Mercury Insurance 2010 Annual Report Download - page 104

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MERCURY GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference
between the Company’s closing stock price and the exercise price, multiplied by the number of in-the-money
options) that would have been received by the option holders had all options been exercised on December 31,
2010. The aggregate intrinsic value of stock options exercised was $431,000, $508,000, and $442,000 during
2010, 2009, and 2008, respectively. The total fair value of options vested was $498,000, $763,000, and $652,000
during 2010, 2009, and 2008, respectively.
The following table presents information regarding stock options outstanding at December 31, 2010:
Options Outstanding Options Exercisable
Range of Exercise Prices
Number of
Options
Weighted-Avg.
Remaining
Contractual Life
(Years)
Weighted-
Avg. Exercise
Price
Number of
Options
Weighted-
Avg. Exercise
Price
$22.06-38.78 ......................... 194,475 7.7 $33.81 51,975 $34.11
$39.11-50.89 ......................... 207,200 5.0 $45.82 143,450 $44.76
$51.43-58.83 ......................... 214,000 5.2 $54.53 184,200 $54.74
As of December 31, 2010, $763,800 of total unrecognized compensation cost related to non-vested stock
options is expected to be recognized over a weighted-average period of 1.9 years.
Under the 2005 Plan, the Compensation Committee of the Company’s Board of Directors granted to Gabriel
Tirador, the Company’s Chief Executive Officer, 10,000 shares of restricted stock on March 23, 2010. On
October 1, 2010, the Compensation Committee granted 45,000 restricted stock units to the Company’s senior
management and key employees under the Plan. The restricted stock and restricted stock units will vest at the end
of a three-year performance period, and then only if, and to the extent that, the Company’s cumulative
underwriting income during such three-year performance period ending December 31, 2012 achieves the
threshold performance levels established by the Compensation Committee.
The fair value of the restricted stock grant was determined based on the market price on the date of grant.
Compensation cost has been recognized based on management’s best estimates that performance goals will be
achieved. If such goals are not met as of the end of the three-year performance period, no compensation cost
would be recognized and any recognized compensation cost would be reversed. In 2010, total compensation cost
was $161,000, and the corresponding income tax benefit recognized in the income statement was $57,000. As of
December 31, 2010, there was $977,000 of unrecognized compensation cost that is expected to be recognized
over next 2 years. A summary of the restricted stock and restricted stock units activity as of December 31, 2010,
and changes during the year then ended is as follows:
Shares
Weighted-Average
Fair Value per
Share
Outstanding at January 1 ...................................... 0
Granted .................................................... 55,000 $41.40
Vested ..................................................... 0
Forfeited/Canceled ........................................... 0
Outstanding at December 31 ................................... 55,000 $41.40
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