exhibit1003longtermincentive.htm


    Nicor
Inc.

    Form
8-K

    Exhibit
10.03

    
 

    NICOR INC. 2009 LONG-TERM
INCENTIVE PROGRAM

     

    This 2009
Long-Term Incentive Program was approved at the March 2009 meeting of the
Compensation Committee, along with the program participants and
awards.

     

    Following
is a description of the 2009 Long-Term Incentive Program.  Nicor Inc.
(the “Company”) will make use of a combination of performance units and
restricted stock units.  The Company may also provide awards of stock
options and restricted stock in select circumstances.  Grants of
performance units and restricted stock units for the 2009 Long-Term Incentive
Program will be made from, and are subject to the terms of, the 2006 Long Term
Incentive Plan.

     

    Award
Agreements

     

    All
awards will be evidenced by an agreement between the Company and the award
recipient in a form approved by the Compensation Committee.  In the
event of a conflict between the description of the awards contained herein and
the terms of the form award agreements approved by the Compensation Committee,
the terms of the agreements shall govern.

     

    Description of Restricted
Stock Units

     

    
      	
              ·  

            	
              Restricted
      stock units give the employee the right to receive shares of stock at a
      designated time or event in the future.  The participant holding
      restricted stock units will have the right to receive dividend equivalent
      rights, which are equal to the amount of dividends that would be paid on
      the restricted shares, as if such shares were
  outstanding.

            


    

     

    
      	
              ·  

            	
              Restricted
      stock units will vest and the shares of Nicor stock will be delivered on
      the fourth anniversary of date of
grant.

            


    

     

    Description of Performance
Units

     

    
      	
              ·  

            	
              Each
      performance unit equals $1.00 and total units are a percentage of base
      salary at the time of the award.

            


    

     

    
      	
              ·  

            	
              Performance
      units pay out based on total shareholder return over a three-year
      performance period.

            


    

     

    
      	
              ·  

            	
              Performance
      units will pay out in cash, unless a participant in the Stock Deferral
      Plan elects to defer up to 50% of their payout into that
      plan.  Deferral elections must meet the guidelines and timing of
      the Stock Deferral Plan to be
effective.

            


    

     

    How Performance Unit Payouts
are Determined

     

    
      	
              ·  

            	
              All
      performance units pay out at the end of a three-year performance
      period.  Payouts generally will be made as soon as practicable
      following the end of the performance period, but not later than
      December 31 of the calendar year following the end of the performance
      period.

            


    

     

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

     

    
 

    
      	
              ·  

            	
              The
      payout is based on a measure of relative total shareholder return
      (TSR).  Nicor’s TSR will be measured as the change in share
      price over the three-year period plus dividends granted over that
      period.  For the measurement of Nicor share price, rather than
      focusing on a single-day’s price, the average of the closing share prices
      over a 20-day period will be used for the base and ending
      TSRs.

            


    

     

    
      	
              ·  

            	
              The
      performance measure and multiplier (described below) is based on the Nicor
      TSR over the performance period, as compared to the performance of the
      companies in a utility industry peer group (S&P MidCap 400 Utility
      group).

            


    

     

    
      	
              ·  

            	
              The
      following schedule shall be used to determine the Performance
      Multiplier:

            


    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	
                                        Performance Unit Multiplier
      Schedule

                                      
	 	 	 
	
                                        Nicor TSR Ranking*

                                      	 	
                                        Payout Multiple

                                      
	
                                        90th
      Percentile or higher

                                      	 	
                                        200%

                                      
	
                                        50th
      Percentile

                                      	 	
                                        100%

                                      
	
                                        25th
      Percentile

                                      	 	
                                        25%

                                      
	
                                        Below
      25th
      Percentile

                                      	 	
                                        0%

                                      
	 	 	 
	
                                        * Values between the data
      points will be interpolated.


                                      


                              

                            

                          

                        

                      

                    

                     

                    Description of Stock Options
(granted under special circumstances
only)

                  

                

              

            

          

        

      

    

     

    
      	
              ·  

            	
              Option
      exercise price set at the fair market value on date of
    grant.

            


    

     

    
      	
              ·  

            	
              Options
      vest after one year and are generally exercisable at the end of three
      years.

            


    

     

    
      	
              ·  

            	
              Options
      expire ten years from date of
grant.

            


    

     

    
      	
              ·  

            	
              Options
      will be non-qualified stock
options.

            


    

     

    Description of Restricted
Stock (granted under special circumstances only)

     

    
      	
              ·  

            	
              Restricted
      Stock – actual shares of common stock, which are subject to restrictions
      on receipt and transfer and are forfeitable in the event the employee
      leaves the Company prior to vesting.  The participant holding
      restricted stock shall have all of the rights of a common shareholder,
      including the right to vote the shares and receive all dividends paid on
      such shares.

            


    

     

    
      	
              ·
        

            	
              Restricted
      stock and deferred restricted stock will vest at the end of four years of
      employment from the date of grant.

            


    

     

    Transferability

     

    With
Committee approval, restricted stock units, performance units, stock options and
restricted stock may be transferred for no consideration to or for the benefit
of the participant’s immediate family as defined in the plan.  All
terms and conditions remain applicable after transfer.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Termination
Provisions

     

    In the
case of death, disability or retirement:

     

    
      	
              ·  

            	
              Unvested
      performance units held for more than one year (as of the date of death,
      disability or retirement) will be eligible for payout at the end of the
      performance period based on the normal per-unit performance/pay out
      guidelines.  The award will not be
  prorated.

            


    

     

    
      	
              ·  

            	
              Unvested
      restricted stock units held for more than one year (as of the date of
      death, disability or retirement) will vest and the stock will be paid on
      the earlier of separation from service or the fourth anniversary of grant
      date.

            


    

     

    
      	
              ·  

            	
              All
      stock options held for more than one year (as of the date of death,
      disability or retirement) will be immediately
      exercisable.  Stock options held less than one year will be
      forfeited.

            


    

     

    ·  Stock
options will remain exercisable for ten years after the date of
grant.

     

    
      	
              ·  

            	
              Unvested
      restricted stock held for more than one year from date of grant will vest
      upon death or disability, but not
retirement.

            


    

     

    
      	
              ·    
      

            	
              Unvested
      restricted stock at retirement will be forfeited, unless the Committee
      chooses to exercise discretion and accelerate vesting for all or part of
      the unvested award.

            


    

     

    In the
case of termination of employment for any other reason, unvested awards will be
forfeited unless the Compensation Committee chooses to override this
policy:

    


    
      	
              ·

            	
                   
      Unvested restricted stock units held for less than four years are
      immediately forfeited.

            


    

    


    
      	
              ·

            	
                   
      Performance units held less than three years are immediately
      forfeited.

            


    

    


    
      	
              ·

            	
                   
      Stock options held less than one year are immediately
      forfeited.

            


    

    


    
      	
              ·

            	
                   
      Stock options held for one year or longer will be exercisable, with the
      remaining term limited to three months after the date of
      termination.  After this date, all unexercised 

                   
      options will
      expire and be immediately
cancelled.

            


    

    


    
      	
              ·

            	
                    Restricted
      stock held for less than four years are immediately
    forfeited.

            


    

    


    
 

    Nicor
Human Resources

    March
2009