the Plan and applicable
law, with prior Board approval, the Committee may, at any time and from time
to time, issue to Participants, either alone or in addition to other Awards
made under the Plan, Stock Appreciation Rights as described in Section 7.2,
Performance Awards as described in Section 7.3, or other Stock Unit Awards as
described in Section 7.4. Any such Awards shall be governed by the terms of an
Agreement, and the Committee may impose such terms and conditions, similar to
those described in Section 5.1 and/or Section 6.2 and not inconsistent with
the terms of this Plan, as it deems appropriate on such Award.
7.2 Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. Stock Appreciation Rights
granted in tandem with an Option or in addition to an Option may be granted
at the time of the Option or at a later time. No Stock Appreciation Rights
granted under the Plan may be exercisable until the expiration of at least
six months after the Grant Date (except that such limitations shall not
apply in the case of death or Disability of the Participant).
(b) Price. The exercise price of each Stock Appreciation Right shall be
determined at the time of grant by the Committee, subject to the limitation
that the grant price shall not be less than 100% of Fair Market Value of
the Common Stock on the Grant Date.
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(c) Exercise. Stock Appreciation Rights shall be exercised by the
delivery of a written notice from the Participant to the Company in a form
prescribed by the Committee. Upon such exercise, the Participant shall be
entitled to receive an amount equal to the excess of the Fair Market Value
of a Share over the grant price thereof on the date of exercise of the
Stock Appreciation Right multiplied by the number of Shares for which the
Stock Appreciation Right was granted.
(d) Payment. Payment upon exercise of the Stock Appreciation Right shall
be made in the form of cash, cash installments, Shares of Common Stock, or
a combination thereof, as determined in the sole and complete discretion of
the Committee. However, if any payment in the form of Shares results in a
fractional share, such payment for the fractional share shall be made in
cash.
7.3 Performance Awards.
(a) Grant of Performance Awards. Performance Awards granted hereunder
may be issued in the form of either Performance Units or Performance Shares
to Participants subject to the Performance Criteria, Performance Period and
other considerations or restrictions as the Committee shall determine. The
Committee shall have complete discretion in determining the number and
value of Performance Units or Performance Shares granted to each
Participant.
(b) Value of Performance Awards. The Committee shall determine the
number and value of Performance Units or Performance Shares granted to each
Participant as a Performance Award. The Committee shall set Performance
Criteria in its discretion for each Participant who is granted a
Performance Award. The extent to which such Performance Criteria are met
will determine the value of the Performance Unit or Performance Share to
the Participant.
(c) Settlement of Performance Awards. After a Performance Period has
ended, the holder of a Performance Unit or Performance Share shall be
entitled to receive the value thereof based on the degree to which the
Performance Criteria established by the Committee and set forth in the
Award Agreement have been satisfied.
(d) Form of Payment. Payment of the amount to which a Participant shall
be entitled upon the settlement of the Performance Award shall be made in
cash, Stock, or a combination thereof and may be made in a lump sum or
installments all as determined by the Committee and set forth in the
related Award Agreement.
7.4 Stock Unit Awards.
(a) Grant of Other Stock Unit Awards. Stock Unit Awards granted
hereunder may be in the form of Common Stock or other securities. The value
of each such Award shall be based, in whole or in part, on the value of the
underlying Common Stock on the Grant Date. The Committee, in its sole and
complete discretion, may determine that an Award, either in the form of a
Stock Unit Award under this Section or as an Award granted pursuant to the
other provisions of the Plan, may provide to the Participant (i) dividends
or dividend equivalents (payable on a current or deferred basis) and (ii)
cash payments in lieu of or in addition to an Award. Subject to the
provisions of the Plan, the Committee, in its sole and complete discretion,
shall determine the terms, restrictions, conditions, vesting requirements,
and payment rules of the Award. The Award Agreement shall specify the rules
of each Award as determined by the Committee. However, each Stock Unit
Award need not be subject to identical rules.
(b) Rules. The Committee, in its sole and complete discretion, may grant
a Stock Unit Award subject to the following rules:
(i) Common Stock or other securities issued pursuant to Stock Unit
Awards may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated by a Participant until the expiration of at
least six months from the Grant Date, except that such limitation shall
not apply in the case of death or Disability of the Participant, a
Change in Control, or where a Committee of the Board, comprised of non-
Employee directors of the Company within the meaning of Rule 16b-3,
approved the Award. To the extent Stock Unit Awards are deemed to be
derivative securities within the meaning
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of Rule 16b-3, the rights of a Participant who is subject to Section 16
of the Exchange Act with respect to such Awards shall not vest or be
exercisable until the expiration of at least six months from the Award
Date unless the Board or the Committee, comprised of non-Employee
directors of the Company within the meaning of Rule 16b-3, specifies
otherwise. All rights with respect to such Stock Unit Awards granted to
a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant or his or her guardian or legal
representative.
(ii) Stock Unit Awards may require the payment of cash consideration
by the Participant in receipt of the Award or provide that the Award,
and any Common Stock or other securities issued in conjunction with the
Award, be delivered without the payment of cash consideration.
(iii) The Committee, in its sole and complete discretion, may
establish certain Performance Criteria that may relate in whole or in
part to receipt of Stock Unit Awards.
(iv) Stock Unit Awards may be subject to a deferred payment schedule
and/or vesting over a specified period.
(v) The Committee, in its sole and complete discretion, as a result
of certain circumstances, may waive or otherwise remove, in whole or in
part, any restriction or condition imposed on a Stock Unit Award,
except to the extent that the existence of such discretion would cause
the tax deduction of the Company in respect of the Stock Unit Award to
be limited under Code Section 162(m).
7.5 Death, Disability, Retirement or Other Termination of Employment.
Unless otherwise provided in a Participant's Award Agreement, in the event of
death, Disability, or Retirement similar rules as provided in Section 5.5 or
6.7 (as applicable) shall apply to an Award granted under this Article.
7.6 Deferral of Payment. Notwithstanding the above, a Participant who is
entitled to payment of an Award under this Article and who is eligible under
the non-qualified deferred compensation plan sponsored by the Company may
defer such payment to the extent provided under such plan.
ARTICLE VIII
ANNUAL INCENTIVE AWARDS
8.1 Timing and Determination of Annual Incentive Awards. Following the
completion of a Performance Period, the Committee shall undertake or direct an
evaluation of Performance Criteria for such Performance Period as determined
in Section 8.2.
No Annual Incentive Award may be paid without a certification by the
Committee that the Performance Goals have been met.
Any Annual Incentive Awards will be paid at such time or times as may be
determined by the Committee following the end of the Performance Period to
which they relate, but not later than the last day of the third month
following the end of the Performance Period without the consent of the
affected Participant.
8.2 Performance Criteria for Annual Incentive Awards. Performance Criteria
of the Company will be established in writing by the Committee before the
beginning of each Performance Period or at such later time as may be permitted
by Section 162(m) of the Code to maintain the status of Annual Incentive
Awards as performance-based Compensation.
The Performance Period with respect to Awards shall be the calendar year or
any other period designated as such by the Committee.
8.3 Maximum Annual Incentive Award. The maximum individual Annual Incentive
Award for a Performance Period of twelve calendar months will be $1,500,000,
provided the Eligible Employee has been a Participant for such twelve month
period. In the event that an Annual Incentive Award is being determined for a
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Performance Period of less than twelve calendar months or for the Performance
Period in which the Eligible Employee becomes a Participant, dies or incurs a
Disability, the maximum Annual Incentive Award of $1,500,000 shall be prorated
in accordance with Section 8.4 or 8.5, whichever is applicable.
8.4 Short Performance Year.
(a) Death, Disability or Retirement. In the event of a Participant's
death, Disability or Retirement prior to the date the Annual Incentive
Award is paid, the following shall apply:
(i) In the event of the Participant's death or Disability before the
end of the Performance Period, the Company will be assumed to have
achieved a target performance level for the Performance Period in which
death or Disability occurs for purposes of determining the Annual
Incentive Award. In the event of the Participant's death or Disability
after the end of the Performance Period, but before the date the Annual
Incentive Award is paid, the Participant's Annual Incentive Award shall
be payable based on the actual Performance Criteria for the entire
period.
(ii) In the event of a Participant's Retirement, the Participant's
Annual Incentive Award shall be determined and payable following the
end of the Performance Period based on the actual Performance Criteria
for the entire period.
(iii) The amount of Annual Incentive Award shall be prorated as
necessary to reflect the period of time during which the individual was
employed in the Performance Period.
(b) New Participants. In the event an individual becomes a Participant
and is eligible for an Annual Incentive Award based on a Performance Period
shorter than twelve months, such Annual Incentive Award shall be prorated
to reflect the period of time the individual was employed in the
Performance Period.
8.5 Limitation on Right to Payment of Award. Notwithstanding any other Plan
provision to the contrary, no Participant shall have a right to receive
payment of an Annual Incentive Award under the Plan if, subsequent to the
commencement of the Performance Period and prior to the date any Award would
otherwise be payable, the Participant resigns or is otherwise terminated from
the Participating Company for reasons other than death, Disability, or
Retirement or following a Change in Control.
ARTICLE IX
SPECIAL PROVISIONS APPLICABLE TO COVERED PARTICIPANTS
9.1 Special Provisions Applicable to Covered Participants. Awards to
Covered Participants shall be governed by the conditions of this Article in
addition to the requirements of Articles V through VIII above. Should
conditions set forth under this Article conflict with the requirements of
Articles V through VIII, the conditions of this Article shall prevail.
(a) All Performance Criteria relating to Covered Participants for a
relevant Performance Period shall be established by the Committee in
writing prior to the beginning of the Performance Period, or by such other
later date for the Performance Period as may be permitted under Section
162(m) of the Code.
(b) The Performance Criteria must be objective and must satisfy third
party "objectivity" standards under Code Section 162(m), and the
regulations promulgated thereunder.
(c) The Performance Criteria shall not allow for any discretion by the
Committee as to an increase in any Award, but discretion to lower an Award
is permissible.
(d) The Award and payment of any Award under this Plan to a Covered
Participant with respect to a relevant Performance Period shall be
contingent upon the attainment of the Performance Criteria that are
applicable to such Award. The Committee shall certify in writing prior to
payment of any such Award that such applicable Performance Criteria have
been satisfied. Resolutions adopted by the Committee may be used for this
purpose.
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(e) The aggregate maximum Awards that may be granted to any Covered
Participant under Article VI and the maximum number of Shares represented
by Performance Shares that may be granted to any Covered Participant under
Article VII during any calendar year shall be 100,000 Shares. The maximum
aggregate amount payable in respect of all other Stock Based Awards (except
Stock Appreciation Rights) granted to a Covered Participant pursuant to
Article VII during any calendar year cannot exceed $1 million.
(f) The aggregate maximum number of shares of Stock subject to Options
under Article V and Stock Appreciation Rights under Article VII made to any
Covered Participant during any calendar year shall be 500,000.
(g) All Awards under this Plan to Covered Participants or to other
Participants who may become Covered Participants at a relevant future date
shall be further subject to such other conditions, restrictions, and
requirements as the Committee may determine to be necessary to carry out
the purposes of this Article, which is to avoid the loss of deductions by
the Company under Code section 162(m).
ARTICLE X
CHANGE IN CONTROL
10.1 Change in Control Agreements. The provision of this Section regarding
the terms and conditions of an Award Agreement upon a Change in Control shall
apply notwithstanding any Plan provision to the contrary, and notwithstanding
any agreement between the Participating Company and such Participant which
relate to the terms of the Awards hereunder upon a Change in Control.
Upon a Change in Control, the following shall apply:
(a) The Awards previously granted shall be immediately vested and not
subject to forfeiture due to any subsequent termination from employment or
removal or resignation from the Board.
(b) In the event the Participant terminates employment from the Company
with Good Reason or is terminated by the Company (except for Cause), any
Stock Option Awards shall be exercisable within such time as specified in
the Option Agreement. In the event the Participant otherwise resigns from
the Company any Stock Option Awards shall be exercisable within 3 months
following such termination of employment. In the event the Participant is
terminated by the Company for Cause, the Participant shall be required to
exercise Options immediately, and Options not immediately exercised shall
lapse.
(c) Restrictions on any Restricted Stock shall be eliminated as of such
event.
(d) If the Change in Control occurs before the end of the Performance
Period, no further adjustment shall be made to the number of Shares of
Restricted Stock contingently granted based on the Performance Criteria.
(e) Annual Incentive Awards shall be considered earned and shall not be
subject to forfeiture due to any subsequent termination from employment. If
the Change in Control occurs before the end of the Performance Period, the
amount of the Annual Incentive Award shall be determined assuming the
Company has achieved a target performance level and, the amount shall then
be multiplied by the portion of the Performance Period the individual was
an active Participant hereunder. If the Change in Control occurs after the
end of the Performance Period but before the Annual Incentive Award is
paid, the amount payable shall be determined based on the actual
performance level. In either case payment of the Annual Incentive Award
shall be made as soon as practicable following the Change in Control.
10.2 Change in Control Defined. For purposes of this Article, "Change in
Control" shall have the same meaning as such term or similar term is defined
in a Participant's individual agreement with the Company which relates to such
Participant's compensation and benefits upon the occurrence of a change in
ownership of the Participating Company or similar event.
(a) In the event there is no such agreement, "Change in Control" shall
mean:
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(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or more of
either (A) the then outstanding shares of Common Stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute an acquisition of control: any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), any acquisition by
the Company, any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company or any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the conditions described
in clauses (A), (B) and (C) of subsection (iii) of this section are
satisfied;
(ii) Individuals who, as of the Effective Date, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of
the Company (the "Board"); provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board;
(iii) Consummation of a reorganization, merger or consolidation, in
each case, unless, following such reorganization, merger or
consolidation, (A) more than sixty percent (60%) of, respectively, the
then outstanding shares of common stock of the corporation resulting
from such reorganization, merger or consolidation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company
Stock and Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding the Company, any employee benefit plan or
related trust of the Company, or such corporation resulting from such
reorganization, merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, twenty percent (20%) or more of
the Outstanding Company Common Stock or Outstanding Voting Securities,
as the case may be) beneficially owns, directly or indirectly, twenty
percent (20%) or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation;
(iv) Approval by the shareholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which following such sale
or other disposition (1) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners,
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respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (2) no Person (excluding the Company and any employee
benefit plan or related trust of the Company, or such corporation and
any Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, twenty percent (20%) or more of
the Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, twenty percent (20%) or more of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(3) at least a majority of the members of the board of directors of
such corporation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for
such sale or other disposition of assets of the Company; or
(v) The closing, as defined in the documents relating to, or as
evidenced by a certificate of any state or federal governmental
authority in connection with, a transaction approval of which by the
shareholders of the Company would constitute an "Change in Control"
under subsection (iii) or (iv) of this Section.
(b) Notwithstanding (a) above, if the Participant's employment is
terminated before a Change in Control as defined in this Section and the
Participant reasonably demonstrates that such termination (i) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a "Change in Control" and who effectuates a
"Change in Control" or (ii) otherwise occurred in connection with, or in
anticipation of, a "Change in Control" which actually occurs, then for all
purposes of this Agreement, the date of a "Change in Control" with respect
to the Participant shall mean the date immediately prior to the date of
such termination of the Participant's employment.
10.3 Good Reason Defined. For purposes of Section 10.1(b), "Good Reason"
shall mean, without the Participant's written consent,
(a) a demotion in the Participant's status, position or responsibilities
which, in his reasonable judgment, does not represent a promotion from his
status, position or responsibilities as in effect immediately prior to the
Change in Control;
(b) the assignment to the Participant of any duties or responsibilities
which, in his reasonable judgment, are inconsistent with such status,
position or responsibilities immediately prior to the Change in Control; or
any removal of the Participant from or failure to reappoint or reelect him
to any of such positions that the Participant had immediately prior to the
Change in Control;
(c) a reduction by the Company in the Participant's base salary or the
Company's failure to increase (within twelve (12) months of the
Participant's last increase in base salary) the Participant's base salary
after a Change in Control in an amount which at least equals, on a
percentage basis, the average percentage increase in base salary for all
executive and senior executives of the Company effected in the preceding
twelve (12) months;
(d) the relocation of the principal executive offices of the Company or
Subsidiary, whichever entity on behalf of which the Participant performs a
principal function of that entity as part of his employment services, to a
location more than fifty (50) miles outside the Evansville, Indiana
metropolitan area or, if his services are not performed in Evansville,
Indiana, the Company's requiring him to be based at any place other than
the location at which he performed his duties immediately prior to the
Change in Control, except for required travel on the Company's business to
an extent substantially consistent with his business travel obligations at
the time of a Change in Control;
(e) the failure by the Company to continue in effect any incentive,
bonus or other compensation plan in which the Participant participates
immediately prior to the Change in Control, including but not limited
B-17
to this Plan, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan), with which he has consented, has been made
with respect to such plan in connection with the Change in Control, or the
failure by the Company to continue his participation therein, or any action
by the Company which would directly or indirectly materially reduce his
participation therein;
(f) the failure by the Company to continue to provide the Participant
with benefits substantially similar to those enjoyed by him or to which he
was entitled under any of the Company's pension, profit sharing, life
insurance, medical, dental, health and accident, or disability plans in
which he was participating at the time of a Change in Control, the taking
of any action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive him of any material fringe benefit
enjoyed by him or to which he was entitled at the time of the Change in
Control, or the failure by the Company to provide him with the number of
paid vacation and sick leave days to which he is entitled on the basis of
years of service with the Company in accordance with the Company's normal
vacation policy in effect on the date hereof;
(g) the failure of the Company to obtain a satisfactory agreement with
any successor or assign of the Company to assume and agree to perform under
any Change in Control agreement between the Company and the Participant; or
(h) any request by the Company that the Participant participate in an
unlawful act or take any action constituting a breach of the Participant's
professional standard of conduct.
For the purpose of Section 10.1(b), "Good Reason" shall also mean with the
Participant's written consent, the exercise by the Participant of a
contractual right to terminate his or her employment voluntarily, without good
reason, during a thirty (30) day period immediately following the first annual
anniversary of a Change in Control.
10.4 Cause Defined. For purposes of Sections 10.1(b) and 5.5(b), "Cause"
shall mean
(a) intentional gross misconduct by the Participant damaging in a
material way to the Company, or
(b) a material breach of the Participant's employment agreement, after
the Company has given the Participant notice thereof and a reasonable
opportunity to cure.
ARTICLE XI
ADMINISTRATION
11.1 The Committee. The Plan shall be administered and interpreted by the
Committee which shall have full authority, discretion and power necessary or
desirable for such administration and interpretation. The express grant in
this Plan of any specific power to the Committee shall not be construed as
limiting any power or authority of the Committee. In its sole and complete
discretion the Committee may adopt, alter, suspend and repeal any such
administrative rules, regulations, guidelines, and practices governing the
operation of the Plan as it shall from time to time deem advisable. In
addition to any other powers and, subject to the provisions of the Plan, the
Committee shall have the following specific powers: (a) to determine the terms
and conditions upon which Awards may be made and exercised; (b) to determine
the Participants to which Awards shall be made; (c) to determine all terms and
provisions of each Agreement, which need not be identical for types of Awards
nor for the same type of Award to different Participants; (d) to construe and
interpret all terms, conditions and provisions of the Plan and all Agreements;
(e) to establish, amend, or waive rules or regulations for the Plan's
administration; (f) to accelerate the exercisability of any Award, the length
of a Performance Period or the termination of any Period of Restriction; and
(g) to make all other determinations and take all other actions necessary or
advisable for the administration or interpretation of the Plan. The Committee
may seek the assistance or advice of any persons it deems necessary to the
proper administration of the Plan.
11.2 Committee Decisions. Unless strictly and expressly prohibited by law,
all determinations and decisions made by the Committee pursuant to the
provisions of this Plan shall be final, conclusive, and binding upon all
persons, including Participants, Designated Beneficiaries, the Company, its
shareholders and employees.
11.3 Rule 16b-3 and Section 162(m) Requirements. Notwithstanding any other
provision of the Plan, the Committee may impose such conditions on any Award
as it may deem to be advisable or required to satisfy the requirements of Rule
16b-3 or Section 162(m).
B-18
ARTICLE XII
GENERAL PROVISIONS
12.1 Withholding. The Company shall have the right to deduct or withhold,
or require a Participant to remit to the Company, any taxes required by law to
be withheld from Awards made under this Plan. In the event an Award is paid in
the form of Common Stock, the Participant may remit to the Company the amount
of any taxes required to be withheld from such payment in cash, or, in lieu
thereof, the Company may withhold (or the Participant may be provided the
opportunity to elect to tender) the number of shares of Common Stock equal in
Fair Market Value to the amount required to be withheld.
12.2 Terms of Awards. Each Award granted under the Plan shall be evidenced
in a corresponding Award Agreement provided in writing to the Participant,
which shall specify the terms, conditions and any rules applicable to the
Award, including but not limited to the effect of a Change in Control, or
death, Disability, or other termination of employment of the Participant on
the Award.
12.3 Non-transferability. No Award, including any Options, granted under
the Plan may be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, except by will or the laws of descent and distribution. Further,
no lien, obligation, or liability of the Participant may be assigned to any
right or interest of the Participant in an Award under this Plan.
12.4 No Right to Employment. Neither the Plan, nor any Award made, or any
other action taken, hereunder shall be construed as giving any Participant or
other person any right of employment or continued employment with the
Participating Company.
12.5 Rights as Shareholder. Subject to the terms and conditions of each
particular Award, no Participant or Designated Beneficiary shall be deemed a
shareholder of the Company nor have any rights as such with respect to any
shares of Common Stock to be provided under the Plan until he or she has
become the holder of such shares.
12.6 Construction of the Plan. Except to the extent superceded by the laws
of the United States, the Plan and all Agreements shall be governed,
construed, interpreted and administered in accordance with the laws of the
State of Indiana. In the event any provision of the Plan or any Agreement
shall be held invalid, illegal or unenforceable, in whole or in part, for any
reason, such determination shall not affect the validity, legality or
enforceability of any remaining provision, portion of provision or the Plan
overall, which shall remain in full force and effect as if the Plan had been
absent the invalid, illegal or unenforceable provision or portion thereof.
12.7 Amendment of Plan. The Committee or the Board of Directors may amend,
suspend, or terminate the Plan or any portion thereof at any time, provided
such amendment is made with shareholder approval if and to the extent such
approval is necessary to comply with any legal requirement, including for
these purposes any approval requirement which is a requirement for the
performance-based compensation exception under Code Section 162(m).
12.8 Amendment of Award. In no event shall the Committee increase the
amount payable pursuant to an Award after it has been granted. In addition, no
amendment shall be made to an outstanding Award without written consent of the
affected Participant.
12.9 Exemption from Computation of Compensation for Other Purposes. By
acceptance of an applicable Award under this Plan, subject to the conditions
of such Award, each Participant shall be considered in agreement that all
shares of Stock sold or awarded and all Options granted under this Plan shall
be considered extraordinary, special incentive compensation and will not be
included as "earnings," "wages," "salary" or "compensation" in any pension,
welfare, life insurance, or other employee benefit arrangement of the Company
except as otherwise specifically provided in such arrangement.
B-19
12.10 Legend. In it sole and complete discretion, the Committee may elect
to legend certificates representing Shares sold or awarded under the Plan, to
make appropriate references to the restrictions imposed on such Shares.
12.11 Special Provisions for Certain Participants. All Award Agreements for
Participants subject to Section 16(b) of the Exchange Act shall be deemed to
include any such additional terms, conditions, limitations and provisions as
Rule 16b-3 requires, unless the Committee in its discretion determines that
any such Award should not be governed by Rule 16b-3. All performance-based
Awards to Covered Participants shall be deemed to include any such additional
terms, conditions, limitations and provisions as are necessary to comply with
the performance-based compensation exemption of Code Section 162(m), unless
the Committee, in its discretion, determines that any such Award is not
intended to qualify for the exemption for performance-based compensation under
Code Section 162(m).
12.12 Unfunded Plan. The Plan shall be unfunded and the Company shall not
be required to segregate any assets in connection with any Awards under the
Plan. Any liability of the Company to any person with respect to any Award
under the Plan or any Award Agreement shall be based solely upon the
contractual obligations that may be created as a result of the Plan or any
such award or agreement. No such obligation of the Company shall be deemed to
be secured by any pledge of, encumbrance on, or other interest in, any
property or asset of the Company or any Subsidiary. Nothing contained in the
Plan or any Award Agreement shall be construed as creating in respect of any
Participant (or beneficiary thereof or any other person) any equity or other
interest of any kind in any assets of the Company or any Subsidiary or
creating a trust of any kind or a fiduciary relationship of any kind between
the Company, any Subsidiary and/or any such Participant, any beneficiary
thereof or any other person.
12.13 Conflict with Employment Agreement. Except as specified in Article X
or otherwise restricted under Section 12.11, to the extent any provision of
this Plan conflicts with any provision of a written employment agreement
between an Employee and the Company, the material terms of which have been
approved by the Board, the provisions of the employment agreement shall
control.
12.14 Gender and Number. Where the context admits, words in the masculine
gender shall include the feminine gender, the plural shall include the
singular and the singular shall include the plural.
12.15 Severability. In the event any provision of this Plan shall be held
to be illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining parts of this Plan, and this Plan shall be construed
and endorsed as if such illegal or invalid provision had never been contained
in this Plan.
12.16 Effect of Headings. The descriptive headings of the Articles and
Sections of this Plan are inserted for convenience of reference and
identification only and do not constitute a part of this Plan for purposes of
interpretation.
12.17 No Liability. No member of the Board or the Committee or any officer
or Employee shall be personally liable for any action, omission or
determination made in good faith in connection with this Plan. The Company
shall indemnify and hold harmless the members of the Committee, the Board and
the officers and Employees, and each of them, from and against any and all
loss which results from liability to which any of them may be subjected by
reason of any act or conduct (except willful misconduct or gross negligence)
in their official capacities in connection with the administration of this
Plan, including all expenses reasonably incurred in their defense, in case the
Company fails to provide such defense. By participating in this Plan, each
Employee agrees to release and hold harmless the Company and its Subsidiaries
(and their respective directors, officers and employees), the Board and the
Committee, from and against any tax or other liability, including without
limitation, interest and penalties, incurred by the Employee in connection
with his participation in this Plan.
B-20
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by
its duly authorized Compensation Committee Chair as of this 24th day of
January, 2001.
Vectren Corporation
/s/ Robert L. Koch II
By: _________________________________
Robert L. Koch II
Compensation Committee Chair
ATTEST
/s/ Ronald E. Christian
By: _________________________________
Ronald E. Christian
Senior Vice President, Secretary
and
General Counsel
B-21
[X] Please mark your vote as in this example. 5455
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE
VOTED FOR PROPOSALS 1 AND 2.
--------------------------------------------------------------------------------
The Board of Director recommends a vote FOR each of the items below
--------------------------------------------------------------------------------
FOR WITHHOLD
1. Election of [_] [_]
Directors
FOR AGAINST ABSTAIN
2. Approval of the Company's [_] [_] [_]
At-Risk Compensation
Plan.
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Nominees:
01. John D. Engelbrecht
02. William G. Mays
03. J. Timothy McGinley
04. Richard P. Rechter
For, except vote withheld from the following nominee(s):
--------------------------------------------------------------------------------
THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE VOTE ON THE PROPOSALS.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY. THANK YOU.
Signature of Shareholder(s) ________________________________ Date: ______
Please sign exactly as your name(s) appears hereon. All joint tenants should
date this proxy and sign. When signing as attorney, executor, administrator,
trustee or guardian, give full title as such. If a corporation, sign the full
corporate name by an authorized officer. If a partnership, sign in partnership
name by authorized person.
. FOLD AND DETACH HERE .
VECTREN CORPORATION
Dear Shareholder:
We encourage you to vote your shares electronically this year either by
telephone or via the Internet. This will eliminate the need to return your proxy
card. You will need your proxy card and Social Security number (where
applicable) when voting your shares electronically. The Vote Control Number that
appears in the box above, just below the perforation, must be used in order to
vote by telephone or via the Internet.
The EquiServe Vote by Telephone and Vote by Internet systems can be accessed
24-hours a day, seven days a week up until the day prior to the meeting.
To Vote by Telephone:
---------------------
Using a touch-tone phone call Toll-free: 1-877-779-8683)
To Vote by Internet:
--------------------
Log on to the Internet and go to the website: http://www.eproxyvote.com/vvc
Note: If you vote over the Internet, you may incur costs such as
telecommunication and Internet access charges for which you will be responsible.
THANK YOU FOR VOTING YOUR SHARES.
YOUR VOTE IS IMPORTANT!
Do Not Return this Proxy Card if you are Voting by Telephone or the Internet.
PROXY
VECTREN CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 25, 2001
The undersigned hereby appoints Jerome A. Benkert, Jr., Ronald E.
Christian, and Richard G. Lynch and each of them, jointly and severally, with
power of substitution, to vote on all matters which may properly come before the
2001 Annual Meeting of shareholders of Vectren Corporation or any adjournment
thereof.
(Continued and to be signed on reverse side)
. FOLD AND DETACH HERE .
Please date, sign and mail your
proxy card back as soon a possible!
Annual Meeting of Shareholders
VECTREN CORPORATION
April 25, 2001