EXHIBIT 10(b)

CONFIDENTIALITY AND SEVERANCE AGREEMENT

BETWEEN

PEOPLES ENERGY CORPORATION

AND

JAMES M. LUEBBERS

 

THIS AGREEMENT, effective as of September 30, 2001, by and between Peoples
Energy Corporation, an Illinois corporation and James M. Luebbers (the
"Executive").

WITNESSETH

WHEREAS, the Company and Executive desire to set forth the terms and conditions
of Executive's termination of employment with the Company.

NOW THEREFORE, it is hereby agreed by and between the parties as follows:

1. Definitions.

"Affiliate" shall mean any entity controlled by or under common control of PEC
and other entities controlled by such subsidiaries.

"Agreement" shall mean this Confidentiality and Severance Agreement.

"Base Compensation" shall mean $233,300.

"Benefit Service" shall mean the Benefit Service as defined in the PEC
Retirement Plan.

"Board" shall mean the Board of Directors of Peoples Energy Corporation.

"Code" shall mean the United States Internal Revenue Code of 1986, as amended,
or any successor thereto.

"Company" shall mean Peoples Energy Corporation and include any Affiliate and
successor or successors to Peoples Energy Corporation.

"Confidential Information" shall have the meaning set forth in Paragraph 9 of
this Agreement.

"Confidentiality and Employment Agreement" shall mean that certain
Confidentiality and Employment Agreement between Peoples Energy Corporation and
Executive, dated September 30, 2001.

"Effective Date" shall mean September 30, 2001.

"Non-Vested Restricted Stock" shall mean Restricted Stock previously granted to
the Executive under the PEC LTIC that will not be vested until after October,
2001.

"PEC" shall mean Peoples Energy Corporation, an Illinois corporation.

"PEC LTIC" shall mean the Peoples Energy Corporation Long Term Incentive
Compensation Plan as in effect on the Effective Date, as amended from time to
time.

"PEC Retirement Plan" shall mean the Peoples Energy Corporation Retirement Plan
as in effect on the Effective Date, as amended from time to time.

"PEC SRB" shall mean the Peoples Energy Corporation Supplemental Retirement
Benefit Plan as in effect on the Effective Date, as amended from time to time.

"PEC STIC" shall mean the Peoples Energy Corporation Short Term Incentive
Compensation Plan as in effect on the Effective Date, as amended from time to
time.

"Pensionable Earnings" shall mean the compensation that can be used to calculate
a pension benefit under the PEC Retirement Plan and the PEC SRB.

"Plan Year" shall mean the Plan Year as defined under the PEC STIC.

"Present Value Amount" shall mean the amount calculated as of March 31, 2002 by
using as a mortality basis the mortality basis used by the PEC Retirement Plan
for determining lump sum benefits, and by using as a discount rate, the discount
rate utilized under the Retirement Plan for determining lump sum benefits based
on the average of the yield on Thirty (30) year United States Treasury Bonds for
the month of September, 2001 or January, 2002, whichever is lower.

"QSERP" shall mean provisions that amend the PEC Retirement Plan whereby some or
all of the executive pension benefits that would otherwise be paid out of the
PEC SRB due to the payment limitations of the Code are paid out of the PEC
Retirement Plan.

"Resignation Date" shall mean March 31, 2002.

"STIC Compensation" shall mean an amount equal to the amount awarded to the
Executive under the PEC STIC for the Plan Year ended September 30, 2001.

2. Employment.

a. Executive shall resign his position as Vice President, Chief Financial
Officer and Controller, and as a director of each Affiliate, effective as of the
close of business on September 30, 2001.

b. Executive shall continue employment with the Company subsequent to the
Effective Date as an appointed officer until the Resignation Date, pursuant to
the Confidentiality and Employment Agreement.

3. Severance Benefit.

a. The Company shall pay to the Executive on the dates set forth below (if the
Executive has died before receiving all payments to which he has become entitled
hereunder, to the beneficiary of the estate of the Executive as described in
paragraph 8) severance pay as described and on the dates set forth below: (1) a
lump sum cash amount equal to two (2) years of the Executive's Base Compensation
to be paid on or before September 30, 2001; (2) a lump sum cash amount equal to
two (2) years of the Executive's STIC Compensation to be paid on or before
December 15, 2001; and (3) the amount equal to the Present Value Amount of the
benefits accrued by the Executive under the PEC Retriement Plan and PEC SRB,
Part A and Part B on the Resignation Date, determined as if (x) the Executive
had received credit for an additional two (2) years of Benefit Service and (y)
the Executive's average 12-month compensation for the 60 highest consecutive
months of Benefit Service utilized for determining a pension benefit is
calculated as set forth in paragraph 3.b, less (z) the lump sum benefit accrued
by the Executive under the PEC Retirement Plan and the PEC SRB, Part A and Part
B on the Resignation Date to be paid on April 1, 2001.

b. The Executive's 12-month average compensation for the 60 highest consecutive
months of Benefit Service for the purpose of clause (y) of paragraph 3.a above
shall be determined by assuming 30 months of the Executive's Pensionable
Earnings are at the annual rate of the Executive's actual Pensionable Earnings
during the 12-month period ended 9/30/01 and 30 months of the Executive's
Pensionable Earnings are the Executive's actual Pensionable Earnings during the
30 month period ended 9/30/01.

4. Tax Withholding.

The Company may withhold from any payments made under this Agreement all
federal, state or other taxes, including excise taxes as shall be required
pursuant to any law or governmental regulation or ruling.

5. Waiver and Releases.

a. In consideration of the covenants under this Agreement, including, but not
limited to, paragraph 3 and the covenants under the Confidentiality and
Employment Agreement, except with respect to Executive's rights under the
Illinois Workers' Compensation Act, the Executive hereby waives, releases and
forever discharges PEC (including its current and former Affiliated companies,
and their current and former officers, directors, employees and agents) from all
claims which he may have against PEC (including its current and former
Affiliated companies, and their current and former officers, directors,
employees and agents of the Company and the Company's benefit plans and
fiduciaries thereof) arising out of or related to his employment with the
Company or termination of such employment, including, but not limited to claims
under the Americans With Disabilities Act, the Age Discrimination in Employment
Act, Title VII of the Civil Rights Act of 1964, the Illinois Human Rights Act,
the Employee Retirement Income Security Act, or any other federal, state or
local statute, regulation, ordinance, or doctrine of common law.

b. In consideration of the covenants under this Agreement, including, but not
limited to, paragraph 3 and the covenants under the Confidentiality and
Employment Agreement, as a condition precedent to receiving any payments under
this Agreement, the Executive agrees to execute on the Effective Date, a release
in the form of Exhibit A attached hereto and by this reference made a part
hereof.

6. Entire Understanding.

This Agreement contains the entire understanding between the Company and the
Executive with respect to the subject matter hereof and supersedes any prior
confidentiality and severance agreement between the Company and the Executive,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of any kind elsewhere provided and not
expressly provided for in this Agreement.

7. Severability.

If, for any reason, any one or more of the provisions or part of a provision
contained in this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement
not held so invalid, illegal or unenforceable, and each other provision or part
of a provision shall to the full extent consistent with law continue in full
force and effect.

8. No attachment.

Except as required by law and as expressly provided in this paragraph 8, no
right to receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge or
hypothecation or to execution, attachment, levy or similar process or assignment
by operation of law, and any attempt, voluntary or involuntary, to effect any
such action shall be null, void and of no effect. Notwithstanding the preceding
sentence, the Executive may, by giving notice to the Company during the
Executive's lifetime, designate a beneficiary or beneficiaries to whom the
severance benefits described in paragraph 3 shall be transferred in the event of
the Executive's death. Any such designation may be revoked or changed by the
Executive at any time and from time to time by similar notice. If there is no
such designated beneficiary living upon the death of the Executive or if all
such designated beneficiaries die prior to the receipt by the Executive of the
referenced severance benefits, such severance benefits shall be transferred to
the Executive's surviving spouse or, if none, then such severance benefits will
be transferred to the estate or personal representative of the Executive. If the
Company, after reasonable inquiry, is unable to determine within twelve months
after the Executive's death whether any designated beneficiary of the Executive
did in fact survive the Executive, such beneficiary shall be conclusively
presumed to have died prior to the Executive's death.

9. Confidential Information.

a. Executive understands and acknowledges that, by virtue of his position with
the Company, he has had access to confidential information belonging to the
Company and/or its Affiliates, the disclosure or use of which may damage the
Company or the Affiliates. "Confidential Information" includes, but is not
limited to, information regarding the Company and its Affiliates' hydrocarbon
interests and prospects, computer programs; unpatented inventions, discoveries
or improvements; marketing, manufacturing, or organizational research and
development, or business plans; sales forecasts; personnel information,
including with respect to the employees of the Company and its Affiliates, their
competence, abilities, and compensation; pricing and financial information;
current and prospective customer lists and information on customers or their
employees; information concerning any planned or pending acquisition or
divestiture, regardless of whether such planned or pending acquisition or
divesture is effectuated or was planned on or prior to the date of this
Agreement; and information concerning purchases of major equipment or property.
"Confidential Information" does not include information which is in or hereafter
enters the public domain through no fault of Executive, or is obtained by
Executive from a third party having the legal right to use and disclose the
same. Executive agrees that all Confidential Information is and shall remain the
sole property of the Company and its Affiliates, and he agrees to maintain the
Confidential Information in strict confidence for a period of two (2) years
after his employment.

b. This Paragraph 9 shall not prevent Executive from using general skills and
experience developed in positions with the Company, or from accepting a position
of employment with another company, firm, or other organization, provided that
such position does not require the divulgence or use of the Confidential
Information.

c. Executive acknowledges that his failure to comply with the terms of this
Paragraph 9 will cause irreparable damage to the Company and/or its Affiliates.
Therefore, he agrees that, in addition to any other remedies at law or in equity
available to the Company or the Affiliates for his breach or threatened breach
of this Paragraph 9, the Company or any of its Affiliates are entitled to
injunctive relief against him to prevent such damage or breach. If any
restriction in this Paragraph 9 is found to be too broad to permit enforcement
to its full extent, such restriction shall be enforced to the maximum extent
permitted by law, and Executive agrees that such restriction may be judicially
modified to permit such maximum enforcement.

10. Outplacement Services.

Unless the company offers outplacement services to the Executive, the Company
shall reimburse the Executive for the costs of outplacement services incurred by
the Executive up to a maximum amount of $20,000.

11. Binding Agreement.

This Agreement shall be binding upon, and shall inure to the benefit of, the
Executive and the Company and their respective permitted successors and assigns.

12. Modification and Waiver.

This Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement except by written instrument
signed by the party charged with such waiver or estoppel. No such written waiver
shall be deemed a continuing waiver unless specifically stated therein, and each
such waiver shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future or as to
any act other than that specifically waived.

13. Headings of No Effect.

The paragraph headings contained in this Agreement are included solely for
convenience of reference and shall not in any way affect the meaning or
interpretation of any of the provisions of this Agreement.

14. Governing Law.

This Agreement and its validity, interpretation, performance, and enforcement
shall be governed by the laws of the State of Illinois without giving effect to
the choice of law provisions in effect in such State.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed, and
the Executive has signed this Agreement, all effective as of the Effective Date.

 

By: /s/ James M. Luebbers___________

 

 

PEOPLES ENERGY CORPORATION

By: /s/ Thomas M. Patrick_____________

Thomas M. Patrick

 

 

 

EXHIBIT A

TO CONFIDENTIALITY AND SEVERANCE AGREEMENT

BETWEEN PEOPLES ENERGY CORPORATION AND

EXECUTIVE

RELEASE AGREEMENT

 

This Release Agreement is entered into on this 28__ day of September___, between
_James M. Luebbers________, _________("Executive") and Peoples Energy
Corporation ("Company") on behalf of Peoples Energy Corporation and any
Affiliate and successor or successors to Peoples Energy Corporation.

1. In consideration of the benefits to be paid and provided to the Executive
under that certain Confidentiality and Severance Agreement between Peoples
Energy Corporation ("PEC") and the Executive, dated as of September 30, 2001
("Confidentiality and Severance Agreement") and that certain Confidentiality and
Employment Agreement between Peoples Energy Corporation and Executive dated
September 30, 2001 ("Employment Agreement"), except with respect to Executive's
rights under the Illinois Workers' Compensation Act, Executive waives, releases
and forever discharges PEC (including its current and former Affiliated
companies, and their current and former officers, directors, employees and
agents) from all claims which he may have against PEC (including its current and
former Affiliated companies, and their current and former officers, directors,
employees and agents of the Company and the Company's benefit plans and
fiduciaries thereof) arising out of or related to his employment with the
Company or termination of such employment, including, but not limited to claims
under the Americans With Disabilities Act, the Age Discrimination in Employment
Act, Title VII of the Civil Rights Act of 1964, the Illinois Human Rights Act,
the Employee Retirement Income Security Act, or any other federal, state or
local statute, regulation, ordinance, or doctrine of common law.

2. The Executive acknowledges that, prior to his execution of this Release
Agreement, he was encouraged to review it with counsel or anyone else of his
choosing. Executive states that he understands its meaning and that he
knowingly, freely and voluntarily executes it.

3. The Executive agrees that any changes made to the Confidentiality and
Severance Agreement, the Employment Agreement and to this Release Agreement,
whether or not material, will not extend the twenty-one day period for accepting
the offer in the Confidentiality and Severance Agreement, the Employment
Agreement and this Release Agreement.

The Company encourages the Executive to consult with an attorney regarding this
Release Agreement. Therefore, the offer contained in the Confidentiality and
Severance Agreement, the Employment Agreement and in this Release Agreement will
remain open for 21 days after the date each was first presented to the
Executive. If after review, the Executive wishes to accept, he should sign the
documents and return them to the Secretary of Peoples Energy Corporation. This
Release Agreement will not become effective until seven days thereafter, and if
the Executive changes his mind within that period, he may revoke this Release
Agreement by notifying the Secretary of Peoples Energy Corporation. The
Executive understands and agrees that no benefits will be paid or provided to
the Executive under the Confidentiality and Severance Agreement and the
Employment Agreement prior to both (1) the receipt by the

Secretary of Peoples Energy Corporation of this Release Agreement executed by
the Executive and (2) the expiration of the seven (7)-day revocation period.

PEOPLES ENERGY CORPORATION:

By:

 _______________________________________

 

 ________________________

 

 

 

Date

 

 

 

 

By:

 _______________________________________

 

 ________________________

 

 

 

Date