Vectren 2008 Annual Report Download - page 94

92
On February 11, 2009, the Company issued 234,450 restricted units to executives and other key non-officer
employees. These agreements have different terms compared previous awards. Awards to executives were only in
the form of restricted units and can only be settled in cash. Further, dividends on those awards are performance
based and are converted into equivalent restricted units based on the closing price of Vectren’s stock on the
payment date, and therefore are subject to forfeiture. Non-officer awards were time based, not performance based,
and can only be settled in cash. In addition, on February 11, 2009, participants forfeited 56,905 shares related to
awards measured during the three year performance period ending December 31, 2008.
Stock Option Related Matters
In the past, option awards were granted to executives and other key employees with an exercise price equal to the
market price of the Company’s stock at the date of grant; those option awards generally required 3 years of
continuous service and have 10-year contractual terms. These awards generally vested on a pro-rata basis over 3
years. The last option grant occurred in 2005, and the Company does not intend to issue options in the future.
The fair value of option awards granted in prior years was estimated on the date of grant using a Black-Scholes
option valuation model. Expected volatilities were based on historical volatility of the Company’s stock and other
factors. The Company used historical data to estimate the expected term and forfeiture patterns of the options. The
risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in
effect at the time of grant.
A summary of the status of the Company’s stock option awards as of December 31, 2008, and changes during the
year ended December 31, 2008, follows:
Weighted average Aggregate
Remaining Intrinsic
Shares Exercise Contractual Value
Price Term (years) (In millions)
Outstanding at January 1, 2008 1,432,774 23.86$
Granted - -$
Exercised (97,560) 22.52$
Forfeited or expired - -$
Outstanding at December 31, 2008 1,335,214 23.95$ 4.1 1.9$
Exercisable at December 31, 2008 1,335,214 23.95$ 4.1 1.9$
The total intrinsic value of options exercised during the twelve months ended December 31, 2008, 2007, and 2006
was $0.5 million, $3.6 million, and $0.8 million, respectively. As of December 31, 2008, all compensation cost has
been recognized. The actual tax benefit realized for tax deductions from option exercises was approximately $0.1
million in 2008, $1.2 million in 2007, and $0.2 million in 2006.
The Company periodically issues new shares and also from time to time repurchases shares to satisfy share option
exercises. During the year ended December 31, 2008, 2007, and 2006, the Company received cash upon exercise
of stock options totaling approximately $1.9 million, $11.4 million, and $3.2 million, respectively. During those
periods, the Company repurchased shares totaling $2.2 million in 2008, $6.9 million in 2007, and $3.8 million in
2006. The Company does not expect future period repurchase activity to be materially different.
Deferred Compensation Plan Matters
The Company has nonqualified deferred compensation plans that include an option to invest in Company phantom
stock. The amount recorded in earnings related to the investment activities in Vectren phantom stock associated
with these plans during the years ended December 31, 2008, 2007, and 2006, was a cost of $0.6 million, a cost of
$0.4 million and a benefit of $0.3 million, respectively.