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    EXHIBIT
      10(d)  

     

     

    PEOPLES
      ENERGY CORPORATION

    LONG-TERM
      INCENTIVE PLAN

    FOR
      DIVERSIFIED BUSINESS UNITS

     

    (Approved
      November 7, 2001; amended December 5, 2001, December 4, 2002, and October 3,
      2006 as effective January 1, 2005)

     

    I.
        Introduction

     

    1.1  Purpose.
      The
      purposes of the Long-Term Incentive Plan for Diversified Business Units (the
      “Plan”)
      of
      Peoples Energy Corporation, an Illinois corporation (the “Company”),
      are
      (i) to align management interests with value creation at the business unit
      level, (ii) to reflect the early lifecycle stages of the Company’s diversified
      businesses and the unique performance measurement challenges each poses, (iii)
      to advance the interests of the Company by attracting and retaining officers
      for
      the Company’s subsidiaries, divisions, joint ventures or other units of the
      Company’s business and (iv) to motivate such officers to act in the long-term
      best interests of the Company’s shareholders.

     

    1.2  Certain
      Definitions.

     

    “Aggregate
      Sharing Percentage”
      shall
      mean, with respect to each Business Unit, a specified percentage of the Excess
      Market Value as determined by the Committee for each Business Unit.

     

    “Award”
      means
      any Performance Award, Equity Interest Award or Percentage Interest Award
      granted under the Plan. 

     

    “Board”
      shall
      mean the Board of Directors of the Company.

     

    “Business
      Unit”
      shall
      mean a subsidiary, division, joint venture or other unit of the Company’s
      business which is designated as such by the Committee.

     

    “Cause”
      shall
      mean (i) unsatisfactory job performance in the discretion of the Company, or
      (ii) the willful and continued failure to substantially perform the duties
      assigned by the Company (other than a failure resulting from the holder’s
      disability) in the discretion of the Company, or (iii) the willful engaging
      in
      conduct which is demonstrably injurious to the Company or any Business Unit,
      monetarily or otherwise, including conduct that, in the reasonable judgment
      of
      the Company, no longer conforms to the standard of the Company’s employees, any
      act of dishonesty, commission of a felony, or a significant violation of any
      statutory or common law duty of loyalty to the Company or its
      Subsidiaries.

     

    “Change
      in Control”
      shall
      have the meaning set forth in Section 4.7(a).

     

    “Code
      Section 409A”
shall
      mean §409A of the Internal Revenue Code. 

     

    
      
         

      

      
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    “Committee”
      shall
      mean the Compensation Committee of the Board.

     

    “Common
      Stock”
      shall
      mean, with respect to a given Newco, the common stock of such Newco if the
      Newco
      is organized as a corporation, or other comparable common equity securities
      of
      such Newco if the Newco is organized as an entity other than a
      corporation.

     

    “Company”
has
      the
      meaning specified in Section 1.1 hereof.

     

    “Disabled”
      means a
      participant is either: a) unable to engage in any substantial gainful activity
      by reason of any medically determinable physical or mental impairment that
      can
      be expected to result in death or can be expected to last for a continued period
      of not less than 12 months, or b) receiving income replacement benefits for
      a
      period of not less than three months under an employer accident and health
      plan
      on account of disability.
      

     

    “Divestiture”
      shall
      mean a Change in Control as to a Business Unit other than in an IPO or in a
      transaction with another Business Unit or other entity controlled directly
      or
      indirectly by the Company. A Divestiture shall satisfy the requirements for
      a
      Change in Control of a Business Unit as defined in Section 4.7(b)
      hereof.

     

    “Equity
      Interest Award”
      shall
      have the meaning set forth in Section 3.1 hereof.

     

    “Excess
      Market Value”
      shall
      mean, with respect to a Divestiture or IPO of a Business Unit, (a) the sum
      of
      (i) the net consideration received by the Company (i.e.,
      the
      difference between the gross consideration paid to the Company and such items
      as
      taxes, legal and intermediary fees and other transaction costs associated with
      the Divestiture or IPO), including cash and the Fair Market Value of any equity
      or debt instruments received or to be received by the Company as consideration
      in connection with the Divestiture or IPO, and (ii) an amount equal to the
      cash
      distributed from the Business Unit to the Company minus (b) the sum of (i)
      the
      Company’s then-current cash investment in the Business Unit (whether in the form
      of debt or equity) and (ii) a minimum compounded return, calculated quarterly
      at
      20% per annum on the net amount of the Company’s investment in the Business Unit
      (taking into account cash distributions and interest payments from the Business
      Unit to the Company) as determined by the Committee in its discretion. In the
      case of an IPO other than an initial public offering of the common equity
      securities of the Business Unit, the gross consideration paid to the Company
      as
      referred to in clause (i) of this definition shall be deemed to be equal to
      the
      average Public Market Capitalization for the first 30 trading days on which
      the
      common equity securities of Newco trade on a Securities Exchange. In the case
      of
      an initial public offering of the common equity securities of a Business Unit,
      the gross consideration shall be determined by taking the product of (x) a
      fraction, the numerator of which is the gross consideration paid to the Company
      for the common equity securities of the Business Unit (i.e., prior to any
      deduction for underwriting, registration, legal and any other transaction fees)
      and the denominator of which equals the total number of common equity securities
      sold in such initial public offering, multiplied by (y) the total number of
      common equity securities of the Newco outstanding (including any shares held
      by
      the Company).

     

    “Exchange
      Act”
      shall
      mean the Securities Exchange Act of 1934, as amended.

     

    
      
         

      

      
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    “Fair
      Market Value”
      shall
      mean the closing price at which the Common Stock of Newco is traded on the
      date
      on which such value is being determined, as reported in the New York Stock
      Exchange Composite Transactions (or any other established stock exchange or
      national market system), or if such date is not a trading day, on the first
      trading day preceding such date; provided,
      however,
      that
      Fair Market Value may be determined by the Committee by whatever means or
      methods as the Committee, in the good faith exercise of its discretion, shall
      at
      such time deem appropriate. The Committee shall not select a means or method
      of
      determining “Fair Market Value” that fails to meet the requirements of Code
      Section 409A.

     

    “IPO”
      shall
      mean, with respect to each Business Unit, either (i) an initial public offering
      of all or part of the common equity securities of such Business Unit pursuant
      to
      an effective registration statement under the Securities Act of 1933, as
      amended, (ii) a Spin-Off, or (iii) any other transaction resulting in the common
      equity securities of the Business Unit being publicly traded on a Securities
      Exchange, except a transaction where (a) the Company acquires some or all of
      the
      equity securities of an entity any of whose common equity securities at the
      time
      of such acquisition are publicly traded on a Securities Exchange, (b) at or
      subsequent to the time of such acquisition the Business Unit is merged with
      or
      into the acquired entity, and (c) it is the Company’s intent that as soon as
      practicable following such merger, the common equity securities which are
      publicly traded will be acquired by the Company and/or delisted from trading
      on
      such Securities Exchange. 

     

    “Management
      Committee”
      shall
      have the meaning set forth in Section 1.3 hereof.

     

    “Newco”
shall
      mean the entity resulting from either the IPO of a Business Unit or the
      Divestiture of a Business Unit.

     

    “Officer”
      shall
      have the meaning set forth in Section 1.4 hereof.

     

    “Participant”
      shall
      mean an Officer of a Business Unit designated by the Committee or the Management
      Committee as eligible to receive awards under the Plan.

     

    “Percentage
      Interest”
      shall
      mean an individual allocation, as determined by the Committee in its discretion,
      of the Aggregate Sharing Percentage applicable to the Business Unit in which
      the
      individual is employed.

     

    “Percentage
      Interest Award”
      shall
      have the meaning set forth in Section 3.2 hereof.

     

    “Performance
      Award”
      shall
      mean a right, contingent upon the attainment of specified Performance Measures
      within a specified Performance Period, to receive payment in cash of a specified
      amount.

     

    “Performance
      Measures”
      shall
      mean the criteria and objectives, established by the Committee, which shall
      be
      satisfied or met during the applicable Performance Period as a condition to
      the
      holder’s receipt of the payment with respect to a Performance Award. Such
      criteria and objectives may be based on one or more Business Units and/or on
      the
      Company as a whole and may include criteria and objectives that can be affected
      by the holder of the Performance Award. 

     

    
      
         

      

      
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    “Performance
      Period”
      shall
      mean the period determined under Section 2.2(c) during which the Performance
      Measures applicable to a Performance Award shall be measured.

     

    “Plan”
      shall
      have the meaning set forth in Section 1.1 hereof.

     

    “Public
      Market Capitalization”
      shall
      mean, with respect to a Newco, the product of (a) the closing price (or closing
      bid price, as the case may be) per unit (stated in United States dollars) of
      the
      common equity securities of Newco on the applicable Securities Exchange on
      the
      day as of which the Public Market Capitalization is being determined, and (b)
      the total number of units of common equity securities (excluding warrants,
      options or similar rights to acquire such equity securities) of such Newco
      issued and outstanding on such day (including any such equity securities held
      by
      the Company).

     

    “Securities
      Exchange”
      shall
      mean a registered national securities exchange under the Exchange Act, including
      the NASDAQ. 

     

    “Spin-Off”
      shall
      mean, with respect to a Business Unit, the distribution by the Company to its
      shareholders of all or part of the equity interest then owned by the Company
      in
      the Business Unit.

     

    “Tax
      Date”
      shall
      have the meaning set forth in Section 4.4 hereof.

     

    1.3  Administration.
      This
      Plan shall be administered by the Committee. The Committee shall, subject to
      the
      terms of this Plan and applicable law (including Code Section 409A), select
      eligible persons for participation in this Plan and determine the form, amount
      and timing of each Award to such persons, the time and conditions of payment
      of
      the Award and all other terms and conditions of the Award. The Committee shall,
      subject to the terms of this Plan, interpret this Plan and the application
      thereof, establish such guidelines, rules and regulations it deems necessary
      or
      desirable for the administration of this Plan and may impose, incidental to
      the
      grant of an Award, conditions with respect to the Award, such as limiting
      competitive employment or other activities. All determinations made by the
      Committee in the administration of the Plan shall be final, binding and
      conclusive with respect to all persons.

     

    The
      Committee may delegate some or all of its power and authority hereunder to
      the
      Chief Executive Officer (the “CEO”),
      such
      other executive of the Company and/or a committee comprised of senior officers
      of the Company appointed by the CEO (the “Management
      Committee”)
      as the
      Committee deems appropriate and may prescribe such limits, guidelines, rules
      and
      regulations for any such delegation as the Committee deems
      appropriate.

     

    A
      majority of the Committee shall constitute a quorum. The acts of the Committee
      shall be either (i) acts of a majority of the members of the Committee present
      at any meeting at which a quorum is present or (ii) acts approved in writing
      by
      all of the members of the Committee without a meeting.

     

    1.4  Eligibility.
      Awards
      may be granted under this Plan to such Officers of the Company and its Business
      Units as the Committee or its delegee may designate in its discretion from
      time
      to time. For purposes of this Plan, the term “Officer” shall mean an employee
      who occupies a position in an officer salary grade; references to employment
      by
      the Company shall 

     

    
      
         

      

      
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    also
      mean
      employment by a Business Unit. The Committee’s selection of a person to
      participate in this Plan at any time shall not require the Committee to select
      such person to participate in this Plan at any other time.

     

    II.
        Performance
      Awards

     

    2.1  Performance
      Awards.
      The
      Committee may, in its discretion, grant Performance Awards to such eligible
      persons as may be selected by the Committee.

     

    2.2  Terms
      of Performance Awards.
      Performance Awards shall be subject to the following terms and conditions and
      such additional terms and conditions, not inconsistent with the terms of this
      Plan, as the Committee shall deem advisable.

     

    (a)  Award
      Opportunities.
      The
      minimum, target and maximum levels of annual award opportunities applicable
      to a
      Performance Award shall be determined by the Committee.

     

    (b)  Performance
      Measures.
      The
      Performance Measures applicable to a Performance Award for each applicable
      Performance Period shall be determined by the Committee and shall be based
      upon
      Performance Measures established for the applicable Business Unit(s) and/or
      for
      the Company as a whole.

     

    (c)  Performance
      Periods.
      A
      Performance Period shall be a period consisting of three (3) consecutive fiscal
      years of the Company, or such other period or periods as the Committee deems
      appropriate. 

     

    (d)  Cash
      Pay-Outs.
      Subject
      to Section 4.7(c) hereof, Performance Awards shall be settled in cash in such
      amounts as determined by the Committee and paid by the Business Unit that
      employs the Participant and to which the Performance Measures apply. The
      Committee’s determination of the cash pay-out of a Performance Award shall be
      final, binding and conclusive with respect to all persons. Such payments shall
      be made no later than the fifteenth day of the third month following the end
      of
      the Performance Period.

     

    2.3  Termination
      of Employment or Service.
      Upon a
      Participant’s voluntary resignation or termination for Cause, all Performance
      Awards held by the Participant with respect to Performance Periods that have
      not
      been completed as of the date of the Participant’s termination of employment
      shall be forfeited. In the event a Participant is transferred to another unit
      of
      the Company, or a Participant’s employment terminates for a reason other than
      voluntary resignation or termination for Cause or a termination under Section
      4.7 hereof, the Participant shall be paid a pro rata cash pay-out no later
      than
      the fifteenth day of the third month following the conclusion of the applicable
      Performance Period for each Performance Award held by the Participant with
      respect to Performance Periods that have not been completed as of the date
      of
      the Participant’s termination of employment. 

     

    The
      amount of the pro rata cash pay-out for such Performance Awards shall be equal
      to the cash pay-out that would have been paid to the Participant if the
      Participant had remained in employment for the entire Performance Period
      multiplied by a fraction the numerator of which is the number of complete
      calendar months between the beginning of the Performance Period and the date
      of
      the Participant’s termination of employment and the denominator of which is the

     

    
      
         

      

      
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    number
      of
      calendar months in the Performance Period; provided, however, that such cash
      pay-out shall not exceed the amount payable with respect to such Performance
      Award if the applicable Performance Measures were satisfied at the target level.
      

     

    III.
        Awards
      in the Event of Certain Business Unit Dispositions

     

    3.1  IPO.
      The
      Committee may, in its discretion, grant an equity interest award to such
      eligible persons as may be selected by the Committee (an “Equity
      Interest Award”).
      Such
      Equity Interest Award shall be a right to receive, in the Committee’s
      discretion, a cash award, an award of restricted common stock of Newco or
      options to purchase shares of common stock of Newco, in each case expressed
      as
      the equivalent of a Percentage Interest, which cash, restricted common stock
      or
      options shall be paid or issued on or after the occurrence of an IPO of a
      Business Unit and subject to such terms and conditions as the Committee shall
      deem advisable;
      provided, however,
      that no
      such award of restricted common stock of Newco shall vest and no such option
      to
      purchase shares of common stock of Newco shall be exercisable until at least
      one
      year from the date of its grant. 

     

    Any
      cash
      awards payable pursuant to this Section 3.1 shall be made no later than the
      fifteenth day of the third month following the occurrence of an IPO of a
      Business Unit. Any restricted stock issued pursuant to this Section 3.1 shall
      be
      non-transferable and delivered no later than the fifteenth day of the third
      month following the date on which such restricted stock award vests. Any stock
      options issued pursuant to this Section 3.1 shall have an exercise price not
      below the fair market value of the stock on the date of grant.

     

    Notwithstanding
      anything in this Plan to the contrary, the amount payable to the holder under
      any Equity Interest Award, shall be reduced by the aggregate amount that has
      been earned by the holder (including amounts payable to the holder but not
      yet
      paid) under all Performance Awards which are in effect at the time of the IPO
      (or terminated in connection with the IPO) and amounts paid or awarded under
      other long-term incentive plans of the Company, including, without limitation,
      the Peoples Energy Corporation Long-Term Incentive Compensation Plan.

     

    3.2  Divestiture.
      The
      Committee may, in its discretion, grant to such eligible persons as may be
      selected by the Committee a right to receive a Percentage Interest on or after
      the occurrence of a Divestiture of a Business Unit (a “Percentage
      Interest Award”).
      Such
      Percentage Interest Award shall be paid in cash no later than the fifteenth
      day
      of the third month following the occurrence of a Divestiture of the Business
      Unit and subject to such terms and conditions as the Committee shall deem
      advisable. Notwithstanding anything in this Plan to the contrary, the amount
      payable to the holder under any Percentage Interest Award, shall be reduced
      by
      the aggregate amount that has been earned by the holder (including amounts
      payable to the holder but not yet paid) under all Performance Awards which
      are
      in effect at the time of (or terminated in connection with) the Divestiture
      and
      amounts paid or awarded under other long-term incentive plans of the Company
      during the Performance Periods applicable to such Performance Awards, including,
      without limitation, the Peoples Energy Corporation Long-Term Incentive
      Compensation Plan. 

     

    The
      maximum amount of Percentage Interest Awards that may be paid to all
      Participants of a Business Unit under the Plan shall not exceed an amount equal
      to three (3) times the dollar 

     

    
      
         

      

      
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    amount
      of
      the sum of all such Participants’ maximum level of annual award opportunities
      under Performance Awards for the Performance Period then most recently
      established under the Plan.

     

    3.3  No
      Duplication.
      Notwithstanding anything in this Plan or any Equity Interest Award or Percentage
      Interest Award to the contrary: (a) in the event of a Divestiture of a Business
      Unit, all Equity Interest Awards applicable to such Business Unit shall become
      automatically null and void, and Participants employed by such Business Unit
      shall only be entitled to payment under applicable Percentage Interest Awards,
      if any; and (b) in the event of an IPO of a Business Unit, all Percentage
      Interest Awards shall become automatically null and void, and Participants
      employed by such Business Unit shall only be entitled to cash, restricted common
      stock or options, if any, required to be paid or issued under applicable Equity
      Interest Awards. 

     

    3.4  Termination
      of Employment or Service.
      All of
      the terms relating to an Equity Interest Award or a Percentage Interest Award,
      or any forfeiture and cancellation of an Equity Interest Award or Percentage
      Interest Award upon a termination of employment with the Company or Newco,
      as
      applicable, of the holder of such Award, whether by reason of disability,
      retirement, death or other termination, shall be determined by the Committee
      and
      communicated to the recipient of such Award at the time the Award is granted.
      Any such award shall comply with the requirements and limitations of Code
      Section 409A.

     

    IV.
        General

     

    4.1  Effective
      Date.
      This
      Plan shall be effective as of October 1, 2001; provided,
      however,
      that
      the first Performance Period for a Performance Award may begin as of October
      1,
      2000. 

     

    4.2  Termination.
      This
      Plan may be terminated by the Board at any time. Termination of this Plan shall
      not affect the terms or conditions of any Performance Award granted prior to
      termination. All Equity Interest Awards and Percentage Interest Awards that
      have
      not matured as a result of an IPO or Divestiture of a Business Unit as of the
      date the Plan is terminated shall be canceled.

     

    4.3  Amendments.
      The
      Board may amend this Plan at any time and in any manner as it shall deem
      advisable, subject to any requirement of shareholder approval required by
      applicable law, rule or regulation. 

     

    4.4  Non-Transferability
      of Awards.
      No Award
      shall be transferable other than by will, the laws of descent and distribution
      or pursuant to beneficiary designation procedures approved by the Company.
      Each
      Award may be settled during the holder’s lifetime only by the holder or the
      holder’s legal representative or similar person. No Award may be sold,
      transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
      of (whether by operation of law or otherwise) or be subject to execution,
      attachment or similar process. Upon any attempt to so sell, transfer, assign,
      pledge, hypothecate, encumber or otherwise dispose of any such Award, such
      Award
      and all rights thereunder shall immediately become null and void.

     

    4.5  Tax
      Withholding.
      The
      Company shall have the right to require, prior to the issuance or delivery
      of
      any shares of Common Stock of Newco or the payment of any cash 

     

    
      
         

      

      
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    pursuant
      to an Award made hereunder, payment by the holder of such Award of any Federal,
      state, local or other taxes which may be required to be withheld or paid in
      connection with such Award. The Committee may determine that (i) the Company
      shall withhold whole shares of Common Stock of Newco which would otherwise
      be
      delivered to a holder, having an aggregate Fair Market Value determined as
      of
      the date the obligation to withhold or pay taxes arises in connection with
      an
      Award (the “Tax
      Date”),
      or
      withhold an amount of cash which would otherwise be payable to a holder, in
      the
      amount necessary to satisfy any such obligation or (ii) the holder may satisfy
      any such obligation by any of the following means: (A) a cash payment to the
      Company, (B) authorizing the Company to withhold whole shares of Common Stock
      of
      Newco which would otherwise be delivered having an aggregate Fair Market Value,
      determined as of the Tax Date, or withhold an amount of cash which would
      otherwise be payable to a holder, equal to the amount necessary to satisfy
      any
      such obligation or (C) any combination of (A) and (B); provided,
      however,
      that
      the Committee shall have discretion to disapprove of an election pursuant to
      any
      of clauses (B) and (C) and that in the case of a holder who is subject to
      Section 16 of the Exchange Act, the Company may require that the method of
      satisfying such an obligation be in compliance with Section 16 and the rules
      and
      regulations thereunder. Any fraction of a share of Common Stock which would
      be
      required to satisfy such an obligation shall be disregarded and the remaining
      amount due shall be paid in cash by the holder.

     

    4.6  Restrictions
      on Shares.
      Each
      Award made hereunder shall be subject to the requirement that if at any time
      the
      Company determines that the listing, registration or qualification of the shares
      of Common Stock of Newco subject to such Award upon any securities exchange
      or
      under any law, or the consent or approval of any governmental body, or the
      taking of any other action is necessary or desirable as a condition of, or
      in
      connection with, the exercise or settlement of such Award or the delivery of
      shares thereunder, such Award shall not be exercised or settled and such shares
      shall not be delivered unless such listing, registration, qualification,
      consent, approval or other action shall have been effected or obtained, free
      of
      any conditions not acceptable to the Company. The Company may require that
      certificates evidencing shares of Common Stock of Newco delivered pursuant
      to
      any Award made hereunder bear a legend indicating that the sale, transfer or
      other disposition thereof by the holder is prohibited except in compliance
      with
      the Securities Act of 1933, as amended, and the rules and regulations
      thereunder.

     

    4.7  Acceleration
      of Performance Awards.

     

    (a)  Change
      in Control of the Company.
      Notwithstanding any provision in this Plan, in the event of a Change in Control
      of the Company, the Committee may, but shall not be required to, make such
      adjustments to outstanding Performance Awards hereunder as it deems appropriate,
      including, without limitation, causing the Performance Period applicable to
      any
      outstanding Performance Award to lapse and the Performance Award to be paid
      out
      either (i) based on actual satisfaction or attainment of the applicable
      Performance Measures at such time or (ii) as if the applicable Performance
      Measures were satisfied at the minimum, target or maximum level. No such
      discretionary payment pursuant to this provision shall be made later than the
      fifteenth day of the third month following the date on which a Change in Control
      of the Company occurs.

     

    
      
         

      

      
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    1. “Change
      in Control of the Company”
shall
      mean any of the following events has occurred: 

     

    
      	 	
              A.

            	
              the
                acquisition by any Person or Persons acting in concert, of ownership
                of
                stock held by such Person or Persons acting in concert, that constitutes
                more than fifty percent (50%) of the total fair market value or total
                voting power of the stock of Peoples Energy Corporation (calculated
                in
                accordance with Section 318(a) of the Code and subject to the limitations
                of Internal Revenue Service, Notice 2005-1);
                or

            

    

     

    
      	 	
              B.

            	
              a
                change in the ownership of a substantial portion of the assets (as
                defined
                for purposes of Section 409A of the Code) of Peoples Energy Corporation;
                or

            

    

     

    
      	
            	C.	
              a
                change in the effective control (as defined for purposes
                of Section
                409A of the Code) of Peoples Energy Corporation.
                

            

    

     

    2. Payment
      upon Involuntary Termination following a Change in Control of the
      Company.
      Notwithstanding the above, unless an accelerated pay-out of a Participant’s
      Performance Awards has been made by the Committee in cash pursuant to Section
      4.7(a), if the holder of an Award is involuntarily terminated within twenty-four
      (24) months following a Change of Control of the Company for any reason other
      than Cause, the Performance Period applicable to any outstanding Performance
      Awards granted hereunder shall immediately lapse and the holder shall be
      entitled to receive, no later than the fifteenth day of the third month
      following termination, a cash payment from the Company in an amount equal to
      the
      amount payable with respect to such Performance Award as if the applicable
      Performance Measures were satisfied at the maximum level. However, in the event
      of that Section 4.7(b) mandates payment at target level, or Section 4.7(c)
      mandates payment in the form of restricted stock or options to purchase common
      stock of Newco, the holder of an Award shall receive no payment pursuant to
      this
      Section 4.7(a)2.

     

    (b)  Certain
      Sales or Closing of Business Units.
      Notwithstanding any provision in this Plan, in the event of: (1) a Change in
      Control of the Business Unit which employs the Participant (other than an IPO):
      or (2) the Participant’s involuntary termination of employment with a Business
      Unit due to the closing of a Business Unit by the Company because of a decision
      to discontinue funding or a change in the Company’s business strategy, each
      outstanding Performance Award granted hereunder to employees of such Business
      Unit or with respect to the performance of such Business Unit shall be
      surrendered to the Company by the holder thereof, and each such Award shall
      be
      canceled immediately by the Company, and the holder shall receive, no later
      than
      the fifteenth day of the third month following Change of Control of the Business
      Unit or the Participant’s termination of employment due to the closing of such
      Business Unit, a cash payment from the Company in an amount equal to the amount
      payable with respect to such Performance Award as if the applicable Performance
      Measures for all then-pending Performance Periods were satisfied at the target
      level. 

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    In
      the
      event a Participant’s involuntary termination of employment with a Business Unit
      because the Business Unit is closed by the Company due to poor performance,
      each
      outstanding Performance Award granted to Participant shall be surrendered to
      the
      Company, and each such Award shall immediately be canceled by the Company,
      and
      the Participant shall receive, no later than the fifteenth day of the third
      month following the Participant’s involuntary termination of employment with the
      Business Unit, a cash payment in an amount equal to the amount payable with
      respect to such Performance Award based on the actual satisfaction or attainment
      of the Performance Measures at such time, but no more than the target
      level.

     

    “Change
      in Control of the Business Unit”
shall
      mean either of the following events has occurred: 

     

    
      	 	
              A.

            	
              the
                acquisition by any Person or Persons acting in concert, of ownership
                of
                stock held by such Person or Persons acting in concert, that constitutes
                more than fifty percent (50%) of the total fair market value or total
                voting power of the stock of the Business Unit (calculated in accordance
                with Section 318(a) of the Code and subject to the limitations of
                Internal
                Revenue Service, Notice 2005-1); or

            

    

     

    
      	 	
              B.

            	
              a
                change in the ownership of a substantial portion of the assets (as
                defined
                for purposes of Section 409A of the Code) of the Business Unit.
                

            

    

     

    (c) IPO
      of
      Business Units.
      Notwithstanding any provision of this Plan, in the event of an IPO of a Business
      Unit, each outstanding Performance Award granted hereunder to employees of
      such
      Business Unit or with respect to the performance of such Business Unit may,
      in
      the Committee’s sole discretion and subject to compliance with all applicable
      securities laws, be required to be surrendered to the Company by the holder
      thereof upon notice from the Company and in such event each such Award shall
      be
      canceled immediately by the Company, and the holder shall receive no later
      than
      the fifteenth day of the third month following the occurrence of the IPO, shares
      of restricted common stock in Newco or options to purchase shares of common
      stock of Newco, or a combination thereof, in such number as is equal in value
      (as determined by the Committee in its sole discretion) to the amount payable
      in
      cash with respect to the Performance Award if the applicable Performance
      Measures were satisfied at the target level. 

     

    4.8  No
      Right of Participation or Employment.
      No
      person shall have any right to participate in this Plan. Neither this Plan
      nor
      any Award made hereunder shall confer upon any person any right to continued
      employment by the Company or a Business Unit or affect in any manner the right
      of the Company or Business Unit to terminate the employment of any person at
      any
      time without liability hereunder.

     

    4.9  Rights
      as Shareholder.
      No
      person shall have any rights as a shareholder of a Business Unit with respect
      to
      any shares of Common Stock or other equity security of a Business Unit which
      is
      subject to an Award hereunder unless and until such person becomes a shareholder
      of record with respect to such shares of Common Stock or equity
      security.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    4.10  Governing
      Law; Venue.
      This
      Plan, each Award hereunder, and all determinations made and actions taken
      pursuant thereto, shall be governed by the laws of the State of Illinois and
      construed in accordance therewith without giving effect to principles of
      conflicts of laws. A
      PARTICIPANT’S PARTICIPATION IN THE PLAN OR ACCEPTANCE OF AN AWARD SHALL
      CONSTITUTE THE PARTICIPANT’S IRREVOCABLE CONSENT THAT ALL DISPUTES ARISING OUT
      OF OR RELATED TO THE PLAN OR ANY AWARDS SHALL BE RESOLVED EXCLUSIVELY BY THE
      STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THAT THE PARTICIPANT
      IRREVOCABLY
      SUBMITS TO THE ORIGINAL, EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
      LOCATED IN CHICAGO, ILLINOIS WITH REGARD TO ANY CONTROVERSY IN ANY WAY RELATING
      TO THE PLAN OR ANY AWARDS.

     

    4.11  Foreign
      Employees.
      Without
      amending this Plan, the Committee may grant Awards to eligible persons who
      are
      foreign nationals on such terms and conditions different from those specified
      in
      this Plan as may in the judgment of the Committee be necessary or desirable
      to
      foster and promote achievement of the purposes of this Plan and, in furtherance
      of such purposes the Committee may make such modifications, amendments,
      procedures, subplans and the like as may be necessary or advisable to comply
      with provisions of laws in other countries or jurisdictions in which the Company
      or the Business Units operate or have employees.

     

    V. Code
      Section 409A Compliance

     

    The
      Plan
      shall be administered in accordance with the requirements of Code Section 409A
      so that there will not be a plan failure under Code Section 409A(a)(1), and
      all
      amounts payable hereunder shall be distributed only in compliance with the
      requirements of paragraphs (2), (3) and (4) of such Code section. No
      distribution shall be made under the Agreement that would fail to meet the
      requirements of Code Section 409A. This Plan has been amended in good faith
      reliance on Code Section 409A’s short term deferral exception. The short term
      deferral exception applies if all benefits are distributed by the later of
      the
      fifteenth day of the third month after the end of the later of the corporate
      tax
      year or the individual tax year in which benefits vest and the Plan does not
      permit additional deferral. Prop. Reg. Preamble Section I.B. and Prop. Reg.
§
1.409A-1(b)(4); IRS Notice 2005-1 Q & A 4(c). The Plan requires that all
      benefits to be distributed no later than the fifteenth day of the third month
      following the date on which benefits vest, which cannot be later than such
      period, and the Plan does not provide for any additional deferral of benefits.
      As such, the Plan complies with the short term deferral exception from 409A,
      as
      described under existing law and guidance, and is not intended to provide for
      the deferral of income under 409A.

    

    Additionally,
      the Amendments to the Plan to comply with Code Section 409A are not intended
      to
      materially modify any deferred compensation plans of the Company that existed
      prior to October 4, 2004. However, if this Plan would otherwise be interpreted
      to be a material modification of any deferred compensation plans of the Company
      that existed prior to October 4, 2004, as permitted by IRS Notice 2005-1,
      Q&A 18(b), this Plan shall be treated as material modification of such
      deferred compensation plans only as to the benefits provided by this Plan,
      and
      only the benefits provided by this Plan shall be subject to Code Section
      409A.

    

    
      
         

      

      
        11Exhibit 10.1

    Exhibit
      10.1

     THE
      STEAK N SHAKE COMPANY 

    2007
      NON-EMPLOYEE DIRECTOR RESTRICTED STOCK PLAN

    

    	1.  	
            Purpose.

          

    

    The
      purpose of the 2007 Non-Employee Director Restricted Stock Plan (the “Plan”) is
      to foster and enhance the long-term profitability of The Steak n Shake Company
      (the “Company”) for the benefit of its shareholders by aligning the interests of
      directors with those of shareholders and to reward directors for strong
      performance.

    

    	2.  	
            Eligibility.

          

    

    Eligibility
      for grants under the Plan shall be limited to non-employee directors of the
      Steak n Shake Company who are or were elected or appointed to serve in such
      capacity on or after January 1, 2005. 

    

    	3.  	
            Restricted
              Stock Grants.

          

    

    	(a)  	
            The
              Board of Directors may grant shares of the Common Stock of the Company
              which are subject to restrictions (“Restricted Shares”) to eligible
              directors (“Participants”) pursuant to the Plan over a period ending
              December 31, 2015. The number of Restricted Shares, if any, granted
              hereunder to Participants shall be within the discretion of the Board
              of
              Directors; provided, however, that the number of Restricted Shares
              which
              may be granted after February 7, 2007 shall not exceed 20,000 shares,
              except as may be adjusted pursuant to Section 5 below. Further, no
              Participant shall receive more than 1,000 shares hereunder. Restricted
              Shares which are forfeited or canceled under Sections 3(d) or (e) hereof
              shall be available for further grants.

          

    	(b)  	
            Grants
              made by the Board of Directors may consist in whole or in part of
              authorized but unissued or treasury shares, and shall be subject to
              the
              provisions of the Plan and to such other terms and conditions, not
              inconsistent with the Plan, as the Board of Directors shall
              determine.

          

    	(c)  	
            Subject
              to the provisions contained in 3(d) and (e) hereof, the Restricted
              Shares
              granted hereunder shall be conditionally owned by the Participant as
              of
              the grant date, and each Participant shall be entitled to the receipt
              of
              cash dividends and voting rights with respect
              thereto.

          

    	(d)  	
            In
              the event of termination of Participant’s service on the Board of
              Directors of the Company for any reason other than death, disability
              or
              retirement with the consent of the Board, during a period of three
              (3)
              years following the grant date (“Forfeiture Period”), the Restricted
              Shares so granted shall be thereupon forfeited by the Participant and
              transferred to the Company as of the date of the Participant’s cessation
              of service. The Restricted Shares granted hereunder may not be sold,
              transferred or pledged by the Participant during the Forfeiture
              Period.

          

    	(e)  	
            If
              a Participant’s service on the Board has terminated because of disability
              or retirement as set out in Section 3(d) above prior to the end of
              the
              Forfeiture Period, the number of Restricted Shares such Participant
              will
              be entitled to retain shall be the number of Restricted Shares determined
              as though such Participant’s service on the Board had not terminated,
              multiplied by a fraction, the numerator of which is the number of months
              such Participant served on the Board during the Forfeiture Period
              (including the month during which service terminated) and the denominator
              of which is the number of months in the Forfeiture Period. The balance
              of
              Restricted Shares shall be transferred to the Company as of the
              termination date. If a participant’s service ceases as a result of the
              participant’s death the restriction on transfer shall be lifted effective
              on the date of the participant’s
              death.

          

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    	4.  	
            Book
              Unit Grants.

          

    

    	(a)  	
            In
              conjunction with the Restricted Share grants, the Board of Directors
              shall
              simultaneously grant each Participant an equivalent number of book
              value
              units (“Book Units”). The aggregate number of Book Units granted hereunder
              after February 7, 2007 shall not exceed 20,000 units, as adjusted for
              splits and stock dividends. Units forfeited or canceled under paragraphs
              4
              (c) or (d) hereof shall be thereafter available for further
              grants.

          

    	(b)  	
            Book
              Units shall be valued on the basis of the aggregated quarterly earnings
              per share of the Common Stock of the Company, as determined in accordance
              with Section 5 (c) hereof on the last day of the fiscal quarter preceding
              the date of grant (“Value Date”) and again on the third anniversary of the
              Value Date, said three (3) year period hereafter referred to as the
              “Accumulation Period”. The aggregated quarterly earnings per share during
              the Accumulation Period plus an amount equal to the dividends paid
              during
              the Accumulation Period on an equal number of shares of Common Stock
              of
              the Company, shall be paid to such Participant in cash within ninety
              (90)
              days following the expiration of the Accumulation Period, provided,
              however, the Book Units have not been forfeited under paragraph 4 (c)
              hereof.

          

    	(c)  	
            In
              the event of termination of Participant’s service on the Company’s Board
              for any reason other than death, retirement with the consent of the
              Board
              or disability during the Accumulation Period, the book units shall
              be
              forfeited by the Participant.

          

    	(d)  	
            If
              a Participant’s service on the Board has terminated because of death,
              disability or retirement with the Board’s consent prior to the end of the
              Accumulation Period, the number of Book Units such Participant or such
              Participant’s beneficiary or estate shall be entitled to receive shall be
              the number of Book Units determined as though such Participant’s service
              was not terminated, multiplied by a fraction, the numerator of which
              is
              the number of months such Participant served on the Board during the
              Accumulation Period (including the month during which service terminated)
              and the denominator of which is the number of months in the Accumulation
              Period. In such event, the Board of Directors shall determine the book
              value as of the last day of the quarter preceding the date of
              termination.

          

    	(e)  	
            In
              the event of a participant’s death the book units shall be valued on the
              date of death and paid to the participant’s estate within thirty (30) days
              of the date the Company receives notice of the participant’s death.
              

          

    

    	5.  	
            Adjustments.

          

    

    	(a)  	
            In
              the event that there are changes in the capitalization of the Company
              affecting in any manner the number or kind of outstanding shares of
              Common
              Stock, whether such changes have been occasioned by declaration of
              stock
              dividends, stock splits, reclassification or recapitalization, or because
              the Company has merged or consolidated with another corporation, or
              for
              any reason whatsoever, then the number and kind of shares then subject
              to
              Restricted Share grants and thereafter to become subject to such grants,
              and the Book Unit values, shall be proportionally adjusted by the Board
              of
              Directors of the Company to whatever extent the Board of Directors
              determines, in its sole and absolute discretion, that any such change
              equitably requires an adjustment.

          

    

    	(b)  	
            If
              the Company at any time should elect to dissolve, undergo a reorganization
              or split-up its stock or merge or consolidate with any other corporation
              and The Steak n Shake Company is not the surviving corporation, then
              (unless in the case of a reorganization, stock split, merger or
              consolidation where one or more of the surviving corporations assumes
              the
              obligations to Participants hereunder or replaces this Plan with a
              substantively equivalent plan in all respects), the Board of Directors
              may
              thereupon accelerate grants of Restricted Shares and Book Units hereunder,
              reduce the applicable Forfeiture Periods and Accumulation Periods,
              or take
              such other action as the Board of Directors, in its sole and absolute
              discretion deems equitable.

          

    

    	(c)  	
            The
              Board of Directors shall determine book value of the Common Stock under
              Section 4 above based on generally accepted accounting principles,
              and
              shall have the right, in its sole and absolute discretion, to
              proportionally adjust such book values for sales or purchases by the
              Company of Common Stock, acquisitions or divestitures, accounting changes
              or other actions of the Company taken during the Accumulation Period
              affecting book value, to whatever extent the Board of Directors determines
              that any such action equitably requires an
              adjustment.

          

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    	6.  	
            Amendment
              and Termination.

          

    

    The
      Board
      of Directors shall have the power to amend, suspend or terminate the Plan at
      any
      time except that, subject to the conditions of Section 5 above, (i) no such
      action shall cancel, reduce or adversely affect any grant theretofore made
      without the consent of the Participant or the Participant’s beneficiary or
      estate; or (ii) without the approval of the shareholders of the Company, the
      Board of Directors may not increase the aggregate number of Restricted Shares
      and Book Units to be granted.

    

    	7.  	
            Restricted
              Share and Book Unit Agreement.

          

    

    Each
      grant of Restricted Shares and Book Units under the Plan shall be evidenced
      by a
      written agreement executed by the Company and accepted by the Participant,
      and
      shall contain such terms and conditions as the Board of Directors may deem
      desirable which are not inconsistent with the Plan.

    

    	8.  	
            Finality
              of Determination.

          

    

    The
      Compensation Committee of the Board of Directors shall have the power to
      interpret the Plan, and all interpretations, determinations and actions by
      the
      Compensation Committee shall be final, conclusive and binding upon all
      parties.

    

    	9.  	
            Effective
              Date.

          

    

    This
      Plan
      shall become effective on February 7, 2007 and will continue to December 31,
      2015, subject to approval of the Plan by the holders of a majority of the shares
      of Common Stock of the Company which are represented in person or by proxy
      at
      the 2007 Annual Meeting of Shareholders.

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