Document:

Unassociated Document

    EXHIBIT
      10(b)

    

    PEOPLES
      ENERGY CORPORATION

    DIRECTORS
      STOCK AND OPTION PLAN

    (Effective
      December 1, 1999 and amended October 3, 2001, November 7, 2001,

    December
      4, 2002, August 1, 2006, August 2, 2006, and October 3, 2006, as effective
      January 1, 2005)

    

     

    1. Purpose

     

    The
      purpose of the Peoples Energy Corporation Directors Stock and Option Plan
is
      to
      provide non-employee members of the Board of Directors with a proprietary
      interest in
      the
      Company to improve the Company's ability to attract and retain highly qualified
      individuals to serve as directors of the Company and to strengthen the
      commonality of interest between directors and shareholders. The Plan grants
      deferred shares
      to
      Directors of the Company after December 4, 2002. Prior to December 5, 2002,
      the
      Plan permitted the grant of
      shares
      of common stock and non-qualified stock options to acquire shares of the
Company's
      common stock as part of each non-employee director's retainer compensation.

     

    2. Definitions

     

    When
      used
      herein, the following terms shall have the respective meanings set forth
      below:

     

    "Agent"
      means a
      securities broker-dealer selected by the Company and registered under the
      Exchange Act.

     

    "Annual
      Retainer"
      means
      the annual retainer payable by the Company to Non-Employee Directors and shall
      include, for purposes of this Plan, meeting fees, cash
      retainers and any other cash compensation payable to Non-Employee Directors
      by
      the Company for services as a Director.

     

    "Board"
      or
"Board
      of Directors"
      means
      the Board of Directors of the Company.

     

    "Broker-Assisted
      Transaction"
      means a
      broker-assisted transaction through such securities broker as the Company may
      designate and with whom the Participant establishes
      a brokerage account, whereby the Participant effects a sale of shares of
Common
      Stock to be delivered by the Company in connection with the exercise of an
      Option and such broker (i) delivers cash proceeds from such sale to the Company
      in satisfaction of the purchase price and/or any applicable taxes required
      to be
      paid by the Participant, and (ii) deducts from the number of shares otherwise
      deliverable to the Participant upon the exercise of an Option such number
      of
      shares of Common Stock as shall have a value equal to the amount of the
      Option exercise price and/or taxes required to be paid in connection with such
      exercise
      (or portion thereof not paid in cash) and applies such shares in satisfaction
      of such sale transaction.

    

    
      
        
        

      

      
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    "Change
      In Control"
      means:

     

    i)  the
      acquisition by any Person or Persons acting in concert, of ownership of stock
      held by such Person or Persons acting in concert, 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

     

    (ii)  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

     

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

     

    "Code"
      means
      the Internal Revenue Code of 1986, as amended.

     

    "Committee"
      means
      the Compensation Committee of the Board.

     

    "Common
      Stock"
      means
      the common stock, no par value, of the Company. Effective as of August 2, 2006,
      after the Effective Time (as defined under the Agreement and Plan of Merger
      among WPS Resources Corporation (“WPS”), Wedge Acquisition Corporation and the
      Company dated as of July 8, 2006), the definition of Company Common Stock with
      respect to Deferred Shares are additional Deferred Shares shall mean WPS common
      stock.

     

    "Company"
      means
      Peoples Energy Corporation, an Illinois corporation, and any successor
      corporation.

     

    "Deferred
      Share"
      means
      the right to receive a share of Common Stock pursuant to the
      terms
      of Section 6 hereof. Prior to the delivery of the underlying shares of
Common
      Stock, Deferred Shares represent an unfunded unsecured promise to deliver shares
      of Common Stock in the future.

     

    "Distribution
      Date"
      means,
      with respect to a Deferred Share credited to a Non-Employee
      Director, the earliest of (i) the first anniversary of the cessation of the
      Non-Employee
      Director's service as a director of the Company for any reason, (ii) the day
      after the cessation of the Non-Employee Director's service as a director
      of the Company following the attainment of his or her seventieth (70th)
birthday,
      and (iii) the date a Change in Control occurs.

     

    "Effective
      Date"
      means
      December 1, 1999.

     

    "Employee"
      means
      any officer or common law employee of the Company or of any of its business
      units or divisions or of any Subsidiary.

     

    "Exchange
      Act"
      means
      the Securities Exchange Act of 1934, as amended.

     

    "Non-Employee
      Director"
      or
"Participant"
      means
      any person who is elected or appointed
      to the Board of Directors of the Company and who is not an
      Employee.

     

    "Option"
      means an
      option to acquire the Company's Common Stock granted pursuant to the terms
      of
      this Plan.

    
      
        
        

      

      
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    "Option
      Payment"
      means
      that portion of the Annual Retainer to be paid to Non-Employee
      Directors in Options rather than cash for services rendered as a director
of
      the
      Company, as provided in Section 5 hereof.

     

    "Plan"
      means
      this Directors Stock and Option Plan, adopted by the Board on December
      1, 1999, as it may be amended from time to time.

     

    "Plan
      Year"
      means
      the period commencing on January 1 of each year and ending on
      December 31 during the term of this Plan, with the first Plan Year commencing
      January 1, 2000.

     

    "SEC"
      means
      the United States Securities and Exchange Commission.

     

    "Stock
      Payment"
      means
      that portion of the Annual Retainer to be paid to Non-Employee
      Directors in shares of Common Stock rather than cash for services rendered
      as a director of the Company, as provided in Section 5 hereof.

     

    "Subsidiary"
      means
      any corporation, limited liability company, partnership, limited partnership,
      or
      other entity of which the Company beneficially owns, directly or indirectly,
      50
      percent or more of the outstanding voting securities.

     

    3. Shares
      of Common Stock Subject to the Plan

     

    A. Subject
      to Section 8 below, the maximum aggregate number of shares of Common
      Stock that may be awarded under the Plan pursuant to Deferred Shares or Stock
      Payments
      or sold pursuant to the exercise of Options distributed under the Plan is
200,000
      shares. If an Option ceases to be exercisable by reason of the expiration of
      the
term
      of
      the Option, the termination of the Non-Employee Director's status as a member
      of
      the Board (other than termination as provided in Section 7 below) or the waiver
      by a Participant of the right to exercise an Option, then the shares of Common
      Stock which were
      subject to such exercise but as to which the Participant has not exercised
      shall
      again become
      available for delivery or sale pursuant to Stock Payments, Deferred Shares,
      or
Option
      Payments.

     

    B. The
      Common Stock to be delivered under the Plan may be made available from
      treasury stock or shares of Common Stock purchased on the open market. Shares
      of
      Common Stock purchased on the open market shall be purchased by the Agent in
      compliance
      with Regulation M under the Exchange Act to the extent compliance shall be
      required by law.

     

    4. Administration

     

    A. The
      Plan
      will be administered by the Committee. The Company shall pay all
      costs
      of administration of the Plan.

     

    B. Subject
      to and not inconsistent with the express provisions of the Plan, the
Committee
      has and may exercise such powers and authority of the Board as may be necessary
      or appropriate for the Committee to carry out its functions under the Plan.
      Without
      limiting the generality of the foregoing, the Committee shall have full power
      and authority
      (i) to determine all questions of fact that may arise under the Plan, (ii)
      to
      interpret the Plan and to make all other determinations necessary or advisable
      for the administration of the Plan and (iii) to prescribe, amend and rescind
      rules and regulations relating to the Plan, including, without limitation,
      any
      rules which the Committee 

    
      
        
        

      

      
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       determines
      are necessary or appropriate to ensure that the Company and the Plan will be
      able
      to
      comply with all applicable provisions of any applicable federal, state or local
      law. All
      interpretations, determinations and actions by the Committee will be final
      and
      binding upon all persons, including the Company and the
      Participants.

     

    5. Determination
      of Annual Retainer and Deferred Shares

     

    A. The
      Board
      shall determine the Annual Retainer payable to all Non-Employee
      Directors of the Company. The cash portion of the Annual Retainer shall be
      paid
      to
      Non-Employee Directors at such times and in such manner as may be determined
      by
      the
      Board of Directors.

     

    B. Each
      director who is a Non-Employee Director on May 1 of each Plan Year
      commencing prior to 2003 shall receive, effective as of such date, a Stock
      Payment of
      300
      shares of Common Stock and an Option Payment of 3000 Options as a portion of
      the
      Annual Retainer payable to such director for the Plan Year in which such date
      occurs. Each director who is a Non-Employee Director on May 1 of each Plan
      Year
      commencing after
      2002 shall receive, effective as of such May 1, an award of one thousand (1000)
      Deferred
      Shares.

     

    6. Terms
      of Deferred Shares

     

    Each
      Deferred Share award granted under the Plan shall be evidenced by a written
      agreement which shall comply with and be subject to the following terms and
      conditions:

     

    A. A
      bookkeeping account shall be established for each Non-Employee Director. The
      account shall reflect the number of Deferred Shares awarded to the Non-Employee
      Director in accordance with paragraph 5.B. above.

     

    B. Additional
      Deferred Shares shall be credited to each Deferred Share account
      on each date that the Company pays a dividend on the Common Stock.
      The
      number of additional
      Deferred Shares so credited shall be determined by dividing the dividend
which
      would be paid on the number of shares of Common Stock equal to the number of
      Deferred Shares credited to the Participant's account as of the dividend record
      date ("Dividend
      Equivalent") by an amount equal to the mean price of a share of Common Stock
      on
      the New York Stock Exchange on the date which such dividend is paid to the
      Company's shareholders. In determining the number of Deferred Shares to be
      credited to a
      Participant's account in accordance with this paragraph 6.B., fractions of
      a
      Deferred Share shall be computed to three decimal places.

     

    C. Shares
      of
      Common Stock underlying an award of Deferred Shares shall be delivered
      to the Non-Employee Director on the Distribution Date. Delivery of such
Common
      Stock shall be made in whole shares in a single payment on such date, or, if
      the
Participant
      has so elected in such number of equal annual installments (or in installments
      as nearly equal as possible without the issuance of fractional shares)
      commencing on the Distribution Date, as provided in the Participant's election.
      Such election shall be made on or before December 31, 2006 with respect to
      amounts deferred on or before January 1, 2007. Participant shall make such
      election with respect to amounts deferred on or after January 1, 2007 on or
      before December 31 of the calendar year prior to the year in which service
      for
      which benefits under this Plan are payable begins. Any fractional share of
      Common Stock to which the Participant is entitled as of the date of the single
      payment or last installment shall be paid in cash.

     

    D. Neither
      the Participant nor any other person claiming under the participant shall
      have any right to the distribution of any shares of Common Stock relating to
      Deferred Shares in advance of the 

    
      
        
        

      

      
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    Distribution
      Date or in advance of the date an installment payable pursuant to the
      Participant's election is otherwise due. Any shares of Common Stock in respect
      of Deferred Shares which shall not have been paid to the Participant during
      his
      or her lifetime shall be paid to the Participant's spouse, if any, who
shall
      survive the Participant or to such person or persons other than such surviving
      spouse as
      the
      participant may designate in writing to receive the same. The Participant shall
      have
      the
      right during his or her lifetime to designate and to change the designation
      of
      the person or persons to whom the Company shall deliver any shares of Common
      Stock relating to Deferred Shares remaining undelivered at the death of the
      Participant.

     

    E. Shares
      of
      Common Stock in respect of Deferred Shares required to be delivered
      to the surviving spouse of the Participant or to such other person or persons
      as
the
      Participant may have designated in writing to the Company to receive the same
      pursuant to paragraph 6.D. shall be made in the same manner and at the same
      time
      or times
      as
      such shares of Common Stock would have been delivered under Paragraph 6.C.
      hereof.

     

    F. If
      any
      shares of Common Stock in respect of Deferred Shares shall remain undelivered
      upon the death of the last to survive of (i) the Participant, (ii) the
      participant's spouse, unless a person or persons other than the spouse has
      been
      designated to receive the same, as provided in paragraph 6.D. above, or (iii)
      such other person or persons
      who may have been so designated, the Company shall deliver such shares of
Common
      Stock to the executor or administrator of the estate of the last to survive
      of
      the following: (i) the Participant; (ii) the Participant's spouse, unless a
      person or persons other
      than the spouse has been designated as provided in paragraph 6.D. above; or
      (iii) any person theretofore receiving payments under a written designation
      as
      provided in paragraph
      6.D.

     

    G. The
      words
      "person or persons" wherever they appear in this Section 6 are intended
      and shall be construed for all purposes to include the estate of the
      Participant.

     

    H. Deferred
      Shares and the shares of Common Stock covered by an award of Deferred Shares
      may
      not be sold, assigned, transferred or otherwise disposed of, or mortgaged,
      pledged or otherwise encumbered until the shares of Common Stock delivered
      at the end of the deferral period have been delivered. The right of the
      Participant, the Participant's spouse, or any other person designated to receive
      shares of Common
      Stock covered by an award of Deferred Shares shall not be
      accelerated.

     

    I. Any
      director may decline an award of Deferred Shares Stock Payment for any
      Plan
      Year; provided, however, that no cash compensation shall be paid in lieu
thereof.
      Any director who declines an award of Deferred Shares must do so in writing
      prior
      to
      the performance of any services as a Non-Employee Director for the Plan Year
      to
which
      such award of Deferred Shares relates.

     

    7. Terms
      of Option Payments

     

    A. Each
      Option shall entitle the Participant to purchase one share of Common
Stock
      at
      a price equal to one hundred percent (100%) of the mean between the highest
      and
      lowest quoted selling price for the Common Stock in the New York Stock Exchange
      Composite
      Transactions on the last day in April of the applicable Plan Year for which
      the
New
      York
      Stock Exchange is open for trading. Each Option Payment shall be evidenced
      by a
      written agreement which shall comply with and be subject to the terms and
      conditions of this Section 7 and may contain such additional terms and
      conditions as the 

    
      
        
        

      

      
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    Committee
      may determine, provided that the terms and conditions of any such agreement
      for
      a
      given Option Payment shall be identical for each Participant receiving an Option
      Payment
      for the same Plan Year.

     

    B. The
      Committee shall determine the commencement and expiration dates of the term
      during which an Option may be exercised, except that (i) no Option may be
      exercised prior to the date which is six (6) months after the date of the Option
      Payment under
      which such Option was issued, except as provided in Paragraphs 7.C and 7.E
      below,
      and (ii) in no event shall any Option be exercisable after the tenth (10th)
      anniversary
      of the date of the Option Payment under which such Option was
      issued.

     

    C. All
      outstanding Options shall become immediately exercisable upon the occurrence
      of
      a Change in Control.

     

    D. Full
      payment for shares purchased pursuant to the exercise of an Option shall
      be
      made in cash and/or Common Stock at the time or times the Option is
      exercised in
      whole
      or in part. Subject to the sole discretion of the Committee and such rules
      and
      regulations as the Committee may have from time to time, payment may be made
      at
      the Participant's election (i) in Common Stock by delivery of shares which
      have
      been issued and outstanding for at least six (6) months, or (ii) subject to
      the
      compliance with all applicable
      securities laws, pursuant to a Broker-Assisted Transaction. Any such
Common
      Stock submitted in payment for an Option pursuant to clause (i) of the preceding
      sentence shall be valued at the mean between the highest and lowest quoted
      selling price of such Common Stock of the Company in the New York Stock Exchange
      Composite Transactions on the date of exercise or, if such stock was not traded
      on such date,
      on
      the last preceding date on which such stock was traded. Any Common Stock
used
      in
      connection with payment for an Option pursuant to a Broker-Assisted Transaction
      shall
      be
      valued at the actual price per share at which the sale transaction is executed
      by the
      broker. No shares shall be issued pursuant to the exercise of an Option until
      full payment
      thereof has been made and no person shall have any of the rights of a
      shareholder with respect to Options held, except to the extent such Options
      have
      been exercised and the shares issued to such person.

     

    E. A
      Participant's rights to exercise an Option shall terminate when the Participant
      is no longer a Non-Employee Director of the Company unless such Participant's
      term as a member of the Board is terminated by reason of such Participant's
      death,
      disability or retirement. If a Participant dies prior to termination of such
      Participant's Option without having fully exercised such Option, the beneficiary
      or beneficiaries
      designated by such Participant pursuant to Paragraph 7.H hereof, or, if no
      such
      beneficiary or beneficiaries have been designated by such Participant or if
      no
      such beneficiary
      or beneficiaries have survived the Participant, then the Participant's surviving
      spouse,
      or, if the Participant has no surviving spouse, then the estate of the
      Participant or any
      person who acquires the right to exercise such Option by bequest or inheritance
      or by reason of the death of the Participant, shall have the right to exercise
      the Option during its term
      within the three (3) year period after the Participant's death. Such Option
      shall become
      immediately exercisable upon the Participant's death.

     

    F. If
      a
      Participant's status as a Non-Employee Director is terminated by reason
      of
      such Participant's disability (as determined in the sole discretion of the
      Committee) prior to termination of such Participant's Option without the
      Participant having fully exercised such Option, the Participant shall have
      the
      right to exercise the Option during its term within such period as may be
      provided at the time of the Option Payment for such Option, not to exceed three
      (3) years after termination of status as a Non-Employee
      Director; provided that no such Option may be exercised prior to the date
which
      is
      six (6) months after the date of the Option Payment under which such Option
      was
      issued.

    
      
        
        

      

      
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    G. If
      a
      Participant retires from the Board prior to termination of such Participant's
      Option without having fully exercised such Option, such Participant shall have
      the right to exercise the Option during its term within such period as may
      be
provided
      at the time of the grant, not to exceed three (3) years after retirement, but
      only to
      the
      extent such Option was exercisable by the Participant immediately prior to
      such
      Participant’s retirement. The Committee may prescribe in its discretion criteria
      for retirement of a Non-Employee Director.

     

    H. Except
      as
      otherwise expressly provided in this Paragraph 7.H, Options shall not be
      transferable other than by will or by the laws of descent and distribution
      and
      during a Participant's lifetime shall be exercisable only by the Participant
      or
      the Participant's guardian or legal representative. Notwithstanding the
      preceding sentence, a Participant may, by giving notice to the Company during
      the Participant's lifetime, designate (i) a beneficiary or beneficiaries to
      whom
      Options shall be transferred in the event of the Participant's death, and (ii)
      the specific number or proportions of the Participant's Options to be
      transferred to each such designated beneficiary if more than one beneficiary
      is
      properly designated. Any such designation may be revoked or changed by the
      Participant at any time and from time to time by similar notice. If there is
      no
      such designated beneficiary living upon the death of the Participant or if
      all
      such designated beneficiaries die prior to exercise of all of the Participant's
      Options under this Plan, any remaining Options shall be transferred to the
      Participant's surviving spouse or, if none, then the remaining Options will
      be
      transferred to the estate or personal representative of the Participant. If
      the
      Company, after reasonable inquiry, is unable to determine within twelve months
      after the Participant's death whether any designated beneficiary of such
      Participant did in fact survive the Participant, such beneficiary shall be
      conclusively presumed to have died prior to the Participant's death. Any
      designated beneficiary, surviving spouse or other person acquiring any Options
      pursuant to this paragraph 7.H shall have the right to exercise such Options
      as
      set forth in paragraph 7.E, above.

     

    8. Adjustment
      For Changes in Capitalization, Etc.

     

    In
      the
      event there is any change in the Common Stock of the Company through
the
      declaration of a stock dividend, or through recapitalization resulting in stock
      split-ups, reverse
      stock split-ups, or combinations or exchanges of shares, or otherwise, then
      the
      number of shares of Common Stock remaining available for Stock Payments, award
      in the
      form
      of Deferred Shares or for sale pursuant to the exercise of Options, the number
      of shares
      for which Options may be exercised under any then existing and unexercised
      Options, the number of Deferred Shares credited to each Participant's account,
      and the number of Deferred Shares to be awarded to a Non-Employee Director
      each
      May 1 as provided
      in Paragraph 5.B. shall be adjusted appropriately by the Committee. The
Committee
      shall also make appropriate adjustments to the exercise price of any then
existing
      and unexercised Options. Any determination by the Committee as to any such
      adjustment will be final, binding and conclusive. The maximum number of shares
      available
      under the Plan as a result of any such adjustment shall be rounded down to
      the
nearest
      whole share. Pursuant to this Paragraph, the Options granted under the Plan
      that
      are unexercised are existing as of the Effective Time (as defined under the
      Agreement and Plan of Merger among WPS Resources Company (“WPS”), Wedge
      Acquisition Corporation and the Company dated as of July 8, 2006) shall be
      converted at the Effective Time into options to purchase shares of WPS common
      stock as follows: (i) the number of shares of WPS common stock subject to the
      converted options shall be determined by multiplying the number of share of
      Company common stock subject to the Options by 0.825 (rounded to the nearest
      whole shore); and (ii) the exercise price per share of the converted options
      to
      purchase shares of WPS common stock shall be equal to the exercise price per
      share of the options for Company common stock divided by 0.825 (rounded up
      to
      the nearest whole cent). Further, pursuant to this Paragraph, the number of
      Deferred Shares of Company common stock 

     

    
      
        
        

      

      
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    existing
      and undistributed as of the Effective Time shall be converted at the Effective
      Time into Deferred Shares of WPS common stock by multiplying the number of
      Deferred Shares of Company common stock by 0.825 (rounded down to the nearest
      whole share). 

     

    9. Amendment
      and Termination of Plan

     

    The
      Board
      will have the power, in its discretion, to amend, suspend or terminate the
      Plan
      at any time; provided, however, that no amendment which requires shareholder
      approval
      in order for the Plan to continue to comply with Rule 16b-3 under the Exchange
      Act, including any successor to such Rule shall be effective unless such
      amendment shall be
      approved by the requisite vote of the shareholders of the Company entitled
      to
      vote thereon. Except as otherwise provided in this Plan, no Option Payment,
      Stock Payment, or
      the
      terms of Deferred Shares made or awarded prior to an amendment to this Plan
      may
be
      altered or impaired without the consent of the Participant affected
      thereby.

     

    10. Effective
      Date and Duration of the Plan

     

    The
      Plan
      will become effective upon the Effective Date, and shall remain in effect,
      subject to the right of the Board of Directors to terminate the Plan at any
      time
pursuant
      to Section 9, until all shares subject to the Plan have been purchased or
      acquired according
      to the Plan's provisions.

     

    11. Miscellaneous
      Provisions

     

    A. Continuation
      of Directors in Same Status

     

    Nothing
      in the Plan or any action taken pursuant to the Plan shall be construed as
      creating or constituting evidence of any agreement or understanding, express
      or
      implied, that the Company will retain a Non-Employee Director as a director
      or
      in any other capacity
      for any period of time or at a particular retainer or other rate of
      compensation, or as
      conferring upon any Participant any legal or other right to continue as a
      director or in any
      other
      capacity.

     

    B. Compliance
      with Government Regulations

     

    Neither
      the plan nor the Company shall be obligated to issue any shares of Common Stock
      pursuant to the Plan at any time unless and until all applicable requirements
      imposed by any federal and state securities and other laws, rules and
      regulations, by any regulatory agencies or by any stock exchanges upon which
      the
Common
      Stock may be listed have been fully met. As a condition precedent to any
issuance
      of shares of Common Stock and delivery of certificates evidencing such shares
      pursuant to the Plan, the Board or the Committee may require a Participant
      to
      take any such
      action and to make any such covenants, agreements and representations as the
      Board or
      the
      Committee, as the case may be, in its discretion deems necessary or advisable
      to
ensure
      compliance with such requirements. The Company shall in no event be obligated
      to
      register Options or shares of Common Stock deliverable under the Plan pursuant
      to the Securities Act of 1933, as amended, or to qualify or register such
      Options or shares under any
      securities laws of any state upon their issuance under the Plan or at any time
      thereafter, or to take any other action in order to cause the issuance and
      delivery of such Options and shares under the Plan or any subsequent offer,
      sale
      or other transfer of such Options
      or shares to comply with any such law, regulation or requirement. Participants
      are
      responsible for complying with all applicable federal and state securities
      and
      other laws, rules and regulations in connection with any offer, sale or other
      transfer of the Options or shares of Common Stock issued under the Plan or
      any
      interest therein including, without limitation, compliance with the registration
      requirements of the 

    
      
        
        

      

      
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    Securities
      Act of 1933, as amended (unless an exemption therefrom is available), or with
      the
      provisions of Rule 144 promulgated thereunder, if applicable, or any successor
      provisions.
      Certificates for shares of Common Stock may be have placed thereon such
legends
      and notices as the Committee shall deem appropriate.

     

    C. Nontransferability
      of Rights

     

    No
      Participant shall have the right to assign or the right to receive any Stock
      Payment,
      Option Payment, Deferred Shares, or any other right or interest under the Plan,
      contingent or otherwise, or to cause or permit any encumbrance, pledge or charge
      of any nature
      to
      be imposed on any such Stock Payment or Deferred Shares (prior to the issuance
      and delivery of shares of Common Stock evidencing such Stock Payment or
      underlying such Deferred Shares), Option Payment or any such right or
      interest.

     

    D. Severability

     

    In
      the
      event that any provision of the Plan is held invalid, void or unenforceable,
      the
      same
      shall not affect, in any respect whatsoever, the validity of any other provision
      of the
      Plan.

     

    E. Governing
      Law

     

    To
      the
      extent not preempted by federal law, the Plan shall be governed by the laws
      of
      the State of Illinois.

     

    F. 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. Alternatively, this Amendment and Restatement
      of the Plan is 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 a
      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. 

    

    
      
        
        

      

      
        9Unassociated Document

    

      EXHIBIT
        10(c)

       

      PEOPLES
        ENERGY CORPORATION

      2004
        INCENTIVE COMPENSATION PLAN

      

      Part
        I.
Establishment
        of Plan

      

      The
        Peoples Energy Corporation, an Illinois corporation, hereby restates and
        amends
        its 2004 Incentive Compensation Plan (“Plan”), as set forth in this document.
        The Plan consists of two sub-plans: (1) the Long-Term Incentive Compensation
        Plan (“Long-Term Plan”), and (2) the Short-Term Incentive Compensation Plan
        (“Short-Term Plan”).

       

      1. Effective
        Date

       

      The
        Plan
        became effective on the date on which it was approved by the affirmative
        vote of
        a majority of the shares of Common Stock present in person or represented
        by
        proxy. The Plan was amended August 1, 2006. and again on October 3, 2006,
        as
        effective as of January 1, 2005.

       

      2. Term
        of Plan

       

      Unless
        terminated sooner by the Board pursuant to Part II, Section 3(g), this Plan
        shall terminate on the date immediately preceding the tenth anniversary of
        the
        Plan’s effective date; no Awards or Award Opportunities shall be granted under
        this Plan after such date.

       

      Part
        II.
Common
        Provisions and Definitions

       

      The
        following provisions shall apply to the entire Plan:

       

      1. Administration

       

      (a) Generally.
        Except
        to the extent that this Plan applies to the chief executive officer of the
        Company (“CEO”), the Plan shall be administered solely by the Compensation
        Committee of the Board. The Committee shall be composed of not less than
        three
        persons who shall be appointed by the Board who are “non-employee directors”
within the meaning of Rule 16b-3, “independent directors” within the meaning of
        any applicable stock exchange rule, and, to the extent that the Board has
        resolved to take actions necessary to enable compensation arising with respect
        to awards under the Plan to constitute performance-based compensation for
        purposes of Section 162(m) of the Code, “outside directors” within the meaning
        of Section 162(m) of the Code. 

       

      With
        respect to the CEO, the Plan shall be administered and awards shall be granted
        by majority vote of the Committee, subject to ratification by a majority
        of all
        members of the Board (including members of the Committee) who are not officers
        or employees of the Company or a Subsidiary, who are “non-employee directors”
within the meaning of Rule 16b-3, “independent directors” within the meaning of
        any applicable stock exchange rule, and, to the 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      extent
        that the Board has resolved to take actions necessary to enable compensation
        arising with respect to awards under the Plan to constitute performance-based
        compensation for purposes of Section 162(m) of the Code, “outside directors”
within the meaning of Section 162(m) of the Code. With respect to the CEO
        and
        any awards granted to the CEO hereunder, all references to the “Committee”
contained in the Plan shall be deemed and construed to mean the Committee,
        the
        decisions of which shall be subject to the ratification of a majority of
        the
        directors described in the preceding sentence. 

       

      The
        Committee shall meet at such times and places and upon such notice as it
        may
        determine. A majority of the Committee shall constitute a quorum. Any acts
        by
        the Committee may be taken at any meeting at which a quorum is present and
        shall
        be by majority vote of those members entitled to vote. Additionally, any
        acts
        reduced to writing or approved in writing by all of the members of the Committee
        shall be valid acts of the Committee.

       

      (b) Powers
        of the Committee.
        The
        Committee shall have all the powers vested in it by the terms of the Plan,
        such
        powers to include the authority, in its sole and absolute discretion, to
        grant
        awards under the Plan, prescribe agreements evidencing such awards and establish
        programs for granting awards. The Committee shall have full power and authority
        to take all other actions necessary to carry out the purpose and intent of
        the
        Plan, including, but not limited to, the authority to:

       

      (i) determine
        the persons who are eligible to receive awards;

       

      (ii)
         determine
        the eligible persons to whom, and the time or times at which, awards shall
        be
        granted;

       

      (iii) determine
        the types of awards to be granted; 

       

      (iv) determine
        the number of shares or cash to be covered by each award;

       

      (v) impose
        such terms, limitations, restrictions and conditions upon any such award
        as the
        Committee shall deem appropriate; and 

       

      (vi) to
        establish objectives and conditions, if any, for earning the grant of an
        award.

       

      In
        selecting the key employees to whom awards shall be granted, as well as
        determining the number of awards to be granted to key employees, the Committee
        shall weigh the positions and responsibilities of the individuals being
        considered, the nature of their services to the Company, their past, present
        and
        potential contributions to the success of the Company or its Subsidiaries,
        and
        such other factors as the Committee shall deem relevant to accomplish the
        purposes of the Plan. 

       

      The
        Committee shall have full power and authority to administer and interpret
        the
        Plan and to adopt such rules, regulations, agreements, guidelines and
        instruments for the administration of the Plan and for the conduct of its
        business as the Committee deems necessary or advisable and to interpret same,
        all within the Committee’s sole and absolute discretion. 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      (c) Limited
        Liability.
        To the
        maximum extent permitted by law, no member of the Board or Committee shall
        be
        liable for any action taken or decision made in good faith relating to the
        Plan
        or any award thereunder.

       

      (d) Indemnification.
        To the
        maximum extent permitted by law and the Company's charter or by-laws, the
        members of the Board and Committee shall be indemnified by the Company in
        respect of all their activities under the Plan.

       

      (e) Effect
        of Committee’s Decision.
        All
        actions taken and decisions and determinations made by the Committee on all
        matters relating to the Plan pursuant to the powers vested in it hereunder
        shall
        be in the Committee’s sole and absolute discretion and shall be conclusive,
        final, and binding on all parties concerned, including the Company, its
        stockholders, any participants in the Plan and any other employee of the
        Company, and their respective successors in interest.

       

      2. Common
        Definitions

       

      Under
        the
        Plan, when capitalized and except where the context otherwise indicates,
        the
        following definitions apply:

       

      (a) “Affiliate”
shall
        mean any entity, whether now or hereafter existing, that controls, is controlled
        by, or is under common control with, the Company (including, but not limited
        to,
        joint ventures, limited liability companies, and partnerships). For this
        purpose, "control" shall mean ownership of 50% or more of the voting power
        of
        the entity.

       

      (b) “Board”
or
        “Board
        of Directors”
shall
        mean the Board of Directors of Peoples Energy Corporation.

       

      (c) “Change
        in Control”
shall
        mean: 

       

      (i)  the
        acquisition by any Person or Persons (as defined herein) acting in concert,
        of
        beneficial ownership (as defined in Rule 13d-3 under the Exchange Act), directly
        or indirectly, of twenty percent (20%) or more of the outstanding stock of
        the
        Company (calculated as provided in paragraph (d) of Rule 13d-3 under the
        Exchange Act in the case of rights to acquire stock), or 

       

      (ii)
         (A)
        the
        consummation of any consolidation or merger of the Company, other than a
        consolidation or merger of the Company in which holders of its stock immediately
        prior to the consolidation or merger hold proportionately at least fifty-five
        percent (55%) of the outstanding common stock of the continuing or surviving
        corporation, or (B) any sale, lease, exchange or other transfer (in one
        transaction or a series of related transactions) of all or substantially
        all the
        assets of the Company (“Transfer Transaction”), except where (1) the Company
        owns all of the outstanding stock of the transferee entity or (2) the holders
        of
        the Company’s common stock immediately prior to the Transfer Transaction own
        proportionately at least fifty-five percent (55%) of the outstanding stock
        of
        the transferee entity, immediately after the Transfer Transaction, or (C)
        any
        consolidation or merger of the Company where, after the consolidation or
        merger,
        one Person owns one hundred percent (100%) of the shares of 

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      stock
        of
        the Company (except where the holders of the Company’s common stock immediately
        prior to such merger or consolidation own proportionately at least fifty-five
        percent (55%) of the outstanding stock of such Person immediately after such
        consolidation or merger); or

       

      (iii)
         a
        change
        in the members of the Board within a twenty-four (24) month period such that
        the
        individuals who are members of the Board at the beginning of such twenty-four
        (24) month-period cease to comprise two-thirds (2/3) of the Board members,
        unless the election or nomination for election by the Company’s shareholders of
        each new director was approved by the vote of at least two-thirds of the
        directors then still in office who were in office at the beginning of the
        twenty-four (24) month period. 

       

      (d) “Code”
shall
        mean the Internal Revenue Code of 1986, as amended, and any regulations
        promulgated thereunder.

       

      
        	 	
                (e)

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

              

      

       

      
        	 	
                (f)

              	
                “Common
                  Stock”
                  shall mean the common stock, no par value, of the
                  Company.

              

      

       

      (g) “Disability”
shall
        mean the inability of an employee to perform substantially all the duties
        of his
        or her employment position with the Company or Subsidiary by reason of any
        medically determinable physical or mental impairment which is expected to
        be
        permanent and continues for more than 180 days. The Committee may require
        such
        proof of Disability as the Committee in its sole discretion deems appropriate
        and the Committee’s determination as to whether the award recipient is disabled
        shall be conclusive, final, and binding on all parties concerned. 

       

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

       

      (i) “Long-Term
        Plan”
shall
        mean the Long-Term Incentive Compensation Plan, a sub-plan of this
        Plan.

       

      (j) “Participant”
shall
        mean an Employee who is actively participating in the Plan, as determined
        by the
        Committee.

       

      (k) “Peoples”
shall
        mean the Peoples Energy Corporation.

       

      (l) “Performance
        Goals”
shall
        mean, a target or targets of objective performance established by the Committee
        in its sole discretion. A Performance Goal shall be based on one or more
        of the
        following criteria: (i)
        total
        shareholder return, (ii) return on invested capital, equity, or assets, (iii)
        operating profit, (iv) earnings per share, (v) sales or revenues, (vi) operating
        expenses, (vii) Common Stock price appreciation; (viii) cash flow;
        (ix) increase in economic value of a Subsidiary, division, business unit,
        or asset or group of assets of the Company or any Subsidiary, division, or
        business unit; (x) pre-tax income or after-tax income, or
        (xi) reductions in expenses, which reductions may be expressed in terms of
        absolute numbers and/or as a percentage decrease. Where applicable, the
        Performance Goals may be expressed in terms of attaining a specified level
        of
        the particular criteria or the attainment of a percentage increase or decrease
        in the particular criteria, may be a comparison of actual performance during
        

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      a
        performance period against budget for such period, and may be applied to
        one or
        more of the Company, or Subsidiary, or a division or strategic business unit
        of
        the Company, or may be applied to the performance of the Company relative
        to a
        market index, a group of other companies or a combination thereof, all as
        determined by the Committee. The Performance Goals may include a threshold
        level
        of performance below which no award will be earned, levels of performance
        at
        which specified awards will be earned, and a maximum level of performance
        at
        which the maximum level of awards will be earned. Each of the foregoing
        Performance Goals shall be determined in accordance with generally accepted
        accounting principles and shall be subject to certification by the Committee;
        provided that the Committee shall have the authority, to the extent consistent
        with the “qualified performance-based compensation” exception of Section 162(m)
        of the Internal Revenue Code and Section 1.162-27(e) of the Income Tax
        Regulations, to make equitable adjustments to the Performance Goals in
        recognition of unusual or non-recurring events affecting the Company or any
        Subsidiary or the financial statements of the Company or any Subsidiary in
        response to changes in applicable laws or regulations, or to account for
        items
        of gain, loss or expense determined to be extraordinary or unusual in nature
        or
        infrequent in occurrence or related to the disposal of a segment of a business
        or related to a change in accounting principles. Once a Performance Goal
        is
        established and Performance Shares are granted to key employees with respect
        to
        a Performance Cycle, the Committee shall have no discretion to increase the
        amount of compensation that would otherwise be payable to a recipient upon
        attainment of the Performance Goal.

       

      (m) “Person”
shall
        have the meaning given in Section 3(a)(9) of the Exchange Act, as modified
        and
        used in Sections 13(d) and 14(d) thereof, including a “group” as defined in
        Section 13(d) except that such term shall not include: (i) the Company or
        any of
        its subsidiaries; (ii) a trustee or other fiduciary holding securities under
        an
        employee benefit plan of the Company or any of its Affiliates; (iii) an
        underwriter temporarily holding securities pursuant to an offering of such
        securities; or (iv) a corporation owned, directly or indirectly, by the
        stockholders of the Company in substantially the same proportions as their
        ownership of stock of the Company.

       

      (n) “Plan”
shall
        mean this 2004 Incentive Compensation Plan.

       

      (o) “Plan
        Year”
shall
        mean the Peoples Energy Corporation’s fiscal year.

       

      (p) “Rule
        16b-3”
shall
        mean Rule 16b-3 as in effect under the Exchange Act on the effective date
        of the
        Long-Term Plan, or any successor provision prescribing conditions necessary
        to
        exempt the issuance of securities under the Long-Term Plan (and further
        transactions in such securities) from Section 16(b) of the Exchange
        Act.

       

      (q) “Short-Term
        Plan”
shall
        mean the Short-Term Incentive Compensation Plan, a sub-plan of the
        Plan.

       

      (r) “Subsidiary”
shall
        mean any corporation more than 50 percent of the total combined voting power
        of
        which is owned by the Company or by another corporation qualifying as a
        Subsidiary within this definition, or by a combination of any of
        them.

       

      (s) “Target
        Level”
shall
        mean, with respect to (i) one or more Performance Goals established by the
        Committee in connection with an award under the Long-Term Plan, or (ii) one
        

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      or
        more
        performance measures established by the Committee in connection with an award
        under the Short-Term Plan that are not Performance Goals, the level of
        achievement designated by the Committee as the target level of performance.
        

       

      3. Additional
        General Provisions 

       

      (a) Governing
        Law.
        The
        validity, construction and effect of the Plan, of all awards and agreements
        hereunder, and of any rules, regulations, determinations or decisions made
        by
        the Board or Committee relating to the Plan, and the rights of any and all
        persons having or claiming to have any interest therein or thereunder, shall
        be
        determined exclusively in accordance with applicable federal laws and the
        laws
        of the State of Illinois, without regard to its conflict of laws rules and
        principles.

       

      (b) Gender
        and Number.
        Except
        where otherwise indicated by the context, any masculine term used herein
        also
        shall include the feminine; the plural shall include the singular, and the
        singular shall include the plural.

       

      (c) Severability.
        In the
        event any provision of the Plan shall be held illegal or invalid for any
        reason,
        the illegality or invalidity shall not affect the remaining parts of
        the Plan, and the Plan shall be construed and enforced as if the illegal or
        invalid provision had not been included.

       

      (d) Costs
        of the Plan.
        All
        costs of implementing and administering the Plan shall be borne by the
        Company.

       

      (e) Successors.
        All
        obligations of the Company under the Plan shall be binding upon and inure
        to the
        benefit of any successor to the Company, whether the existence of such successor
        is the result of a direct or indirect purchase, merger, consolidation, or
        otherwise, of all or substantially all of the business and/or assets of the
        Company.

       

      (f) Withholding
        Taxes.
        The
        Company shall have the right to deduct from all payments under the Plan any
        Federal, state, or local taxes required by law to be withheld with respect
        to
        such payments. 

       

      (g) Amendment
        and Termination.
        The
        Board may, by resolution and without notice, at any time and from time to
        time,
        amend, revise, or terminate this Plan in whole or in part, except that no
        amendment or termination shall be made which would (i) impair the rights
        of a
        Participant under an award previously granted without such Participant’s
        consent, or (ii) extend the term of the Plan. Subject to other applicable
        provisions of the Plan, all awards made or payments due under the Plan prior
        to
        its termination shall remain in effect until such awards or payments have
        been
        satisfied or terminated in accordance with the Plan and the terms of such
        awards.

       

      (h) Modification
        of Awards or Award Opportunities. The Committee may amend or modify any
        outstanding Award under the Long-Term Plan or Award Opportunity under the
        Short-Term Plan in any manner to the extent that the Committee would have
        had
        the authority to make such Award or Award Opportunity as so modified or amended
        provided that no amendment or modification of any outstanding Award or Award
        Opportunity shall impair the rights of an Award recipient without such
        recipient’s consent, and provided further, that in the 

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      case
        of
        any Award or Award Opportunity that is intended by the Committee to constitute
        performance-based compensation for purposes of Section 162(m) of the Code
        with
        respect to a Participant, the Committee shall have no discretion to modify
        such
        Award or Award Opportunity to increase the amount of compensation that would
        be
        otherwise payable to the Participant.

       

      (i) Non-Guarantee
        of Employment.
        Nothing
        in the Plan or in any award agreement thereunder shall confer any right on
        an
        employee to continue in the employ of the Company or a Subsidiary or shall
        interfere in any way with the right of the Company or Subsidiary to terminate
        an
        employee at any time.

       

      (j) Termination
        of Employment.
        For
        purposes of maintaining a Participant’s continuous status as an employee and
        accrual of rights under any award granted pursuant to the Plan, transfer
        of an
        employee among the Company and the Company’s Subsidiaries shall not be
        considered a termination of employment with the employer. 

       

      (k) Non-Uniform
        Determinations.
        The
        Committee’s determinations under the Plan (including, without limitation,
        determinations of the persons to receive awards, the form, amount and timing
        of
        such awards, the types, terms and provisions of such awards and the agreements
        evidencing same) need not be uniform and may be made by it selectively among
        persons who receive, or are eligible to receive, awards under the Plan, whether
        or not such persons are similarly situated.

       

      (l) No
        Limit on Other Compensation Arrangements.
        Nothing
        contained in the Plan shall prevent the Company or any of its Subsidiaries
        from
        adopting or continuing in effect other compensation arrangements (whether
        such
        arrangements be generally applicable or applicable only in specific cases)
        as
        the Committee in its discretion determines desirable, including without
        limitation the granting of stock-based incentive awards otherwise than under
        the
        Plan.

       

      (m) No
        Trust or Fund Created.
        Neither
        the Plan nor any award shall create or be construed to create a trust or
        separate fund of any kind or a fiduciary relationship between the Company
        and a
        Participant or any other person. To the extent that any Participant or other
        person acquires a right to receive payments from the Company pursuant to
        an
        award, such right shall be no greater than the right of any unsecured general
        creditor of the Company.

       

      (n) Beneficiary
        Designation.
        Each
        Participant under the Plan may, from time to time, name any beneficiary or
        beneficiaries (who may be named contingently or successively) to whom any
        benefit under the Plan is to be paid in case of his or her death before he
        or
        she receives any or all of such benefit. Each designation will revoke all
        prior
        designations by the same Participant, shall be in a form prescribed by the
        Committee, and will be effective only upon receipt by the Secretary of the
        Company or a written notice given by the Participant during the Participant’s
        lifetime. In the absence of any such designation, benefits remaining unpaid
        at
        the Participant’s death shall be paid to the Participant’s estate.

       

      (o) Application
        of the Performance-Based Compensation Exception of Code Section
        162(m).
        If and
        to the extent that the Committee intends that an award granted or established
        with respect to a “covered employee” (as defined in Section 162(m) of the Code)
        under either the Long-Term Plan or the Short-Term Plan constitute
        performance-based compensation for 

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      purposes
        of Section 162(m) of the Code, the Plan and the relevant agreement for such
        Award or Award Opportunity shall be administered and interpreted by the
        Committee in a manner consistent with such intent. 

       

      Part
        III.
Long-Term
        Incentive Compensation Plan

       

      1.Purpose
        and Types of Awards

       

      The
        purpose of the Long-Term Plan is to attract, retain, and motivate strong
        management employees by providing additional incentive to key employees of
        the
        Company and its Subsidiaries to acquire a proprietary interest in the business
        of the Company and its Subsidiaries and by encouraging the interest of such
        persons in the financial success and growth of the Company. The Long-Term
        Plan
        contemplates the granting of Restricted Stock, Restricted Stock Units, and
        Performance Shares, or combinations thereof. A key employee may be granted
        and
        may hold one or more Restricted Stock Awards, Restricted Stock Unit Awards,
        Performance Shares, or any combination thereof under this Long-Term Plan.
        

       

      2. Shares
        Available for the Long-Term Plan

       

      (a) Generally.
        Subject
        to the adjustments described below, up to 700,000 Shares of Common Stock
        may be
        delivered with respect to Awards granted under the Long-Term Plan, provided,
        however, that no more than 350,000 shares of Common Stock may be granted
        for
        Awards that provide for vesting solely upon continued service.

       

      (b) Cancellations,
        Forfeitures, Etc.
        If
        shares of Common Stock covered by Restricted Stock Awards under the Long-Term
        Plan are
        cancelled, forfeited, waived, surrendered, or terminated, or if any Restricted
        Stock Unit or Performance Share is cancelled, forfeited, waived, surrendered
        or
        terminated without the delivery of Common Stock, or if the recipient tenders
        previously-acquired shares in satisfaction of applicable withholding tax
        obligations, or if any shares of Common Stock covered by an Award are not
        delivered to the Award recipient because such shares are withheld to satisfy
        applicable withholding tax obligations, such shares shall again be available
        for
        further grants under the Long-Term Plan.

       

      (c) Sources
        of Common Stock.
        The
        Common Stock to be delivered in payment of an Award under the Long-Term Plan
        may
        be available from authorized but unissued shares of Common Stock, treasury
        stock, or shares of Common Stock purchased on the open market.

       

      (d) Individual
        Limitations.
        Subject
        to adjustment as provided in Part III, Section 3(e), in no event shall any
        individual be granted, within any one fiscal year of the Company, (i) Awards
        of
        Performance Shares and/or Restricted Stock Units, the vesting of which is
        contingent upon the achievement of one or more Performance Goals, or any
        combination thereof, covering more than 100,000 shares of Common Stock or
        (ii)
        Awards of Restricted Stock and/or Restricted Stock Units, the vesting of
        which
        is contingent solely upon continued service, or any combination thereof,
        in
        excess of 100,000 shares of Common Stock. As a condition to any Award, each
        recipient shall agree to continue such recipient’s employee status for such
        period (not less than one year) as shall be provided in the Award. 

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      (e) Adjustment
        of Shares.
        In the
        event that the Committee shall determine that any reclassification,
        recapitalization, stock split, dividend or other distribution (whether in
        the
        form of cash, stock or other property), combination, merger, consolidation,
        spin-off, share exchange, repurchase or other similar corporate transaction
        or
        event affects the Common Stock such that an adjustment is appropriate in
        order
        to prevent dilution or enlargement of the rights of Award recipients under
        the
        Long-Term Plan, the maximum number and kind of shares reserved for issuance
        or
        with respect to which Awards may be granted under the Long-Term Plan shall
        be
        adjusted to reflect such event, and the Committee shall make such adjustments
        as
        it deems appropriate and equitable in the number, kind and price of shares
        covered by outstanding Awards previously granted under the Long-Term Plan,
        and
        in any other matters which relate to Awards and which are affected by the
        changes in the Common Stock referred to above. Pursuant to this Part III,
        Section 3(e), the number of shares of Peoples Common Stock distributable
        as
        Performance Shares as of the effective time (as defined under the Agreement
        and
        Plan of Merger among WPS Resources Corporation (“WPS”), Wedge Acquisition
        Corporation and Peoples dated as of July 8, 2006) shall be converted into
        the
        number of shares of WPS Common Stock determined by multiplying the number
        of
        shares of Peoples Common Stock distributable as Performance Shares by 0.825
        (rounded down to the nearest whole share).

       

      3. Participation

       

      Participation
        in the Long-Term Plan shall be open to key employees of the Company and its
        Subsidiaries, as may be selected by the Committee from time to time. Directors
        of the Company or its Subsidiaries who are not officers or employees of the
        Company or its Subsidiaries shall not be eligible to become Award recipients
        under the Long-Term Plan. Awards may be granted to such eligible persons
        and for
        such number of shares of Common Stock as the Committee shall determine, subject
        to the limitations in Part III, Section 2. A grant of any type of Award
        made in any one year to an eligible person shall neither guarantee nor preclude
        a further grant of that or any other type of Award to such person in that
        year
        or subsequent years. 

       

      4. Restricted
        Stock

       

      The
        Committee may make grants of Restricted Stock to eligible persons, which
        grants
        may be made either alone or in addition to other Awards granted under the
        Long-Term Plan. Each grant of Restricted Stock under the Long-Term Plan shall
        be
        evidenced by an Award Agreement which shall comply with and be subject to
        the
        following terms and conditions: 

       

      (a) Shares
        of
        Common Stock covered by an Award Agreement shall not be sold, assigned,
        transferred or otherwise disposed of, mortgaged, pledged or otherwise encumbered
        until such shares have become fully vested pursuant to the Long-Term Plan
        and
        the applicable Award Agreement. 

       

      (b) Except
        as
        provided in this Part III, Section 4 and unless the Committee provides otherwise
        in the applicable Award Agreement, the participant shall have, with respect
        to
        the shares of Restricted Stock, all of the rights of a stockholder of the
        Company holding the class or series of Common Stock that is the subject of
        the
        Restricted Stock, including, if applicable, the right to vote the shares
        and the
        right to receive any cash dividends. 

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      (c) Restricted
        Stock shall be issued in such form as the Committee may deem appropriate,
        including book-entry registration or issuance of one or more stock certificates.
        Any stock certificate issued in respect of shares of Restricted Stock shall
        be
        registered in the name of such participant and shall bear an appropriate
        legend
        referring to the terms, conditions, and restrictions applicable to such Award,
        substantially in the following form:

       

      "The
        transferability of this certificate and the shares of stock represented hereby
        are subject to the terms and conditions (including forfeiture) of the 2004
        Incentive Compensation Plan and an Award Agreement. Copies of such Plan and
        Award Agreement are on file at the headquarters offices of Peoples Energy
        Corporation.” 

       

      The
        Committee may require that the certificates evidencing such shares be held
        in
        custody by the Company until the restrictions thereon shall have lapsed and
        that, as a condition of any Award of Restricted Stock, the participant shall
        have delivered a stock power, endorsed in blank, relating to the Common Stock
        covered by such Award.

       

      (d) Shares
        of
        Common Stock covered by an Award Agreement granted to a recipient shall vest
        in
        accordance with the terms of the grant; provided, however, that shares of
        Common
        Stock covered by an Award Agreement shall vest with respect to 100% of the
        shares covered by the Award Agreement upon the termination of the recipient’s
        employment by reason of death, Disability or retirement after attaining age
        65
        (or such earlier date as established by the Committee). In addition, the
        Committee may, in its sole discretion, accelerate the vesting of any or all
        grants of Restricted Stock under the Long-Term Plan. 

       

      (e) In
        the
        event of the termination of employment of the recipient of a grant of Restricted
        Stock other than by reason of death, Disability, or retirement on or after
        attaining age 65 (or such earlier date as determined by the Committee), the
        recipient shall forfeit the shares of Common Stock covered by such grant
        which
        are not vested as of the date of termination. 

       

      (f) Upon
        the
        occurrence of a Change in Control, all outstanding Restricted Stock Awards
        granted under the Long-Term Plan shall immediately become fully
        vested.

       

      (g) Restricted
        Stock granted under the Long-Term Plan shall be subject to such additional
        provisions as may be deemed advisable by the Committee. 

       

      5. Restricted
        Stock Units

       

      The
        Committee may make grants of Restricted Stock Units to eligible persons,
        which
        grants may be made either alone or in addition to other Awards granted under
        the
        Long-Term Plan. Each grant of Restricted Stock Units under the Long-Term
        Plan
        shall be evidenced by an Award Agreement which shall comply with and be subject
        to the following terms and conditions: 

       

      (a) A
        Restricted Stock Unit may not be sold, assigned, transferred or otherwise
        disposed of, mortgaged, pledged or otherwise encumbered; shares of Common
        Stock
        covered by a grant of Restricted Stock Units may not be sold, assigned,
        transferred or otherwise disposed of, or mortgaged, pledged or otherwise
        encumbered until such shares have been actually delivered to the recipient
        in
        settlement of the Restricted Stock Units to which they relate. 

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      (b) With
        respect to any grant of Restricted Stock Units, the recipient of such Restricted
        Stock Units shall acquire no rights of a shareholder of Common Stock unless
        and
        until the recipient becomes the holder of shares of Common Stock delivered
        to
        such recipient in settlement of such Restricted Stock Units. 

       

      (c) Restricted
        Stock Units covered by an Award Agreement granted to a recipient shall vest
        in
        accordance with the terms of the Award Agreement, which vesting may be based
        (i)
        solely upon the continued service of the recipient, (ii) upon the achievement
        of
        one or more Performance Goals established by the Committee, or (iii) upon
        a
        combination of continued service by the recipient and the achievement of
        one or
        more Performance Goals established by the Committee. However, Restricted
        Stock
        Units covered by an Award Agreement that provides for vesting based solely
        on
        continued service shall also vest with respect to 100% of the Restricted
        Stock
        Units covered by the Award Agreement upon the termination of the recipient’s
        employment by reason of death, Disability or retirement after attaining age
        65
        (or such earlier date as established by the Committee). Further, Restricted
        Stock Units covered by an Award Agreement that provides for vesting based
        solely
        or in part upon the achievement of one or more Performance Goals (i) shall
        also
        vest with respect to 100% of the Restricted Stock Units covered by the Award
        Agreement upon the termination of the recipient’s employment by reason of death
        or Disability, and (ii) shall vest upon termination of the recipient’s
        employment by reason of retirement on or after attaining age 65 (or such
        earlier
        date as established by the Committee) as provided in the Award Agreement.
        In
        addition, the Committee may also, in its sole discretion, accelerate the
        vesting
        of any or all grants of Restricted Stock Units under the Long-Term Plan if
        vesting is based solely on continued service. 

       

      (d) In
        the
        event of a Restricted Stock Units recipient’s termination of employment other
        than by reason of death, Disability, or retirement on or after attaining
        age 65
        (or such earlier date as determined by the Committee), the recipient shall
        forfeit any Restricted Stock Units that are not vested as of the date of
        termination. 

       

      (e) Upon
        the
        occurrence of a Change in Control, all outstanding Awards of Restricted Stock
        Units granted under the Long-Term Plan shall immediately become fully
        vested.

       

      (f) The
        Committee may provide that a Restricted Stock Units recipient shall be entitled
        to receive an amount per Restricted Stock Unit equal in value to the cash
        dividend, if any, paid per share of Common Stock on issued and outstanding
        shares, as of the dividend payment dates occurring during the period between
        the
        date on which the Restricted Stock Units are granted to the recipient and
        the
        date on which such Restricted Stock Units are settled by the delivery of
        Common
        Stock (or are cancelled, forfeited, waived, surrendered or terminated without
        the delivery of Common Stock). Such paid amounts (herein called “dividend
        equivalents”) may, in the discretion of the Committee, be (i) paid in cash, (ii)
        credited to the recipient as additional Restricted Stock Units, or (iii)
        any
        combination of cash and additional Restricted Stock Units. If dividend
        equivalents are credited to the recipient as additional Restricted Stock
        Units,
        the number of additional Restricted Stock Units that shall be credited to
        a
        recipient with respect to any dividend on Common Stock shall not exceed the
        amount that is the result of multiplying the number of Restricted Stock Units
        credited to the recipient on the dividend record date by the dividend paid
        on
        each share of Common Stock, and then dividing this amount by the price per
        share
        of Common Stock on the dividend payment date. For this 

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      purpose,
        the price per share of Common Stock shall be the average of the daily high
        and
        low sales prices quoted on the New York Stock Exchange composite tape for
        that
        date. In the event no trading is reported for the dividend payment date,
        the
        price per share of Common Stock shall be the average of the high and low
        sales
        prices of Common Stock for the most recent prior date for which trading for
        Common Stock was reported on the NYSE composite tape. A Restricted Stock
        Unit
        credited to a recipient as a dividend equivalent shall vest at the same time
        as
        the Restricted Stock Unit to which it relates. Any credit of dividend
        equivalents as additional Restricted Stock Units shall be subject to the
        share
        limitations of Part III, Section 2(a).

       

      (g) Restricted
        Stock Unit Awards shall be settled by the delivery to the recipient of the
        number of shares of Common Stock equal to the number of the recipient’s
        Restricted Stock Units that are vested as of the date of the recipient’s
        termination of employment, such delivery to occur as soon as practicable
        following such termination of employment or such later date as may be specified
        by the Committee.

       

      (h) Awards
        of
        Restricted Stock Units granted under the Long-Term Plan shall be subject
        to such
        additional provisions as may be deemed advisable by the Committee.

       

      6. Performance
        Shares

       

      The
        Committee may make grants of Performance Shares to eligible persons, which
        grants may be made either alone or in addition to other Awards granted under
        the
        Long-Term Plan. Each grant of Performance Shares under the Long-Term Plan
        shall
        be evidenced by an Award Agreement, which shall comply with and be subject
        to
        the following terms and conditions:

       

      (a) For
        each
        grant of Performance Shares, the Committee shall establish a Performance
        Cycle
        and Performance Goals. The attainment of the Performance Goals determined
        as of
        the last day of the Performance Cycle shall be a condition to the settlement
        for
        Common Stock of the Performance Shares so granted.

       

      (b) Upon
        the
        expiration of the Performance Cycle, the Committee shall determine and certify
        the extent to which the Performance Goals have been achieved and shall determine
        the number of Performance Shares granted to a recipient that shall have been
        earned, and the Committee shall then cause to be delivered to the recipient
        the
        number of shares of Common Stock equal to the number of Performance Shares
        determined by the Committee to have been earned as soon as practicable
        thereafter or such later date as may be specified by the Committee. In no
        event
        shall such delivery occur later than the 15th
        day of
        the third month of the first calendar year following the end of the Performance
        Cycle.

       

      (c) With
        respect to any grant of Performance Shares, the recipient of such Performance
        Shares shall acquire no rights of a shareholder of Common Stock unless and
        until
        the recipient becomes the holder of shares of Common Stock delivered to such
        recipient in settlement of such Performance Shares.

       

        (d) Upon
        a
        Performance Shares recipient's termination of employment by reason of death
        or
        Disability prior to the end of the relevant Performance Cycle, the Performance
        Goals for the recipient’s Performance Shares shall be deemed to have been
        achieved at Target Levels, all 

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      other
        terms and conditions related thereto shall be deemed to have been satisfied,
        and
        the recipient (or the recipient’s beneficiary, estate, or personal
        representative in the case of a deceased recipient) shall be entitled to
        a pro
        rata distribution of shares of Common Stock in settlement of the recipient’s
        outstanding Performance Shares. The pro rata distribution of shares of Common
        Stock to such recipient shall be determined by multiplying the number of
        shares
        of Common Stock that would be deliverable to the recipient in settlement
        of the
        recipient’s Performance Shares at Target Level achievement by a fraction, the
        numerator of which is equal to the number of full calendar months of the
        Performance Cycle that the recipient was employed by the Company or a
        Subsidiary, and the denominator of which is the number of months in the
        Performance Cycle. Such distribution shall occur no later than the
        15th
        day of
        the third month of the first calendar year following the year in which a
        recipient’s employment terminates by reason of death or disability.

       

      (e) Upon
        a
        Performance Shares recipient's termination of employment by reason of retirement
        on or after attaining age 65 (or such earlier date as determined by the
        Committee) prior to the end of the relevant Performance Cycle, the recipient
        (or
        the recipient’s beneficiary, estate, or personal representative in the case of a
        deceased recipient) shall be entitled to a pro rata distribution of shares
        of
        Common Stock in settlement of the recipient’s outstanding Performance Shares.
        The pro rata distribution of shares of Common Stock to such recipient shall
        be
        determined by multiplying the number of shares of Common Stock that would
        have
        been deliverable to the recipient in settlement of the recipient’s Performance
        Shares had the recipient remained a key employee through the last day of
        the
        Performance Cycle by a fraction, the numerator of which is equal to the number
        of full calendar months of the Performance Cycle that the recipient was employed
        by the Company or a Subsidiary, and the denominator of which is the number
        of
        months in the Performance Cycle. A distribution payable to a recipient by
        reason
        of this subparagraph shall be paid no later than the 15th
        day of
        the third month of the first calendar year following the recipient’s
        retirement.

       

      (f) In
        the
        event of the termination of employment of a recipient of Performance Shares
        other than by reason of death, Disability or retirement after attaining age
        65
        (or such earlier date as determined by the Committee) on or before the last
        day
        of the relevant Performance Cycle, the recipient will forfeit the Performance
        Shares granted with respect to such Performance Cycle.

       

      (g)
         Upon
        the
        occurrence of a Change of Control, the Performance Goals of all then outstanding
        Performance Shares granted under the Long-Term Plan shall be deemed to have
        been
        achieved at Target Levels, all other terms and conditions related thereto
        shall
        be deemed to have been satisfied, and a recipient shall be entitled to a
        pro
        rata distribution of shares of Common Stock in settlement of the recipient’s
        outstanding Performance Shares. The pro rata distribution of shares of Common
        Stock to a recipient shall be determined by multiplying the number of shares
        of
        Common Stock that would be deliverable to the recipient in settlement of
        the
        recipient’s Performance Shares, at Target Level achievement, by a fraction, the
        numerator of which is equal to the number of full calendar months of the
        Performance Cycle that have elapsed on or before the date on which the Change
        of
        Control occurs and during which the recipient was a key employee, and the
        denominator of which is the number of months in the Performance Cycle. The
        Performance Shares of a recipient for which no delivery of common stock has
        been
        made shall be forfeited. 

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      (h) A
        Performance Share may not be sold, assigned, transferred or otherwise disposed
        of, or mortgaged, pledged or otherwise encumbered; shares of Common Stock
        covered by a grant of Performance Shares may not be sold, assigned, transferred
        or otherwise disposed of, or mortgaged, pledged or otherwise encumbered until
        such shares have been actually delivered to the recipient in settlement of
        the
        Performance Shares to which they relate.

       

      (i) Performance
        Shares granted under this Long-Term Plan shall be subject to such additional
        provisions as may be deemed advisable by the Committee.

       

      7. Additional
        Long-Term Plan Provisions for the Withholding of Taxes

       

      The
        Company may require, as a condition to the delivery of certificates for shares
        issued or payments of cash to an Award recipient pursuant to the Long-Term
        Plan
        or an Award Agreement (hereinafter collectively referred to as a “taxable
        event”), that the recipient pay to the Company in cash any federal, state or
        local taxes of any kind required by law to be withheld with respect to any
        taxable event under the Long-Term Plan. The Company, to the extent permitted
        or
        required by law, shall have the right to deduct from any payment of any kind
        (including salary or bonus) otherwise due to an Award recipient any federal,
        state or local taxes of any kind required by law to be withheld with respect
        to
        any taxable event under the Long-Term Plan, or to retain or sell without
        notice
        a sufficient number of the shares to be issued to such recipient to cover
        any
        such taxes. Unless the Committee specifies otherwise in an Award Agreement,
        a
        recipient may elect to pay all or a portion of the withholding tax obligation
        for an Award by delivering shares of Common Stock to the Company or by having
        shares of Common Stock withheld by the Company. If shares of Common Stock
        are to
        be withheld by the Company from shares of Common Stock otherwise to be issued
        in
        satisfaction or settlement of any Award, for purposes of satisfying withholding
        tax obligations, the number of shares to be so withheld shall be calculated
        using the minimum statutory withholding rates for federal and state tax
        purposes, including payroll taxes, that are applicable to the taxable event
        then
        applicable to such Award. If shares of Common Stock are to be delivered by
        the
        recipient in satisfaction or settlement of any Award, for purposes of satisfying
        withholding tax obligations, the number of shares so withheld shall be
        calculated using the minimum statutory withholding rates for federal and
        state
        tax purposes, including payroll taxes, that are applicable to the taxable
        event
        then applicable to such Award. Under procedures satisfactory to the Committee,
        in lieu of an actual delivery of shares of Common Stock, a recipient may
        satisfy
        any delivery requirement by presenting proof of beneficial ownership
        satisfactory to the Committee, in which case the Company shall withhold from
        the
        shares to be delivered in settlement of the Award such number of shares of
        Common Stock as shall be appropriate. 

       

      8.
        Long-Term
        Plan Definitions

       

      Under
        the
        Long-Term Plan, when capitalized and except where the context otherwise
        indicates, the following definitions apply:

       

      (a) “Award”
shall
        mean any Restricted Stock, Restricted Stock Units or Performance Share granted
        under the Long-Term Plan.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      (b) “Award
        Agreement”
shall
        mean a written agreement between the Company and an Award recipient
        memorializing the terms and conditions of an Award granted pursuant to the
        Long-Term Plan.

       

      (c) “Performance
        Cycle”
shall
        mean the period of one year or longer established by the Committee in connection
        with the grant of Performance Shares.

       

      (d) “Performance
        Share”
shall
        mean a contingent right to receive a share of Common Stock in the future
        pursuant to the terms of a grant made under Part III, Section 6 and the relevant
        Award Agreement.

       

      (e) “Performance
        Share Award”
shall
        mean a grant or one or more Performance Shares pursuant to the terms of Part
        III, Section 6 and the relevant Award Agreement. 

       

      (f) “Restricted
        Stock”
shall
        mean a share of Common Stock which is granted pursuant to, and subject to
        the
        terms of Part III, Section 4 and is subject to such additional terms and
        restrictions as set forth in the relevant Award Agreement. 

       

      (g) “Restricted
        Stock Award”
shall
        mean a grant of one or more shares of Restricted Stock pursuant to the terms
        of
        Part III, Section 4 and the relevant Award Agreement.

       

      (h) “Restricted
        Stock Unit”
        shall
        mean a contingent right to receive a share of Common Stock in the future
        pursuant to the terms of a grant made under Part III, Section 5 and the relevant
        Award Agreement.

       

      (i) “Restricted
        Stock Unit Award”
shall
        mean a grant or one or more Restricted Stock Units pursuant to the terms
        of Part
        III, Section 5 and the relevant Award Agreement. 

       

      9. Additional
        Provisions

       

      (a) Incorporation
        of Long-Term Plan’s Terms in Award Agreement.
        Each
        Award Agreement entered into between the Company and an Award recipient with
        respect to an Award granted under the Long-Term Plan shall be deemed to have
        incorporated the terms of this Long-Term Plan and shall contain such provisions,
        consistent with the provisions of the Long-Term Plan, as may be established
        by
        the Committee.

       

      (b) Listing
        and Registration.
        If the
        Company determines that the listing, registration or qualification upon any
        securities exchange or upon any quotation system or under any law, of shares
        subject to any Award is necessary or desirable as a condition of, or in
        connection with, the granting of same or the issue or purchase of shares
        thereunder, no such Award may be delivered by the Company in whole or in
        part,
        unless such listing, registration or qualification is effected free of any
        conditions not acceptable to the Company.

       

      (c) Compliance
        with Securities Law.
        Common
        Stock shall not be issued with respect to an Award granted under the Long-Term
        Plan unless the issuance and delivery of share certificates for such Common
        Stock pursuant thereto shall comply with all relevant provisions of law,
        including, without limitation, the Securities Act of 1933, the Exchange Act
        the
        rules and regulations promulgated thereunder, and the requirements of any
        national securities exchange or 

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      quotation
        system upon which the Common Stock may then be listed or quoted, and shall
        be
        further subject to the approval of counsel for the Company with respect to
        such
        compliance to the extent such approval is sought by the Committee. All
        certificates for Common Stock delivered under the Long-Term Plan pursuant
        to any
        Award or the exercise thereof shall be subject to such stop transfer orders
        and
        other restrictions as the Committee may deem advisable under the Long-Term
        Plan
        or the rules, regulations, and other requirements of the Securities and Exchange
        Commission, any stock exchange or quotation system upon which such securities
        are then listed or quoted, and any applicable Federal or state laws, and
        the
        Committee may cause a legend or legends to be put on any such certificates
        to
        make appropriate reference to such restrictions.

       

      Part
        IV.
Short-Term
        Incentive Compensation Plan

       

      1. Purposes

       

      1.1 The
        Short-Term Plan permits the awarding of annual cash bonuses to Employees
        of the
        Company, based on levels of achievement under pre-established performance
        measures for the following purposes:

       

      (a) To
        provide to Participants meaningful incentives that will benefit shareholders
        and
        customers through improvement in performance in areas of strategic concern
        to
        the Company;

       

      (b) To
        provide competitive levels of compensation to enable the Company to attract
        and
        retain people who are able to make a significant contribution to the Company’s
        success; and

       

      	(c)
                	
              To
                encourage teamwork and cooperation in the achievement of Company
                goals.

            

       

      2. Definitions

       

      Under
        the
        Short-Term Plan, when capitalized and except where the context otherwise
        indicates, the following definitions apply:

       

      (a)
         “Award
        Opportunity”
shall
        mean the various levels of incentive award payouts which a Participant may
        earn
        under the Short-Term Plan, as established by the Committee pursuant to Part
        IV,
        Section 4.2 herein.

       

      (b)
         “Cause”
shall
        mean the occurrence of any one or more of the following:

       

      (i) The
        willful and continued failure by a Participant to perform substantially his
        or
        her duties (other than any such failure resulting from the Participant’s
        disability), after a written demand for substantial performance is delivered
        to
        the Participant that specifically identifies the manner in which
        the Company believes that the Participant has not substantially performed
        his or her duties, and the Participant has failed to remedy the situation
        within
        ten (10) business days after receiving such notice; 

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      (ii)
         The
        Participant’s conviction for committing a felony; or 

       

      (iii) The
        willful engaging by the Participant in gross misconduct materially and
        demonstrably injurious to the Company. However, no act, or failure to act,
        on
        the Participant’s part shall be considered “willful” unless done, or omitted to
        be done, by the Participant not in good faith and without reasonable belief
        that
        his or her action or omission was in the best interest of the
        Company.

       

      (c) “Computed
        Award Amount”
shall
        mean the amount of an award to a Participant, computed at the end of the
        Plan
        Year on the basis of levels of achievement under the preestablished corporate,
        divisional and/or individual measures.

       

      (d) “Employee”
shall
        mean a full-time, salaried employee of the Company who occupies a position
        in an
        officer salary grade.

       

      (e)
         “Final
        Award”
shall
        mean the actual award earned during a Plan Year by a Participant, as determined
        by the Committee following the close of the Plan Year. 

       

      3. Eligibility
        and Participation

       

      3.1 Eligibility.
        All
        Employees (as defined in Part IV, Section 2 herein) who are actively employed
        by
        the Company prior to April 1 of any Plan Year shall be eligible to participate
        in the Short-Term Plan for such Plan Year.

       

      3.2 Participation.
        Participation in the Short-Term Plan shall be determined annually by
        the Committee based upon the criteria set forth in Part IV, Section 3.1
        herein. Employees who are to be Participants in the Short-Term Plan for a
        Plan
        Year shall be so notified in writing, and shall be apprised of the
        performance measures and related award opportunities for the Plan Year, at
        the
        beginning of the Plan Year or as soon as is practicable.

       

      3.3 Partial
        Plan Year Participation.
        In the
        event that an Employee becomes eligible to participate in the Short-Term
        Plan
        subsequent to the commencement of a Plan Year, but prior to April 1 of such
        Plan
        Year, then such Employee’s Final Award shall be prorated based upon the number
        of full weeks of employment with the Company during such Plan Year.

       

      3.4 No
        Right to Participate.
        No
        Participant or other Employee shall at any time have a right to be selected
        for
        participation in the Short-Term Plan for any Plan Year, despite having
        previously participated in the Short-Term Plan.

       

      4. Award
        Determination

       

      4.1 Performance
        Measures.
        Prior
        to the beginning of each Plan Year, or as soon as practicable thereafter,
        the
        Committee shall establish performance measures for that Plan Year. The
        performance measures may be based on any combination of corporate, divisional,
        and/or individual measures which must be established no later than 90 days
        following the commencement of the relevant fiscal year. The Committee also
        may
        establish one or more Company-wide performance measures which must be achieved
        for any Participant to receive an award for that Plan Year. The performance
        measures for any Final Awards that are intended by 

       

      
        
          
          

        

        
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      the
        Committee to qualify as performance-based compensation for purposes of Section
        162(m) of the Code shall be one or more Performance Goals. After the performance
        measures are established, the Committee will align the achievement of
        performance levels with the Award Opportunities (as described in Part IV
        Section
        4.2 herein), such that the levels of achievement under the pre-established
        performance measures at the end of the Plan Year will determine the Final
        Award
        amounts, subject to the Committee’s exercising discretion (as described in Part
        IV, Section 4.4) in the determination and certification of Final Awards for
        all
        Participants. The CEO shall have the responsibility for the designation and
        evaluation of divisional and/or individual performance measures, subject
        to the
        Committee’s determination of Final Award amounts.

       

      4.2 Award
        Opportunities.
        Prior
        to the beginning of each Plan Year, or as soon as practicable thereafter,
        the Committee shall establish an Award Opportunity for each Participant,
        The
        established Award Opportunities for a Plan Year may vary in relation to the
        job
        classifications of Participants. In the event a Participant changes job levels
        during a Plan Year, the Participant’s Award Opportunity may be adjusted to
        reflect the amount of time at each job level during the Plan Year.

       

      4.3 Adjustment
        of Performance Measures.
        The
        Committee shall have the right to adjust the performance measures, including
        Company-wide performance measures, and the Award Opportunities (either up
        or
        down) during a Plan Year if it determines that external changes or other
        unanticipated business conditions have materially affected the appropriateness
        of the measures or have unduly influenced the Company’s or the Participant’s
        ability to meet levels of achievement under the measures. Further, in the
        event
        of a Plan Year of less than twelve (12) months, the Committee shall have
        the
        right to adjust the performance measures and the Award Opportunities
        accordingly, at its discretion.

       

      4.4 Final
        Award Determinations.
        At the
        end of each Plan Year, a Final Award shall be computed by the Committee for
        Participants. Unless otherwise specified by the Committee, the Final Award
        for a
        Participant may vary above or below the Computed Award Amount at the sole
        discretion of the Committee. The Final Award for the Chief Executive Officer
        may
        be reduced by the Committee in its sole discretion below the Computed Award
        Amount, and may be increased by the Committee in its sole discretion above
        the
        Computed Award Amount unless prohibited under the terms of the relevant Award
        Opportunity guidelines.

       

      4.5 Award
        Cap.
        The
        Committee may establish guidelines governing the maximum Final Awards that
        may
        be earned by Participants (either in the aggregate, by Employee class, or
        among
        individual Participants) in each Plan Year. The guidelines may be expressed
        as a
        percentage of corporate-wide goals or financial measures, or such other measures
        as the Committee shall from time to time determine. In addition, for any
        Plan
        Year, no Final Award paid with respect to such Plan Year may exceed 200%
        of the
        Participant’s base annual salary, determined as of the beginning of such Plan
        Year. 

       

      5. Payment
        of Final Awards: Form and Timing of Payment.
        Each
        Final Award payment shall be paid in cash, in one lump sum, on or before
        the
        15th
        day of
        the third month of the first calendar year following the year in which the
        service giving rise to the Final Award determination is complete.

       

      
        
          
          

        

        
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      6. Termination
        of Employment

       

      6.1 Termination
        of Employment Due to Death or Retirement.
        In the
        event a Participant’s employment is terminated by reason of death or retirement,
        the Final Award determined in accordance with Part IV, Section 4.4 herein,
        shall
        be reduced to reflect only participation prior to termination. Such reduced
        Final Award shall be determined by multiplying said Final Award by a fraction;
        the numerator of which is the number of full weeks of employment in the Plan
        Year through the date of employment termination, and the denominator of
        which is fifty-two (52).

       

      The
        Final
        Award thus determined shall be paid no later than the 15th
        day of
        the third month of the first calendar year following the year in which
        employment termination occurred.

       

      6.2 Termination
        of Employment Due to Disability.
        In the
        event a Participant’s employment is terminated by reason of Disability, the
        Committee, in its sole discretion, may either: (A) pay the Final Award
        determined in accordance with Part IV Section 4.4 herein without reduction
        or
        (B) pay a reduced amount of the Final Award, computed as determined by the
        Committee. 

       

             
        6.3 Termination
        of Employment for Other Reasons.
        In the
        event the employment of a Participant is terminated for any reason other
        than
        death, Disability, or retirement after attaining age 65 (or such earlier
        date as
        established by the Committee), all of the Participant’s rights to a Final Award
        for the Plan Year then in progress shall be forfeited. However, except in
        the
        event of an employment termination for Cause, the Committee, in its sole
        discretion, may pay a prorated award for the portion of that Plan Year that
        the
        Participant was employed by the Company, computed as determined by the
        Committee. 

       

      7. Non-Transferability;
        Effect on Other Benefits

       

      7.1 Non-transferability.
        No
        right or interest of any Participant in the Short-Term Plan shall be assignable
        or transferable, or subject to any lien, directly, by operation of law, or
        otherwise, including, but not limited to, execution, levy, garnishment,
        attachment, pledge, and bankruptcy.

       

      7.2 Effect
        of Award on Employee Benefits.
        Except
        as is expressly set forth in any employee benefit plan of the Company, payment
        of an award to a Participant under the Short-Term Plan is special additional
        compensation and shall not have any effect upon any of the Participant’s
        employee benefits.

       

      8. Change
        in Control

       

      If
        a
        Change in Control occurs during a Plan Year for which Award Opportunities
        have
        been established, each Participant shall be entitled to payment of a
        prorated Computed Award Amount for such Plan Year. A Participant’s prorated
        Computed Award Amount shall be determined by multiplying the Participant’s
        Computed Award Amount determined at Target Levels by a fraction, the numerator
        of which is the number of full weeks in the Plan Year that have elapsed on
        or
        before the date on which the Change of Control occurs and during which the
        Participant 

       

      
        
          
          

        

        
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      was
        an
        Employee, and the denominator of which is fifty-two (52). Such amount shall
        be
        paid in cash to each Participant on or before the date which is the
        15th
        day of
        the third month in the first calendar year following the date on which the
        Change in Control occurs.

       

      9. Code
        Section 409A Compliance 

       

      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 15th
        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 Company’s tax year is
        presently October 1 through September 30. The Plan requires that all benefits
        to
        be distributed no later than the 15th
        day of
        the third month following the calendar year in which benefits vest, 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. 

       

      
        
          
          

        

        
          20

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