Exhibit 99.1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No._)
Filed by the Registrant |X|
Filed by a Party other than the Registrant
|_| Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-12
VECTREN CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- ---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- ---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ---------------------------------------------------------------------------
(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
Reg. (S) 240.14a-101. SEC 1913 (3-99)
[GRAPHIC OMITTED]
VECTREN CORPORATION
20 N. W. Fourth Street
Evansville, Indiana 47708
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 2003
TO THE SHAREHOLDERS OF VECTREN CORPORATION
The annual meeting of shareholders of Vectren Corporation (the "Company")
will be held at The Victory Theatre, 600 Main Street, Evansville, Indiana, on
Wednesday, May 14, 2003, at 10:00 a.m. (Central Daylight Time), for the
following purposes:
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;
2. The ratification of the reappointment of Deloitte & Touche LLP as the
independent accountants for the Company and its subsidiaries for 2003.
3. The adoption of, if presented at the meeting, a shareholder proposal
by Massachusetts Carpenters Pension & Annuity Funds, which the board
of directors OPPOSES.
4. The adoption of, if presented at the meeting, a shareholder proposal
by Sheet Metal Workers' International Association, which the board of
directors OPPOSES.
5. The transaction of 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 24, 2003, 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 1-800-542-1160 or using the Internet
(www.votefast.com) 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.
If you are unable to attend the meeting, you may listen to the webcast
live, as well as view the accompanying presentation, on Vectren Corporation's
website, http://www.vectren.com. Approximately two hours after the conclusion of
the webcast, an audio archive will be made available at the same location.
By order of the board of directors.
VECTREN CORPORATION
/s/Ronald E. Christian
By RONALD E. CHRISTIAN
Senior Vice President, General Counsel,
and Corporate Secretary
Evansville, Indiana
April 2, 2003
LOCATION OF MAY 14, 2003
ANNUAL SHAREHOLDERS' MEETING
[GRAPHIC OMITTED]
The Victory Theatre
600 Main Street
Evansville, Indiana 47708
Parking for shareholders will be provided in the Sycamore Street Parking
Garage, 500 Sycamore Street. Enter via the N.W. Fifth Street entrance and
indicate to the parking garage attendant that you are there for the Vectren
meeting. Handicapped individuals may be dropped off at the N.W. Sixth Street
entrance of the Victory Theatre near the lobby.
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.
2
TABLE OF CONTENTS
Page
------
Proxy Statement 1
Solicitations of Proxies 1
Purposes of Meeting 1
Voting Securities 2
Item 1: Election of Directors 2
Class III Directors 2
Class I Directors 3
Class II Directors 4
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 8
Report of the Nominating and Corporate Governance Committee 8
A. Scope of Responsibilities 8
B. 2002 Accomplishments 9
C. Commitment 10
Report of the Corporate Affairs Committee 11
A. Scope of Responsibilities 11
B. 2002 Accomplishments 11
C. Commitment 12
Report of the Audit Committee 12
A. Scope of Responsibilities 12
B. 2002 Accomplishments 13
C. Delineation of Responsibilities Between Management,
the Independent Accountants and the Audit Committee 14
D. 2002 Form 10-K 14
E. Reappointment of Deloitte & Touche LLP 14
F. Commitment 15
Executive Compensation and Other Information 15
Report of the Compensation and Benefits Committee 15
A. Executive Compensation Policy 15
B. Components of Executive Compensation 15
Base Salary 15
Annual Incentive Compensation 16
Long-Term Incentive Compensation 17
C. Chief Executive Officer Compensation 18
D. Share Ownership 18
E. Compensation Consultant, Termination Benefits Agreements
and Deductibility of Executive Compensation 19
F. Shareholder Proposals 19
Page
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Compensation 20
Table I: Summary Compensation 20
Table II: Option/Stock Appreciation Rights Grants In Last
Fiscal Year 22
Table III: Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values from
1/1/2002--12/31/2002 23
Table IV: Long-Term Incentive Plan Awards in Last Fiscal Year 23
Retirement Savings Plan 24
Retirement Plans 24
Table: Pension Plan 25
Stock Option Plan 26
Employment Agreements 26
Corporate Performance 27
Comparison of 33 Month Cumulative Total Return 27
Item 2: Ratification Of Appointment Of Independent Accountants 28
Independent Public Accountants of the Company 28
Audit Fees 28
Financial Systems Design & Implementation Fees 28
All Other Fees 28
Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 29
Item 3: The Adoption of, if Presented at the Meeting, a
Shareholder Proposal by Massachusetts Carpenters Pension
& Annuity Funds, Which the Board of Directors Opposes 29
Supporting Statement 29
Statement of Opposition 30
Vote Required 31
Item 4: The Adoption of, if Presented at the Meeting, a Shareholder
Proposal by Sheet Metal Workers' International
Association, Which the Board of Directors Opposes 31
Supporting Statement 31
Statement of Opposition 32
Vote Required 32
Cost and Method of Solicitation 32
Annual Report 33
Revocation Rights 33
Nomination of Directors by Shareholders 33
Shareholders' Proposals for 2004 Annual Meeting 33
APPENDIX A Corporate Governance Guidelines A-1
APPENDIX B Nominating and Corporate Governance Committee Charter B-1
APPENDIX C Corporate Affairs Committee Charter C-1
APPENDIX D Audit Committee Charter D-1
APPENDIX E Compensation and Benefits Committee Charter E-1
APPENDIX F Executive Committee Charter F-1
COMMUNICATIONS TO NON-EMPLOYEE DIRECTORS
In February 2003, the Nominating and Corporate Governance committee
("Governance committee") of the board of directors created a new position of
Lead director, whose primary responsibilities are set forth in the corporate
governance guidelines attached as Appendix A. The corporate governance
guidelines also provide that the Chair of the Governance committee is to serve
as the Lead director. In 2003, the Chair of the Governance committee is Robert
L. Koch II. In February of 2003, Mr. Koch was elected Lead director by the full
board.
The Audit committee is responsible for establishing, reviewing and
updating a Code of Ethical Conduct and ensuring that management has established
a system to enforce this Code. The committee also ensures that the Company
implements and follows necessary and appropriate financial reporting processes.
In 2003, the Chair of the Audit committee is J. Timothy McGinley.
Shareholders and other parties interested in communicating directly with
the Lead director, Chair of the Audit committee or with any of the non-employee
directors as a group may do so by writing to:
Lead Director, Chair, Audit Committee,
or Non-Employee Directors
Vectren Corporation
P. O. Box 3144
Evansville, IN 47731-3144
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
Victory Theatre, 600 Main Street, Evansville, Indiana, on Wednesday, May 14,
2003, at 10:00 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 April 2, 2003.
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.
If your shares are held in a brokerage account, you will receive a Voting
Instruction Form asking how you want your shares to be voted. If you give
instructions on the form, your shares must be voted as you direct. If you do not
give instructions, one of two things can happen depending on the type of
proposal. For some proposals such as the election of directors, the broker may
vote your shares at its discretion. But for other proposals, including
shareholder proposals, the broker may not vote your shares at all. When that
happens, it is called a "broker non-vote."
PURPOSES OF MEETING
As of this date, the only known business to be presented at the 2003
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; (2) the ratification of the reappointment of Deloitte &
Touche LLP as the independent accountants for the Company and its subsidiaries
for 2003; (3) the adoption of, if presented at the meeting, a shareholder
proposal by Massachusetts Carpenters Pension & Annuity Funds, which the board of
directors OPPOSES; and (4) the adoption of, if presented at the meeting, a
shareholder proposal by Sheet Metal Workers' International Association, which
the board of directors OPPOSES. 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
As of March 24, 2003, the Company had one class of capital stock
outstanding, consisting of 68,070,500 shares of common stock without par value.
The holders of the outstanding shares of common stock are entitled 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 24, 2003
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 thirteen directors
divided into three classes having staggered terms of three years each. The Class
III directors, John M. Dunn, Niel C. Ellerbrook, Anton H. George, and Robert L.
Koch II, are nominees for election with terms expiring in 2006. Andrew E. Goebel
is also currently a Class III director, but is retiring from the Company
effective April 30, 2003, and will not be standing for reelection to the board.
The Class I directors, John D. Engelbrecht, William G. Mays, J. Timothy
McGinley, and Richard P. Rechter, have terms expiring in 2004. The Class II
directors, L. A. Ferger, Ronald G. Reherman, Richard W. Shymanski, and Jean L.
Wojtowicz, have terms expiring in 2005. Mr. Ellerbrook also serves as Chair,
Chief Executive Officer and director of Vectren Utility Holdings, Inc. ("VUHI"),
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. Mr. Ellerbrook also serves as Chair and director of Vectren Capital,
Corp. ("Vectren Capital"), the Company's subsidiary that serves as the vehicle
for financing non-regulated business activities, Vectren Enterprises, Inc.
("Vectren Enterprises"), the Company's subsidiary that serves as the corporate
parent for non-regulated business activities, and Vectren Foundation, Inc.
("Vectren Foundation"), the entity that serves as the vehicle for fulfilling
philanthropic objectives in the areas where the Company's subsidiaries provide
service.
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 May 14, 2003.
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 III Directors--Term expiring 2006
John M. Dunn, age 65, has been a director of SIGCORP, Inc. ("SIGCORP"), a
predecessor to the Company, or the Company since 1996. Mr. Dunn is President and
Chief Executive Officer of Dunn Hospitality Group, Ltd., a hotel development and
management company. He is also a director of Old National Bank of Evansville,
Indiana.
Niel C. Ellerbrook, age 54, has been a director of Indiana Energy, Inc.
("Indiana Energy"), a predecessor to the Company, Indiana Gas, SIGECO, VUHI 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, which was the point in time when SIGCORP and Indiana Energy merged to
create the Company. 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 the
Chairman, Chief Executive Officer and a director of Vectren Utility Holdings.
Mr. Ellerbrook is also the Chair and a director of Vectren Capital and Vectren
Enterprises and President, Chair and a director of Vectren Foundation. He is
also a director of Old National Bancorp and Deaconess Hospital of Evansville,
Indiana.
Anton H. George, age 43, 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.
Robert L. Koch II, age 64, has been a director of SIGECO, SIGCORP, or the
Company since 1986. As Chair of the Nominating and Corporate Governance
Committee of the Company's board, Mr. Koch is also the Lead director among the
non-management board members. Mr. Koch is President and Chief Executive Officer
of Koch Enterprises, Inc., a holding company comprised of worldwide subsidiaries
that produce aluminum die castings, industrial painting systems, structural
adhesives and distribute heating and air conditioning equipment and hydraulic
and pneumatic equipment. Mr. Koch is also a director of Fifth Third Bancorp.
The board of directors recommends a vote "FOR" all nominees for Class III
director.
Class I Directors--Term expiring 2004
John D. Engelbrecht, age 51, has been a director of SIGCORP or the Company
since 1996. Mr. Engelbrecht is President and Chief Executive Officer of South
Central Communications Corp., 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 57, has been a director of Indiana Energy or the
Company since 1998. Mr. Mays is President and Chief Executive Officer of Mays
Chemical Company, Inc., an Indianapolis, Indiana based chemical distribution
company. Mr. Mays is also a director of Anthem, Inc.
J. Timothy McGinley, age 62, has been a director of Indiana Energy or the
Company since January 1999. Mr. McGinley is Managing Partner and principal owner
of House Investments, Inc., a real estate investment company. He is also a
director of Waterfield Mortgage Corporation and he is the Chairman of the Board
of Trustees of Purdue University.
Richard P. Rechter, age 63, has been a director of Indiana Gas, Indiana
Energy, or the Company since 1984. Mr. Rechter is a director and Chairman of
Rogers Group, Inc., a company providing crushed stone, sand and gravel, asphalt,
highway construction, concrete masonry and construction materials recycling. Mr.
Rechter is also a director of Monroe Bank and Monroe Bancorp.
Class II Directors--Term expiring 2005
L. A. Ferger, age 68, 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.
Ronald G. Reherman, age 67, 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
Corporation.
Richard W. Shymanski, age 66, has been a director of SIGECO, SIGCORP, or
the Company since 1989. Mr. Shymanski is a consultant to the Private Client
Group of Fifth Third Bank. He is also the retired Chairman and Chief Executive
Officer of Harding, Shymanski & Co., P.C., Certified Public Accountants and
consultants, in Evansville, Indiana.
Jean L. Wojtowicz, age 45, 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.
OTHER EXECUTIVE OFFICERS
Other executive officers of the Company are Andrew E. Goebel, age 55,
Jerome A. Benkert, Jr., age 44, Carl L. Chapman, age 47, and Ronald E.
Christian, age 45.
Mr. Goebel has served as President and Chief Operating Officer of the
Company 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 Corporation, Vectren Utility
Holdings, Vectren Capital, and Vectren Enterprises. Mr. Goebel is retiring from
the Company effective April 30, 2003.
Mr. Benkert has served as Executive Vice President and Chief Financial
Officer of the Company since March 2000 and as Treasurer of the Company from
October 2001 to March 31, 2002. Mr. Benkert has also served as director of
Indiana Gas, SIGECO and VUHI since March 31, 2000. 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
Assistant Treasurer for Indiana Gas from January 1, 1991 to October 1, 1993. 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.
On March 31, 2000, Mr. Chapman was elected Executive Vice President of the
Company and President of Vectren Enterprises, Inc. Prior to March 31, 2000 and
since 1999, Mr. Chapman served as Executive Vice President and Chief Financial
Officer of Indiana Energy. From October 1, 1997 to June, 2002, Mr. Chapman
served as President of IGC Energy, Inc., which has been renamed Vectren Energy
Marketing and Services, Inc.("VEMS"). Mr. Chapman served as President of
ProLiance Energy, LLC ("ProLiance"), a gas supply and energy marketing joint
venture partially owned by VEMS, 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. Christian was elected Senior Vice President, General
Counsel and Secretary of the Company. Mr. Christian has also served as director
of Indiana Gas, SIGECO and VUHI since March 31, 2000. Prior to March 31, 2000,
and since 1999, he was Vice President and General Counsel of Indiana Energy,
Inc. From July of 1998 to July of 1999, Mr. Christian served as Vice President,
General Counsel and Secretary of Michigan Consolidated Gas Company. Mr.
Christian served as General Counsel and Secretary of Indiana Energy, Inc. from
1993 to 1998. Prior to 1993 and since 1988, Mr. Christian was employed as
counsel for the Company.
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 March 3, 2003. Except as otherwise indicated, each
individual has sole voting and investment power with respect to the shares
listed below.
Shares Owned
Name of Individuals or Identity of Group Beneficially (1)
- ---------------------------------------- ----------------
John M. Dunn 11,842(2)(3)(4)
Niel C. Ellerbrook 210,837(2)(3)(6)(8)
John D. Engelbrecht 13,602(3)(4)
L. A. Ferger 152,270(4)(7)
Anton H. George 2,594,690(1)(4)(5)
Andrew E. Goebel 187,976(2)(3)(6)(8)
Robert L. Koch II 12,663(2)(3)(4)
William G. Mays 9,225(4)
J. Timothy McGinley 17,830(2)(4)
Richard P. Rechter 20,341(2)(4)
Ronald G. Reherman 159,257(3)(4)(9)
Richard W. Shymanski 22,410(3)(4)
Jean L. Wojtowicz 9,343(2)(4)
Jerome A. Benkert, Jr. 49,243(2)(6)(8)
Carl L. Chapman 75,850(2)(6)(8)
Ronald E. Christian 48,253(2)(6)(8)
All Directors and Executive Officers as a
Group (16 Persons) 3,595,632(1)
- ----------
(1) Except for Anton H. George, no director or executive officer owned
beneficially as of March 3, 2003, more than .31 percent of common stock of
the Company. Excluding Anton H. George, all directors and executive
officers owned beneficially an aggregate of 1,000,942 shares or 1.47
percent of Common Stock of the Company. The beneficial ownership by Anton
H. George of 2,594,690 shares or 3.81 percent 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 5,922
Niel C. Ellerbrook 53,837
Andrew E. Goebel 2,654
Robert L. Koch II 6,101
J. Timothy McGinley 1,695
Richard P. Rechter 15,247
Jean L. Wojtowicz 4,463
Jerome A. Benkert, Jr. 16,436
Carl L. Chapman 29,826
Ronald E. Christian 27,511
All Directors and Executive Officers as a Group (10 Persons) 163,692
(3) Includes shares held by spouse, jointly with spouse or as custodian for a
minor.
(4) Includes shares granted to non-employee directors under the Company's
Directors Restricted Stock Plan and At-Risk Compensation Plan, which are
subject to certain transferability restrictions and forfeiture provisions.
(5) Of the 2,594,690 shares, Mr. George has both voting and investment power
with respect to 15,052 shares. Also included in this number are 6,589
shares, which he has the right to acquire as of May 3, 2003, or within
sixty (60) days thereafter, under the Vectren Corporation At-Risk
Compensation Plan. Regarding the balance, he has either voting or
investment power in his capacity as a member of the shareowner's board of
directors, charitable donations committee, or board of managers. Mr. George
disclaims beneficial interest in these shares.
(6) Includes shares granted to executives under the Company's Executive
Restricted Stock Plan and a restricted stock award granted to certain
executives on January 1, 2003 under the Company's At-Risk Compensation
Plan. These shares are subject to certain transferability restrictions and
forfeiture provisions.
(7) Includes 144,053 shares held in a family partnership, in which Mr. Ferger
is a general partner and owns limited partnership interests.
(8) Includes shares which the named individual has the right to acquire as of
March 3, 2003, or within sixty (60) days thereafter, under the Vectren
Corporation Stock Option Plan (formerly SIGCORP, Inc. Stock Option Plan) or
the Company's At-Risk Compensation Plan.
(9) As of March 3, 2003, Mr. Reherman had the right to acquire 133,193 shares
under the Vectren Corporation Stock Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Andrew E. Goebel is President and Chief Operating Officer of the Company.
During 2002, Hasgoe Cleaning Systems, a cleaning company owned by Mr. Goebel's
brother's family, performed certain cleaning services for the Company and
certain of its subsidiaries and is expected to perform such services in 2003.
During 2002, the cost of such services was $221,745, 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 and Benefits Committee, the Corporate
Affairs Committee, and the Nominating and Corporate Governance Committee.
The members of the Executive Committee are Niel C. Ellerbrook, Chair,
Andrew E. Goebel, John D. Engelbrecht, Anton H. George, Robert L. Koch II and
Jean L. Wojtowicz. 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 developed a charter to govern its operations; that charter is attached
to this proxy statement as Appendix F. The Executive Committee meets as
required. There was one (1) meeting of the committee during the past fiscal
year.
The members of the Audit Committee are J. Timothy McGinley, Chair, John M.
Dunn, John D. Engelbrecht, L. A. Ferger, and Anton H. George. Membership on the
committee is restricted to non-employee members of the board of directors. The
functions of the Audit Committee are described under "Report of the Audit
Committee" below. There were eight (8) meetings of the committee during the past
fiscal year.
The members of the Compensation and Benefits Committee are Jean L.
Wojtowicz, Chair, Robert L. Koch II, J. Timothy McGinley, Richard P. Rechter,
and Richard W. Shymanski. Membership on the committee is restricted to
non-employee members of the board of directors. The functions of the committee
are described under "Report of the Compensation and Benefits Committee" below.
There were three (3) meetings of the committee during the past fiscal year.
The members of the Corporate Affairs Committee are Richard W. Shymanski,
Chair, John M. Dunn, L. A. Ferger, William G. Mays, Richard P. Rechter and
Ronald G. Reherman. None of the members is an officer or employee of the
Company. The functions of the committee are described under "Report of the
Corporate Affairs Committee" below. There were two (2) meetings of the committee
during the past fiscal year.
The members of the Nominating and Corporate Governance Committee are Robert
L. Koch II, Chair, Anton H. George, William G. Mays, J. Timothy McGinley, and
Richard W. Shymanski. As Chair of the committee, Mr. Koch is also the Company's
Lead non-management Director. Membership on the committee is restricted to
non-employee members of the board of directors. The functions of the committee
are described under "Report of the Nominating and Corporate Governance
Committee" below. There were three (3) meetings of the committee during the past
fiscal year.
DIRECTOR COMPENSATION
As more fully discussed in the Report of the Nominating and Corporate
Governance Committee, which begins at page 8, the establishment of compensation
for non-management directors is part of the responsibilities of that committee.
The philosophy for the compensation decisions are discussed in that report.
Non-employee directors of the Company receive a cash retainer of $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 May 1, 2002, each non-employee member of the board received a grant of
307 shares of restricted stock under the Vectren Corporation Directors
Restricted Stock Plan (formerly the Indiana Energy, Inc. Directors Restricted
Stock Plan). As more fully discussed in the Report of the Nominating and
Corporate Governance Committee, on October 1, 2002, each non-employee member of
the board received an additional grant of 500 shares of restricted stock under
the Company's At-Risk Compensation Plan. The terms of both of those grants
provide that, subject to certain limited exceptions, the restrictions will lift
on May 1, 2003. At that time, if the director continues serving on the board he
or she will receive the shares without restrictions. As part of the total
compensation provided to non-employee directors, a similar sized grant will be
made on May 1, 2003.
On May 1, 2002, each non-employee member of the board also received a
grant of 1,384 options to acquire one share of the Company's Common Stock for
each option. The options were issued under the Company's At-Risk Compensation
Plan. On October 1, 2002, each director also received an additional grant of
2,400 stock options under the At-Risk Compensation Plan, and the terms of the
grants mirror the terms of the grants made on May 1, 2002. The terms of those
grants provide that, subject to certain limited exceptions, the options will
vest on May 1, 2003 and will be exercisable until May 1, 2012. If non-employee
directors continue serving on the board, as part of the total compensation
provided to non-employee directors, a similar sized grant will be made on May 1,
2003.
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 percent 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 with one exception, which is described in
the following paragraph, all filings required to be made under Section 16(a)
during 2002 were timely made.
The Company, which prepares these reports on behalf of its insiders,
discovered in June of 2002 that it had inadvertently understated the ownership
of John D. Engelbrecht by 100 shares of Common Stock. These shares of Common
Stock were inherited by Mr. Engelbrecht's spouse and he disclaims beneficial
ownership in those shares. This error has been corrected and Mr. Engelbrecht's
common stock holdings are accurately reflected on his most recent SEC filing.
REPORT OF THE NOMINATING
AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance committee ("Governance committee")
is primarily responsible for corporate governance matters affecting the Company
and its subsidiaries. The Governance committee has five (5) members and is
composed entirely of non-employee directors. The Governance committee met three
(3) times during the past fiscal year.
A. Scope of Responsibilities
Established in February 2002, the Governance committee has several
significant responsibilities, including:
o Identifying and selecting qualified nominees for election to the
board;
o Evaluating the renomination of existing members of the board;
o Establishing qualification criteria for service as a member of the
board, including "independence;"
o Serving as a conduit for shareholders to communicate with the
non-employee members of the board regarding nominees and other matters
affecting Company business;
o Formulating recommendations concerning the composition, organization
and functions of the board and its committees;
o Establishing compensation for non-employee members of the board;
o Monitoring the effectiveness and functioning of the board and its
various committees;
o Periodically reviewing the performance of the Chief Executive Officer
and Chairman;
o Approving management participation on compensated third party boards
of directors; and
o Monitoring other corporate governance matters, including periodically
reviewing the Company's Shareholder Rights Agreement, Code of By-Laws
and Articles of Incorporation as they relate to corporate governance.
B. 2002 Accomplishments
While newly created in 2002, the Governance committee achieved several
accomplishments in its first year. Its first act was to assist the full board in
formally delineating the responsibilities for each of the other board
committees. That action was memorialized in an amendment to the Company's Code
of By-Laws in April of 2002. By design, there is at least one member of the
Governance committee on each of the other committees of the board, and those
persons serve as liaisons to the other committees with respect to corporate
governance matters.
Throughout the year, the Governance committee gathered and assessed
information, as well as monitored events, relating to corporate governance. With
the enactment of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") and the
recommendation of significant changes for listed companies by the New York Stock
Exchange ("NYSE"), the Governance committee has had much to consider. Throughout
the year the Governance committee evaluated these events and assessed their
impact on the Company. This effort is ongoing.
Based upon its assessment of corporate governance matters, the Governance
committee developed and recommended an initial set of corporate governance
principles applicable to the full board. The principles have been approved by
the full board and are attached to this proxy statement as Appendix A. In
addition, the Governance committee developed a charter to govern its operations;
that charter is attached to this proxy statement as Appendix B. The Governance
committee also oversaw the development of charters by the other board committees
which are attached as Appendices C through F. Each of the charters has been
approved by the full board. The Governance committee anticipates that the
corporate governance principles and each of the committee charters may change
over time in order to continuously reflect enhanced corporate governance
practices.
The Governance committee also determined that it would be appropriate to
curtain the authority of the Executive committee to act only in accordance with
a specific delegation from the full board, or, subject to statutory limitations,
when it is impracticable for a quorum of the full board to act. That curtailment
has been reflected in the Executive committee's charter, which is attached as
Appendix F. Since its inception, the Executive committee has primarily served as
a financing committee, discharging the full board's directives in connection
with Company financing transactions. In addition to the statutory limitations on
actions by board committees, these further limitations will ensure that whenever
practicable the full board will directly participate in all board level decision
making.
The Governance committee conducted an informational inquiry with respect
to each board member's relationship with the Company and its subsidiaries. The
initiation of this effort was in furtherance of the Governance committee's
establishment of independence standards for the board, which are required to be
prepared under the corporate governance principles. The Governance committee is
still deliberating with respect to the standards for independence to be adopted
for the full board, and this process is expected to be brought to closure in the
first half of 2003.
The Governance committee recommended to the full board that executive
sessions, where management is excluded, be conducted at board and committee
meetings. This recommendation was accepted and implemented during the year. The
provision has been made in the corporate governance principles and committee
charters to ensure that executive sessions are conducted.
The Governance committee recommended to the full board the realignment of
the members of the board on the various board committees. As part of this
recommendation, which was accepted, the Governance committee also provided for
the rotation of committee Chairs.
The Governance committee established and implemented a board evaluation
process pursuant to which the board critiqued its performance. The evaluation
results were shared with the full board and responsive actions are being
implemented as a result of that process.
The Governance committee established and implemented a succession planning
process regarding the Chief Executive Officer position. With assistance from an
independent consultant retained by the Company, internal candidates were
identified and, based upon testing and other analyses performed by the
consultant, the candidates are undergoing developmental training with respect to
this opportunity. While neither the Governance committee nor the full board
expect or desire Mr. Ellerbrook to leave his position, the continuation of the
development of these candidates will occur under the oversight of the Governance
committee.
The Governance committee recommended to the board that a Lead director
position be established. The responsibilities of the Lead director are set forth
in the corporate governance principles, which also provide that the Chair of the
Governance committee is to serve as the Lead director. In February of 2003,
Robert L. Koch II, the Chair of the Governance committee, was elected Lead
director by the full board.
Formal board development activities were established and implemented. In
late October and early November, the board conducted a multi-day development
session where they heard from various professionals with respect to important
issues affecting the Company, including issues relating to accounting, credit
quality, corporate governance and energy regulation.
The full board amended the Vectren Corporation At-Risk Compensation Plan
to provide for the Governance committee to act as the plan administrator with
respect to compensation for non-employee members of the board. With assistance
from an independent compensation consultant, the Governance committee conducted
an evaluation of the continuing market competitiveness of the non-employee board
members' compensation. As a result of this effort, it was determined that this
compensation, which had been established in early 2000, at the time of the
merger creating the Company, was no longer market competitive and, as a result,
it was adjusted by providing for additional grants of stock options and
restricted stock. These new grant levels will be used in the future.
A framework was established for shareholders to communicate directly with
the non-employee members of the board regarding Company business. At page iii of
the proxy statement, information is provided to enable shareholders to directly
contact the Lead director and the Chair of the Audit Committee.
Finally, in connection with the 2003 Annual Meeting, employing the
qualification criteria set forth in the corporate governance guidelines, the
Governance committee evaluated the board nominees who are standing for
reelection. As a result of that process, and with Messrs. George and Koch
recusing themselves, the Governance committee concluded that the full board
should recommend to the shareholders that the four existing directors whose
terms are expiring at this meeting be reelected.
C. Commitment
The Governance committee is committed to ensuring that the Company
implements and follows corporate governance principles that are in furtherance
of the interests of the Company's stakeholders. The Governance committee
anticipates meeting throughout 2003 to continue to enhance the Company's
corporate governance principles, which are expected to evolve coincident with
the ongoing changes being implemented by the Securities and Exchange Commission
under Sarbanes-Oxley and the NYSE as part of its oversight of listed companies.
Nominating and Corporate Governance Committee
Robert L. Koch II, Chair
Anton H. George
William G. Mays
J. Timothy McGinley
Richard W. Shymanski
REPORT OF THE CORPORATE AFFAIRS COMMITTEE
The Corporate Affairs committee is primarily responsible for ensuring the
discharge of the board's duties relating to the Company's policies, practices
and procedures as a responsible corporate citizen. The Corporate Affairs
committee consists of six (6) members and is composed entirely of non-employee
directors. The Corporate Affairs committee met twice during the last fiscal
year.
A. Scope of Responsibilities
The Corporate Affairs committee has been in existence since the time of
the merger creating the Company. It was formerly known as the Public and
Environmental Affairs committee. In April of 2002, the name was changed and the
scope of responsibilities was expanded to include other areas relating to the
Company's role as a responsible corporate citizen. Those responsibilities are
set forth in a charter that has been adopted by the Corporate Affairs committee
and which is attached to this proxy statement as Appendix C. The
responsibilities include:
o Overseeing policies, practices and procedures relating to business
practices, including compliance with applicable laws and regulations;
o Overseeing policies, practices and procedures relating to public
communications with key stakeholders, other than the financial
community;
o Overseeing policies, practices and procedures relating to community
relations, including charitable contributions and community affairs;
o Overseeing policies, practices and procedures relating to customer
relations, including customer satisfaction and quality of customer
service;
o Overseeing policies, practices and procedures relating to employer
practices and procedures, including the o Company's objective of being
an employer of choice, the attainment of workforce diversity, and
compliance with employment related laws, regulations and policies; and
o Overseeing policies, practices and procedures relating to environmental
compliance and stewardship, including adherence to environment related
laws and regulations.
B. 2002 Accomplishments
With its expanded scope of responsibilities in 2002, the Corporate Affairs
committee considered several matters during the year. A number of presentations
from management were provided regarding customer satisfaction. As part of this
process, the measures employed for determining customer satisfaction were
extensively discussed and, as a result, improvements were considered and
implemented. These measures are also used by the Compensation and Benefits
committee ("Compensation committee") as one of the performance metrics for
establishing annual at-risk payment awards under the Vectren Corporation At-Risk
Compensation Plan ("At-Risk Plan").
Safety performance by the Company's subsidiaries was monitored.
Considerable attention was given to the types of safety issues that arise in
operations, as well as efforts that can and should be implemented to minimize
workplace accidents and injuries. Safety performance is also used by the
Compensation committee as a metric in establishing annual at-risk payment awards
under the At-Risk Plan.
The Company's ongoing efforts to enhance the diversity of its workforce
was considered by the Corporate Affairs committee. As part of this effort, both
the strategic implications and benefits of pursuing diversity at the Company
were considered.
The overall satisfaction of the Company's employees was considered. The
Corporate Affairs committee evaluated an employee satisfaction survey conducted
by the Company and considered the results and response of management in light of
the objective to be an employer of choice.
Reports were provided by management with respect to the Company's
community relations efforts, which are predicated on foundation/sponsorship
contributions, leadership contributions and public relations. The Corporate
Affairs committee provided management with guidance regarding these matters.
Environmental compliance and stewardship are an important focus for the
Corporate Affairs committee. Under the charter, these matters must be addressed
at every Corporate Affairs committee meeting.
Reports were provided by legal counsel regarding litigation affecting the
Company and its subsidiaries. Those reports included environmental compliance
and employment litigation matters.
With assistance from the Human Resources department of the Company, the
Corporate Affairs committee considered enterprise-wide succession planning,
including the performance management model that has been developed and
implemented by the Company.
The Corporate Affairs committee reviewed and considered the Company's
practices with respect to acquiring gas supply for its natural gas distribution
operations.
Finally, legislative matters that are of interest to the Company at the
federal level, as well as in Indiana and Ohio were reviewed and considered.
C. Commitment
The Corporate Affairs committee is committed to ensuring that the Company
conducts its operations consistent with being a good corporate citizen. The
Corporate Affairs committee anticipates meeting at least twice in 2003 to
continue to focus on the matters set forth in its charter, and, as necessary or
appropriate, the Corporate Affairs committee will revise its charter to
discharge its responsibilities.
Corporate Affairs Committee
Richard W. Shymanski, Chair
John M. Dunn
L. A. Ferger
William G. Mays
Richard P. Rechter
Ronald G. Reherman
REPORT OF THE AUDIT COMMITTEE
The Audit committee oversees the Company's financial reporting process on
behalf of the full board. The Audit committee consists of five members, all of
whom are independent from the Company and the Company's management in accordance
with the New York Stock Exchange's ("NYSE") currently effective listing
requirements. The Audit committee met eight (8) times during the past fiscal
year.
A. Scope of Responsibilities
The Audit committee operates under a written Audit Committee Charter,
which was recently updated to reflect requirements imposed by the Securities and
Exchange Commission ("SEC") and proposed by the NYSE.
That charter is attached to this proxy statement as Appendix D. The Audit
committee's responsibilities include the authority and the responsibility of:
o Selecting, evaluating, and replacing the independent accountants;
o Reviewing the scope, conduct, and results of audits performed;
o Making inquiries as to the differences of views, if any, between such
independent accountants and officers and o employees of the Company and
subsidiaries with respect to the financial statements and records and
accounting policies, principles, methods and systems;
o Considering whether the provision by the independent accountants of
services for the Company in addition to the annual audit examination is
compatible with maintaining the independent accountants' independence;
and
o Reviewing 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.
B. 2002 Accomplishments
The Audit committee had a high level of activity in 2002. Because of
developments affecting Arthur Andersen, LLP ("Andersen"), the independent
accountants for the Company since its inception, and, prior to that time, the
independent accountants for the Company's two predecessor companies, early in
the year the Audit committee monitored circumstances and events regarding
whether Andersen should continue to serve as the independent accountants. While
the Audit committee initially determined that Andersen should be reappointed as
the independent accountants, it also concluded that the reappointment should be
subject to ratification by the Company's shareholders. Following that
determination, subsequent events affecting Andersen convinced the Audit
committee to revisit its recommendation that Andersen be reappointed. On March
22, 2002, the Audit committee decided to discontinue the use of Andersen as the
Company's independent accountants, upon the appointment of a replacement firm.
Thereafter, the Audit committee began the process of selecting a replacement
firm. The Audit committee then met with other independent accountants that were
considered as potential replacements. As a result of that process, in early May
of 2002, the Audit committee appointed Deloitte & Touche LLP as the Company's
independent accountants.
In fulfilling its oversight responsibilities, the Audit 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 disclosure controls.
The Audit committee reviewed with the independent accountants, 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 Audit
committee under generally accepted auditing standards.
In addition, the Audit committee has discussed with the independent
accountants the accountants' independence from management and the Company,
including the matters in the accountants' written disclosures required by the
Independence Standards Board.
The Audit committee also discussed with the Company's internal auditors
and independent accountants the overall scope and plans for their respective
audits. The Audit committee meets periodically with the internal auditors and
independent accountants, 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.
The Audit committee prepared a policy to govern when and under what
circumstances the Company can engage its independent accountants to provide
non-audit related services. The policy is in response to directives from the SEC
with respect to ensuring independent accountants' independence from the Company.
The policy was finalized and approved in February of 2003.
As provided for in its charter, the Audit committee is responsible for
establishing, reviewing and updating periodically a Code of Ethical Conduct
("Code") and ensuring that management has established a system to enforce this
Code. This includes ensuring that the Code is in compliance with all applicable
rules and regulations.
The Audit committee reviews management's monitoring of the Company's
compliance with the Code, and ensures that management has the proper review
system in place to ensure that the Company's financial statements, reports and
other financial information disseminated to governmental organizations and the
public satisfy legal requirements.
C. Delineation of Responsibilities Between Management, the Independent
Accountants and the Audit Committee
Management is responsible for the Company's financial reporting process,
including its system of internal controls, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles.
The Company's independent accountants are responsible for auditing the
financial statements prepared by management.
The Audit committee's responsibility is to monitor and review the
processes performed by management and the independent accountants. It is not the
Audit committee's duty or responsibility to conduct auditing or accounting
reviews or procedures. The Audit committee members are not employees of the
Company. Therefore, the Audit committee has relied, without independent
verification, on management's representation that the financial statements have
been prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States of America and on the
representations of the independent accountants included in their report on the
Company's financial statements. Furthermore, the Audit committee's
considerations and discussions with management and the independent accountants
do not assure that the Company's financial statements are presented in
accordance with generally accepted accounting principles, that the audit of the
Company's financial statements has been carried out in accordance with generally
accepted auditing standards or that the Company's independent accountants are in
fact "independent."
D. 2002 Form 10-K
In reliance on the reviews and discussions referred to above, the Audit
committee recommended to the board of directors that the audited financial
statements for 2000, 2001 and 2002 be included in the Annual Report on Form 10-K
for the fiscal year ended December 31, 2002 for filing with the SEC. A copy of
the Company's 10-K is available without charge upon request. Send your request
to:
Attn: Investor Relations
Vectren Corporation
P.O. Box 209
Evansville, IN 47702
E. Reappointment of Deloitte & Touche LLP
The Audit committee considered and has recommended to the full board that
Deloitte & Touche LLP be reappointed as the Company's independent accountants
for fiscal year 2003. That recommendation calls for the reappointment to be
subject to ratification by the shareholders of the Company at the 2003 Annual
Meeting.
F. Commitment
The Audit committee is committed to ensuring that the Company implements
and follows necessary and appropriate financial reporting processes. The Audit
committee anticipates meeting at least quarterly throughout 2003.
Audit Committee
J. Timothy McGinley, Chair
John M. Dunn
John D. Engelbrecht
L. A. Ferger
Anton H. George
EXECUTIVE COMPENSATION AND OTHER INFORMATION
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
The Compensation and Benefits committee ("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 with
respect to those officers serves as an administrator of the annual and long-term
incentive plan, including the Company's At-Risk Compensation Plan (the "At-Risk
Plan"). The Compensation 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 Compensation
committee is composed entirely of non-employee directors. The Compensation
committee has developed a charter to govern its operations, which is attached to
this proxy statement as Appendix E.
A. Executive Compensation Policy
The Company's total compensation program for officers includes base
salaries, as well as annual incentive and long-term incentive opportunities
under the At-Risk Plan. Currently, there are also outstanding grants of
restricted stock that were made under the Vectren Corporation Executive
Restricted Stock Plan ("Restricted Stock Plan") which is the former Indiana
Energy, Inc. Executive Restricted Stock Plan. Those grants occurred prior to the
adoption of the At-Risk Plan.
The Compensation 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 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 size. It is the opinion of the Compensation committee that the total
compensation earned by Company officers in 2002 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 Compensation 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 opportunity under
the At-Risk 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 55
percent of base salary.
For 2002, under the At-Risk Plan, the Compensation committee established
three performance metrics to be used for determining whether and to what extent
annual incentive payments would be made to participants. The first metric was
based upon the Company's achievement of specified earnings per share ("EPS")
measures, as adjusted for normal weather. For 2002, excluding Mr. Ellerbrook,
this metric represented 75 percent of the total annual incentive payment
opportunity for three of the four executive officers. In the case of Mr.
Chapman, this metric represented 60 percent of his total incentive payment
opportunity, with the remaining 40 percent based upon the EPS of Vectren
Enterprises, Inc. ("Enterprises"), the holding company for the Company's
non-regulated business interests. The Compensation committee established three
2002 EPS measures for payments: threshold (zero payment); target; and maximum
(two times target incentive). Linear interpolation was to be used for results
between threshold, target and maximum. As a result of the Company's performance
in 2002, the payment relating to Company EPS was at 86.7 percent of target. In
the case of Mr. Chapman, because the EPS of Enterprises did not exceed
threshold, there was no payment under the At-Risk Plan for this metric.
The second metric was based upon achieving a specified level of safety
performance during 2002 and, excluding Mr. Ellerbrook, represented 15 percent of
the total annual incentive opportunity for the executive officers other than Mr.
Chapman. This metric was designed to incent the minimization of OSHA recordable
accidents at the Company and the Company's regulated subsidiaries. Similar to
the EPS metric, the Compensation committee established achievement standards for
2002 OSHA Recordable Accidents: threshold; target; and maximum. Similar to the
measurement used for the first metric, linear interpolation was used for results
between threshold, target and maximum. In 2002, the actual number of OSHA
recordable accidents resulted in a 137.5 percent of target payment with respect
to this metric.
The third metric was based upon achieving a specified level of customer
satisfaction during 2002, and, excluding Mr. Ellerbrook, represented the
remaining 10 percent of the total annual incentive opportunity for the executive
officers other than Mr. Chapman. In 2002, the customer satisfaction performance
resulted in a 120 percent of target payment with respect to this metric.
The amounts payable under the At-Risk Plan for 2003 will be determined and
paid early in 2004 and accordingly will be reflected in next year's proxy
statement as part of calendar year 2003 compensation.
In February of 2002, the Compensation committee established a separate
compensation objective for Mr. Chapman that was to be measured based upon an
assessment of the success of Mr. Chapman's then ongoing efforts relating to the
resolution of certain identified issues arising from Vectren Communications
Services, Inc.'s business. Following an assessment of the outcome of those
efforts, in November 2002, Mr. Chapman was paid a bonus of $50,000, which was
the maximum amount possible.
Long-Term Incentive Compensation
The purpose of the long-term incentive opportunity under the At-Risk 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 Compensation committee determines 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 as the annual incentive opportunity under the At-Risk Plan,
this component of total compensation is also performance driven and totally at
risk.
Prior to the adoption of the At-Risk Plan by the Company's shareholders in
April 2001, in September of 2000 the board of directors determined that it was
appropriate to grant to the executive officers, as well as other principal
officers, restricted stock under the Restricted Stock Plan, which was originally
approved by Indiana Energy's shareholders. It was adopted by the Company's board
of directors as a Company plan concurrent with the effective date of the merger
of Indiana Energy and SIGCORP in March of 2000. That September 2000 grant, which
was effective as of October 1, 2000, provided as prescribed by the Restricted
Stock Plan that, depending upon the Company's performance as measured using
total shareholder return (stock price appreciation plus dividends) relative to
the performance of its designated peer group, the grant could double, vest or be
forfeited. The grant was subdivided into three segments, which had,
respectively, performance measuring periods ending December 31, 2002, December
31, 2003 and December 31, 2004. At the end of December 31, 2002, the Company's
performance placed it into the top quartile of its peer group and, as a result,
one third of the grant was doubled. That grant is still subject to forfeiture
since, subject to limited exceptions provided in the Restricted Stock Plan,
i.e., death, retirement, the grant recipient must remain employed by the Company
for an additional year to receive the shares on an unrestricted basis.
Regarding the portion of the grant with measuring periods ending December
31, 2003 and December 31, 2004, the Compensation committee determined that in
measuring the Company's performance relative to its peers, the concept of linear
interpolation should be employed instead of the use of absolute quartiles. This
action, which was taken in December of 2002, and subsequently ratified by the
full board (excluding Messrs. Ellerbrook and Goebel), provides that if the
Company's performance puts it below the 25th percentile relative to its peers,
the grant is forfeited. Performance by the Company between the 25th and 90th
percentile of the peer group can result in the grant ranging from 0.375 to two
times. Performance by the Company at the 90th percentile and higher will result
in the grant doubling. The Compensation committee concluded, based upon advice
from its independent consultant, that this method is preferable to the use of
the absolute quartile method, which relies upon measurement cliffs.
In December of 2002, the Compensation committee met and decided to provide
annual long-term compensation grants as part of executives' total compensation
opportunity for service to be provided in 2003. The Compensation committee
authorized grants of stock options as of January 1, 2003, at the market price on
the first trading date after the date of grant to each of the Company's key
employees. The award of options under the At-Risk Plan varied for each
participant and was based upon market data that established the appropriate
market level for those payouts consistent with the Executive Compensation Policy
described above. The award was predicated upon a review of long-term market
incentive compensation data as of December 2002, and provides that the options
will vest 34 percent as of January 1, 2004, 33 percent as of January 1, 2005,
and 33 percent as of January 1, 2006. The options have a term of ten years. The
Compensation committee also authorized grants of restricted stock, the ultimate
amount of which will be determined by the Company's performance relative to its
peer group. Linear interpolation will be employed when performing that
calculation, and performance versus the peer group which is below the 25th
percentile will result in a complete forfeiture, while performance at the 90th
percentile will result in a doubling of the grant.
It is the opinion of the Compensation committee that the long-term plan
meets the 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 shareholder value relative to the performance
of the Company's common stock. 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 2002, the
Compensation 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 report.
Mr. Ellerbrook's annual incentive opportunity and actual payment received
for 2002 were established pursuant to the At-Risk Plan and was based upon the
three metrics described in section B of this report--2002 EPS, Safety and
Customer Satisfaction. With respect to 2002 EPS, which accounted for the vast
majority of Mr. Ellerbrook's annual incentive opportunity, he received $314,600,
which represented 86.7% of the target payment opportunity. Regarding Safety, he
received a payment of $99,825, and with respect to Customer Satisfaction he
received a payment of $58,080, which payments represented, respectively, 137.5%
and 120% of the applicable target payment opportunities. The methods of
measurements ensured the linkage of this aspect of Mr. Ellerbrook's compensation
to the Company's financial performance, as well as the maintenance of a safe
workplace and customer satisfaction. Mr. Ellerbrook was eligible to receive a
target annual incentive opportunity of 80 percent of salary and a maximum annual
incentive of 160 percent of salary.
Mr. Ellerbrook's receipt of stock options under the At-Risk Plan is
likewise directly linked to the Company's performance. Whether the options have
value and, if so, in what amount, will depend upon the performance of the
Company's common stock. Similarly, Mr. Ellerbrook's receipt of restricted stock
has a direct correlation to the Company's performance relative to its peers.
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 Compensation committee that Mr. Ellerbrook's
total compensation is reasonable and appropriate.
D. Share Ownership
The Company's share ownership policy requires officers and directors to
meet share ownership targets. That policy was adopted in 2000 and it provides
for a five year transition period for compliance. The Compensation committee
expects the officers and directors to make ratable progress toward compliance
each year. The program includes these key features:
o Participants who are officers 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 of the end
of 2002, four of the o five named executive officers listed in the
compensation table on page 20, already exceed the established
ownership requirements.
o Participants who are non-employee board members have a share ownership
target of five times the annual retainer o amount of $20,000. As of
the end of 2002, ten of the eleven non-employee board members already
exceed the established ownership requirement.
o 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.
E. Compensation Consultant, Termination Benefits Agreements And Deductibility Of
Executive Compensation
To assist the Compensation 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.
As described elsewhere under the heading "Employment And Termination
Benefits 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 Compensation 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 one million dollars unless the compensation is payable solely
on achievement of an objective performance goal. The "At-Risk Compensation Plan"
has been structured to satisfy the requirements of 162(m) of the Code.
Consequently, the Compensation 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.
F. Shareholder Proposals
At the 2003 Annual Meeting there are two shareholder proposals that will
be considered relating to the accounting treatment for stock options and the use
of index-based stock options. Upon receipt of these proposals by the Company,
they were referred to the Compensation committee, which evaluated each proposal,
with assistance from its compensation consultant, and formulated responses that
were recommended for approval by the full board. The recommended responses of
the Compensation committee with respect to each proposal were accepted by the
full board and are set forth on pages 30 and 32 of the proxy statement.
Compensation and Benefits Committee
Jean L. Wojtowicz, Chair
Robert L. Koch II,
J. Timothy McGinley
Richard P. Rechter
Richard W. Shymanski
COMPENSATION
The following tabulation shows for years 2000, 2001, and 2002 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
Annual Compensation
Compensation Payouts
-------------- --------------
Other
Annual
Com- Options LTIP All Other
Bonus ($) pensation (# Shares) payouts Compensation
Name and Principal Position Year Salary ($) (1) ($)(2) (3) ($)(4) ($)(5)
- ------------------------------ ---- --------- -------- --------- --------- ------- ------------
Niel C. Ellerbrook 2002 603,732 472,505 53,918 125,000 -- 96,576
Chairman and 2001 548,847 77,000 51,903 230,000 -- 120,278
Chief Executive Officer 2000 470,873 583,357 19,063 -- 496,433 399,126
Andrew E. Goebel 2002 374,654 201,352 28,199 40,000 -- 34,977
President and 2001 359,328 39,600 27,145 100,000 -- 44,674
Chief Operating Officer 2000 326,143 369,000 6,720 -- -- 17,638
Carl L. Chapman 2002 294,424 134,370 18,332 37,500 -- 34,543
Executive Vice President 2001 269,617 27,000 17,647 85,000 -- 39,083
President Vectren Enterprises 2000 244,437 226,326 7,098 -- 218,066 220,132
Jerome A. Benkert Jr. 2002 274,425 120,811 13,857 37,500 -- 29,850
Executive Vice President and 2001 249,423 22,500 13,339 50,000 -- 33,904
Chief Financial Officer 2000 208,943 156,422 5,347 -- 163,389 159,550
Ronald E. Christian 2002 254,423 99,578 11,862 30,000 -- 35,059
Senior Vice-President, General 2001 229,616 18,400 11,419 50,000 -- 36,330
Counsel and Secretary 2000 204,670 153,910 3,857 -- 135,352 101,718
- ------------
Earnings are shown on a calendar year basis.
(1) The amounts shown in this column for 2002 and 2001 are exclusively payments
under the Company's At-Risk Compensation Plan, which is discussed above in
Part B, relating to "Annual Incentive Compensation," with the exception of
Mr. Chapman. For Mr. Chapman, the 2002 bonus amount represents $84,370
compensation from the At-Risk Compensation Plan, and a separate $50,000
bonus approved by the Compensation and Benefits Committee for the
successful resolution of business issues involving the Company's
non-regulated business interests.
The amounts shown in this column for 2000 include payments under the
Company's Executive Annual Incentive Plan, Indiana Energy's Annual
Management Incentive Plan (for Mr. Ellerbrook, Mr. Chapman, Mr. Benkert,
and Mr. Christian), and the SIGCORP Corporate Performance Plan (for Mr.
Goebel). Payments in 2000 attributable to the Company's Executive Annual
Incentive Plan for the performance period of April 1 to December 1, 2000
(Mr. Ellerbrook, $489,000; Mr. Goebel, $232,000; Mr. Chapman, $178,000; Mr.
Benkert, $125,000; and Mr. Christian, $120,000). Also, at the close of the
merger of Indiana Energy and SIGCORP into the Company on March 31, 2000,
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
($94,357), Mr. Chapman ($48,326), Mr. Benkert ($31,422), and Mr. Christian
($33,910), these bonus payments are included 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. Also included in 2000 for Mr. Goebel, ($107,500) is the
payment attributable to SIGCORP's performance for the period January 1 to
December 31, 1999.
(2) The amounts shown in this column are dividends paid on restricted shares
issued under the Vectren Corporation Executive Restricted Stock Plan
(formerly the Indiana Energy Executive Restricted Stock Plan), which was
adopted by the Company on March 31, 2000. No restricted shares were issued
to executives in 2001 and 2002. Mr. Goebel did not participate in the Stock
Plan prior to March 31, 2000.
(3) The options shown were issued under the Company's At-Risk Compensation
Plan. For further information, see the discussion above in Part B relating
to "Long-term Incentive Compensation," and Part C of the Compensation and
Benefits Committee Report.
(4) The amounts shown in this column represent the value of shares issued under
the Vectren Corporation Restricted 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 percent 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, Mr. Christian--2,674 shares,
$53,066. 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.
(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
percent of their annual base salary and other allowances related to
the move. Of the five officers discussed in this section, four
relocated and, therefore, received income related to relocation: Mr.
Ellerbrook--$204,797, Mr. Chapman--$114,919, Mr. Benkert--$86,817, Mr.
Christian--$79,394. These payments were made in year 2000.
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 percent 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, Mr. Benkert, Mr. Christian, the
balance of this column reflects Company contributions to the
retirement savings plan (Ellerbrook: 2002--$11,500, 2001--$10,031,
2000--$10,200; Chapman: 2002--$11,500, 2001--$10,200, 2000--$10,200;
Benkert: 2002--$11,500, 2001--$10,200, 2000--$10,200; Christian:
2002--$10,137, 2001--$8,367, 2000--$9,911) 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: 2002--$48,445,
2001--$47,444, 2000--$24,496; Chapman: 2002--$11,430, 2001--$11,101,
2000--$8,880; Benkert: 2002--$7,784, 2001--$7,549, 2000--$4,705;
Christian: 2002--$13,023, 2001--$12,793, 2000-- $10,255), credits for
flexible spending accounts, wellness, and perfect attendance
(Ellerbrook: 2000--$75; Chapman: 2000--$150; Benkert: 2000--$196;
Christian: 2000--$125), deferred compensation contributions to restore
employer contributions to the Company Retirement Savings Plan
(Ellerbrook: 2002--$29,344, 2001--$52,240, 2000--$18,174; Chapman:
2002--$10,785, 2001--$16,657, 2000--$4,507; Benkert: 2002--$6,316,
2001--$12,265, 2000--$2,632; Christian: 2002--$4,869, 2001--$12,610,
2000--$2,033), reimbursement for taxable expenses (Ellerbrook:
2002--$7,287, 2001--$10,563, 2000--$12,884; Chapman: 2002--$828,
2001--$1,125, 2000--$18,977; Benkert: 2002--$4,250, 2001--$3,890;
Christian: 2002--$7,030, 2001--$2,560), and non-cash earnings
(Ellerbrook: 2000--$6,000).
d) For Mr. Goebel, this column contains income related to reimbursement
for taxable expenses (2002--$10,122, 2001--$9,195, 2000--$954),
imputed earnings from automobile usage (2000--$961), Company
contributions to the retirement savings plan (2002--$11,500,
2001--$10,200, 2000--$10,184), and deferred compensation contributions
to restore employer contributions to the Company Retirement Savings
Plan (2002--$13,355, 2001--$25,280). 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, Mr. Goebel was given a one-time automobile buyout of
$5,538, paid in 2000.
TABLE II
OPTION/STOCK APPRECIATION RIGHTS ("SAR") GRANTS
IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise or Grant Date
SARs Employees in Base Price Expiration Present
Name Granted (#)(1) Fiscal Year (Per Share)($) Date Value ($)(2)
------ -------------- ------------ -------------- ---------- ------------
Niel C. Ellerbrook 125,000/0 27.42 23.19 1/1/13 584,100
Andrew E. Goebel 40,000/0 8.77 23.19 1/1/13 186,900
Carl L. Chapman 37,500/0 8.23 23.19 1/1/13 175,200
Jerome A. Benkert, Jr. 37,500/0 8.23 23.19 1/1/13 175,200
Ronald E. Christian 30,000/0 6.58 23.19 1/1/13 140,200
- ----------------
(1) On December 11, 2002, a total of 384,500 options were awarded effective as
of January 1, 2003 to all plan participants under the Vectren Corporation
At-Risk Compensation Plan. Stock options are exercisable upon vesting in
whole or in part and expire ten years from the date of grant. This grant
has a vesting schedule pursuant to which 34 percent vests at the end of the
first year and 33 percent vests at the end of the second and third years.
(2) The assumptions used for the Model are as follows: Volatility--23.69
percent based on monthly stock prices for the period of January 1, 2000 to
December 31, 2002; Risk-free rate of return--4.54 percent; Dividend
Yield--4.78 percent over the period of January 1, 2000 to December 31,
2002; and, a ten-year exercise term. A discount rate of .9412 was applied
to reflect a 3-year graduated vesting schedule. (Per a binomial model as
certified by an independent consultant retained by the Compensation and
Benefits committee.)
TABLE III
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
FROM 1/1/2002 TO 12/31/2002
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares Value Options As of 12/31/2002(1) As of 12/31/2002(2)
Acquired on Realized ------------------------- -------------------
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
----- ----------- -------- ----------- ------------- ----------- -------------
Niel C. Ellerbrook 0 0 92,000 263,000 42,320 63,480
Andrew E. Goebel 40,490 320,342.61 117,214 100,000 212,268 27,600
Carl L. Chapman 0 0 34,000 88,500 15,640 23,460
Jerome A. Benkert, Jr. 0 0 20,000 67,500 9,200 13,800
Ronald E. Christian 0 0 20,000 60,000 9,200 13,800
- ----------
(1) Includes grants authorized by the Compensation and Benefits Committee on
December 11, 2002 to be effective as of January 1, 2003.
(2) Includes value of unexercisable grants authorized by the Compensation and
Benefits Committee on December 11, 2002 effective as of January 1, 2003.
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 Other
Number of Periods Until Threshold Target Maximum
Shares; Units or Maturation or Number of Number of Number of
Other Rights(1) Payout(2) Shares(3) Shares(4) Shares(5)
---------------- ------------- --------- --------- ---------
Niel C. Ellerbrook 30,000 0 11,250 30,000 60,000
Andrew E. Goebel 10,000 0 3,750 10,000 20,000
Carl L. Chapman 9,000 0 3,375 9,000 18,000
Jerome A. Benkert, Jr. 9,000 0 3,375 9,000 18,000
Ronald E. Christian 8,000 0 3,000 8,000 16,000
- -------------
(1) This column reflects restricted stock grants awarded under the Vectren
Corporation At-Risk Compensation Plan by the Compensation and Benefits
Committee on December 11, 2002, to be effective January 1, 2003. The manner
for determining the awards, and other terms and conditions of the At-Risk
Plan, are discussed in the Compensation and Benefits Committee Report
relating to "Long-Term Incentive Compensation". The market value of the
shares on the date of grant is determined by the market price on the date
of grant or, if no trading occurs on that date, the market price on the
next trading day on which shares are traded. Dividends are paid directly to
the holders of the stock.
(2) As discussed in the Compensation and Benefits Committee Report relating to
"Long-Term Incentive Compensation," for the grant authorized on December
11, 2002 and granted on January 1, 2003, the measurement period commenced
on January 1, 2003 and will conclude on December 31, 2005.
(3) The ultimate amount of the grant will be determined by the Company's
performance relative to its peer group. Performance at the 25th percentile
will result in a threshold payment equal to 0.375 of the initial grant
which is shown in column (b), and in column (e). Performance versus the
peer group which is below the 25th percentile will result in a complete
forfeiture.
(4) The total number of shares in column (b), and also set forth in column (e),
are subject to forfeiture as discussed in footnote (3). If the Company's
performance compared to the peer group during the measurement period places
it above 25% and below 90%, linear interpolation will be employed to
perform the award calculation. At target, the payment will be equal to the
initial grant which is shown in column (b).
(5) Under the At-Risk Plan, if the Company's performance compared to the peer
group during the measuring period places it in the 90th percentile, 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.
In general, the Company's Retirement Savings Plan permits participants to
elect to have not more than 50 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. Salaried participants in the Savings Plan
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 Company contribution is made to the Savings
Plan for all eligible salaried employees which is equal to 3 percent of
compensation, other than certain employees who are grandfathered in a certain
traditional pension plan. Effective January 1, 2002, the 3 percent annual
contribution will also not be made for employees of certain non-regulated
subsidiaries.
To the extent certain officers' contributions are reduced by reason of
Internal Revenue Code limits on compensation and contributions, the Company will
make up these contributions in an unfunded, non-qualified deferred compensation
plan arrangement. However, the value of the Company-provided contributions under
the non-qualified arrangement will also apply as an offset to the benefits
provided under the supplemental pension plan described below.
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).
To the extent an officer's benefits under the defined benefit pension plan
are limited by reason of Internal Revenue Code limits on compensation and
benefits, the benefits are restored under an unfunded, non-qualified plan
maintained by the Company. However, these non-qualified defined benefit pension
plan benefits also act as an offset under the supplemental pension plan
described below.
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 15 20 25 30
Remuneration 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. Benefits under 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 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, Carl L. Chapman and Ronald E. Christian, 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 established
performance targets, 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:
o 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
o If the executive voluntarily terminates his employment for good reason
(i.e., certain material changes in the terms of the executive's
employment); or
o 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.
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 33 MONTH CUMULATIVE TOTAL RETURN*
AMONG VECTREN CORPORATION, THE S & P 500 INDEX
AND THE S & P UTILITIES INDEX
[GRAPHIC OMITTED]
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* $100 invested on 4/3/00 in stock or on 3/31/00 in index-including
reinvestment of dividends. Fiscal year ending December 31.
Copyright(C)2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The board of directors recommends that the stockholders ratify the
selection of Deloitte & Touche LLP ("D&T") as independent public accountants to
examine the consolidated financial statements of the Company and its
subsidiaries for the fiscal year ending December 31, 2003. A representative of
D&T will be present at the annual meeting to make a statement if such
representative desires to do so and to respond to appropriate questions.
The votes cast for ratification must exceed the votes cast against
ratification. Abstentions and broker non-votes will not be counted either for or
against the proposition. In the event the stockholders fail to ratify the
appointment, the Audit committee of the board of directors will consider it as a
direction to select other auditors. Even if the selection is ratified, the board
of directors in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the board of
directors determines that such change would be in the best interest of the
Company and its stockholders.
The board of directors recommends voting "FOR" this proposal.
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
The board of directors and the Audit committee have selected D&T as the
independent public accountants of the Company and its subsidiaries for fiscal
year 2003. See "Report of the Audit Committee."
Audit Fees
The aggregate fees paid to D&T for professional services rendered for the
audit of the Company's 2002 fiscal year annual financial statements, and the
reviews of the Company's financial statements included in the Company's Forms
10-Q filed during the Company's 2002 fiscal year were $350,000. This includes
fees incurred for audit services related to certain of the Company's
subsidiaries, in connection with the audit of the Company's financial
statements. The aggregate fees paid to Andersen for professional services
rendered for its reviews of the Company's financial statements included in the
Company's Form 10-Q for the period ended March 31, 2002 were $40,000.
Financial Systems Design and Implementation Fees
During 2002, no services were rendered by D&T, the Company's principal
accountant, in connection with (a) operating or supervising the operation of the
Company's information system or managing the Company's local area network; 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 paid to D&T for other services during 2002 totaled
$209,180. Of this amount, audit-related fees were $135,555 and consisted of
consultation on various accounting issues and review of internal cost allocation
methodologies in connection with their audits. The remaining fees of $73,625
were paid to D&T for tax planning and review of tax returns of the Company.
The Audit committee has considered whether the provision by D&T of the
services described above is compatible with maintaining D&T's independence.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
On March 22, 2002, the Audit committee decided to replace Andersen as the
Company's independent auditors, effective upon completion of a transition period
which was expected to extend through the conclusion of their review of the
financial results of the Company and its subsidiaries for the first quarter of
2002. On May 10, 2002, the Audit committee determined to dismiss Andersen and
replace them with D&T effective as of the later of May 15, 2002 or receipt by
the Chair of the Audit committee of written notification from D&T that the
Company had been accepted as a client. The Chair received notification of
acceptance from D&T on May 17, 2002, and accordingly the appointment of D&T and
dismissal of Andersen became effective on that date.
In connection with the audits for the two most recent fiscal years and
through the date of dismissal on May 17, 2002, there were no disagreements with
Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Andersen, would have caused Andersen to make
reference thereto in its report on the financial statements of the Company for
such time periods. Also, during those time periods, there were no "reportable
events" as such term is used in Item 304(a)(1)(v) of Regulation S-K.
Andersen's reports on the financial statements of the Company for the last
two years neither contained an adverse opinion or disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope, or accounting
principles, except for the adoption of new accounting standards required under
accounting principles generally accepted in the United States.
During the years ended December 31, 2001 and 2000 and through the date of
hiring on May 17, 2002, neither the Company nor anyone acting on their behalf
consulted D&T with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events listed in Items
304(a)(2)(i) and (ii) of Regulation S-K.
ITEM 3. THE ADOPTION OF, IF PRESENTED AT THE MEETING, A
SHAREHOLDER PROPOSAL BY MASSACHUSETTS CARPENTERS PENSION &
ANNUITY FUNDS, WHICH THE BOARD OF DIRECTORS OPPOSES
The Massachusetts Carpenters Pension & Annuity Funds, 350 Fordham Road,
Wilmington, MA 01887, the holders of approximately 1,400 shares of Common Stock,
have submitted the following proposal:
RESOLVED, that the shareholders of Vectren Corporation ("Company") hereby
request that the Company's Board of Directors establish a policy of expensing in
the Company's annual income statement the costs of all future stock options
issued by the Company.
Supporting Statement:
Current accounting rules give companies the choice of reporting stock
option expenses annually in the company income statement or as a footnote in the
annual report (See: Financial Accounting Standards Board Statement 123). Most
companies, including ours, report the cost of stock options as a footnote in the
annual report, rather than include the option costs in determining operating
income. We believe that expensing stock options would more accurately reflect a
company's operational earnings.
Stock options are an important component of our Company's executive
compensation program. Options have replaced salary and bonuses as the most
significant element of executive pay packages at numerous companies. The lack of
option expensing can promote excessive use of options in a company's
compensation plans, obscure and understate the cost of executive compensation
and promote the pursuit of corporate strategies designed to promote short-term
stock price rather than long-term corporate value.
A recent report issued by Standard & Poor's indicated that the expensing
of stock option grant costs would have lowered operational earnings at companies
by as much as 10%. "The failure to expense stock option grants has introduced a
significant distortion in reported earnings," stated Federal Reserve Board
Chairman Alan Greenspan. "Reporting stock options as expenses is a sensible and
positive step toward a clearer and more precise accounting of a company's
worth." Globe and Mail, "Expensing Options is a Bandwagon Worth Joining," Aug.
16, 2002.
Warren Buffett wrote in a New York Times Op-Ed piece on July 24, 2002:
"There is a crisis of confidence today about corporate earnings reports and the
credibility of chief executives. And it's justified. For many years, I've had
little confidence in the earnings numbers reported by most corporations. I'm not
talking about Enron and WorldCom--examples of outright crookedness. Rather, I am
referring to the legal, but improper, accounting methods used by chief
executives to inflate reported earnings. . . Options are a huge cost for many
corporations and a huge benefit to executives. No wonder, then, that they have
fought ferociously to avoid making a charge against their earnings. Without
blushing, almost all CEO's have told their shareholders that options are
cost-free. . . When a company gives something of value to its employees in
return for their services, it is clearly a compensation expense. And if expenses
don't belong in the earnings statement, where in the world do they belong?"
Many companies have responded to investors' concerns about their failure
to expense stock options. In recent months, more than 100 companies, including
such prominent ones as Coca-Cola, The Washington Post, and General Electric,
have decided to expense stock options in order to provide their shareholders
more accurate financial statements. Our Company has yet to act. We urge your
support.
Statement of Opposition
The Board of Directors of the Company believes that this proposal is not
in the best interests of the Company or its shareholders. The Company currently
accounts for stock options in accordance with APB Opinion 25 "Accounting for
Stock Issued to Employees" which for the options granted to Vectren employees
and Directors does not require recognition of an expense. However, the Company
does disclose in a footnote to the audited financial statements the pro-forma
effect had a compensation cost for these stock options been calculated
consistent with the methodology prescribed in SFAS No. 123 "Accounting for
Stock-Based Compensation." For 2002, the effect of expensing stock options would
have been equal to about $.01 per share. Had the Company elected to expense
stock options, this expense would have occurred regardless of whether the stock
options were ever exercised. In addition, the dilutive effect of stock options
is also reflected in the financial statements through the presentation of
diluted earnings per share.
The Board believes it is generally in the best interest of shareholders to
follow the most widely used industry practice when given a choice under
accounting rules. To date, less than 150 companies (including less than 10
utilities) of the thousands of publicly-traded companies have announced their
intention to expense stock options. This is a very small fraction of all public
companies. Since this area is in a state of flux, and given the current
relatively low acceptance of stock option expensing, the Board believes that it
should not decide to expense stock options at this time. Instead, the Board
believes that it would be well advised to await the final clarification of the
accounting regulations relating to the accounting for stock options. Proceeding
now without the benefit of this final action on how to account for stock options
may require the Company to choose yet another approach for options based upon
the outcome of that process by the accounting profession. In the meantime, as
explained in the prior paragraph, the impact of the potential expense associated
with options is clearly disclosed in the notes to the Company's consolidated
financial statements, which will give investors a clear understanding of the
impact of options on the Company's earnings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS
OTHERWISE SPECIFY IN THEIR PROXY.
Vote Required
The votes cast in favor of this proposal must exceed the votes cast
against the proposal in order for the proposal to be adopted. Abstentions and
broker non-votes will not be counted as either for or against the proposal.
ITEM 4. THE ADOPTION OF, IF PRESENTED AT THE MEETING, A SHAREHOLDER
PROPOSAL BY SHEET METAL WORKERS' NATIONAL PENSION FUND, WHICH THE
BOARD OF DIRECTORS OPPOSES
The Sheet Metal Workers' National Pension Fund, 601 N. Fairfax Street,
Suite 500, Alexandria, VA 22314, the holder of approximately 5,300 shares of the
company's Common Stock, have submitted the following proposal:
RESOLVED, that the shareholders of Vectren Corporation (the "Company")
request that the Board of Directors adopt an executive compensation policy that
all future stock option grants to senior executives shall be performance-based.
For the purposes of this resolution, a stock option is performance-based if the
option exercise price is indexed or linked to an industry peer group stock
performance index so that the options have value only to the extent that the
Company's stock price performance exceeds the peer group performance level.
Supporting Statement
As long-term shareholders of the Company, we support executive
compensation policies and practices that provide challenging performance
objectives and serve to motivate executives to achieve long-term corporate value
maximization goals. While salaries and bonuses compensate management for
short-term results, the grant of stock and stock options has become the primary
vehicle for focusing management on achieving long-term results. Unfortunately,
stock option grants can and do often provide levels of compensation well beyond
those merited. It has become abundantly clear that stock option grants without
specific performance-based targets often reward executives for stock price
increases due solely to a general stock market rise, rather than to
extraordinary company performance.
Indexed stock options are options whose exercise price moves with an
appropriate peer group index composed of a company's primary competitors. The
resolution requests that the Company's Board ensure that future senior executive
stock option plans link the options exercise price to an industry performance
index associated with a peer group of companies selected by the Board, such as
those companies used in the Company's proxy statement to compare 5 year stock
price performance.
Implementing an indexed stock option plan would mean that our Company's
participating executives would receive payouts only if the Company's stock price
performance was better than that of the peer group average. By tying the
exercise price to a market index, indexed options reward participating
executives for outperforming the competition. Indexed options would have value
when our Company's stock price rises in excess of its peer group average or
declines less than its peer group average stock price decline. By downwardly
adjusting the exercise price of the option during a downturn in the industry,
indexed options remove pressure to reprice stock options. In short, superior
performance would be rewarded.
At present, stock options granted by the Company are not indexed to peer
group performance standards. As long-term owners, we feel strongly that our
Company would benefit from the implementation of a stock option program that
rewarded superior long-term corporate performance. In response to strong
negative public and shareholder reactions to the excessive financial rewards
provided executives by non-performance based option plans, a growing number of
shareholder organizations, executive compensation experts, and companies are
supporting the implementation of performance-based stock option plans such as
that advocated in this resolution. We urge your support for this important
governance reform.
Statement of Opposition
The Board of Directors of the Company believes that this proposal is not
in the best interests of the Company or its shareholders. Under current
accounting rules (specifically APB 25), the use of indexed options would result
in the recognition of greater compensation expense and would be dilutive.
Greater compensation expense would result because the use of this form of option
would require the Company to recognize as an additional expense an amount equal
to the excess of the stock's market value over the exercise price of the stock
over the entire period the options are outstanding. Also, the use of this form
of option would result in greater dilution because indexing a stock option
reduces its Black-Scholes value and an indexed option is worth less than a
non-indexed option. As a result, a greater number of options would have to be
granted to provide the same level of competitive long-term incentive.
The Company's current compensation program is substantially
performance-based, with over 60 percent of the proxy-named executives' total
compensation based on performance (including performance relative to peer
companies). The Board believes that the current use of stock options as one
piece of this overall compensation program achieves the alignment of the
interest of the Company's senior executives with the Company's stockholders.
These stock options are inherently performance-based because a holder of the
options receives no benefit unless the Company's stock price increases after the
determination of the stock option grant.
The Board, through the Compensation and Benefits Committee, which is
composed solely of non-management directors, will continuously monitor
developments in the area of executive compensation, including changes in the
accounting rules governing stock options. As these developments occur and
further clarity is provided regarding the accounting for stock options, the
Board plans to carefully and continuously review and assess the benefit of
additional performance-based stock option features (including indexed options)
versus their associated costs.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS
OTHERWISE SPECIFY IN THEIR PROXY.
Vote Required
The votes cast in favor of this proposal must exceed the votes cast
against the proposal in order for the proposal to be adopted. Abstentions and
broker non-votes will not be counted as either for or against the proposal.
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 $6,500 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, 2002, was mailed to
shareholders on or about April 2, 2003.
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.
SHAREHOLDERS' PROPOSALS FOR 2004 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 2004 annual meeting of its shareholders
by submitting their proposals to the Company in a timely manner. In order to be
so included for the 2004 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 December 5, 2003, 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.
By order of the board of directors.
VECTREN CORPORATION
/s/ Ronald E. Christian
-----------------------
By RONALD E. CHRISTIAN
Senior Vice President, General Counsel and
Corporate Secretary
Evansville, Indiana
April 2, 2003
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 1-800-542-1160 or using the Internet
(www.votefast.com) 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.
APPENDIX A
Vectren Corporation
Board of Directors
Corporate Governance Guidelines
Adopted As Of February 26, 2003
1. Director Qualification Standards
A. A majority of the members of the Board of Directors ("Board") must
qualify as independent directors in accordance with the applicable provisions of
the Securities Exchange Act of 1934, and the rules promulgated thereunder, and
the applicable rules of the New York Stock Exchange.
B. The Nominating & Corporate Governance Committee ("Governance
Committee") shall be responsible for developing additional qualifications for
directors, including the establishment of criteria for determining the
independence of directors, which qualifications will be subject to approval by
the full Board.
C. Recognizing the value of continuity of directors who have experience
with the Company, there are no limits on the number of terms in which a director
may hold office.
D. No member of the Board shall serve on the board of directors of more
than 3 other public companies.
E. Directors are expected to advise the Chair of the Board and the Chair
of the Governance Committee promptly upon accepting any other public company
directorship or any assignment to the audit committee or compensation committee
of the board of directors of any public company of which such director is a
member.
F. Directors are expected to report changes in their principal business
responsibilities, including retirement, to the Chair of the Board and the Chair
of the Governance Committee.
G. A director should offer to resign if the Board concludes that the
director no longer meets the Company's qualifications for service as a director.
H. Following the adoption of these guidelines, if the Company's Chief
Executive Officer ("CEO") leaves that office, the CEO will tender to the
Governance Committee his or her resignation from the Board to be effective
following such transition period that is determined by the Governance Committee
to be necessary or advisable to provide for the transfer of responsibility to
the new CEO.
I. Upon reaching the age of seventy (70), a director shall be deemed to
have retired from the Board effective as of the last day of the month during
which the director reached the age of seventy (70).
2. Board Composition
A. The optimal size of the Board shall be between twelve (12) and fourteen
(14) directors. However, the Board would be willing to have a somewhat larger
number of directors to accommodate the availability of an outstanding candidate.
Similarly, the Board is willing to reduce the size of the Board, or maintain a
vacancy, if it cannot identify available candidates meeting the Board's
qualification standards.
B. The Chair of the Board and the Chair of the Governance Committee shall
jointly extend invitations to new nominees to the Board.
C. The Board reserves the right to determine, from time to time, how to
configure the leadership of the Board and the Company in the way that best
serves the Company.
D. The Board specifically reserves the right to vest the responsibilities
of Chair of the Board and Chief Executive Officer in the same individual and the
Board has no fixed policy with respect to combining or separating the offices of
Chair of the Board and Chief Executive Officer.
E. The Board will schedule at each meeting executive sessions where
non-management directors meet without management participation.
3. Director Responsibilities
A. Directors should exercise their business judgment to act in what they
reasonably believe to be in the best interests of the Company in a manner
consistent with their fiduciary duties.
B. In all matters relating to the Company's business and stakeholders,
directors shall diligently discharge their responsibilities, as well as conduct
themselves with integrity and in an honest manner.
C. In considering the best long-term and short-term interests of the
Company, directors may consider the effects of any action on shareholders,
employees, suppliers and customers of Company and its subsidiaries, communities
in which the Company and its subsidiaries conduct business and other pertinent
factors.
D. Directors should regularly attend meetings of the Board and of all
Board committees upon which they serve.
E. Directors should participate in Board development activities arranged
by the Company.
F. To prepare for meetings, directors should review the materials that are
sent to directors in advance of those meetings.
G. Directors shall preserve the confidentiality of confidential material
given or presented to the Board.
H. The Chair of the Board shall set the agenda of meetings of the Board
and the Chair of each committee shall set the agenda of meetings of the
applicable committee. Any director may suggest agenda items and may raise at
meetings other matters that they consider worthy of discussion.
I. Directors must disclose to other directors any potential conflicts of
interest they may have with respect to any matter under discussion and, if
appropriate, refrain from voting on a matter in which they may have a conflict.
4. The "Lead" Non-Management Director
A. The Board will select from the non-management directors a "lead"
non-management director who shall have the following duties:
o Coordinate the activities of non-management directors;
o Provide the Chair of the Board with input as appropriate on agendas
for the Board and committee meetings;
o Serve as Chair of the Governance Committee;
o Coordinate and develop the agenda for, and Chair executive sessions
of, the non-management directors; and
o Facilitate communications between the Chair of the Board and the other
members of the Board, including communicating other members' requests
to call special meetings of the Board.
In performing the duties described above, the "lead" non-management
director will consult with the Chairs of the appropriate Board committees and
solicit their participation in order to avoid diluting the authority or
responsibilities of such committee Chairs.
B. The Board will establish methods by which interested parties may
communicate directly with the "lead" non-management director or with the
non-management directors of the Board as a group and cause such methods to be
disclosed to the public.
5. Board Committees
A. The Board shall at all times maintain an Audit Committee, a
Compensation and Benefits Committee, a Corporate Affairs Committee, an Executive
Committee, and a Nominating and Corporate Governance Committee which must
operate in accordance with applicable law, their respective charters as adopted
and amended from time to time by the Board, and the applicable rules of the
Securities and Exchange Commission and the New York Stock Exchange. The Board
may also establish such other committees as it deems appropriate and delegate to
such committees such authority permitted by applicable law and the Company's
Code of By-Laws as the Board sees fit.
B. The Board, with assistance from the Governance Committee, shall
annually review the Committee assignments and shall consider the rotation of
Chairs and members with a view toward balancing the benefits derived from
continuity against the benefits derived from the diversity of experience and
viewpoints of the various directors.
6. Public Comments on Behalf of the Company
A. Except in unusual circumstances or as required by committee charters or
as requested by senior management, directors are expected to follow the
principle that senior management, as opposed to individual directors, provides
the public voice of the Company. Directors receiving inquiries from
institutional investors, the press or others should refer them to the Chief
Executive Officer or other appropriate officer of the Company.
7. Director Access to Management and Independent Advisors
A. The Company shall provide each director with complete access to the
management of the Company, subject to reasonable advance notice to the Company
and reasonable efforts to avoid disruption to the Company's management, business
and operations.
B. The Board and Board committees, to the extent set forth in the
applicable committee charter, have the right to consult and retain independent
legal counsel and other advisors at the expense of the Company.
8. Director Compensation and Stock Ownership
A. The Governance Committee will determine, as well as periodically
review, the form and amount of director compensation, including cash,
equity-based awards and other compensation.
B. The Board will be aware that the independence of directors could be
questioned if substantial charitable contributions are made to organizations in
which a director is affiliated or if the Company enters into consulting
contracts with, or provides other indirect compensation to, a director. The
Board, with assistance from the Governance Committee, will critically evaluate
each of these matters when determining the form and amount of director
compensation, and the independence of a director.
C. The Board believes that directors should be stockholders and have a
financial stake in the Company. The Governance Committee shall establish Company
stock ownership guidelines for directors and monitor compliance with those
guidelines.
9. Director Orientation and Development
A. The Company, with oversight from the Governance Committee, will
establish, or identify and provide access to, appropriate orientation programs
and sessions for newly elected directors of the Company for their benefit either
prior to or within a reasonable period of time after their nomination or
election as a director.
B. The Company, with oversight from the Governance Committee, will arrange
for directors to periodically participate in appropriate programs, sessions or
materials regarding the responsibilities of directors of publicly-traded
companies and the Company's businesses.
10. Management Evaluation and Succession
A. The Board (not including any members of management of the Company),
with assistance from the Compensation and Benefits Committee, will conduct an
annual review of the performance and compensation of the Chief Executive
Officer.
B. The Chief Executive Officer will provide an annual report on succession
planning and related development recommendations to the Governance Committee,
including a short-term succession plan delineating temporary delegation of
authority in the event that the Chief Executive Officer or any other executive
officer is unexpectedly unable to perform his or her duties.
C. The Corporate Affairs Committee will review, at least annually, the
Company's succession planning process for all positions other than the Chief
Executive Officer.
11. Annual Performance Evaluation of the Board
A. The Board, with assistance from the Governance Committee, will conduct
a self-evaluation annually to determine whether the Board and its committees are
functioning effectively. The full Board will discuss the evaluation report to
determine what, if any, action could improve Board and Board committee
performance.
B. The Board, with assistance from the Governance Committee, shall review
these Corporate Governance Guidelines no less frequently than annually to
determine whether any changes are necessary or advisable.
12. Amendment, Modification and Waiver
A. These Guidelines may be amended, modified or waived by the Board and
waivers of these Guidelines may also be granted by the Governance Committee,
subject to the disclosure and other provisions of the Securities and Exchange
Act of 1934, the rules promulgated thereunder and the applicable rules of the
New York Stock Exchange.
APPENDIX B
Vectren Corporation
Board of Directors
Nominating and Corporate Governance Committee Charter
Adopted As Of February 26, 2003
I. Statement of Purpose
The Nominating and Corporate Governance Committee ("Committee") is a
standing committee of the Board of Directors ("Board"). The purpose of the
Committee is to identify individuals qualified to become members of the Board,
to recommend director nominees for each annual meeting of shareholders and
nominees for election to fill any vacancies on the Board and to address related
matters. The Committee shall also develop and recommend to the Board corporate
governance principles applicable to the Company and be responsible for leading
the annual review of the Board's performance. The Committee will also be
responsible for the development of the Board, as well as oversight of the
succession planning process relating to the Company's Chief Executive Officer.
II. Organization
A. Charter. At least annually, this charter shall be reviewed and
reassessed by the Committee and any proposed changes shall be submitted to the
Board for approval.
B. Members. The members of the Committee shall be appointed by the Board
and shall meet the independence requirements of applicable laws and regulations,
as well as the listing standards of the New York Stock Exchange, including any
permitted transition period. The Committee shall be comprised of at least three
members. Committee members may be removed by the Board. The Board shall also
designate a Committee Chair.
C. Meetings. In order to discharge its responsibilities, the Committee
shall each year establish a schedule of meetings; additional meetings may be
scheduled as required.
D. Executive Sessions. At the conclusion of each meeting, the Chair may
conduct an executive session where non-management directors meet without
management participation.
E. Quorum; Action by Committee. A quorum at any Committee meeting shall be
at least a majority of the Committee. All determinations of the Committee shall
be made by a majority of its members present at a meeting duly called and held.
Any decision or determination of the Committee reduced to writing and signed by
all of the members of the Committee shall be fully as effective as if it had
been made at a meeting duly called and held.
F. Agenda, Minutes and Reports. The Chair of the Committee shall be
responsible for establishing the agendas for meetings of the Committee. An
agenda, together with materials relating to the subject matter of each meeting,
shall be sent to members of the Committee prior to each meeting. Minutes for all
meetings of the Committee shall be prepared to document the Committee's
discharge of its responsibilities. The minutes shall be circulated in draft form
to all Committee members to ensure an accurate final record, shall be approved
at a subsequent meeting of the Committee and shall be distributed periodically
to the full Board. The Committee shall make regular reports to the Board.
G. Performance Evaluation. The Committee shall evaluate its performance on
an annual basis and develop criteria for such evaluation.
III. Responsibilities
The following shall be the principal responsibilities of the Committee:
A. Director Selection Criteria. The Committee shall establish
criteria for selecting new directors, which shall reflect at a minimum any
requirements of applicable law or listing standards, as well as a
candidate's strength of character, judgment, business experience, specific
areas of expertise, factors relating to the composition of the Board
(including its size, structure and the skills of existing members) and
principles of diversity, including geographic as well as traditional
considerations.
B. Director Recruitment. The Committee shall consider (in
consultation with the Chair of the Board and Chief Executive Officer) and
recruit candidates to fill positions on the Board, including as a result
of the removal, resignation or retirement of any director, an increase in
the size of the Board or otherwise. The Committee shall also review any
candidate recommended by the shareholders of the Company in light of the
Committee's criteria for selection of new directors. As part of this
responsibility, the Committee shall be responsible for conducting, subject
to applicable law, any and all inquiries into the background and
qualifications of any candidate for the Board and such candidate's
compliance with the independence and other qualification requirements
established by the Committee.
C. Reconsideration of Directors for Re-Election. In connection with
its annual recommendation of a slate of nominees, the Nominating and
Corporate Governance Committee shall assess the contributions of those
directors selected for re-election, and shall at that time review its
criteria for Board candidates in the context of the Board evaluation
process and other perceived needs of the Board. Final approval of any
candidate shall be determined by the full Board.
D. Recommendation to the Board. The Committee shall recommend the
director nominees for approval by the Board and the shareholders.
E. Director Removal Guidelines. The Committee shall establish and
recommend to the Board guidelines for the removal of members of the Board.
F. Governance Guidelines. The Committee shall recommend to the Board
corporate governance guidelines addressing, among other matters, the size,
composition and responsibilities of the Board and its Committees,
including its oversight of management and consultation with management.
The corporate governance guidelines shall be reviewed not less frequently
than annually by the Committee, and the Committee shall make
recommendations to the Board with respect to changes to the guidelines.
G. Advice as to Committee Membership and Operations. The Committee
shall advise the Board with respect to the structure and operations of the
various Committees of the Board and qualifications for membership thereon,
including policies for removal of members and rotation of members among
other Committees of the Board. The Committee shall recommend to the full
Board (after consultation with the Chair of the Board and Chief Executive
Officer) the composition of each committee of the Board.
H. Non-Management Board Member Compensation. The Committee shall be
responsible to periodically review, assess and recommend changes to the
Board with respect to compensation for non-management members of the
Board.
I. Common Stock Ownership Guidelines. The Committee shall
periodically review and, if concluded to be appropriate, recommend changes
to the minimum Company common stock ownership guidelines applicable to the
non-management members of the Board. The Committee shall also monitor
compliance with these guidelines and periodically report on this subject
to the Board.
J. Director Independence. The Committee shall develop and recommend
to the Board standards to be applied in making determinations as to the
absence of material relationships between the Company and a director.
K. Evaluation and Development of the Board. The Committee shall
oversee the evaluation and development of the Board. In discharging this
responsibility, the Committee shall solicit comments from all directors
and report annually to the Board on the results of the evaluation. The
Committee shall also plan for and implement periodic development
opportunities for directors.
L. Approval of Officer Service on Outside Boards. The Committee
shall establish a process and guidelines governing the review and
acceptance by any Company officer of a post as a compensated member of the
board of directors of an unrelated entity.
M. Succession Planning. The Committee shall oversee the succession
planning process for the office of Chief Executive Officer of the Company.
Periodically, the Committee will review that process with the Board, as
well as make recommendations to the Board with respect to candidates for
that office.
N. Periodic Review of the Shareholder Rights Agreement, the Code of
By-Laws and the Articles of Incorporation. The Committee shall
periodically review and, if concluded to be appropriate, make
recommendations for changes to the Company's Shareholder Rights Agreement,
the Code of By-Laws and the Articles of Incorporation.
O. Access to Records, Consultants and Others. In discharging its
responsibilities, the Committee shall have full access to any relevant
records of the Company and may retain outside consultants, at the
Company's expense, to advise the Committee. The Committee shall have the
ultimate authority and responsibility to engage or terminate any such
outside consultant and to approve the terms of any such engagement and the
fees of any such consultant. The Committee may also request that any
officer or other employee of the Company, the Company's outside legal
counsel or any other person meet with any members of, or consultants to,
the Committee.
P. Delegation. The Committee may delegate any of its
responsibilities to a subcommittee comprised of one or more members of the
Committee.
Q. Other Delegated Responsibilities. The Committee shall also carry
out such other duties that may be delegated to it by the Board from time
to time.
APPENDIX C
Vectren Corporation
Board of Directors
Corporate Affairs Committee Charter
Adopted As Of February 26, 2003
I. Statement of Purpose
The Corporate Affairs Committee ("Committee") is a standing committee of
the Board of Directors ("Board"). The purpose of the Committee is to discharge
the duties of the Board relating to its policies, practices and procedures as a
responsible corporate citizen.
II. Organization
A. Charter. At least annually, this charter shall be reviewed and
reassessed by the Committee and any proposed changes shall be submitted to the
Board for approval.
B. Members. The members of the Committee shall be appointed by the Board.
Any member of the Board shall be eligible to serve on the Committee. The
Committee shall be comprised of at least three members. Committee members may be
removed by the Board. The Board shall also designate a Committee Chair.
C. Meetings. In order to discharge its responsibilities, the Committee
shall each year establish a schedule of meetings; additional meetings may be
scheduled as required.
D. Executive Sessions. At the conclusion of each meeting, the Chair may
conduct an executive session where non-management directors (i.e., directors who
are not Company officers but who do not otherwise have to qualify as
"independent" directors) meet without management participation.
E. Quorum; Action by Committee. A quorum at any Committee meeting shall be
a majority of the Committee. All determinations of the Committee shall be made
by a majority of its members present at a meeting duly called and held. Any
decision or determination of the Committee reduced to writing and signed by all
of the members of the Committee shall be fully as effective as if it had been
made at a meeting duly called and held.
F. Agenda, Minutes and Reports. The Chair of the Committee shall be
responsible for establishing the agendas for meetings of the Committee. An
agenda, together with materials relating to the subject matter of each meeting,
shall be sent to members of the Committee prior to each meeting. Minutes for all
meetings of the Committee shall be prepared to document the Committee's
discharge of its responsibilities. The minutes shall be circulated in draft form
to all Committee members to ensure an accurate final record, shall be approved
at a subsequent meeting of the Committee and shall be distributed periodically
to the full Board. The Committee shall make regular reports to the Board.
G. Performance Evaluation. The Committee shall evaluate its performance on
an annual basis and develop criteria for such evaluation.
III. Responsibilities
The following shall be the principal responsibilities of the Committee:
A. Business Practices. The Committee shall oversee the Company's
policies, practices and procedures relating to business practices,
including compliance with applicable laws and regulations.
B. Public Communications. The Committee shall oversee the Company's
policies, practices and procedures relating to public communications with
key stakeholders, other than the financial community.
C. Community Relations. The Committee shall oversee the Company's
policies, practices and procedures relating to community relations,
including charitable contributions and community affairs.
D. Customer Relations. The Committee shall oversee the Company's
policies, practices and procedures relating to customer relations,
including customer satisfaction and quality of customer service.
E. Employment Practices. The Committee shall oversee the Company's
policies, practices and procedures relating to employment practices and
procedures, including employer of choice, workforce diversity and
compliance with employment related laws, regulations and policies.
F. Environmental Compliance and Stewardship. The Committee shall
oversee the Company's policies, practices and procedures relating to
environmental compliance and stewardship, including adherence to
environmental related laws and regulations. At each meeting of the
Committee, a report shall be provided with respect to environmental
compliance and stewardship.
G. Access to Records, Consultants and Others. In discharging its
responsibilities, the Committee shall have full access to any relevant
records of the Company and may retain outside consultants, at the
Company's expense, to advise the Committee. The Committee shall have the
ultimate authority and responsibility to hire or terminate any outside
consultant engaged to assist the Committee in discharging its
responsibilities and to approve the terms of any such engagement and the
fees of any such consultant. The Committee may also request that any
officer or other employee of the Company, the Company's outside legal
counsel or any other person meet with any members of, or consultants to,
the Committee.
H. Delegation. The Committee may delegate any of its
responsibilities to a subcommittee comprised of one or more members of the
Committee.
I. Other Delegated Responsibilities. The Committee shall also carry
out such other duties that may be delegated to it by the Board from time
to time.
APPENDIX D
Vectren Corporation
Board of Directors
Audit Committee Charter
Adopted As Of February 26, 2003
I. Statement of Purpose
The Audit Committee ("Committee") is established by and amongst the Board
of Directors ("Board") of Vectren Corporation ("Company") for the primary
purpose of assisting the Board in:
o overseeing the integrity of the Company's financial statements,
o overseeing the Company's compliance with legal requirements,
o overseeing the independent auditor's qualifications and independence,
o overseeing the performance of the company's internal audit function
and independent auditor, and
o overseeing the Company's system of disclosure controls and system of
internal controls regarding finance, accounting, legal compliance, and
ethics that management and the Board have established.
Consistent with this function, the Committee should encourage continuous
improvement of, and should foster adherence to, the Company's policies,
procedures and practices at all levels. The Committee should also provide an
open avenue of communication among the independent auditors, financial and
senior management, the Internal Audit department, and the Board.
The Committee has the authority to obtain advice and assistance from
outside legal, accounting, or other advisors as deemed appropriate to perform
its duties and responsibilities.
The Company shall provide appropriate funding, as determined by the
Committee, for compensation to the independent auditor and to any advisers that
the Committee chooses to engage.
The Committee will primarily fulfill its responsibilities by carrying out
the activities enumerated in Section III of this Charter. The Committee will
report regularly to the Board regarding the execution of its duties and
responsibilities.
II. Organization
A. Charter. At least annually, this charter shall be reviewed and
reassessed by the Committee and any proposed changes shall be submitted to the
Board for approval.
B. Members. The Audit Committee shall be comprised of three or more
directors as determined by the Board, each of whom shall be independent
directors (as defined by all applicable rules and regulations), and free from
any relationship (including disallowed compensatory arrangements) that, in the
opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee. In complying with the
requirements for independence (as defined by all applicable rules and
regulations), the Committee may choose to achieve such compliance over any
permitted transition period. 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 be a "financial expert" in compliance with the criteria
established by the SEC. The existence of such member(s) shall be disclosed in
periodic filings as required by the SEC. Committee members may enhance their
familiarity with finance and accounting by participating in educational programs
conducted by the Company or an outside consultant.
Annually, the members of the Committee shall be elected by the Board at
the annual meeting of the Board. Vacancies or additions to the Committee may be
filled at any time during the year by action of the full Board. The term of
service for Committee members shall be one year or until their successors shall
be duly elected and qualified. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the full
Committee membership.
C. Meetings. The Committee shall meet at least four times annually, or
more frequently as circumstances dictate. Meetings may be conducted through the
use of any means of communication by which all members may simultaneously hear
each other during the meeting. As part of its job to foster open communication,
the Committee should meet periodically with management, the director of the
Internal Auditing department and the independent auditors in separate executive
sessions to discuss any matters that the Committee or each of these groups
believe should be discussed privately. In addition, the Committee should meet
quarterly with the independent auditors and management to discuss the annual
audited financial statements and quarterly financial statements, including the
Company's disclosure under "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
D. Executive Sessions. At the conclusion of each meeting, the Chair may
conduct an executive session where directors meet without management
participation.
E. Quorum; Action by Committee. A quorum at any Committee meeting shall be
at least a majority of the Committee. All determinations of the Committee shall
be at least a majority of its members present at a meeting duly called and held.
Any decision or determination of the Committee reduced to writing and signed by
all of the members of the Committee shall be fully as effective as if it had
been made at a meeting duly called and held.
F. Agenda, Minutes and Reports. The Chair of the Committee shall be
responsible for establishing the agendas for the meetings of the Committee. An
agenda, together with materials relating to the subject matter of each meeting,
shall be sent to the members of the Committee prior to each meeting. Minutes for
all meetings of the Committee shall be prepared to document the Committee's
discharge of its responsibilities. The minutes shall be circulated in draft form
to all Committee members to ensure an accurate final record, shall be approved
at a subsequent meeting of the Committee and shall be distributed periodically
to the full Board. The Committee shall make regular reports to the Board.
G. Performance Evaluation. The Committee shall evaluate its performance on
an annual basis and develop criteria for such evaluation.
III. Responsibilities
The following shall be the principal responsibilities of the Committee:
A. Documents/Reports/Accounting Information Review
1. Review and discuss with management the Company's annual financial
statements, quarterly financial statements, and all internal controls reports
(or summaries thereof). Review other relevant reports or financial information
submitted by the Company to any governmental body, or the public, including
management certifications as required by the Sarbanes-Oxley Act of 2002
(Sections 302 and 906) and relevant reports rendered by the independent auditors
(or summaries thereof).
2. Recommend to the Board whether the financial statements should be
included in the Annual Report on Form 10-K. Review with financial management and
the independent auditors the 10-Q prior to its filing (or prior to the release
of earnings).
3. Review earnings press releases with management, including review of
"pro-forma" or "adjusted" non-GAAP information.
4. Discuss with management financial information and earnings guidance
provided to analysts and rating agencies. Such discussions may be on general
terms (i.e., discussion of the types of information to be disclosed and the type
of presentation to be made).
5. Review the regular internal reports (or summaries thereof) to management
prepared by the Internal Audit department and management's response.
B. Independent Auditors
1. Appoint (subject to shareholder ratification, if the Board determines
such ratification should be submitted to the Company's shareholders),
compensate, and oversee the work performed by the independent auditor for the
purpose of preparing or issuing an audit report or related work. Review the
performance of the independent auditors and remove the independent auditors if
circumstances warrant. Review the experience and qualifications of senior
members of the independent audit team annually and ensure that all partner
rotation requirements, as promulgated by applicable rules and regulations, are
executed. The independent auditors shall report directly to the Committee and
the Committee shall oversee the resolution of disagreements between management
and the independent auditors in the event that they arise. Consider whether the
auditor's performance of permissible non-audit services is compatible with the
auditor's independence.
2. Review with the independent auditor any problems or difficulties and
management's response; review the independent auditor's attestation and report
on management's internal control report; and hold timely discussions with the
independent auditors regarding the following:
o all critical accounting policies and practices;
o all alternative treatments of financial information within generally
accepted accounting principles that have been o discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor;
o other material written communications between the independent auditor
and management including, but not limited to, the management letter
and schedule of unadjusted differences; and
o an analysis of the auditor's judgment as to the quality of the
Company's accounting principles, setting forth significant reporting
issues and judgments made in connection with the preparation of the
financial statements.
3. At least annually, obtain and review a report by the independent auditor
describing:
o the firm's internal quality control procedures;
o any material issues raised by the most recent internal quality-control
review, peer review, or by any inquiry or o investigation by
governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues; and
o (to assess the auditor's independence) all relationships between the
independent auditor and the Company.
4. Review and pre-approve both audit and non-audit services to be provided
by the independent auditor (other than with respect to de minimis exceptions
permitted by the Sarbanes-Oxley Act of 2002). This duty may be delegated to one
or more designated members of the Committee with any such pre-approval reported
to the Committee at its next regularly scheduled meeting. Approval of non-audit
services shall be disclosed to investors in periodic reports required by Section
13(a) of the Securities Exchange Act of 1934.
5. Set clear hiring policies, compliant with governing laws or regulations,
for employees or former employees of the independent auditor.
C. Financial Reporting Processes and Accounting Policies
1. In consultation with the independent auditors and the Internal Audit
department, review the integrity of the organization's financial reporting
processes (both internal and external), and the internal control structure
(including disclosure controls).
2. Review with management major issues regarding accounting principles and
financial statement presentations, including any significant changes in the
Company's selection or application of accounting principles, and major issues as
to the adequacy of the Company's internal controls and any special audit steps
adopted in light of material control deficiencies.
3. Review analyses prepared by management and the independent auditor
setting forth financial reporting issues and judgments made in connection with
the preparation of the financial statements, including analyses of the effects
of alternative GAAP methods on the financial statements.
4. Review with management the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the financial
statements of the Company.
5. Establish and maintain procedures for the receipt, retention, and
treatment of complaints regarding accounting, internal accounting, or auditing
matters.
6. Establish and maintain procedures for the confidential, anonymous
submission by Company employees regarding questionable accounting or auditing
matters.
D. Internal Audit
1. Review and advise on the selection and/or removal of the Internal Audit
director.
2. Review activities, organizational structure, and qualifications of the
Internal Audit department.
3. Annually, review and recommend changes (if any) to the Internal Audit
charter.
4. Periodically review with the Internal Audit director any significant
difficulties, disagreements with management, or scope restrictions encountered
in the course of the department's work.
E. Ethical Compliance, Legal Compliance, and Risk Management
1. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code. Ensure
that the code is in compliance with all applicable rules and regulations.
2. Review management's monitoring of the Company's compliance with the
organization's Ethical Code, and ensure that management has the proper review
system in place to ensure that Company's financial statements, reports and other
financial information disseminated to governmental organizations, and the public
satisfy legal requirements.
3. Review, with the Company's general counsel, legal compliance matters
including corporate securities trading policies.
4. Review, with the Company's general counsel, any legal matter that could
have a significant impact on the organization's financial statements.
5. Discuss policies with respect to risk assessment and risk management.
Such discussions should include the Company's major financial and accounting
risk exposures and the step management has undertaken to control them.
F. Other Responsibilities
1. Review with the independent auditors, the Internal Auditing department
and management the extent to which changes or improvements in financial or
accounting practices, as approved by the Committee, have been implemented. (This
review should be conducted at an appropriate time subsequent to implementation
of changes or improvements, as decided by the Committee.)
2. Prepare the report that the SEC requires be included in the Company's
annual proxy statement.
3. 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.
APPENDIX E
Vectren Corporation
Board of Directors
Compensation and Benefits Committee Charter
Adopted As of February 26, 2003
I. Statement of Purpose
The Compensation and Benefits Committee ("Committee") is a standing
committee of the Board of Directors ("Board"). The purpose of the Committee is
to discharge the responsibility of the Board relating to total compensation of
the Company's executive officers and such other senior executives as the
Committee may determine (together, "management") and related matters. The
Committee shall also prepare a report on executive compensation for inclusion in
the Company's annual proxy statement.
II. Organization
A. Charter. At least annually, this charter shall be reviewed and
reassessed by the Committee and any proposed changes shall be submitted to the
Board for approval.
B. Members. The members of the Committee shall be appointed by the Board
and shall meet the independence requirements of applicable law and the listing
standards of the New York Stock Exchange, the requirements of an "outside
director" for purposes of Section 162(m) of the Internal Revenue Code of 1986,
as amended, and the requirements of a "non-employee director" for purposes of
Section 16 of the Securities Exchange Act of 1934, as amended. The Committee
shall be comprised of at least three members. Committee members may be removed
by the Board. The Board shall also designate a Committee Chair.
C. Meetings. In order to discharge its responsibilities, the Committee
shall each year establish a schedule of meetings; additional meetings may be
scheduled as required.
D. Executive Sessions. At the conclusion of each meeting, the Chair may
conduct an executive session where non-management directors (i.e., directors who
are not Company officers) meet without management participation.
E. Quorum; Action by Committee. A quorum at any Committee meeting shall be
a majority of the Committee. All determinations of the Committee shall be made
by a majority of its members present at a meeting duly called and held. Any
decision or determination of the Committee reduced to writing and signed by all
of the members of the Committee shall be fully as effective as if it had been
made at a meeting duly called and held.
F. Agenda, Minutes and Reports. The Chair of the Committee shall be
responsible for establishing the agendas for meetings of the Committee. An
agenda, together with materials relating to the subject matter of each meeting,
shall be sent to members of the Committee prior to each meeting. Minutes for all
meetings of the Committee shall be prepared to document the Committee's
discharge of its responsibilities. The minutes shall be circulated in draft form
to all Committee members to ensure an accurate final record, shall be approved
at a subsequent meeting of the Committee and shall be distributed periodically
to the full Board. The Committee shall make regular reports to the Board.
G. Performance Evaluation. The Committee shall evaluate its performance on
an annual basis and develop criteria for such evaluation.
III. Responsibilities
The following shall be the principal responsibilities of the Committee:
A. Goals and Objectives. The Committee shall review and approve
periodically, but no less frequently than annually, the Company's goals and
objectives relevant to compensation of the Chief Executive Officer and
management, including the balance between short-term compensation and long-term
incentives, shall evaluate the performance of the Chief Executive Officer and
management in light of those goals and objectives, and shall set the
compensation level of the Chief Executive Officer and management based on such
evaluation.
B. Compensation Levels. The Committee shall establish the compensation
level (including base and incentive compensation) and direct and indirect
benefits of the Chief Executive Officer and management. In determining incentive
compensation, the Committee shall consider, among other factors it deems
appropriate from time to time, the Company's performance and relative
shareholder return (or other criteria) during such periods as the Committee may
deem appropriate, the value of similar incentive awards to persons holding
comparable positions at comparable companies and the awards given to management
in prior years. The Chair of the Committee shall be responsible for
communicating to the Chief Executive Officer the evaluation of the performance
of the Chief Executive Officer conducted by the outside Directors of the Company
and the level of compensation approved for the Chief Executive Officer.
C. Post-Service Arrangements. The Committee shall evaluate the post-service
arrangements and benefits of the Chief Executive Officer and management and
their reasonableness in light of practices at comparable companies and any
benefits received by the Company in connection with such arrangements. The
Committee shall also review for reasonableness all other post-service
arrangements between the Company, including its wholly-owned subsidiaries, and
current or former employees to the extent those arrangements involve an annual
Company obligation of in excess of $100,000.00.
D. Incentive Compensation Plans. The Committee shall make recommendations
to the Board with respect to the establishment and terms of incentive
compensation plans and equity-based plans and, unless determined otherwise by
the Board, shall be the principal administrator of such plans, including
determining any awards to be granted to the Chief Executive Officer and
management under any such plan implemented by the Company.
E. Consulting and Employment Agreements. The Committee shall have the
responsibility for reviewing and approving all consulting and employment
agreements of the Company with any of the Company's executive officers, or with
any director, provided that any such agreement must also be approved by the full
Board. The Committee shall also review for reasonableness all other consulting
agreements between the Company, including its wholly-owned subsidiaries, and
former employees to the extent those agreements involve an annual Company
obligation of in excess of $100,000.00.
F. Administration of Employee Benefits and Benefit Plans. The Committee
shall have the responsibility for overseeing the administration of employee
benefits and benefit plans for the Company and its subsidiaries; reviewing new
benefits or changes in existing benefits; and appointing from among the
management of the Company committees to administer such employee benefits and
benefit plans.
G. Common Stock Ownership Guidelines. The Committee shall periodically
review, assess and recommend changes to the minimum Company common stock
ownership guidelines applicable to the officers of the Company.
H. Evaluation of Total Compensation Program. The Committee shall review on
a periodic basis the operation of the Company's total compensation program to
evaluate its coordination and execution and shall recommend to the Board steps
to modify compensation programs that provide benefits or payments that are not
reasonably related or are disproportionate to the benefits received by the
Company.
I. Perquisite Policies. The Committee shall establish and review
periodically policies with respect to management perquisites.
J. Access to Records, Consultants and Others. The Committee shall have the
ultimate authority and responsibility to engage and terminate any outside
consultant, at the Company's expense, to assist in determining appropriate
compensation levels for the Chief Executive Officer or other senior executive
management and to approve the terms of any such engagement and the fees of any
such consultant. In discharging its responsibilities, the Committee shall have
full access to any relevant records of the Company and may also request that any
officer or other employee of the Company, including the Company's senior
compensation or human resources executives, the Company's outside legal counsel
or any other person meet with any members of, or consultants to, the Committee.
K. Annual Compensation and Benefits Committee Report. The Committee shall
produce an annual report on executive compensation for inclusion in the
Company's annual proxy statement, all in accordance with applicable rules and
regulations.
L. Delegation. The Committee may delegate any of its responsibilities to a
subcommittee comprised of one or more members of the Committee.
M. Other Delegated Responsibilities. The Committee shall also carry out
such other duties that may be delegated to it by the Board from time to time.
APPENDIX F
Vectren Corporation
Board of Directors
Executive Committee Charter
Adopted As Of February 26, 2003
I. Statement of Purpose
The Executive Committee ("Committee") is a standing committee of the Board
of Directors ("Board"). The purpose of the Committee is to discharge the duties
of the Board, to the maximum extent provided by law, when it is impracticable
for the full Board to meet and take action, as well as when the Board has
specifically delegated to the Committee authority to take certain actions.
II. Organization
A. Charter. At least annually, this charter shall be reviewed and
reassessed by the Committee and any proposed changes shall be submitted to the
Board for approval.
B. Members. The Committee shall have as its standing members the Chair of
the Board and Chief Executive Officer, who shall be the Chair of the Committee,
and the President and Chief Operating Officer, provided, that, on and after May
1, 2003, the only standing member will be the Chair, President and Chief
Executive Officer. The Board shall designate four other members of the Committee
from other Board members on a rotating basis with terms of two years, except for
the initial membership which had two members with three-year terms. Any member
of the Board shall be eligible to serve on the Committee. The Committee shall be
comprised of at least three members. Committee members may be removed by the
Board. The Board shall also designate a Committee Chair.
C. Meetings. Meetings of the Committee shall be held at such times as may
be requested by the Chair of the Board and Chief Executive Officer and are
intended to be held when, in the reasonable judgment of the Chair and Chief
Executive Officer, it is necessary or desirable to have Board involvement in
actions of the Company, but it is either impracticable to convene a meeting of
the full Board, or action by the Committee has been authorized pursuant to
specific delegation by the full Board. Reasonable notice of all meetings shall
be provided by the Secretary of the Company.
D. Quorum; Action by Committee. A quorum at any Committee meeting shall be
a majority of the Committee. All determinations of the Committee shall be made
by a majority of its members present at a meeting duly called and held. Any
decision or determination of the Committee reduced to writing and signed by all
of the members of the Committee shall be fully as effective as if it had been
made at a meeting duly called and held.
E. Agenda, Minutes and Reports. The Chair of the Committee shall be
responsible for establishing the agendas for meetings of the Committee. An
agenda, together with materials relating to the subject matter of each meeting,
shall be sent to members of the Committee prior to each meeting. Minutes for all
meetings of the Committee shall be prepared to document the Committee's
discharge of its responsibilities. The minutes shall be circulated in draft form
to all Committee members to ensure an accurate final record, shall be approved
at a subsequent meeting of the Committee and shall be distributed periodically
to the full Board. The Committee shall make regular reports to the Board.
F. Performance Evaluation. The Committee shall evaluate its performance on
an annual basis and develop criteria for such evaluation.
III. Responsibilities
The following shall be the principal responsibilities of the Committee:
A. Authority. When it is impracticable for the full Board to meet and take
action, the Committee shall have all of the authority of the full Board allowed
by applicable law to discharge the duties of the Board.
Moreover, the Committee shall also have all of the authority of the full Board
allowed by applicable law to discharge the duties that have been delegated by
the Board.
B. Access to Records, Consultants and Others. In discharging its
responsibilities, the Committee shall have full access to any relevant records
of the Company and may retain outside consultants, at the Company's expense, to
advise the Committee. The Committee shall have the ultimate authority and
responsibility to hire or terminate any outside consultant engaged to assist the
Committee in discharging its responsibilities and to approve the terms of any
such engagement and the fees of any such consultant. The Committee may also
request that any officer or other employee of the Company, the Company's outside
legal counsel or any other person meet with any members of, or consultants to,
the Committee.
C. Delegation. The Committee may delegate any of its responsibilities to a
subcommittee comprised of one or more members of the Committee.
D. Other Delegated Responsibilities. The Committee shall also carry out
such other duties that may be delegated to it by the Board from time to time.
VECTREN
c/o National City Bank
Corporate Trust Operations
Locator 5352
P. O. Box 94856
Cleveland, OH 44101-4800
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VOTE BY TELEPHONE
Have your proxy card available when you call the Toll-Free Number 1-800-542-1160
using a touch-tone phone. You will be prompted to enter your Control Number and
then you can follow the simple instructions that will be presented to you to
record your vote.
VOTE BY INTERNET
Have your proxy card available when you access the website www.votefast.com. You
will be prompted to enter your Control Number and then you can follow the simple
prompts that will be presented to you to record your vote.
VOTE BY MAIL
Please mark, sign and date your proxy card and return it in the postage-paid
envelope provided or return to: Stock Transfer Dept (VVC), National City Bank,
P.O. Box 94856, Cleveland, OH 44101-4800.
- ------------------------ ---------------------- -------------------
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the website and Return your proxy
Touch-Tone phone: cast your vote: in the postage-paid
1-800-542-1160 www.votefast.com envelope provided.
- ------------------------ ---------------------- -------------------
Vote 24 hours a day, 7 days a week!
Your telephone or Internet vote must be
received by 11:59 p.m. Eastern Daylight
Time on May 13, 2003, to be counted in
the final tabulation.
If you vote by telephone or Internet, please do not send your proxy by mail.
------------------------
Your Control Number is:
------------------------
If voting by mail, Proxy must be signed and dated below.
Please fold and detach card at perforation before mailing.
Proxy Vectren Corporation Proxy
This Proxy is solicited by the Board of Directors for the Annual Meeting of
Shareholders to be held on May 14, 2003.
The undersigned hereby appoints Jerome A. Benkert, Jr., Ronald E. Christian and
Richard G. Lynch and each of them, jointly and severally, with powers of
substitution, to vote on all matters which may properly come before the 2003
Annual Meeting of Shareholders of Vectren Corporation (or any adjournment
thereof).
Signature(s) of shareholder
---------------------------
Signature, if held jointly
Date:
----------------------------
-----------------------2003
Please sign as your name(s) appear
hereon. All joint tenants should date
this proxy and sign. When signing as
attorney, executor, trustee or
guardian, give the full title of such
If a corporation, sign the full
corporate name by an authorized
officer. If a partnership, sign in
partnership name by authorized person.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY. THANK YOU.
ELECTRONIC ACCESS TO FUTURE DOCUMENTS NOW AVAILABLE
You now have the opportunity to access your Annual Report and Proxy Statement
over the Internet, instead of receiving these documents in print. Participation
is completely voluntary. If you give your consent to receive future annual
reports and proxy statements via the Internet, we will notify you each year of
the Internet location when the documents become available. Once you give your
consent, it will remain in effect until you notify Vectren Corporation by mail
that you wish to resume mail delivery of the Annual Report and Proxy Statement.
As a Vectren shareholder, you have the right to request copies of these
documents.
To give your consent, follow the prompts when you vote by telephone or over the
Internet. If you are voting by mailing your proxy card, check the appropriate
box located on the proxy card below.
Please fold and detach card at perforation before mailing.
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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, AGAINST 3 and 4 and in the discretion of the proxy
holders upon such other matters as may properly come before the meeting. This
proxy can be revoked at any time prior to the vote on the Proposals.
The Board of Directors recommends a vote FOR all of the nominees and FOR
Proposal 2.
1. Election of Directors (three-year term):
Nominees: (01) John M. Dunn
(02) Niel C. Ellerbroo
(03) Anton H. George
(04) Robert L. Koch, II
|_| FOR |_| WITHHOLD
For, except vote withheld from the following nominees:
--------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratify the appointment of Deloitte & Touche, LLP
as Independent accountants for 2003: |_| |_| |_|
The Board of Directors recommends a vote AGAINST
Proposals 3 and 4.
3. Adoption of shareholder proposal concerning
Option Expensing: |_| |_| |_|
4. Adoption of shareholder proposal concerning
Option Indexing: |_| |_| |_|
|_| I plan to attend the Annual Meeting.
|_| I consent to access future Annual Reports and Proxy Statements over the
Internet rather than to receive copies by mail.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)