Exhibit 10(b)
PEOPLES ENERGY CORPORATION
2004 INCENTIVE COMPENSATION PLAN
PERFORMANCE SHARES AWARD AGREEMENT
FOR PERFORMANCE CYCLE BEGINNING OCTOBER 1, _______
AND ENDING SEPTEMBER 30, ________
(Approved February 27, 2004)
Name: _____________________________
Position: ___________________________
(1) (2)
Performance Share Performance
Award Cycle
(Fiscal Years)
_______ ____ - _______
1. GRANT OF PERFORMANCE SHARES. The Compensation Committee of the Board of
Directors of Peoples Energy Corporation ("Committee"), acting on behalf of
the Peoples Energy Corporation ("Company"), hereby grants to the
individual named above (the "Employee") the Performance Share Award set
forth above based on the terms and conditions set forth in this
Performance Shares Award Agreement ("Award Agreement") and in the Peoples
Energy Corporation 2004 Incentive Compensation Plan ("Plan"). Capitalized
terms have the meanings set forth in the Plan.
2. SETTLEMENT OF GRANT
Unless the Employee's Performance Shares shall have been earlier forfeited
or otherwise disposed of pursuant to the terms of the Plan, upon (i) the
expiration of the Performance Cycle and (ii) the Committee's determination
and certification of the extent to which the Performance Goals set forth
herein have been achieved, the Employee shall become entitled to the
number of Performance Shares equal to the Percent of Grant Paid determined
by the level of achievement of the Performance Goals multiplied by the
Performance Share Award. Achieving Target Performance on both Performance
Goals will earn 100% of the Performance Share Award. The maximum possible
Percent of Grant Paid is 150% of the Performance Share Award.
3. PERFORMANCE CYCLE. The Performance Cycle for the Performance Shares
granted herein shall be the three-year Performance Cycle beginning October
1, ____ and ending September 30, ____ ("Performance Cycle").
4. PERFORMANCE GOALS. The Performance Goals for the Performance Cycle are as
set forth on Appendix A of this Award Agreement.
5. PERCENT OF GRANT PAID. The Percent of Grant Paid will be prorated between
levels of the performance matrix set forth on Appendix A, if both
threshold Performance Goals are met.
6. FORM AND TIMING OF PAYMENT. Payment to the Employee in settlement of this
Award of Performance Shares shall be made in shares of Common Stock, to be
paid pursuant to the terms of the Plan.
7. FORFEITURE. If the Employee's employment with the Company and all
Subsidiaries terminates other than by reason of death, disability or
retirement prior to the last day of the Performance Cycle, the Employee
shall forfeit all Performance Shares granted herein.
8. DEATH, DISABILITY, AND RETIREMENT. In the event of the Employee's
termination of employment with the Company and all Subsidiaries by reason
of death, disability or retirement prior to the last day of the
Performance Cycle, the Employee's right to payment with respect to his or
her Performance Shares shall be governed by the terms of the Plan.
9. WITHHOLDING TAXES. The Company shall have the right to deduct from all
amounts payable under this Award Agreement any Federal, state, or local
taxes required by law to be withheld with respect to such payments.
10. NO GUARANTEE OF EMPLOYMENT. Nothing in this Award Agreement or the Plan
shall confer any right on the Employee to continue in the employ of the
Company or any Subsidiary or shall interfere in any way with the right of
the Company or Subsidiary to discharge the Employee at any time.
11. NO TRANSFERS OF AWARDS; NO RIGHTS OF A SHAREHOLDER. The Performance Shares
that are the subject of this Award Agreement are not transferable by the
Employee (other than by the laws of descent and distribution). The
Employee shall acquire no rights of a shareholder of Common Stock unless
and until the Employee actually becomes the holder of shares of Common
Stock delivered to the Employee in settlement of the Performance Shares
granted hereunder.
12. ACKNOWLEDGEMENT. The Employee's signature below indicates the Employee's
acceptance of the Award, the Employee's agreement to the terms and
conditions set forth in this Award Agreement, his or her acknowledgement
of having received a copy of the Plan and its Prospectus, and his or her
agreement to the terms and conditions set out in the Plan and its
Prospectus. In the event of any conflict between the terms of this Award
Agreement and the Plan, the Plan shall control.
PEOPLES ENERGY CORPORATION
By: _______________________________
Date: __________________
AGREED TO AND
ACKNOWLEDGED BY:
___________________________
Employee's Signature
___________________________
Date
APPENDIX A
PEOPLES ENERGY CORPORATION
2004 INCENTIVE COMPENSATION PLAN
PERFORMANCE SHARES AWARD
FOR PERFORMANCE CYCLE BEGINNING OCTOBER 1, ______
AND ENDING SEPTEMBER 30, ______
PERFORMANCE GOALS
Performance Goals for the Performance Cycle beginning October 1, _____ and
ending September 30, ______ are shown in the following performance/reward
matrix:
PERCENT OF GRANT PAID
MAXIMUM
THREE-YEAR ____% 50% 100% 125% 150%
AVERAGE RETURN PLAN TARGET
ON CAPITAL ____%
THRESHOLD 25% 75% 100% 125%
____%
BELOW 0% 50% 63% 75%
THRESHOLD
0% 0% 25% 25%
BELOW THRESHOLD TARGET MAXIMUM
THRESHOLD 35TH %TILE 55TH %TILE 75TH %TILE
AND OVER
ANNUALIZED THREE-YEAR TOTAL SHAREHOLDER RETURN
RELATIVE TO PEERS
THREE-YEAR AVERAGE RETURN ON CAPITAL (ROC) means the average of the Return on
Capital for the three fiscal years of the Performance Cycle.
RETURN ON CAPITAL means for any fiscal year, (i) the Company's Operating Profits
After Taxes divided by (ii) its Average Capital.
OPERATING PROFITS AFTER TAXES means, for the relevant fiscal year, the sum of
(i) Operating Income After Taxes and (ii) Qualified Tax Benefits.
OPERATING INCOME AFTER TAXES is the product of (a) the Company's operating
income minus short term interest expense and fees related to commercial paper
and lines of credit plus interest income and (b) one minus the Company's
marginal tax rate.
QUALIFIED TAX BENEFITS is identifiable tax credits that contribute to the
economic merits of a project or investment (e.g. wind power, oil and gas
production tax credits).
AVERAGE CAPITAL means, for the relevant fiscal year, the average of invested
capital (stockholders' equity plus long-term debt, including long-term debt
classified as short-term), determined by dividing (a) thirteen into (b) the sum
of (i) the invested capital balance at month end for each of the 12 months of
the relevant fiscal year and (ii) the month end balance of invested capital for
the month immediately preceding such fiscal year.
ANNUALIZED THREE-YEAR TOTAL SHAREHOLDER RETURN (TSR) means (a) taking the cubic
root of Total Shareholder Return and (b) subtracting one.
Total Shareholder Return means the result of dividing (a) Ending Total
Value by (b) Beginning Total Value.
Ending Total Value means the product of (a) the Number of Shares On Ending
Date multiplied by (b) the closing share price on the last Trading Day of
the Performance Cycle.
Beginning Total Value means the closing value of one share on the last
Trading Day of the month immediately preceding the beginning date of the
Performance Cycle.
Number of Shares On Ending Date means the number of shares, inclusive of
dividend reinvestment, on the last day of the Performance Cycle. Number of
Shares on Ending Date is calculated assuming one share is owned at the
beginning of the Performance Cycle, to which amount is added, in any month
in which a dividend payment occurs (determined by the date a stock goes
"ex-dividend"), the amount of additional shares that could be purchased by
dividing (a) the ending month share price into (b) the product of (i) the
amount of shares owned (inclusive of any prior dividend reinvestments) at
the beginning of the month and (ii) the dividend rate per share. Share
prices are determined by the closing price on the last Trading Day of the
month.
Trading Day means any day that the New York Stock Exchange is open for
business.
ANNUALIZED THREE-YEAR TOTAL SHAREHOLDER RETURN RELATIVE TO PEERS will be Peoples
Energy's Annualized Three - Year Total Shareholder Return compared against the
Annualized Three-Year Total Shareholder Return of the following companies (the
"Peer Group"):
Ticker Ticker Ticker
Symbol Company Symbol Company Symbol Company
- ------ ------- ------ ------- ------ -------
ATG Atlanta Gas Light ATO Atmos Energy DTE Detroit Edison
EGN Energen LG Laclede Gas WEC Wisconsin Energy
EQT Equitable Resources NJR New Jersey Resources EXC Exelon
KSE Keyspan SRE Sempra AAE Ameren
NFG National Fuel Gas SJI South Jersey Ind. ED ConEdison
GAS NICOR CGC Cascade Natural Gas
NWN Northwest Natural Gas OGE OGE
NUI NUI Corp SWX Southwest Gas
OKE Oneok VVC Vectren
PNY Piedmont NI NiSource
STR Questar MGEE Madison Gas & Electric
SUG Southern Union UGI UGI
WGL Washington Gas Light
Percentile Rank will be determined by assigning a rank ordering to the Company
and its peers on the basis of Annualized Three Year Total Shareholder Return,
and assigning to each rank the following percentile:
Rank Percentile Rank Percentile
- ---- ---------- ---- ----------
1 100.00% 19 40.00%
2 96.60% 20 36.60%
3 93.30% 21 33.30%
4 90.00% 22 30.00%
5 86.60% 23 26.60%
6 83.30% 24 23.30%
7 80.00% 25 20.00%
8 76.60% 26 16.60%
9 73.30% 27 13.30%
10 70.00% 28 10.00%
11 66.60% 29 6.60%
12 63.30% 30 3.30%
13 60.00% 31 .00%
14 56.60%
15 53.30%
16 50.00%
17 46.60%
18 43.30%
Should a situation arise where it would no longer be possible to calculate Total
Shareholder Return for a Peer Group company (e.g. stock de-listing, acquisition)
then a suitable replacement firm will be added to the listing of Peer Group
companies, such replacement firm subject to approval of the Committee. In the
event no suitable replacement firm can be identified, then the
percentile-ranking table will be adjusted to reflect the remaining number of
firms in a manner consistent with current percentile-ranking table.
COMPUTATION OF FINAL PERCENT OF GRANT PAID: Since the matrix is not linear,
proration will occur in some cases. Base Value will be the pay-out box value
that corresponds to ROC and TSR levels immediately below those achieved.
Proration will occur when that base value is above zero. From the Base Value,
the ROC prorated value will be calculated by taking a proration between that ROC
level and the next higher ROC level. Then the TSR prorated value will be
computed in a like manner (starting from the Base Value). The two prorated
values will be added to the base value to get the percent of grant paid. If the
base value is zero, no proration will occur.